Chapter 9 ECON 411

24) Refer to figure 4.20 in NOTEBOOK: With a specific tariff of $3 per unit, what is the quantity of Widgets produced domestically?

$40 : Move price from $3 to $6 on the Domestic Supply Curve

23) Refer to figure 4.20 in NOTEBOOK: The lowest specific tariff which would be considered prohibitive is ________.

$5 (can't go above equilibrium: 3 + 5 = 8)

15) Refer to figure 4.20: In the absence of trade, what is the country's consumer surplus?

( [(14-6)x60] / 2 ) = $180

16) Refer to figure 4.20: In the absence of trade, what is the country's producer surplus?

( [(8-3)x60] / 2 ) = $180

21) Refer to figure 4.20. What is the amount of government revenue resulting from imposition of the tariff?

((80-40) x 3) = $120

18) Refer to figure 4.20: In the absence of a tariff and in the presence of trade, what is the country's consumer surplus?

(100 x (14-3)) / 2 = $550

20) Refer to figure 4.20 in NOTEBOOK: With free trade and no tariffs, what is the quantity of Widgets imported?

(100-10) = 90

17) Refer to figure 4.20: The loss of Consumer Surplus due to the tariff equals ________.

(3 x ((100-10) + (80-10))) / 2 = $240

19) Refer to figure 4.20. Given a tariff of $3 per unit, what is the country's consumer surplus?

(80 x (14-6)) / 2 = $320

5) An export subsidy is A) a payment to a firm or individual that ships a good abroad. B) a fee that is charged to a country that ships goods to the U.S. C) a payment made to a foreign government in return for preferential trade treatment. D) illegal in the U.S. but is fairly common in the rest of the world. E) a limit on the quantity of a good or service that can be sold abroad

A) a payment to a firm or individual that ships a good abroad.

22) Refer to figure 4.20 in NOTEBOOK: With free trade and no tariffs, what is the quantity of Widgets produced domestically?

10

25) Refer to figure 4.20 in NOTEBOOK: With free trade and no tariffs, what is the quantity of Widgets consumed domestically?

100 (Highest quantity of demand curve)

21) Refer to figure 4.20 in NOTEBOOK: With a specific tariff of $3 per unit, what is the quantity of Widgets imported?

40 (move price from $3 to $6, and subtract 80-40)

18) Refer to figure 4.20 in NOTEBOOK: In the absence of trade, how many Widgets does this country produce?

60

19) Refer to figure 4.20 in NOTEBOOK: in the absence of trade, how many Widgets does this country consume?

60

26) Refer to figure 4.20 in NOTEBOOK: With a specific tariff of $3 per unit, what is the quantity of Widgets consumed domestically?

80 (move price from $3 to $6 and look at new quantity on Demand curve)

4) If an import-competing firm is the only domestic producer of a good, then a transition from autarky to free trade will ________ domestic price, ________ producer surplus, ________ consumer surplus, and ________ overall domestic national welfare. A) decrease; decrease; increase; increase B) increase; increase; increase; increase C) decrease; decrease; decrease; decrease D) increase; increase; decrease; decrease E) increase; increase; decrease; increase

A) decrease; decrease; increase; increase

12) The change in the economic welfare of a country associated with an increase in a tariff equals A) efficiency loss - terms of trade gain. B) efficiency gain - terms of trade loss. C) efficiency loss + tax revenue gain. D) efficiency loss + tax revenue gain + terms of trade gain. E) efficiency loss - tax revenue gain.

A) efficiency loss - terms of trade gain.

14) Tariff rates on products imported into the U.S. A) have dropped substantially over the past 50 years. B) were prohibited by the Constitution. C) reached an all time high in 2002. D) have risen steadily since 1920. E) were the government's main source of income in 2006

A) have dropped substantially over the past 50 years.

12) Tariffs are NOT defended on the grounds that they A) improve the terms of trade of foreign nations. B) protect jobs and reduce unemployment. C) promote growth and development of young industries. D) prevent over-dependence of a country on only a few industries. E) protect domestic producers from foreign low prices

A) improve the terms of trade of foreign nations.

28) If the tariff on computers is not changed, but domestic computer producers shift from domestically produced semiconductors to imported components, then the effective rate of protection in the computer industry will A) increase. B) decrease C) remain the same. D) depend on whether computers are PCs or "Supercomputers." E) no longer apply.

A) increase.

