6.3 Effects of Trade Policies

• Taxes imposed on imported goods are called tariffs
• Trade policies can lead to inefficiencies and higher consumer prices
• What are trade policies defined as?

  Government policies regulating trade
• What effect do subsidies have on domestic producers?

  Lower their costs
• Order the effects of tariffs on consumers:

  1️⃣ Higher import prices

  2️⃣ Reduced demand for imports

  3️⃣ Increased domestic production
• Trade policies can protect domestic industries but reduce consumer choices
• Why do tariffs reduce the demand for imports?

  Higher import prices
• Subsidies are financial aid provided to domestic producers to lower their costs.


  True
• What is the effect of tariffs on consumer prices?

  Increase prices
• Why do tariffs reduce the demand for imports?

  Higher prices
• What is the primary effect of quotas on domestic prices?

  Increase domestic prices
• Match the trade policy with its effect on global trade:

  Tariffs ↔️ Can trigger retaliatory tariffs

  Quotas ↔️ May lead to trade disputes

  Subsidies ↔️ Could distort international trade
• What is the effect of subsidies on producer surplus?

  Increase producer surplus
• Trade policies can create political tensions between countries.


  True
• What are trade policies designed to regulate?

  International trade
• Subsidies lower costs for domestic producers.

  True
• What is the primary effect of quotas on the supply of imports?

  Restrict supply
• Why do tariffs lead to higher consumer prices?

  Taxes on imports
• What happens to consumer surplus under tariffs?

  Decreases
• How do tariffs affect domestic employment?

  Increase employment
• What must policymakers balance when implementing trade policies?

  Economic efficiency and political considerations
• Quotas restrict the supply of imports and increase domestic prices.


  True
• Match the trade policy with its effect:

  Tariffs ↔️ Increase import prices

  Quotas ↔️ Restrict import supply

  Subsidies ↔️ Lower production costs
• What happens to import demand when tariffs increase prices?

  Demand decreases
• Subsidies enhance the competitiveness of domestic firms in international markets.


  True
• How do subsidies differ from tariffs and quotas in their effect on domestic producers?

  Lower production costs
• Match the trade policy with its definition:

  Tariffs ↔️ Taxes on imported goods

  Quotas ↔️ Limits on import quantity

  Subsidies ↔️ Financial aid to domestic producers
• How do subsidies affect domestic producers?

  Lower costs
• How do quotas directly affect the supply of imports?

  Restrict supply
• Subsidies can distort international trade by creating unfair competition.

  True
• Quotas reduce consumer surplus by increasing domestic prices.


  True
• Match the trade policy with its example of effect on domestic employment:

  Tariffs on imported steel ↔️ Boost domestic steel jobs

  Quotas on imported textiles ↔️ Protect local textile jobs

  Subsidies to agriculture ↔️ Increase food production jobs
• What is the primary aim of trade policies according to the final summary?

  Protect domestic industries
• What effect do quotas have on domestic prices?

  Increase prices
• Tariffs on imported goods reduce demand because they increase prices
• Effects of tariffs on imported goods

  1️⃣ Increase consumer prices

  2️⃣ Reduce import demand

  3️⃣ Decrease consumer surplus

  4️⃣ Increase producer surplus
• Subsidies can distort global trade patterns.


  True
• Quotas reduce consumer surplus by limiting import availability
• Match the trade policy with its political implication:

  Tariffs ↔️ Retaliatory tariffs

  Quotas ↔️ Political conflict

  Subsidies ↔️ Unfair market intervention
• Tariffs make imported goods more affordable for consumers.

  False