A government introduces various commercial policy interventions to regulate foreign trade and protect domestic markets. Match each commercial policy intervention on the left with its precise economic impact on domestic price, government revenue, or market welfare on the right.
- Specific TariffGenerates state tax revenue proportional to physical volume while raising the domestic price above the world market level.
- Import QuotaRestricts import volume and creates quota rents, raising domestic price without generating government customs revenue.
- Domestic Production SubsidyLowers production costs for local producers competing with imports without directly increasing the price paid by domestic consumers.
- Export SubsidyReduces domestic availability and raises domestic price of the exported good while lowering prices for foreign buyers.
Answer
Specific Tariff matches with generating state tax revenue proportional to physical volume while raising domestic prices; Import Quota matches with restricting import volume and creating quota rents without generating customs revenue; Domestic Production Subsidy matches with lowering production costs for local producers competing with imports without increasing prices paid by domestic consumers; Export Subsidy matches with reducing domestic availability and raising domestic prices while lowering prices for foreign buyers.
Each commercial policy instrument matches its precise economic mechanism: specific tariffs levy fixed per-unit customs revenue while raising prices; quotas create quota rents and restrict quantity; domestic production subsidies lower producer costs without inflating consumer prices; export subsidies raise domestic prices by diverting supply overseas.
Step-by-Step Solution
Key Concept
Market and Welfare Effects of Commercial Policy Instruments
Estimated Time:2m 0s