CSUF Econ 335 Chapter 4

True or False: Two common valuation concepts used by customs appraisers are the free-on-board (FOB) technique and the cost-insurance-freight (CIF) technique. Under an FOB valuation, an ad valorem tariff is levied as a percentage of the imported commodity's total value as it arrives at its final destination. Under a CIF valuation, an ad valorem tariff is applied to a product's value as it leaves the exporting country.

False

Suppose that the production of $1 million worth of steel in Canada requires $100,000 worth of imported taconite. Canada's nominal tariff rates for importing these goods are 40% for steel and 10% for taconite. Given this information, the effective rate of protection for Canada's steel industry is _______ .

43% e= 0.4-(0.1)x(0.1) -------------- 1-0.1 = 0.4-0.01 -------- 0.9 = 0.43 or 43%

Which of the following defines an ad valorem tariff?

A fixed percentage of the value of the imported product as it enters the country

What is meant by the term bonded warehouse?

A storage facility for imported goods

Although tariffs may improve the welfare of a single nation, the world's welfare may decline. Under what conditions would this be true? Check all that apply.

A tariff sparks retaliatory tariffs by other nations. Tariffs lower the volume of trade.

The difference between the amount that buyers would be willing and able to pay for a good and the actual amount the buyer pays The difference between the minimum amount that producers would be willing sell their products for and the actual amount they receive A decrease in the market price results in an increase in ______ surplus and a decrease in ______ surplus.

Consumer Surplus Producer Surplus consumer producer

Which of the following accurately describe the effects of an import tariff imposed on oil? Check all that apply.

Higher manufacturers' prices An increase in output of domestic oil producers

Which of the following are arguments for trade restrictions that might be considered valid in today's world? Check all that apply.

Infant-industry argument National security argument

What impact does the imposition of a tariff normally have on a large nation's terms of trade and volume of trade?

Terms of trade improve, while trade volume declines.

Generally, what factors influence the size of the revenue, protective, consumption, and redistributive effects of a tariff? Check all that apply.

The impact of the tariffs on domestic prices The response of domestic producers and consumers to price changes

How do bonded warehouses help importers mitigate the effects of domestic import duties?

They allow imported goods to be put into storage without the payment of duties until the goods are withdrawn for domestic consumption.

Suppose CaliBerry, which makes smartphones, adds value by assembling smartphone components that are produced abroad. Suppose the imported components can enter the United States on a duty-free basis (zero tariff). Suppose also that 20% of a smartphone's final value can be attributed to domestic assembly activities (value added). The domestic price of a smartphone is $500. The remaining 80% reflects the value of the imported components. Let the cost of the smartphone's components be the same for both CaliBerry and its foreign competitor, which can produce and sell a smartphone for $500. True or False: When material inputs or intermediate products enter a country at a low duty while the final imported product is protected by a high duty, the nominal tariff rate on the final product understates the effective rate of protection.

True

True or False: An import tariff does not need to push the price of an imported computer above the price of its domestic counterpart for the domestic producers to prosper. The tariff should be just high enough to reduce the price differential between the imported products and the domestically made products.

True

Which of the following is the correct formula for the effective rate of protection?

e= n−ab -------- 1-a

Suppose a large economy imposes a specific tariff of $1,000 on imported appliances. If the terms-of-trade effect exceeds the deadweight losses resulting from the tariff, its national welfare ______ .

increases

Which of the following tariffs provide protection to domestic producers during periods of changing prices? Check all that apply.

An ad valorem tariff

Which of the following would be in the best interest of less developed nations?

Avoidance by industrialized countries of disproportionate tariff reductions on raw materials