Restrictions of Free trade

What is free trade

international trade without trade barriers

types of trade restrictions

1. Tariffs

2. Quotas

3. Subsidies

4. non-tariff barriers

what is a tariff

A tax put on an import

Tariff diagram

A- Producer surplus gained

C- Tax Revenues

B+d= Welfare loss

what is the amount imported

130-70

What are Quotas

limit on quantity of imports

cons of quotas

earn no tax revenue

sever shortages

how are subsidies restrictions for free trade

grants given reduce costs of production ,increase quantity supplied . Domestic goods more competitive and reduce demand for imports

whare non-tariff barriers

Health and safety regulations

environmental regulations

label regulations

Reasons to restrict free trade

1. Prevent dumping

2. Protecting domestic employment

3. Protecting infant industries

4. Health and safety

what is dumping

predatory pricing on an international scale

foreign firms aggressively cut prices below average costs to force out competition

what are infant industries

industries that do not benefit from economies of scale , increase production of costs , increase prices