(a)
To explain:
The possible benefits and costs of a commercial policy designed to follow the given goal.
Explanation of Solution
Before saving any job in the industry it must be created first. Importing restrictions may save domestic jobs but at the same time the cost which is to be incurred to the consumers may be greater than the benefits for those who retain their jobs.
Comparative advantage refers to the benefits of producing goods and services at lower
(b)
To explain:
The possible benefits and costs of a commercial policy designed to follow the given goal.
Explanation of Solution
In this policy, people used to believe that the domestic government should take necessary steps to offset the advantage of foreign firms because foreign workers are always willing to work on a very low level of wages. Imposing restrictions will also eliminate the comparative advantage of foreign firms. By doing these, domestic consumers will worse off and undermine the basis of economy efficiency.
Comparative Advantage:
Comparative advantage refers to the benefits of producing goods and services at lower opportunity cost than the other country.
(c)
To explain:
The possible benefits and costs of a commercial policy designed to follow the given goal.
Explanation of Solution
Government revenue is being generated by tariff on trade. There are industrial countries for which income taxes are easy to collect and it rarely justifies tariffs based on the revenue generated for government spending. But there are many developing countries which find income taxes very difficult to levy and to collect tariffs is very easy for them. In developing countries, Observation of trade flows makes tariffs a very popular tax, and for which their revenue requirements may provide a valid justification for their existence.
Comparative Advantage:
Comparative advantage refers to the benefits of producing goods and services at lower opportunity cost than the other country.
(d)
To explain:
The possible benefits and costs of a commercial policy designed to follow the given goal.
Explanation of Solution
The industries which are very critical to the national defense should be protected from foreign competitions so that their existence is ensured. Likewise, proper care must be taken to highly ensure that the national defense arguments are not to be used to protect the countries other than those who are very crucial to national defense. The protection from foreign competition is very necessary so that the key defense related industries should continue to produce. For example, the shipbuilding industry is necessary in war since foreign made ships are not to be used at that time.
Comparative Advantage:
Comparative advantage refers to the benefits of producing goods and services at lower opportunity cost than the other country.
(e)
To explain:
The possible benefits and costs of a commercial policy designed to follow the given goal.
Explanation of Solution
Protecting infant industries is necessary for countries so that when the time is needed to be competitive, they can stand against the rest of the world. Nations are often inclined to protect new industries so that these new industries need adequate time to develop and to establish themselves to be more efficient enough. With the help of this, their costs are even no longer higher than those of foreign rivals. The main motive of such protection is to subsidize the costs. When the infant industry gets maturity and achieves enough size, such protection is withdrawn, and the industry is ready to compete with foreign competitors.
Comparative Advantage:
Comparative advantage refers to the benefits of producing goods and services at lower opportunity cost than the other country.
(f)
To explain:
The possible benefits and costs of a commercial policy designed to follow the given goal.
Explanation of Solution
An industry in which the cost of producing a unit of output fall due to increase in output is produced is an increasing return to scale. Strategic trade policy is intended to provide domestic increasing return to scale with an advantage over there foreign competitors. Opportunity cost falls in some industries with the increased level of output, such an increasing return to scale will require concentrating on production.
Comparative Advantage:
Comparative advantage refers to the benefits of producing goods and services at lower opportunity cost than the other country.
