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- UID
- 223266
- 帖子
- 275
- 主题
- 124
- 注册时间
- 2011-7-11
- 最后登录
- 2016-4-16
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At the country level, tariffs do NOT cause inefficiency in the society. Inefficiency occurs, when Price in the market is away from the equilibrium price determined by Demand and Supply for that product.
In this case, by imposing tariffs on tyres, govt is restricting supply to domestic supply only. So, country's supply curve for tyres shifts left and new equilibrium price is obtained which is higher. But this is still the equlibrium price and at equlibrium price there is never a Dead Weight Loss. Domestic firms will still compete with each other and would produce tyres as efficiently as they can limited to geographical boundaries.
But inefficiency occurs at GLOBAL LEVEL. Some of the resources in China, which were efficiently producing tyres will need to be re-allocated to do something else at less than their previous efficiency levels (this is assuming they were most efficiently allocated in producing tyres).
And resources in the US which could be freed up to do something else, dont get freed up.
Combined, this becomes inefficiency at GLOBAL ECONOMY Level. |
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发表于 2011-7-13 16:09
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