Tarriffs generate revenue for the government.

Quotas generate revenues only for those companies that are able to to obtain and sell a portion of the intentionally limited supply of the product.

1) Quotas limit supply.

2) Quotas provide little incentive to use price competition to increase sales.

Quotas - limits the quantity of a product that can be imported or exported in a given time.

• A quota may:
• Set the total amount to be traded.
• Allocate amounts by country.

Unless they're optimum tarriffs, import tarriffs raise the price of imported goods by placing a tax on them that is not placed on domestic goods, thereby giving domestically produced goods a relative price advantage.

1) Export Tarriffs - collected by the exporting country.

2) Transit Tarriffs - collected by a country through which the goods pass.

3) Import Tarriffs - collected by the importing country.

Dumping

&

2 Effects of Importing Restrictions

Dumping - companies sometimes export below cost or below their home-country's price.

Import Restrictions May:

1. Prevent dumping from being used to put domestic producers out of business.
2. Get foreign producers to lower their prices.

Why Governments Intervene in Trade

(4 Noneconomic Reasons)

1) Maintaining essential industries

2) Dealing w/ unfriendly countries

3) Maintaining or extending spheres of influence

4) Preserving national identity

Why Governments Intervene in Trade

(4 Economic Reasons)

1) Preventing unemployment

2) Protecting Infant Industries

3) Promoting Industrialization

4) Improving Comparative Position

• Governmental trade policies, restrictions, and competitive support actions that:'
• Affect the ability of foreign producers to compete in a home country.
• May limit or enhance a company's ability to sell abroad or to acquire foreign supplies.