Author Question: In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes ... (Read 114 times)

rosent76 · **on:** Jun 29, 2018

In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes agree to limit their exports to a country. What are these types of agreements called?

A) involuntary export restraints B) sanctions
C) implicit quotas D) voluntary export restraints

Question 2

Explain the Hotelling principle.

What will be an ideal response?

Mollythedog · **Reply #1 on:** Jun 29, 2018

Answer to Question 1

D

Answer to Question 2

The Hotelling principle is the result that the price of a nonrenewable natural resource is expected to rise at a rate equal to the interest rate. Only when this situation exists can the market be in equilibrium. For example, if the price is expected to rise more rapidly than the interest rate, supply decreases and demand increases, and the present price rises. Supply will continue to decrease, demand will continue to increase, and the present price will continue to rise until the percentage increase from the present price to the future expected price equals the interest rate. At that point, which is the situation outlined by the Hotelling principle, the market is in equilibrium because supply stops decreasing and demand stops increasing.