E333_Ch6_pink

E333_Ch6_pink - Commercial Policy (2) 1. Tariffs tax...

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Commercial Policy (2) 1. Tariffs – tax imposed on imports or  exports 2. Quotas – limit on the quantity or value of  an imported good 3. Subsidies – a government payment to an  industry based on how much it trades 4. Nontariff barriers – other government  policies affecting trade (ex: health and  safety standards)
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Gains from trade 1. Static gains  2. Dynamic gains
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Static Gains Compare Autarky to free trade The US is better off with free trade since  they are consuming on a higher CIC  Static Gains can be divided into Consumption gains Production gains
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Static consumption gains Assume:  US market opened to free trade But production stays at Autarky point (A) World price of chemicals is higher than US  price (so US exports) Chemical exports finance textile imports US consumes on a higher CIC (B)
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This note was uploaded on 08/25/2009 for the course ECON 333 taught by Professor Yavas,cemilepan,lu during the Fall '06 term at Penn State.

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E333_Ch6_pink - Commercial Policy (2) 1. Tariffs tax...

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