Author Question: According to the market imperfections theory, competition is a common market imperfection. ... (Read 61 times)

xclash · **on:** Jul 7, 2018

According to the market imperfections theory, competition is a common market imperfection.

Indicate whether the statement is true or false

Question 2

Explain how tariffs protect domestic producers, and describe how a foreign trade zone might offset the effects of tariffs.

What will be an ideal response?

cuttiesgirl16 · **Reply #1 on:** Jul 7, 2018

Answer to Question 1

FALSE

Answer to Question 2

A tariff is a government tax levied on a product as it enters or leaves a country. A tariff increases the price of an imported product directly and, therefore, reduces its appeal to buyers.
Nations can use tariffs to protect domestic producers. For example, an import tariff raises the cost of an imported good and increases the appeal of domestically produced goods. In this way, domestic producers gain a protective barrier against imports.
While tariffs are designed to restrict trade, most countries promote trade with other nations by creating what is called a foreign trade zone (FTZ)a designated geographic region through which merchandise is allowed to pass with lower customs duties (taxes) and/or fewer customs procedures. Increased employment is often the intended purpose of foreign trade zones, with a by-product being increased trade.
Customs duties increase the total amount of a good's production cost and increase the time needed to get it to market. Companies can reduce such costs and time by establishing a facility inside a foreign trade zone. A common purpose of many companies' facilities in such zones is final product assembly. The U.S. Department of Commerce administers dozens of foreign trade zones within the United States. Many of these zones allow components to be imported at a discount from the normal duty. Once assembled, the finished product can be sold within the U.S. market with no further duties charged. State governments welcome such zones to obtain the jobs that the assembly operations create.