So domestic producers can charge 30 per shirt in

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So, domestic producers can charge $30 per shirt. In general , the price facing domestic buyers & sellers equals (P W + T ).
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GESB 1006: Economics of Everyday Life University of Macau Analysis of Tariff on Cotton Shirts $30 P W = $20 Free trade: buyers demand 80 sellers supply 25 imports = 55 T = $10/shirt price rises to $30 buyers demand 70 sellers supply 40 imports = 30 P Q D S $20 25 Cotton shirts 40 70 80 imports
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GESB 1006: Economics of Everyday Life University of Macau Analysis of Tariff on Cotton Shirts $30 Free trade CS = A + B + C + D + E + F PS = G Total surplus = A + B + C + D + E + F + G With tariff CS = A + B PS = C + G Revenue = E Total surplus = A + B + C + E + G P Q D S $20 25 Cotton shirts 40 A B D E G F C 70 80 deadweight loss = D + F
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GESB 1006: Economics of Everyday Life University of Macau Import Quotas Import Quotas Quantitative limit on imports of a good Mostly has the same effects as a tariff: -Raises price, reduces quantity of imports -Reduces buyers’ welfare -Increases sellers’ welfare Creates profits for the foreign producers of the imported goods, who can sell them at higher price
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GESB 1006: Economics of Everyday Life University of Macau Arguments for Restricting Trade The Employment Argument Trade with other countries destroys domestic jobs” Free trade creates jobs at the same time that it destroys them Total unemployment does not rise as imports rise, because job losses from imports are offset by job gains in export industries…. Quantitative limit on imports of a good Mostly has the same effects as a tariff: -Raises price, reduces quantity of imports -Reduces buyers’ welfare -Increases sellers’ welfare Creates profits for the foreign producers of the imported goods, who can sell them at higher price
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GESB 1006: Economics of Everyday Life University of Macau The U.S. Imports and Unemployment (Decade Averages) 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 1955-1964 1965-1974 1975-1984 1985-1994 1995-2004 2005-2014 Imports as % of GDP Unemployment rate
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GESB 1006: Economics of Everyday Life University of Macau Arguments for Restricting Trade The National Security Argument ● “The industry is vital for national security and it should be protected from foreign competition, to prevent dependence on imports that could be disrupted during wartime When there are legitimate concerns over national security But producers may exaggerate their own importance to national security to obtain protection from foreign competition
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GESB 1006: Economics of Everyday Life University of Macau Arguments for Restricting Trade The Infant Industry Argument ● “New
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