Question 1

If Canada reduces the tariff imposed on a commodity from 10 percent to 5 percent, we would expect to observe

Accepted Answer

A reduction in tariff would result in a lower cost of the commodity for Canadian consumers, leading to an increase in quantity consumed of the commodity in Canada.

Question 2

An example of the "infant industry" argument for trade protection is that

Accepted Answer

The "infant industry" argument suggests that new industries in a country should be protected from foreign competition through tariffs, in order to allow them to grow and develop economies of scale which will permit comparative advantage in the future. This argument therefore supports choice E, as it suggests that trade protection may be necessary in order for new industries to thrive and eventually become competitive on a global scale.

Question 3

An agreement among a group of countries that allows for tariff- free trade among the members but leaves each member free to levy its own tariffs on imports from other countries is called a

Accepted Answer

A free-trade area is an agreement among a group of countries that allows for tariff-free trade among the members but leaves each member free to levy its tariffs on imports from other countries. In a free-trade area, countries eliminate or reduce trade barriers such as tariffs, quotas, and subsidies on goods traded among themselves. However, each member country maintains its trade barriers against non-member countries.

Question 4

The diagram below shows the domestic demand and supply curves for cotton towels in Canada. The prevailing world price of cotton towels is PW. Assume that all cotton towels are identical.  FIGURE 34- 3
-Refer to Figure 34- 3. If the Canadian government imposes a quota on imported cotton towels of the amount (Q3 - Q2), then the deadweight loss to the Canadian economy is shown by the area

Accepted Answer

The deadweight loss is the loss of consumer and producer surplus that results from a quota. In this case, the quota is (Q3 - Q2), which means that the quantity of towels imported will be reduced from Q3 to Q2. The deadweight loss is the area below the demand curve and above the supply curve between Q2 and Q3. This area is B + C + D.

Question 5

Consider the following statement: "Canadians on average are worse off when some manufacturing jobs migrate from Canada to low- wage countries in Central America." This statement is because _ .

Accepted Answer

The statement is incorrect because the permanent gains to consumers from lower prices outweigh the temporary losses to displaced manufacturing workers. While there may be some short-term negative impact on specific industries or regions, the overall effect of international trade is to increase economic efficiency and benefit both consumers and producers in the long run.

Question 6

Suppose Canada eliminates a 15- percent tariff on foreign- made leather goods. There will be a
In the Canadian price of leather goods, profits for domestic leather- goods producers, and in the deadweight loss associated with the tariff.

Accepted Answer

Eliminating the tariff will lower the price of leather goods in Canada, decrease profits for domestic producers due to increased competition, and reduce the deadweight loss associated with the tariff.

Question 7

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical.  FIGURE 34- 2
-Refer to Figure 34- 2. If Canada imposes a tariff of $t per pair of jeans, Canadian jean producers' revenues will increase by the area equal to

Accepted Answer

The answer of The diagram below shows the domestic demand...

Question 8

Continued tariff protection for industries that have already attained all potential economies of scale and opportunities for learning by doing is likely to

Accepted Answer

Continued tariff protection for industries that have already attained all potential economies of scale and opportunities for learning by doing is likely to redistribute income in favour of the factors used in the protected industries. This is because the protected industry will be able to charge higher prices due to the lack of competition, leading to higher profits for the factors of production used in that industry, such as capital and labor. This can lead to income inequality and unfair distribution of resources in the economy.

Question 9

The concept of "trade diversion" refers to

Accepted Answer

The answer of The concept of "trade diversion" refers to
...

Question 10

The diagram below shows the domestic demand and supply curves for cotton towels in Canada. The prevailing world price of cotton towels is PW. Assume that all cotton towels are identical.  FIGURE 34- 3
-Refer to Figure 34- 3. If Canada imposes a tariff of $t per cotton towel, foreign producers' revenues from their Canadian sales will be equal to the area

Accepted Answer

The answer of The diagram below shows the domestic demand...

Question 11

If Canada reduces the tariff imposed on a commodity from 10 percent to 5 percent, we would expect to observe

Accepted Answer

The answer of If Canada reduces the tariff imposed on...

Question 12

It is not possible for one country to sell all products more cheaply than other countries for any length of time because the

Accepted Answer

The answer of It is not possible for one country...

Question 13

If a tariff is imposed by a country that is large enough to have market power in global markets, the domestic consumer will face a price than the world price for the product, and this world price will be by the tariff.

