Modern Principles: Macroeconomics
Modern Principles: Macroeconomics
3rd Edition
ISBN: 9781429278409
Author: Tyler Cowen, Alex Tabarrok
Publisher: Worth Publishers
Question
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Chapter 19, Problem 1FT
To determine

Trade barrier and theory of trade.

Expert Solution & Answer
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Explanation of Solution

By removing the trade barriers, Japanese consumers would be better off, whereas the Japanese rice farmers would be worse off. The net gain would be positive according to the theory of trade; Japanese consumers would be better off than Japanese producers (who would be worse off). By the theory of politics, Japanese rice farmers would be lobbying against the reduction in trade barriers than consumers who would be favoring the reduction in barriers. The gains received per consumer are comparatively lower than the losses to producers. Thus, the producers will have a greater incentive to lobby against reductions in trade barriers.

Economics Concept Introduction

Concept introduction:

Trade barrier: Trade barriers refer to the government-induced restrictions imposed usually on international trade.

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