QA.

1
a) i) - Dumping is selling the product to another country below its cost price.
ii) - Subsidies are government assistance given to producers in this context to
produce more.
b) - Chinese exports will increase as US Imports for chinese product increases.
- Chinese exports will be cheaper compared to US products.
- Diagram - Actual Quota diagram with supply curve again shifting left showing the
removal of quota..shown through an arrow.
c) Tariff are taxes on imported goods and with US tariffs on Chinese producers the US
producers gain as they produce and sell more at higher prices while US consumers
lose as they have to pay higher. US workers gain off as employment increases with
an increase in supply. Diagram - Normal tariff graph
d) - Free trade - absence of government intervention in internal trade so trade takes
place without any restrictions between individuals or firms or different countries.
- Both countries will compete according to their absolute and comparative
advantage.. Better allocation of resources..allocation of government revenue in more
efficient way.

QA.2
a) i) Quota is a type of trade protection where by the quantity of imports of a product is
limited or restricted to a certain amount over a particular period of time.
ii) Anti-dumping tariff is trade protection where the government put taxes on dumped
goods in order to protect the domestic firms from dumping firms in the international
market.
b) -Subsidies are government assistance given to producers in this context to produce
more.
- Diagram - subsidy- supply shift
- Diagram explanation
- producers gain off as they receive higher prices for each unit they sell and they sell
more.. Consumption is not affected as the price and quantity demand does not
change.
c) theory (or law) of comparative advantage, as long as opportunity costs in two (or
more) countries differ, it is possible for all countries to gain from specialisation and
trade according to their comparative advantage. The global allocation of resources
improves, resulting in greater global output and greater global consumption, allowing
countries to consume outside their PPC.The theory of absolute advantage can
explain only a small part of gains from specialisation and trade.that countries can
gain from specialisation and trade even if one country has the absolute advantage in
both goods. theory of absolute advantage, if countries specialise in and export the
good in which they have an absolute advantage (can produce with fewer resources),
the result is increased production and consumption in each country.
d) anti dumping tariff to protect US producers, employment protection of US workers.
- With the removal of quota, the domestic producers worse off because they
lose some of the production while the consumers gain as they buy goods at
lower prices. Efficiency increases and global allocation of resources of
increases.
- Tax revenue decreases - with removal of tariff..