What Is an Advantage of Free-Trade Agreements Quizlet


For example, the United States prescribes an import quota for cars from Japan. The Japanese government may find it appropriate to introduce a quota-sharing program to determine the number of cars that each Japanese automaker is allowed to export to the United States. Any additional number that a manufacturer wishes to export must be negotiated with another manufacturer who could not or cannot maximize his share of the quota. Quotas, like other trade restrictions, are generally used for the benefit of the producer of a good in this economy. In addition, there are co-payment insurance programs in which liability and premiums are distributed proportionally among insurers. For example, three companies purchase a $1,000,000 fire insurance policy on a co-share basis, with Company A accepting 50% ($500,000), Company B 30% ($300,000) and Company C 20% ($200,000). If the annual premium were $5,000, Company A would receive a premium of $2,500, a premium of $1,500 B and a premium of $1,000 C. Company A would pay 50% of a claim, Company B would pay 30% of a claim, and Company C would pay 20% of a claim. An import quota is a type of trade restriction that sets a physical limit on the quantity of a product that can be imported into a country during a given period. [1] The share corresponds to a certain number or percentage of the allocation as a total quota imposed on each sole proprietorship. .