Ch 24 - Free Trade and Protectionism

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19 Terms

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Comparative advantage

is distorted leading to inefficient use of world resources.

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Government restrictions

are placed on the imports of foreign competitors (tariffs, quotas and subsidies)

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Subsidy

: an amount of money paid by the government to a form per unit of output.

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→ National

embargoes: marketing campaigns to encourage people to buy domestic goods.

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Free trade

international trade (imports and exports) without government restrictions

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Protectionism 

Protection of domestic industries against foreign competition 

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Arguments for protectionism

  • Protecting domestic employment 
  • Protecting the economy from low cost labour 
  • Protecting the economy from low cost labour 
  • Protecting an infant (sunrise) industry 
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Tariff

a tax that is charged on an imported good. Any tax will cause suppliers to supply less

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Subsidy

an amount of money paid by the government to a form per unit of output 

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Quotas

physical limit on the number of value of goods that can be imported to a country

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Administrative barriers

When goods are imported there are always administrative processes

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Embargoes

complete ban on imports 

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Health, safety, and environmental standards

When restrictions are put on the type of goods that can sold in the domestic market 

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Free trade

international trade (imports and exports) without government restrictions

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Tariff

a tax that is charged on an imported good

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Subsidy

an amount of money paid by the government to a form per unit of output

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Quotas

physical limit on the number of value of goods that can be imported to a country

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→ Embargoes

complete ban on imports

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→ National embargoes

marketing campaigns to encourage people to buy domestic goods