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Chapter 20: Q. 48 (page 491)

Why might a tax on domestic consumption of resources critical for national security be a more efficient approach than barriers to imports?

Short Answer

Expert verified

A tax on domestic consumption of resources critical for national security is a more efficient approach than barriers to imports because it preserves the availability of resources.

Step by step solution

01

Step 1. Meaning of tax.

A mandatory fee or financial charge levied by any government on an individual or an organization to collect revenue from the public is called a tax. It is levied to provide the best facilities and infrastructre.

02

Step 2. Reason for domestic consumption an efficient approach.

A tax on domestic consumption of resources critical for national security is a more efficient approach than barriers to imports because it preserves the availability of resources. The tax protects inefficient and excessive use of resources and the country can operate at efficient levels.

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Most popular questions from this chapter

Who gains and who loses from trade?

Why do you think labor standards and working conditions are lower in the low-income countries of the world than in countries like the United States?

From the Work It Out "Effects of Trade Barriers," you can see that a tariff raises the price of imports. What is interesting is that the price rises by less than the amount of the tariff. Who pays the rest of the tariff amount? Can you show this graphically?

The country of Pepper land exports steel to the Land of Submarines. Information for the quantity demanded (Qd) and quantity supplied (Qs) in each country, in a world without trade, are given in Table.

Price\(Qd
Qs
60230180
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80170220
90150240
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Table 20.6 Pepper land

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Table 20.7 Land of Submarines

a. What would be the equilibrium price and quantity in each country in a world without trade? How can you tell?

b. What would be the equilibrium price and quantity in each country if trade is allowed to occur? How can you tell?

c. Sketch two supply and demand diagrams, one for each country, in the situation before trade.

d. On those diagrams, show the equilibrium price and the levels of exports and imports in the world after trade.

e. If the Land of Submarines imposes an antidumping import quota of 30, explain in general terms whether it will benefit or injure consumers and producers in each country.

f. Does your general answer change if the Land of Submarines imposes an import quota of 70?

You have just been put in charge of trade policy

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well and the Malawian export market is developing. As such, Malawi coffee is an infant industry. Malawi coffee producers come to you and ask for tariff protection from cheap Tanzanian coffee. What sorts of policies will you

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