1) An export tariff will ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare. A) increase; decrease; increase; have an ambiguous effect on B) increase; decrease; decrease; decrease C) increase; decrease; have no effect on; have an ambiguous effect on D) increase; decrease; have no effect on; decrease E) increase; increase; decrease; have an ambiguous effect on

A) increase; decrease; increase; have an ambiguous effect on

1) If an import-competing firm is imperfectly competitive, then under free trade an export tariff will ________ domestic market price, ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare. A) increase; have no effect on; decrease; increase; decrease B) decrease; decrease; increase; decrease; have no effect on C) increase; have no effect on; increase; decrease; increase D) decrease; increase; decrease; increase; decrease E) have no effect on; have no effect on; decrease; increase; decrease

A) increase; have no effect on; decrease; increase; decrease

3) Suppose an import-competing firm is imperfectly competitive. Replacement of an export tariff with an import quota that yields the same level of imports will ________ market price, ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare. A) increase; increase; decrease; decrease; decrease B) have no effect on; have no effect on; have no effect on; decrease; decrease C) increase; have no effect on; decrease; decrease; increase D) increase; increase; increase; decrease; have an ambiguous effect on E) decrease; decrease; increase; decrease; increase

A) increase; increase; decrease; decrease; decrease

8) The deadweight loss of a tariff A) is a social loss because it promotes inefficient use of national resources. B) is a social loss because it reduces the revenue of the government. C) is not a social loss because it merely redistributes revenue from one sector to another. D) is not a social loss because it is paid for by rich corporations. E) is not a social loss because it aids domestic consumers.

A) is a social loss because it promotes inefficient use of national resources.

9) A tax of 20 cents per unit of imported garlic is an example of a(n) A) specific tariff. B) ad valorem tariff. C) nominal tariff. D) effective protection tariff. E) a disadvantageous tariff.

A) specific tariff.

8) An import quota is similar to a ________ in its effect on imports, except that an import quota ________. A) tariff; does not generate revenue B) tariff; generates revenue C) subsidy; does not generate revenue D) subsidy; generates revenue E) tariff; does not result in an efficiency loss.

A) tariff; does not generate revenue

5) A specific tariff provides home producers more protection when A) the home market buys cheaper products rather than expensive products. B) it is applied to a commodity with many grade variations. C) the home demand for a good is elastic with respect to price changes. D) it is levied on manufactured goods rather than primary products. E) the home supply outnumbers the foreign imports

A) the home market buys cheaper products rather than expensive products.

8) Which of the following is a fixed percentage of the value of an imported product? A) specific tariff B) ad valorem tariff C) nominal tariff D) effective protection tariff E) infant industry tariff

B) ad valorem tariff

10) A tax of 20 percent per unit of imported garlic is an example of a(n) A) specific tariff. B) ad valorem tariff. C) nominal tariff. D) effective protection tariff. E) a disadvantageous tariff

B) ad valorem tariff.

33) In an inflationary environment, then over time A) a specific tariff will tend to raise more revenue than an ad valorem tariff. B) an ad valorem tariff will tend to raise more revenue than a specific tariff. C) an optimum tariff will tend to raise more revenue than an escalating tariff. D) a tariff quota will tend to raise more revenue than a specific tariff. E) an import quota would raise more revenue than a specific tariff.

B) an ad valorem tariff will tend to raise more revenue than a specific tariff.

29) If the tariff on computers is not changed, but the government then adds hitherto nonexistent tariffs on imported semi-conductor components, then the effective rate of protection in the computer industry will A) increase. B) decrease. C) remain the same. D) depend on whether computers are PCs or "Supercomputers." E) no longer apply.

B) decrease.

2) Throughout the post-World War II era, the importance of tariffs as a trade barrier has A) increased. B) decreased. C) remained the same. D) fluctuated wildly. E) demonstrated a classic random walk with a mean-reversion tendency.

B) decreased.

5) The main redistribution effect of a tariff is the transfer of income from A) domestic producers to domestic buyers. B) domestic buyers to domestic producers. C) domestic producers to domestic government. D) domestic government to domestic consumers. E) foreign producers to domestic consumers.

B) domestic buyers to domestic producers.

11) Which type of tariff is forbidden in the United States on Constitutional grounds? A) import tariff B) export tariff C) specific tariff D) prohibitive tariff E) import quota

B) export tariff

1) An important difference between tariffs and quotas is that tariffs A) raise the price of the good. B) generate tax revenue for the government. C) stimulate international trade. D) help domestic producers. E) are paid by foreign producers.

