Ch. 6 Homework
Suppose that in the United States laptops are built from a combination of foreign parts and domestic inputs. In this case, the effective rate of protection is _____ percent. (round to one decimal place)
30
Suppose that in the United States laptops are built from a combination of foreign parts and domestic inputs. If a laptop sells for $600 but requires $200 of imported parts, the domestic value added is $________.
400
Suppose that in the United States laptops are built from a combination of foreign parts and domestic inputs. If, in addition to the 20 percent tariff on the final good, a 20 percent tariff on imported parts is levied, the effective rate of protection for U.S. laptop manufacturers becomes ______ percent. (round to one decimal place)
44.4
Suppose that in the United States laptops are built from a combination of foreign parts and domestic inputs. Assuming that the United States cannot cause the world price to change, a 20 percent tariff levied on laptops of the same quality and with the same features will cause the domestic price to rise to $_______ and cause the domestic value added to become $_______.
720; 520
Compared with free trade, large countries may increase national welfare when they place a tariff on imports. What unique aspect of large countries, explains thisconclusion? Large countries A. reduce the world price of the import when they levy a tariff. B. have large numbers of domestic producers who can expand substantially when they are protected by tariffs. C. are less likely to face tariff retaliation by trade partners. D. All of the above.
A
Under free trade, a digital SLR camera sells for $1000. If the U.S. imported the parts to produce a digital SLR, the free trade price of the parts would be $550. If U.S. producers produce digital SLRs under these conditions A. their value-added equals $450. B. their value-added equals $1000. C. their value-added equals $550. D. their value-added equals $0.
A
A country may actually make itself better off by levying a tariff if A. there are no harmful effects on innovation. B. it is large enough to affect the world price when it imposes a tariff. C. no rent seeking behavior occurs. D. other nations do not retaliate. E. all of the above. F. A, B, and D only.
E
Consult Figure 6.3 "The Effects of a Tariff" on page 123 of the text. The figure indicates that when the country moves from free trade to the tariff equilibrium A. its imports fall by the amount Q1 to Q1*. B. its imports fall by the amount Q2 to Q2*. C. it changes by the net amount Q2 to Q2* minus Q1 to Q1*. D. it falls by the amount Q1* to Q2*. E. its imports fall by the amount Q1 to Q1* plus Q2 to Q2*.
E
Nontariff barriers such as quotas, health and safety codes, product standards, etc. tend to be less transparent than tariffs because they A. are often associated with special circumstances known only to a select few. B. are never formally published. C. often require careful and precise interpretation. D. all of the above. E. A and C only.
E
Under free trade, a digital SLR camera sells for $1000. If the U.S. imported the parts to produce a digital SLR, the free trade price of the parts would be $550. U.S. digital SLR producers will receive the highest "Effective Rate of Protection" if A. the U.S. introduces a 25% tariff on imported digital SLR cameras. B. the U.S. introduces a 25% tariff on imported parts that are used to produce digital SLR cameras. C. the U.S. introduces a 25% tariff on both digital SLRs and on the imported parts that are used to produce digital SLR cameras. D. the U.S. introduces a quota limit on imported parts that are used to produce digital SLR cameras.
A
Unlike the eight previous rounds of world trade negotiations since the creation of GATT in 1948, the Doha round appears to be the first to have A. broken down with no agreement. B. received unanimous approval. C. forced the rich nations to compensate the poor nations. D. pitted the U.S. against its traditional allies.
A
Suppose the "Effective Rate of Protection" for Brazilian automobile producers is calculated to be −60%. This result indicates that A. Brazilian automobile producers would be better off if Brazil increased its tariffs on imported automobile parts. B. Brazilian automobile producers would be better off if Brazil adopted free trade for all parts and final goods. C. Brazilian automobile producers would be better off if Brazil increased its tariffs on both imported automobile parts and imported cars by 60% each. D. there is a flaw in the calculation. The effective rate of protection is always positive.
B
Which sets of countries reduced their average tariff rates between the mid-1990s and 2012? A. Low- and middle-income countries only. B. Low-, middle-, and high-income countries. C. High-income and middle-income countries only. D. High-income countries only. E. Low-income countries only.
B
Because of its politically sensitive nature, the last economic sector to be liberalized via multilateral trade negotiations has been A. energy. B. financial services. C. manufacturing. D. agriculture. E. transportation.
D
In addition to the production and consumption side of deadweight losses, a variety of other potential costs of tariffs have been identified. Which of the following is not one of those costs? A. The threat of retaliation and the potential loss of export markets. B. The stifling of the incentive to innovate. C. The encouragement of rent seeking. D. The likelihood of excessive growth in the protected industry.
D
Suppose the U.S. decided to use a quota to limit cell phone imports. Assume the U.S. is a small country. If the U.S. used an auction to allocate quota rights A. the U.S. welfare would be higher than it would be if U.S. continued to have a free trade policy. B. the auction would generate much more revenue than would be generated by a tariff which limited imports to the level allowed under the quota. C. the U.S. welfare would be lower than it would be if the exporting countries used voluntary export restraints instead. D. the auction could generate revenue that was roughly equal to the revenue generated by a tariff which limited imports to the level allowed under the quota.
D
The "Uruguay Round" of trade talks resulted in A. the formation of the World Trade Organization. B. new measures for trade dispute settlement. C. measures regulating the treatment of intellectual property. D. All of the above.
D
What problems may be created by home country tariff policies? A. Trade policy retaliation by trade partners. B. Limited innovation by home firms. C. Rent seeking. D. All of the above.
D
Which of the following is NOT true about the VER? A. It always produces a loss for the importing country. B. They are frequently imposed at the request of an importer. C. It is an export quota. D. It benefits the exporting country as a whole.
D
The GATT strongly favors tariffs as a protective measure over quotas or other nontariff measures. It encourages new members to convert quotas to their tariff equivalents. One of the main reasons that tariffs are preferred is because they are more transparent, particularly by comparison to nontariff measures. Transparency refers to the ability of all participants to easily _____________________.
discover and understand the rules
Given that VERs are a form of quotas, and that they create quota rents and a larger reduction in national welfare than a tariff, nations still used them instead of tariffs because voluntary export restraints avoid the obligations nations share under the rules of the GATT to __________________.
not raise tariffs
The Uruguay Round of the GATT (1986-93) began a process of phasing out the use of voluntary export restraints (VERs). This form of quota came into widespread use in the 1980s because governments came to see them as being ______________________.
politically "safe" to use
