Trade_policy - Trade Policy Protecting with Tariffs Quotas and Other Trade Barriers The Small Open Economy World markets set prices The small

Info iconThis preview shows pages 1–8. Sign up to view the full content.

View Full Document Right Arrow Icon
Trade Policy Protecting with Tariffs, Quotas and Other Trade Barriers
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
The Small, Open Economy World markets set prices The small economy is a price taker, for example, Canada, Italy, Chile, S. Korea Autarkic market clearing prices vs. the world price Export if domestic price is less Import if it is more
Background image of page 2
Import Equilibrium
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Import Equilibrium Price falls to import price Domestic quantity supplied is less But import price is less than domestic cost Gain = cost savings Lost jobs and profits in the contracting sector Domestic quantity demanded is more But MB > import price Gain = consumer surplus No losers
Background image of page 4
Export Equililbrium
Background image of page 5

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Export Equilibrium Price rises to export price Domestic quantity supplied is higher Profits on extra output MC < export price No losers Domestic quantity demanded is less But MB < export price More gain from selling than consuming Consumers lose
Background image of page 6
Protectionism Protect the economy from losses
Background image of page 7

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 8
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/17/2011 for the course EC 201 taught by Professor Haider during the Spring '10 term at Michigan State University.

Page1 / 13

Trade_policy - Trade Policy Protecting with Tariffs Quotas and Other Trade Barriers The Small Open Economy World markets set prices The small

This preview shows document pages 1 - 8. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online