Answer to Question #47604 in Microeconomics for Moe

Question #47604
Why would the removal of import tariff impact (to be more efficient) the industry in short run and long run?
Expert's answer
Tariffs are an important barrier to free trade. They are often imposed to protect domestic industry from cheap imports. However, it often leads to retaliation with other countries placing tariffs on their exports.
Trade liberalization involves removing barriers to trade such as tariffs on imports. Removing the tariff and having free trade would be a net gain for society.
Sometimes consumers are better off and producers worse off, and sometimes consumers are worse off and producers are better off, but the imposition of trade restrictions causes a net loss to society because the losses from trade restrictions are larger than the gains from trade restrictions. Free trade creates winners and losers, but theory and empirical evidence show that the size of the winnings from free trade are larger than the losses.

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Assignment Expert
14.10.14, 17:47

Dear Prcko. Thank you for adding information.

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