POL-1.B—a. Define tariffs and quotas. b. Explain (using graphs where appropriate) how markets are affected by public policy related to…

a. Define tariffs and quotas. b. Explain (using graphs where appropriate) how markets are affected by public policy related to international trade. c. Calculate (using data from a graph or table as appropriate) changes in market outcomes resulting from public policy related to international trade.

• Equilibria in competitive markets may be altered by the decision to open an economy to trade with other countries; equilibrium price can be higher or lower than under autarky, and the gap between domestic supply and demand is filled by trade. Opening an economy to trade with other countries affects consumer surplus, producer surplus, and total economic surplus.
• Tariffs, which governments sometimes use to influence international trade, affect domestic price, quantity, government revenue, and consumer surplus and total economic surplus.
• Quotas can be used to alter quantities produced and therefore affect price, consumer surplus, and total economic surplus. Exclusion: The graphing of quotas is beyond the scope of the course and the AP Exam, but understanding how quotas affect quantities produced is within the scope.
• Enduring understanding POL-1: Government policies influence consumer and producer behavior and therefore affect market outcomes.