B) generate tax revenue for the government.

1) Specific tariffs are A) import taxes stated in specific legal statutes. B) import taxes calculated as a fixed charge for each unit of imported goods. C) import taxes calculated as a fraction of the value of the imported goods. D) the same as import quotas. E) import taxes calculated based solely on the origin country.

B) import taxes calculated as a fixed charge for each unit of imported goods

9) A policy of tariff reduction in the computer industry is A) in the interest of the United States as a whole and in the interest of computer producing regions of the country. B) in the interest of United States as a whole but not in the interest of computer producing regions of the country. C) not in the interest of the United States as a whole but in the interests of computer producing regions of the country. D) not in the interest of the United States as a whole and not in the interests of computer consumers. E) not in the interest of the United States as a whole but in the interests of foreign computer producers.

B) in the interest of United States as a whole but not in the interest of computer producing regions of the country

2) An export subsidy will ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare. A) increase; decrease; increase; have an ambiguous effect on B) increase; decrease; decrease; decrease C) increase; decrease; have no effect on; have an ambiguous effect on D) increase; decrease; have no effect on; decrease E) increase; increase; decrease; have an ambiguous effect on

B) increase; decrease; decrease; decrease

31) Of the many arguments in favor of tariffs, the one that has enjoyed significant economic justification has been the A) cheap foreign labor argument. B) infant industry argument. C) even playing field argument. D) balance of payments argument. E) domestic living standard argument.

B) infant industry argument.

30) When a government allows raw materials and other intermediate products to enter a country duty free, this generally results in a(an) A) effective tariff rate less than the nominal tariff rate. B) nominal tariff rate less than the effective tariff rate. C) rise in both nominal and effective tariff rates. D) fall in both nominal and effective tariff rates. E) rise in only the effective tariff rate.

B) nominal tariff rate less than the effective tariff rate.

2) If a good is imported into (small) country H from country F, then the imposition of a tariff In country H A) raises the price of the good in both countries (the "Law of One Price"). B) raises the price in country H and does not affect its price in country F. C) lowers the price of the good in both countries. D) lowers the price of the good in H and could raise it in F. E) raises the price of the good in H and lowers it in F.

B) raises the price in country H and does not affect its price in country F.

3) If a small country imposes a tariff, then A) the producers must suffer a loss. B) the consumers must suffer a loss. C) the government revenue must suffer a loss. D) the demand curve must shift to the left. E) the world price on that item will shift.

B) the consumers must suffer a loss.

7) A problem encountered when implementing an "infant industry" tariff is that A) domestic consumers will purchase the foreign good regardless of the tariff. B) the industry may never "mature." C) most industries require tariff protection when they are mature. D) the tariff may hurt the industry's domestic sales. E) the tariffs fail to protect the domestic producers.

B) the industry may never "mature."

15) What is a TRUE statement concerning the imposition in the U.S. of a tariff on cheese? A) It lowers the price of cheese domestically. B) It raises the price of cheese internationally. C) It raises revenue for the government. D) It will always result in retaliation from abroad. E) it leads to higher domestic demand for cheese.

C) It raises revenue for the government.

6) An export subsidy differs from a tariff in each of the following ways EXCEPT A) a tariff generates revenue. B) a tariff is applied to imports. C) a tariff results in an efficiency loss. D) a tariff is a tax. E) a tariff discourages imports.

C) a tariff results in an efficiency loss.

6) A lower tariff on imported steel would most likely benefit A) foreign producers at the expense of domestic consumers. B) domestic manufacturers of steel. C) domestic consumers of steel. D) workers in the steel industry. E) foreign consumers of steel.

C) domestic consumers of steel.

6) The principle benefit of tariff protection goes to A) domestic consumers of the good produced. B) foreign consumers of the good produced. C) domestic producers of the good produced. D) foreign producers of the good produced. E) the domestic government.

C) domestic producers of the good produced.

3) In the exporting country, an export subsidy will A) help consumers and raise the overall economic welfare of the exporting country. B) hurt consumers but raise the overall economic welfare of the exporting country. C) hurt consumers and lower the overall economic welfare of the exporting country. D) help consumers but lower economic welfare of the exporting country. E) help consumers and have no effect on the economic welfare of the exporting country.

C) hurt consumers and lower the overall economic welfare of the exporting country.

