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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406

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Microeconomics

13th Edition
Roger A. Arnold
ISBN: 9781337617406
Textbook Problem

Some economists have argued that, because domestic consumers gain more from free trade than domestic producers gain from (import) tariffs and quotas, consumers should buy out domestic producers and rid themselves of costly tariffs and quotas. For example, if consumers save $400 million from free trade (through paying lower prices) and producers gain $100 million from tariffs and quotas, consumers can pay producers something more than $100 million but less than $400 million and get producers to favor free trade too. Assuming that this scheme were feasible, what do you think of it?

To determine

The effectiveness of voluntary agreement policy in international trade.

Explanation

The given statement is almost similar to the voluntary agreement, where both the producers and consumers benefit more than from disagreement. Here, the consumers are willing to pay off domestic producers with their benefit received from free trade. This is because the benefit received by the consumers from free trade is greater ...

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