Untitled Flashcards Set

Who gains from tariffs?

Government and domestic producers.

Who suffers from tariffs?

Consumers and the world economy.

Subsidies

Government payment to domestic producers.

Economies of scale

Factors that cause a producer's average cost per unit to fall as output rises.

Voluntary Export Restraint (VER)

A quota on trade imposed from the exporting country's side.

Quota rent

Extra profit producers make when supply is artificially limited by an import quota.

Local Content Requirement (LCR)

A requirement that a specific fraction of a good be produced domestically.

Dumping

Selling goods in another country below market prices to drive competition out then raise prices.

Political Arguments for Government Intervention

Protecting jobs and industries; protecting national security.

Krugman's view on strategic trade policies

Policies that establish domestic firms in a dominant position but may provoke retaliation.

FDI Limitations to Exporting

Governments increase the attractiveness of FDI by limiting imports through quotas and tariffs.

Limitations of Licensing

Involves giving away tech knowledge and lack of control over production, marketing, and strategy.

Greenfield Investments

The establishment of a wholly new operation in a foreign country.

Internalization Theory

Firms prefer FDI over licensing to retain control over capabilities.

The Eclectic Paradigm

Combines location-specific assets and firm's unique assets to necessitate FDI.

Pragmatic Nationalism

Supports FDI only when its national benefits outweigh costs.

Host Country Benefits of FDI

Balance of payments effects and surpluses by replacing other imports.

Home Country Benefits of FDI

Inward flow of earnings, employment, and learning from other countries.

Levels of Economic Integration

Political, economic, common, customs, and free trade.

Customs Union

Eliminates trade barriers between member countries and adopts a common external trade policy.

Common Market

A group of countries acting as a single market without trade barriers between them.