Using a graph, illustrate what the market effects of a quota, a tariff, or a complete ban on imports would be
What will be an ideal response?
As shown in the figure, the demand for the product is the same in all cases; the question is what the supply curve would look like. In the case of the complete ban, the supply curve is the domestic supply curve. It shifts to the right if the tariff or quota is put in place, and shifts further to the right in the world without trade barriers. So free trade has the highest quantity and lowest price, an import ban has the lowest quantity and highest price, and the tariff or quota is somewhere in between the two cases.
You might also like to view...
Which method of corporate finance is used the most? Why?
What will be an ideal response?
One purpose of interest-rate ceilings was to: a. establish a ceiling on bank profits
b. establish a floor on bank profits. c. encourage competition in other areas. d. eliminate the need for the FDIC. e. reduce the chance of bank failures.
If speculators lost confidence in foreign economies and so wanted to buy more U.S. bonds
a. the dollar would appreciate which would cause aggregate demand to shift right. b. the dollar would appreciate which would cause aggregate demand to shift left. c. the dollar would depreciate which would cause aggregate demand to shift right. d. the dollar would depreciate which would cause aggregate demand to shift left.
An adverse supply shock that is permanent shifts which curve in addition to the curves shifted by one that is temporary?
A. The IS curve B. The LM curve C. The labor demand curve D. The FE line