Econ 451 E 2

C. 8: Tariffs have fallen in recent decades as a result of _____ done under the auspices of the ____

negotiated agreements;GATT and WTO

C.8: The tariff-caused loss to consumers in an importing country that is derived from the reduction in their total consumption of the good is called the

Consumption Effect

C.8: If a small country imposes a specific tariff on a product, the domestic price of that good rises above the world price by

the full amount of the tariff.

C. 8: When a tariff drives the domestic price of a product upward, domestic producers ____ their output and sales of that product

INCREASE

C.8: The production effect of a tariff is a part of what consumers pay that becomes a gain to

Nobody Else

C.8: A tariff encourages a shift from foreign production to more expensive domestic production, and this extra cost is called the

Production effect of the tariff

C.10 If an activity has a marginal social benefit (SMB) in excess of its marginal private benefit (MB) and price (P), then an appropriate government policy is a subsidy equal to _____.

SMB - MB

C.10 the elements in the political-economic analysis of protection

The size of the losses for the losers of protection and the number of losers. The reasons individuals have for taking positions for or against protection. The types of political activities and their costs. The nature of the country's political institutions and process. The size of the gains for the winners of protection and the number of winners.

C.8: If a tariff is set as a percentage of the estimated market value of goods as they reach an importing country, then the tariff is

ad valorem.

C.8: The well-being of domestic producers is higher _____ the imposition of a tariff on imported commodities.

after

C.10 Governments typically employ tariffs or other import barriers rather than subsidies even though the latter are less costly to the economy because tariffs and import barriers

can be a source of tax revenue for governments. are easier to shelter from internal political attacks.

C.10 Trade adjustment assistance appear to be _____ with the specificity rule.

consistent

C.8: Because the tariff-caused loss to consumers in an importing country is not a gain to someone else somewhere, it is referred to as a(n)

deadweight loss

C.8: As a consequence of the imposition of a tariff, domestic consumers will _____ their overall purchases of the product.

decrease

C.10 Using tariffs to improve or restore equity in living standards within a country is the basis for the income _____ argument for protection.

distribution

C 10 Since government assistance granted to an infant industry makes it tempting for that industry to strive to keep, an important question concerns the _____ of the industry's "childhood."

duration

C.8: The percentage by which a country's entire set of trade barriers raises an industry's value added per unit of output is known as the _____ rate of protection.

effective

C.10 One major source of distortions in an economy is the inability of private markets to achieve full economic

efficiency

C.8: The social value judgment used in the analysis of the effects of a tariff on consumers, producers, and the government treats each dollar of gain or loss

exactly the same, regardless of who experiences it.

C.8: When a small country imposes a tariff, the sum of the gain to its producers and the tax revenue collected by its government is _____ the loss to its consumers.

exceeded by

C.10 If the marginal external benefit of protecting a dying industry against imports _____ the deadweight cost, then doing so is preferred to doing nothing.

exceeds

C.8: When a government imposes a tariff on imports, the price that consumers must pay becomes higher

for both imported and domestically produced units.

C.10 Because large, dispersed groups are more seriously afflicted by the _____ problem, their interests are often overridden by those in smaller, well-organized groups.

free-rider

C.8: When a nation can affect prices at which it trades with foreigners, it can ________ from its own tariff.

gain

C.10 The infant industry argument for protection would be valid if, assuming the protection is granted, the present value of the stream of national benefits is _____ than the present value of the stream of national costs.

greater than

C.8: In the case of a small country, the loss suffered by its consumers is _____ the gain realized by its producers.

greater than

C.8: A tariff ___________ those groups tied closely to the production of import substitutes.

helps

C.8: Average tariff rates imposed by developing countries tend to be _____ those imposed by industrialized countries.

higher than

C. 10 Only if the pride comes from increased self-sufficiency is restricting ___________ the best policy.

imports

C. 8: As a result of the imposition of a tariff, the producer surplus accusing to domestic firms

increases

C.10 A tariff can ___________ domestic production.

induce

C.10 Labor groups in the United States have found fault with that country's version of trade adjustment assistance because, in their opinion _____

its eligibility standards are too high. it is ineffective at retraining. its financial support is too limited.

C. 8: As far as the tariff imposing country's consumers and producers alone are concerned, the tariff is a clear net

loss

C. 8: For a small importing country, the imposition of a tariff gives it a net national

loss

C. 8: Tariffs tend to be _____ for nonagricultural products than for agricultural products -higher -lower

lower

C.8: In general, tariffs in the world today are _____ than they were in the years just before WWII.

lower

C. 8: A tariff usually _____ the well-being of the nation imposing the tariff -lowers -increases

lowers

C.8: A tariff almost always _____________ world well-being.

lowers

C.10 The struggle over tariffs for intermediate goods tends to be _____ intense since both buyers and sellers of these goods are firms which tend to be _____ organized.

more;well

C. 8: The revenue that a tariff generates for the gov that imposes it ____ be considered as a part of the national gain associated with the tariff

must

C.8: The net national loss from a tariff imposed by a small country is _____ to estimate empirically.

not difficult

C.8: The commonly applied social value judgment to the analysis of a tariff's net national effect is known as the

one-dollar, one vote metric.

C.10 Suppose a small country imposes a tariff in order to promote production in a import-competing industry that generates positive externalities. If the marginal external benefit exceeds the sum of the tariff's production and consumption effects, then the net national gain will be _____ compared to doing nothing.

positive

C.10 When a government protects a new supplier in earlier years, they can then lower their costs and the tariff is _____________.

removed

C.8: As long as a tariff is not so high as to prohibit all imports, the tariff-imposing government will acquire _____ from it.

revenue

C.8: If a tariff is set as a money amount per unit of some imported good, then the tariff is

specific

When the government of a country chooses the policy tool that acts as directly as possible on the source of a distortion, it is using the _____ rule.

specificity

C.10 Suppose an activity occurs at a level such that the social marginal benefit (SMB) exceeds private benefits (MB) and market price (P). In this case, government should enact a _____.

subsidy

C.10 According to the tax-or-subsidy approach, distortions in the incentives of private decision-makers can be corrected through the use of

taxed and subsidies

C.8: The effective rate of protection for an industry is the percentage by which a country's entire set of trade barriers raises the industry's _____ per unit of output.

value added