2) Ad valorem tariffs are A) import taxes stated in ads in industry publications. B) import taxes calculated as a fixed charge for each unit of imported goods. C) import taxes calculated as a fraction of the value of the imported goods. D) the same as import quotas. E) import taxes calculated solely on the origin country.

C) import taxes calculated as a fraction of the value of the imported goods

4) Suppose the United States eliminates its tariff on ball bearings used in producing exports. Ball bearing prices in the United States would be expected to A) increase, and the foreign demand for U.S. exports would increase. B) decrease, and the foreign demand for U.S. exports would increase. C) increase, and the foreign demand for U.S. exports would decrease. D) decrease, and the foreign demand for U.S. exports would decrease. E) decrease, and the foreign demand would be unchanged.

C) increase, and the foreign demand for U.S. exports would decrease.

3) An import quota will ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare. A) increase; decrease; increase; have an ambiguous effect on B) increase; decrease; decrease; decrease C) increase; decrease; have no effect on; have an ambiguous effect on D) increase; decrease; have no effect on; decrease E) increase; increase; decrease; have an ambiguous effect on

C) increase; decrease; have no effect on; have an ambiguous effect on

3) The excess supply curve of a product we (H) import from foreign countries (F) increases as A) excess demand of country H increases. B) excess demand of country F increases. C) excess supply of country H increases. D) excess supply of country F increases. E) excess supply of country F decreases.

D) excess supply of country F increases.

16) The tariff levied in a "large country" (Home), lowers the world price of the imported good. This causes A) foreign consumers to demand less of the good on which was levied a tariff. B) domestic demand for imports to decrease. C) domestic demand for imports to increase. D) foreign suppliers to produce less of the good on which was levied a tariff. E) no change in the foreign price of the good it imports.

D) foreign suppliers to produce less of the good on which was levied a tariff.

4) A voluntary export restraint will ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare. A) increase; decrease; increase; have an ambiguous effect on B) increase; decrease; decrease; decrease C) increase; decrease; have no effect on; have an ambiguous effect on D) increase; decrease; have no effect on; decrease E) increase; increase; decrease; have an ambiguous effect on

D) increase; decrease; have no effect on; decrease

7) Should the home country be "large" relative to its trade partners, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms of the trade rectangle exceed the sum of the A) revenue effect plus redistribution effect. B) protective effect plus revenue effect. C) consumption effect plus redistribution effect. D) production distortion effect plus consumption distortion effect. E) terms of trade gain.

D) production distortion effect plus consumption distortion effect.

9) The U.S. sugar quota A) generates government revenue. B) results in net welfare benefits to the U.S. economy. C) results in benefits to sugar producers that exceed the cost to consumers. D) results in costs to consumers that exceed the benefits to sugar producers. E) does not result in an efficiency loss.

D) results in costs to consumers that exceed the benefits to sugar producers.

27) The effective rate of protection measures A) the "true" ad valorem value of a tariff. B) the quota equivalent value of a tariff. C) the efficiency with which the tariff is collected at the customhouse. D) the protection given by the tariff to domestic value added. E) the difference between domestic and foreign prices of the import.

D) the protection given by the tariff to domestic value added.

32) As globalization tends to increase the proportion of imported inputs relative to domestically supplied components A) the nominal tariff automatically increases. B) the rate of (effective) protection automatically decreases. C) the nominal tariff automatically decreases. D) the rate of (effective) protection automatically increases. E) the amount of tariffs levied increases.

D) the rate of (effective) protection automatically increases.

4) The imposition of tariffs on imports results in deadweight (triangle) losses. These are A) production and consumption distortion effects. B) redistribution effects. C) revenue effects D) efficiency effects. E) distortion of incentives.

E) distortion of incentives

13) The most vocal political pressure for tariffs is generally made by A) consumers lobbying for export tariffs. B) consumers lobbying for import tariffs. C) consumers lobbying for lower import tariffs. D) producers lobbying for export tariffs. E) producers lobbying for import tariffs.

E) producers lobbying for import tariffs

1) If a good is imported into (large) country H from country F, then the imposition of a tariff in country H A) raises the price of the good in both countries (the "Law of One Price"). B) raises the price in country H and cannot affect its price in country F. C) lowers the price of the good in both countries. D) lowers the price of the good in H and could raise it in F. E) raises the price of the good in H and lowers it in F.

E) raises the price of the good in H and lowers it in F