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Stick with Steel Tariffs

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Introduction

"Let's Stick With the Steel Tariffs" 1. Define the following terms indicated in bold in the text: a. Dumping - dumping is defined as the act of a manufacturer in one country exporting a product to another country at a price which is either below the price it charges in its home market or is below its costs of production. The term has negative connotation, but advocates of free markets see "dumping" as beneficial for consumers and believe that protectionism to prevent it b. Comparative advantage - is a principle to explain how it can be beneficial for two parties (countries, regions, individuals and so on) to trade if one has a lower relative cost of producing some good. ...read more.

Middle

the price level, domestic production has increased from Q1 to Q3, while the level of imports has been reduced to Y4 - Y3. 3. Using a diagram explain one other type of protectionist policy that the American government might have considered in order to support the steel industry. The effect of an import quota on domestic producers is to allow them to recover the producer surplus in area b, which they take away from consumers. The effect on international producers is that they now obtain area f as a surplus the effect on consumers is that they lose b, c, f and g. the effect on the total world economy is that areas c and g are lost in what is called a deadweight loss. ...read more.

Conclusion

If the government wouldn't have intervened, this economy would have caused further structural unemployment and this would have caused more concern for the government. This intervention not only benefited the market but also genuinely benefited local authorities. Governments receive more income from domestic suppliers than from importers and therefore the government would genuinely want to maintain the domestic supply at a high rate so that importers don't take over the market. Governments never want to depend on foreign intervention as this in consequence could trouble the country. Consequently this concludes to the fact that when a country is too dependant on foreign involvement, if this involvement is extracted and the multinationals leave the country, the country will fail economically. ...read more.

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