CH 38 Protectionism

Question 1

What is protectionism?

Answer 1

An approach used by governments to protect domestic producers

Question 2

What are trade barriers?

Answer 2

Measures to designed to restrict imports

Question 3

What are the reasons for protectionism?

Answer 3

-To prevent dumping
-To protect employment
-To protect infant industries
-To gain tariff revenue
-To prevent the entry of harmful or unwanted goods
-To reduce current account defecits
-To retaliate

Question 4

What is dumping?

Answer 4

When an overseas firm sells large quantities of a product below cost in the domestic market

Question 5

What are the protectionist meothods?

Answer 5

-Tariffs
-Subsidies
-Quotas

Question 6

What are the advantages of Tariffs?

Answer 6

-Increased government revenue
-Protects domestic and infant industries
-Improving the current account by limiting imports

Question 7

What are the disadvantages of tariffs?

Answer 7

-Might face retaliation
-Consumers pay a higher price
-Firms have to pay a higher input price
-Decreased standards of living
-Domestic firms can become less efficient/compedetive

Question 8

What are the advantages of Quotas?

Answer 8

-Protects firms
-Protects employment
-Limits dumping
-Physically limits the supply of imports

Question 9

What are the disadvantages of quotas?

Answer 9

-Domestic firms may exploit consumers
-Less compedetive/efficicent

Question 10

What are the advantages of subsidies?

Answer 10

-Lower production costs
-Improves firms competitiveness
-Improves employment opportunities
-Protects infant firms

Question 11

What are the disadvantages of subsidies?

Answer 11

-Opportunity cost for the government