Effects of Import Quota: prices rises quantity bought decreases quantity produced in U.S. increases • U.S. consumers of good lose • U.S. producers of good gain • Importers of good gain • Society loses: a deadweight loss arises • Conclusion: A tariff brings in revenue for the government while a quota brings a profit for the importers. What are other import barriers? • Health, safety, and regulation barriers (restrict international trade) • Voluntary export restraints (like a quota allocated to a foreign exporter of a good) • A subsidy is a payment by the government to a producer • An export subsidy is a payment by the government to the producer of an exported good (illegal) • Rich nations want greater access to the markets of developing nations in exchange for allowing those nations greater access to the rich world’s markets • Developing nations want access to the farm product markets of the rich world, but they also want to protect their infant industries • Conclusion: Export subsidies bring gains to domestic producers, but they result in inefficient underproduction in the rest of the world and create a deadweight loss.
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