Question 1

A small nation is one:&#10;A)which does not affect world price by its trading&#10;B)which faces an infinitely elastic world supply curve for its import commodity&#10;C)whose consumers will pay a price that exceeds the world price by the amount of the tariff&#10;D)all of the above

Accepted Answer

All of the above statements are true for a small nation. The nation does not have enough market power to affect the world price by its trading, it faces an infinitely elastic world supply curve for its import commodity, and its consumers will pay a higher price after the implementation of a tariff that equals the amount of the tariff.

Question 2

Which of the following statements is incorrect?&#10;A)An ad valorem tariff is expressed as a percentage of the value of the traded commodity&#10;B)a specific tariff is expressed as a fixed sum of the value of the traded commodity.&#10;C)export tariffs are prohibited by the U.S.Constitution&#10;D)The U.S.uses exclusively the specific tariff

Accepted Answer

The statement that the U.S. uses exclusively the specific tariff is incorrect. In fact, the U.S. uses both ad valorem and specific tariffs, depending on the product being imported.

Question 3

The imposition of an import tariff by a large nation:&#10;A)increases the nation's terms of trade&#10;B)reduces the volume of trade&#10;C)may increase or reduce the nation's welfare&#10;D)all of the above

Accepted Answer

A) The imposition of an import tariff by a large nation can increase the nation's terms of trade by making imports more expensive and giving domestic producers a competitive advantage.
B) However, it can also reduce the volume of trade by discouraging foreign producers from exporting to that nation and potentially spurring retaliation from other nations.
C) The impact on the nation's welfare is ambiguous and dependent on a variety of factors, such as the elasticity of demand and supply for the goods affected by the tariff, the presence of substitutes or complements, and the potential effects on income distribution. Thus, the imposition of an import tariff by a large nation may increase or reduce the nation's welfare.

Question 4

With a_i=50%,t_i=0,and t=20%,g is: A)40% B)20% C)80% D)0

Accepted Answer

Given that a_i = 50% and t_i = 0 with t = 20%, we can deduce that g = 40%. This is because the formula for calculating g in this context is g = a_i - t_i / t, which simplifies to g = 50% - 0 / 20% = 40%.

Question 5

If a small nation increases the tariff on its import commodity:&#10;A)the rent of domestic producers of the commodity increases&#10;B)the protection cost of the tariff decreases&#10;C)the deadweight loss decreases&#10;D)all of the above

Accepted Answer

Increasing the tariff on an import commodity increases the price of that commodity, making it more expensive for consumers to purchase. This creates an opportunity for domestic producers of the commodity to increase their prices and earn higher profits or rents. Therefore, the rent of domestic producers of the commodity increases. Choice B is incorrect because the cost of protection, which refers to the economic costs of implementing and maintaining protectionist policies, would likely increase with an increase in the tariff. Choice C is also incorrect because the deadweight loss, which refers to the loss of economic efficiency resulting from the tariff, would likely increase with an increase in the tariff.

Question 6

The imposition of an import tariff by a nation can be represented by a rotation of the:&#10;A)nation's offer curve away from the axis measuring the commodity of its comparative advantage&#10;B)the nation's offer curve toward the axis measuring the commodity of its comparative advantage&#10;C)the other nation's offer curve toward the axis measuring the commodity of its comparative advantage&#10;D)the other nation's offer curve away from the axis measuring the commodity of its

Accepted Answer

When a nation imposes an import tariff, it increases the price of imported goods, making them less attractive to consumers. This will cause the nation's offer curve to rotate away from the axis measuring the commodity of its comparative advantage, as it will now be producing more of the goods it previously imported. This is because the increased price of imported goods will make domestically produced goods relatively more attractive to consumers, leading to an increase in the quantity demanded of domestically produced goods. As a result, the nation will move along its production possibility curve, producing more of the goods in which it has a comparative advantage, and less of the imported goods on which the tariff has been imposed.