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Chapter 21 Solutions
Microeconomics (MindTap Course List)
- Name and define three policy tools for enacting protectionism.arrow_forwardIf the president of the United States wishes to implement protectionist policies, which one of the following can be employed? Group of answer choices A) Lower export subsidies. B) Place high tariffs on imported goods. C) Agree to "most favored nation" clauses. D) Remove quotas on imported goods. E) Reduce required labelling regulations on imported goods.arrow_forwardWhat is an argument expressed to counter infant industry rationale for protectionism? Group of answer choices The protectionism intended to be short-term often extends further than planned. Trying to create a comparative advantage is typically less successful than investing in industries that already have a comparative advantage. The industry typically fails to be worth investing in, and thousands of jobs are lost. Government intervention in international trade is rarely successful.arrow_forward
- Exports of goods is a strategy for international companies. Which of the following is not a limitation to export strategy. Select one: a. Threats of quotas b. Threats of import tariffs c. Establishment of trade agreement d. High transportation costs Which of the following represents the stage where economic integration is least complete Select one: a. Free Trade Area b. Monetary Union c. Common Market d. Customs Union Japanese auto producers found it easier to set up operation in US to deal with protectionist threats made by US. Select one: True False Residents of Ireland decide it is cheaper to import 100,000 more bushels of wheat from Canada than it is to reallocate domestic land to wheat production. In this case: a. The opportunity cost of wheat must be lower in Canada than in Ireland b. Ireland has a comparative advantage in wheat production. c. Canada must have an absolute advantage…arrow_forwardIdentify which of the arguments for restricting trade that each of the following rebuttals directs against. Rebuttals The Jobs Argument The National-Security Argument The Infant-Industry Argument The Unfair-Competition Argument The Protection-as-a-Bargaining-Chip Argument (A) The gains of the consumers from buying imports at the low price subsidized by foreign governments would exceed the losses of domestic producers. (B) Companies may exaggerate the degree to which their products are essential to national defense in order to obtain protection from foreign competition at the expense of consumers. (C) The country may be forced into deciding between implementing trade restrictions as threatened, which would make the society as a whole worse off, or backing down on its own threat, which would cause it to lose credibility in foreign affairs. (D) Opening up to free trade may impose hardship on some…arrow_forwardThe country of Autarkistan is currently closed off from the world and engages in no international trade. Like the rest of the world, it produces and consumes (only) two goods, textiles and machines, using labor and capital. The textile industry employs more labor, per unit of capital, than does the machine industry. Being poor, Autarkistan has far less capital per worker than does the rest of the world. According to the Factor Proportions (H-O) model of international trade, in which good does Autarkistan have a comparative advantage? Group of answer choices Textiles Machines Cannot tell.arrow_forward
- The country of Autarkistan is currently closed off from the world and engages in no international trade. Like the rest of the world, it produces and consumes (only) two goods, textiles and machines, using labor and capital. The textile industry employs more labor, per unit of capital, than does the machine industry. Being poor, Autarkistan has far less capital per worker than does the rest of the world. According to the Factor Proportions (H-O) model of international trade, in which good does Autarkistan have a comparative advantage? Again, suppose that Autarkistan opens up to free international trade with the world. Using the H-O model, what will happen to the real wage of labor in the machine industry in Autarkistan? Group of answer choices Rise Fall Not Change Cannot tell.arrow_forwardFor many years, an international agreement called the Multifiber Agreement limited the amount of textiles that the developed economies of North America and Europe could buy from poor countries in Latin America and Asia. Textiles can be produced by relatively unskilled labor with a reasonably small amount of capital. Who benefited from the protectionism of the Multifiber Agreement? Who suffered? The Multifiber Agreement expired on January 1, 2005. Who should benefit from its end? Who will suffer?arrow_forwardThanks in advance! Please give all statement answer Trade decreases productivity through non-specialization and the accumulation of knowledge. T or F? International trade allows a country to go beyond the domestic production possibility frontier (PFF). T or F? Import quotas place limits on the price of an imported product. T or F? Historical critiques of capitalism revolve around commodity production controlled by capitalists for profit-making based on consumer spending and want free and open markets and deregulation supplies the solution for many problems. T or F?arrow_forward
- What is the primary argument supporting protectionism? Group of answer choices Free trade can lead to job loss and lower wages. Protectionism drives innovation because nations need to develop or improve their comparative advantage for a good. Free trade enables political adversaries to benefit. Protectionism is a way to reduce inflation.arrow_forwardTrade policy that protects domestic industry, such as export subsidies, will always decrease welfare in other countries. True Falsearrow_forwardTRUE OR FALSE? EXPLAIN. To protect an industry, it is best when the Effective Rate of Protection is higher than the Normal Rate of Protection. For a Tariff-Rate Quota, the government imposes an import tariff and an import quota. The formation of Free Trade Areas and Custom Unions leads to free trade between all countries. Immiserizing growth takes place when there is an increase in growth and trade of a country. In the U.S, countervailing duties are levied on imported goods if they receive an export subsidy from the foreign government.arrow_forward
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