Question

You are a policymaker. Name and describe the situation(s) where it is beneficial to do the following. Briefly support your choice using economic arguments. A possible answer can be never!

1. Utilizing general equilibrium analysis to study the impact of protection.
2. Measuring tariff rates using an effective rate of protection.
3. Using trade taxes as a source of government revenue.
4. Imposing import tariffs to extract a foreign monopoly profit.
5. Imposing import tariffs to offset a foreign production subsidy.

Answer 1

A protection against import has an impact on the general equilibrium of the country.exporting means a capital.inflow in the country but import means capital outflow from the country.and if any country can restrict import then his balance of payments or net export situation increases.for the developing countries import is much more greater than export.as developing countries import medicines highly advanced machines etc.and imports mainly agricultural product.so their net export is negative.so those country has to pay huge money to forign country and to acquire funds for this payments they have to take loans.but if these countries can testrict his import then the balance of payment will increase.and the country will be in better situation.

#sometimes tariff may also be protection against import.but there may be certain conditions like tariff rate must be high.let us explain this with a example.suppose a mobile will cost $500 in the home market of a country.and a foreign brand sell mobile at $460.so individual of that country will consume the foreign product.but if country imposes $50 tariff upon it then the price will increases to $510.so it is now higher than the home market price.so no one will buy foreign mobile.now this is a tariff uses as protection.

#in nowdays trade is essential for all country.and tax is a main source of income of government.and government can earn high revenue by imposing tax on trade.trade tax will be two types.importing duty and exporting tax.but any country doesn't want to impose higher level of export duty as it hampers the country's export.but by imposing higher rate of tariff onimporting products any country can generate a good amount of revenue.

#in a world with trade large industries dominates the world and they are control market through monopoly.like xiaomi is a chinese brand operating in India.he is nearly closed to earn monopoly profit from India.now if India imposes a tariff upon xiaomi then government take a part of his profit.as after imposing tariff xioami can't increase price.as if he do so then individual will go to other brands which cause a loss to xioami.so they have to pay that tariff from his monopoly profit

#china is a country which gives subsidy to their producer so they can sell their product to foreign country at such a lower price that others can't provide.so they will left the market and chinise company will enjoy a monopoly certain country.but by imposing a tariff of the same amount any country can offset the subsidy by chinise government.in todays world the trade war between china and USA are occured due to this reasons only.