Answer to Question #294162 in Economics for Rey

Question

Which of the following are potentially valid arguments for tariff or export subsidies and which are not ? Explain your answers!

a. “The more oil the United States imports, the higher the price of oil will be in the next world shortage"

b. “US Farm exports don’t just mean higher incomes for farmers - they can create higher incomes for everyone who sells goods and services to the US Farm sector”

Answer 1

a. This statement is not valid to impose tariffs on imports of oil, because the price of oil may really increase in the next world shortage, but imports of cheaper oil makes U.S. oil prices lower during good times.

b. US Farm exports can create higher incomes for everyone who sells goods and services to the US Farm sector, but it should be supported only in times of crisis when the support is crucial.