| Chapter 15 Outline |
| III. BARRIERS TO INTERNATIONAL TRADE |
| A. Tariffs |
| 1. A tariff is a tax levied upon a good when it crosses a nation's border. |
| 2. Because a tariff increases the domestic price of a good, consumers are worse off and domestic producers are better off. |
| 3. Because a tariff redirects resources from industries that have a comparative advantage to those that have a comparative disadvantage, society is made worse off. |
| B. Quotas |
| 1. An import quota specifies the maximum amount of a good that may be imported during a time period. |
| 2. The effects of a quota are similar to the effects of a tariff. |
| a. One difference is the fact that a tariff generates revenue for the federal
government; a quota does not. |
| b. Another difference is the fact that a quota may result in a higher price
than a tariff because imports cannot respond to an increase in demand. |
| C. Voluntary Export Restraints |
| 1. A voluntary export restraint (VER) is an agreement between importing and exporting countries whereby exporting nations agree to limit the mount of a good shipped to importing nations. |
| 2. Like a tariff and quota, a VER increases the price of a good and redirects resources from industries that have a comparative advantage to those that have a comparative disadvantage. |