International Econ 1

International Econ 1 - Chapter 6 Effects of tariffs on a...

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Chapter 6 Effects of tariffs on a small country: -always reduces the welfare of a small country Large country: ambiguous (may increase, decrease, or do nothing) CONSUMER SURPLUS AND DEMAND CURVE -above market price & below the demand curve -at a higher price, consumer surplus decreases -the lower the price, the higher the consumer surplus SUPPLY CURVE AND PRODUCER SURPLUS -above supply curve & below market price -higher price higher Producer surplus -lower price smaller PS -a small country/economy is one that is a price-taker in the international/world market -a small country CANNOT affect the going world price of a product -a large country can affect the world price IN A SMALL COUNTRY -consumers are better off through trade -tariff will increase the price of the imported good -tariff will increase Producer surplus barriers to trade: policies countries use to restrict trade tariffs: a tax imposed on a good as it crosses a national boundary protectionist policy: a way to protect a domestic industry from foreign producers
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This note was uploaded on 02/08/2012 for the course ECONOMICS 300:04 taught by Professor Choudhary during the Fall '11 term at Rutgers.

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International Econ 1 - Chapter 6 Effects of tariffs on a...

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