Homework 4 (Ch4)

If the domestic value added before an import tariff for a product is $500 and the domestic value added after the tariff is $550, the effective rate of protection is

10 percent

Suppose that the production of $500,000 worth of steel in the United States requires $100,000 worth of iron ore. The U.S. nominal tariff rates for importing these goods are 15 percent for steel and 5 percent for iron ore. Given this information, the effective rate of protection for the U.S. steel industry is approximately

18 percent

If the world price of a good is $40, a specific tariff of $10 is equivalent to an ad-valorem tariff of

25 percent

Suppose that the United States eliminates its tariff on steel imports, permitting foreign-produced steel to enter the U.S. market. Steel prices to U.S. consumers would be expected to

Decrease, and the foreign demand for U.S. exports would increase

Imports tariffs usually cause welfare losses in an economy (referred to as deadweight loss by economists). However, should the home country be "large" relative to the world, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms-of-trade effect exceeds the sum of the

Protective effect plus consumption effect

The offshore assembly provision in the U.S

Provides favorable treatment to products assembled abroad from U.S. manufactured components

For the United States, a foreign trade zone (FTZ) is

a site within the United States

Suppose that Mexico levies a tariff on steel that is collected as a fixed amount of money per ton imported. This refers to

a specific tariff

Which of the following policies permits a specified quantity of goods to be imported at one tariff rate and applies a higher tariff rate to imports above this quantity?

tariff quota

Assume that Mexico is a "small country" in the global market for automobiles, and it imposes a tariff on imported automobiles. As a result of the tariff

the world price of autos remains constant

Arguments for U.S. trade restrictions include all of the following except

Improving incomes for developing countries

In general, tariffs tend to have

revenue effects, protective effects, and consumption effects

Which of the following is a fixed percentage of the value of an imported product as it enters the country?

Ad valorem tariff

A decrease in the import tariff will result in

An increase in imports but a decrease in domestic production

The redistribution effect of an import tariff is the transfer of income from the domestic

Buyers to domestic producers of the good

A lower tariff on imported aluminum would most likely benefit

Domestic consumers of aluminum, e.g. domestic automobile manufacturers

The principal benefit of tariff protection goes to

Domestic producers of the good produced

When the production of a commodity does not utilize imported inputs, the effective tariff rate on the commodity

Equals the nominal tariff rate on the commodity

Which type of tariff is not used by the American government?

Export tariff

The deadweight loss of a tariff

Is a social loss since it promotes inefficient production

Which of the following is true concerning a specific tariff?

It affords less protection to home producers during eras of rising prices

When a government allows raw materials and other intermediate products to enter a country duty free, its tariff policy generally results in a

Nominal tariff rate less than the effective tariff rate

The most vocal political pressure for tariffs is generally made by

Producers lobbying for import tariffs

A compound tariff is a combination of a (an):

Specific tariff and an ad valorem tariff

Developing nations often maintain that industrial countries permit raw materials to be imported at very low tariff rates while maintaining high tariff rates on manufactured imports. Which of the following refers to the above statement?

Tariff escalation effect

Should Canada impose a tariff on imports, one would expect Canada's

Terms of trade to improve and volume of trade to decrease

When a tariff on imported inputs exceeds that on the finished good

The nominal tariff rate on the finished product would tend to overstate its protective effect

If a Canadian manufacturing firm uses some imported inputs in the production process, the most accurate measure of the rate of protection is the

effective tariff

Suppose that Canada levies a tariff on imports that is a fixed percentage of the product's price. This refers

an ad valorem tariff

For a "large nation" in the global market for steel, the levying of an import tariff on steel

causes price of steel on the world market to decline

Suppose an importer of steel is required to pay a tariff of $20 per ton plus 5 percent of the value of steel. This is an example of a (an):

compound tariff

The difference between the maximum amount buyers are willing to pay for a given quantity of a good and the amount actually paid is called

consumer surplus

Suppose that Japan levies a 40 percent on pickup trucks and a 20 percent on engines (part of pickup trucks). The effective rate of protection on pickup trucks

less than the nominal rate of protection on pickup trucks

Suppose that Germany levies a tariff on oranges, but none are grown in Germany. This tariff has

only a revenue effect

The U.S. constitution allows the country to levy tariffs

only on imports

The revenue that producers receive over and above the minimum necessary for production is called

producer surplus