ECONOMICS

Tariff and Quota

Tariffs And Quota

Tariff practically is the best thing to do. The optimum tariff applies only to large countries. That is the first important thing. The punch line is that the larger countries tend to impact the price of the imported goods. Their demand is so big that they definitely exert influence the world price of the commodity. Imposing tariff reduces demand for the imported goods and depresses the world price of the imported goods (Cherunilam, 2008, pp.265). This is the key thing when it comes to optimal tariff. The reason the country is said to gain is by forcing the price of the imports down so that the one gets a product cheaper than the price it was bought for earlier. Simultaneously it can then result in a net gain despite the deficiencies that are present. The reduction in the price of the imported good can aid in eradicating the deficiencies present (gitman & mcdaniel, 2008, pp. 74)

Positive externalities

Positive externalities arise where the amount of activities of a particular industry has got skill over benefits for other industries in the economy and an appropriate example would be any type of a high technology oriented company (Mankiw, 2011, pp. 199). The question that arises is that why does hi-tech oriented companies have positive externalities. The answer to it is that high technology oriented company have technological knowledge that is generic in an industry can help to solve technological problems that they come across on day to day basis of not only their industry but also of other industries. Another appropriate example which has intensive technology made use off is the laser technology. A point that should be pondered upon is that why were lasers invented. Lasers were first invented to accurately measure the distance of the earth from the moon. Laser at the time had a very narrow usage. Lasers, today, are incorporated in millions of things. One little technology that was initially used to measure the distance has proven to be fruitful for various other technologies and that too after further research and development and simultaneously has solved technological problems or has aided in inventing new technologies useful for many other industries. After analyzing the degree to which the positive externalities exist in high technology oriented industry, one might want to enter and invest in such an industry since the knowledge made use of is benefitting the other industries (Mankiw & Taylor, 2006, pp. 194)

Strategic industries

There are many strategic industries and an example of it is computing and is very valuable because the military is highly dependent and using computing extensively to develop defense mechanism for the country. It is not only used for military purposes but also used for commercial purposes. As far as tariff is concerned it is going to aid in expanding the domestic production. It is going to promote the size and growth of the industry that are more critical for military reasons, steel, other traditional industries and high technology oriented ...