Week 3 Discussion - to my country and receiving the money...

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Week 3 Discussion: Chapter 14 Question Number 4: If you were an import- competing producer in a growing market, which trade instrument would you prefer – a tariff, an import quota, or a subsidy? Why? Post: The trade instrument that I would choose if I were an import – competing producer in a growing market is an import quota. With an import quota the amount of goods and services that are imported are limited. “This reduces the quantity available to consumers, which in turns causes the domestic price to rise” (Appleyard, Field, & Cobb, 2010). Since there are higher domestic prices and sales, without an increase in imports, the growth in demand is higher. “The quota thus restricts quantity supplied, causing price to adjust, in contrast to a tariff, which induces a quantity adjustment by fixing a higher domestic price” (Appleyard, Field, & Cobb, 2010). When you think about a tariff or subsidy, you know there will be some growth in the domestic market. However, foreign producers will receive an increase due to foreign exports. Meaning they are importing
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Unformatted text preview: to my country and receiving the money for the good or service that I am producing and no one is purchasing. The only option to me seems a quota that way I can limit the amount of imports reassuring that my company will still be able to produce and sell our goods or services. Putting a tax on imports does not seem to be in my best interest. References: Appleyard, Field, & Cobb. (2010). International Economics (Seventh Edition ed.). New York, New York: McGraw - Hill Companies, INC. Answer from book: You would prefer the quota because in this instance you would receive the benefits of the growth in demand via higher domestic prices and sales without any accompanying increase in imports. With the tariff or subsidy, at least some of the benefits of growth in the domestic market would accrue to foreign producers in the form of increased foreign exports. A quota also provides greater market certainty for producers....
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