Question 7

The imposition of an import tariff by a small nation:&#10;A)increases the nation's welfare&#10;B)reduces the nation's welfare&#10;C)leaves the nation's welfare unchanged&#10;D)any of the above is possible

Accepted Answer

The imposition of an import tariff by a small nation reduces the nation's welfare. This is because the tariff raises the price of imported goods for consumers, leading to a decrease in the quantity of imports demanded. This, in turn, reduces competition in the domestic market, allowing domestic producers to raise their prices, resulting in a decrease in the quantity of goods demanded. As a result, tariff leads to a decrease in both consumer and producer surplus, reducing the overall welfare of the nation.

Question 8

The imposition of an optimum tariff by a large nation:&#10;A)improves its terms of trade&#10;B)reduces the volume of trade&#10;C)increases the nation's welfare&#10;D)all of the above

Accepted Answer

An optimum tariff imposed by a large nation can improve its terms of trade by lowering the price of its imports relative to its exports, reduce the volume of trade by making imports more expensive and thus less attractive, and increase the nation's welfare by capturing some of the gains from trade that would otherwise accrue to foreign producers.

Question 9

The imposition of an import tariff by a nation results in:&#10;A)an increase in relative price of the nation's import commodity&#10;B)an increase in the nation's production of its importable commodity&#10;C)reduces the real return of the nation's abundant factor&#10;D)all of the above

Accepted Answer

When a nation imposes an import tariff, it increases the relative price of the imported commodity, which leads to an increase in the nation's production of its importable commodity. This results in a decrease in the real return of the nation's abundant factor (since the increased production leads to diminishing returns). Therefore, all of the above options are correct.

Question 10

The increase in producer surplus when a small nation imposes a tariff is measured by the area:&#10;A)to the left of the supply curve between the commodity price with and without the tariff&#10;B)under the supply curve between the quantity produced with and without the tariff&#10;C)under the demand curve between the commodity price with and without the tariff&#10;D)none of the above.

Accepted Answer

The increase in producer surplus with a tariff is measured by the difference between the price received by producers with the tariff and the price they would have received without the tariff. This difference is shown by the area to the left of the supply curve between the commodity price with and without the tariff. Therefore, choice A is the correct answer.

Question 11

The imposition of an import tariff by a small nation:&#10;A)increases the relative price of the import commodity for domestic producers and consumers&#10;B)reduces the relative price of the import commodity for domestic producers and consumers&#10;C)increases the relative price of the import commodity for the nation as a whole&#10;D)any of the above is possible

Accepted Answer

The answer of The imposition of an import tariff by...

Question 12

Which of the following statements is incorrect with respect to the rate of effective protection? A)for given values of ai and ti,g is larger the greater is t B)for a given value of t and ti,g is larger the greater is a_i C)g exceeds,is equal to or is smaller than t,as t_i is smaller than,is equal to or is larger than t D)when a_it_i exceeds t,the rate of effective protection is positive

Accepted Answer

The answer of Which of the following statements is incorrect...

Question 13

The optimum tariff for a small nation is:&#10;A)100%&#10;B)50%&#10;C)0&#10;D)depends on elasticities

Accepted Answer

The answer of The optimum tariff for a small nation...

Question 14

If a small nation increases the tariff on its import commodity,its:&#10;A)consumption of the commodity increases&#10;B)production of the commodity decreases&#10;C)imports of the commodity increase&#10;D)none of the above

Accepted Answer

The answer of If a small nation increases the tariff...

Question 15

According to the Stolper-Samuelson theorem,the imposition of a tariff by a nation:&#10;A)increases the real return of the nation's abundant factor&#10;B)increases the real return of the nation's scarce factor&#10;C)reduces the real return of the nation's scarce factor&#10;D)any of the above is possible

Accepted Answer

The answer of According to the Stolper-Samuelson theorem,the imposition of...

Deck 8: Trade Restrictions: Tariffs