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ITI Part 2 (instruments of trade policy (import tariff (small country:…
ITI Part 2
instruments of trade policy
import tariff
small country: domestic price increases, world prices stays the same
large country: domestic price increase, world price deceases (CAN LEAD TO OVERALL WELFARE GAIN)
specific/ad valorem
import quota
a certain number of goods imported into a country
export subsidies
voluntary export restraints (VER)
export limited on purpose from a foreign country
scarcity on domestic market (like import quota)
internal economies of scale
lower AC= lower price= sales and producion expands--> imperfect competition beause competitiors are driven out of market
no profits, p=AC not MC
dumping= rice elasticity domestic is lower than in foreign so that higher prices are charged at home than in abroad
FDI
management influence
greenfield vs brownfield
horizontal: operations are in foreign coutnry--> traiff jumping closer to consumer