AP Microeconomics / Unit 2: Supply and Demand
2.9 International Trade and Public Policy
Notes
- Free trade at the world price: consumers gain; domestic producers lose; total surplus rises.
- Tariffs and quotas raise domestic prices, help domestic producers, hurt consumers and create deadweight loss.
Practice
A tariff on imported steel:
A tax on imports.
With free trade at a world price below the domestic price, the country:
Buys cheaper abroad.
A quota limits:
Quantity restriction.
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