Protectionism: Key methods of protectionism

Overview

Recall questions on Key methods of protectionism.

What you need to know

Answer each one before you reveal it.

Questions from this subtopic

Each one with the model answer underneath.

1. 1

   What happens to the quantity demanded domestically when a tariff is imposed?

   Model answer

   Quantity demanded falls because the higher price reduces consumer purchases.

2. 2

   How does a tariff affect domestic supply?

   Model answer

   Domestic supply increases because the higher price makes it profitable for domestic producers to supply more.

3. 3

   Explain what happens to the volume of imports when a tariff is imposed.

   Model answer

   Imports decrease because higher prices reduce demand while domestic supply increases, narrowing the gap between domestic supply and demand.

4. 4

   How does a tariff generate revenue for the government?

   Model answer

   The government collects revenue equal to the tariff per unit multiplied by the quantity of goods still imported after the tariff is imposed.

5. 5

   Why does a tariff create deadweight welfare loss?

   Model answer

   A tariff creates deadweight loss because it causes inefficient domestic production and reduces consumption below the free trade level, resulting in a net loss of economic welfare.

6. 6

   What is the infant industry argument for protectionism?

   Model answer

   New industries may need temporary protection from established foreign competitors until they achieve economies of scale and become competitive.

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