Accepted Answer

The answer of If a tariff is imposed by a...

Question 14

Suppose Canada has a 12- percent tariff on foreign- made cotton clothing. If the tariff is raised to 20 percent, there will be a in the Canadian price of cotton clothing, profits for domestic producers, and _ in deadweight loss.

Accepted Answer

When the tariff is raised from 12% to 20%, the price of foreign-made cotton clothing will be more expensive for Canadian consumers, leading to a rise in the Canadian price of cotton clothing. This will increase profits for domestic producers since they face less competition from foreign producers. However, deadweight loss will increase because the higher tariff will reduce the quantity of cotton clothing purchased in the Canadian market due to the higher price. Therefore, the correct choice is C.

Question 15

If country A has wages that are substantially less than those in country B,

Accepted Answer

The pattern of comparative advantage depends not only on wage differences, but also on the relative productivity of labor in both countries. Therefore, it cannot be concluded that country A has an absolute advantage over country B or that country B will benefit from placing tariffs on imports from country A. The statement about subsidization of export industries is irrelevant to the given information. The statement about import and export is also not supported by the information given.

Question 16

The diagram below shows the demand and supply curves for refrigerators in Canada.  FIGURE 34- 1
-Refer to Figure 34- 1, and assume the world price is P0. The Canadian government now imposes an import quota of the amount Q2Q4. The result would be that the price in Canada would:

Accepted Answer

The answer of The diagram below shows the demand and...

Question 17

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market. Assume that all bicycles are identical.  FIGURE 34- 4
-Refer to Figure 34- 4. Assume there is free trade in bicycles. At a world price of $300, Canada's
Will be bicycles per year.

Accepted Answer

At a world price of $300, Canada's domestic supply is 10,000 bicycles per year, and its domestic demand is 40,000 bicycles per year. Therefore, Canada will import 30,000 bicycles per year (40,000 - 10,000).

Question 18

Suppose you are an economist advising the Canadian government as to whether to erect trade barriers for the protection of Canada's textile industry. You would study the gains to be realized in this industry and weigh those against

Accepted Answer

As an economist, the main objective is to promote the overall economic welfare in a country. Erecting trade barriers may provide temporary protection to the textile industry, but it comes at a significant cost to consumers who would be forced to pay higher prices for textile products. This cost would result in the lowering of real incomes for Canadian consumers, thus reducing overall economic welfare. Therefore, the best choice is to not erect trade barriers and instead focus on creating policies that can help the textile industry to better compete in the global market.

Question 19

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical.  FIGURE 34- 2
-Refer to Figure 34- 2. If Canada imposes a tariff of $t per pair of jeans, the deadweight loss to the Canadian economy is represented by the area

Accepted Answer

The answer of The diagram below shows the domestic demand...

Question 20

The North American Free Trade Agreement (NAFTA) is guided by the principle of

Accepted Answer

NAFTA is guided by the principle of national treatment, which means that each member country grants the same treatment to imported goods as it does to domestically produced goods. This eliminates discrimination against foreign goods and encourages free trade between the member countries.

Quiz 34: Trade Policy

If Canada reduces the tariff imposed on a commodity from 10 percent to 5 percent, we would expect to observe

An example of the "infant industry" argument for trade protection is that

An agreement among a group of countries that allows for tariff- free trade among the members but leaves each member free to levy its own tariffs on imports from other countries is called a

Consider the following statement: "Canadians on average are worse off when some manufacturing jobs migrate from Canada to low- wage countries in Central America." This statement is because _ .

Suppose Canada eliminates a 15- percent tariff on foreign- made leather goods. There will be a In the Canadian price of leather goods, profits for domestic leather- goods producers, and in the deadweight loss associated with the tariff.

Continued tariff protection for industries that have already attained all potential economies of scale and opportunities for learning by doing is likely to

The concept of "trade diversion" refers to

If Canada reduces the tariff imposed on a commodity from 10 percent to 5 percent, we would expect to observe

It is not possible for one country to sell all products more cheaply than other countries for any length of time because the

If a tariff is imposed by a country that is large enough to have market power in global markets, the domestic consumer will face a price than the world price for the product, and this world price will be by the tariff.

Suppose Canada has a 12- percent tariff on foreign- made cotton clothing. If the tariff is raised to 20 percent, there will be a in the Canadian price of cotton clothing, profits for domestic producers, and _ in deadweight loss.

If country A has wages that are substantially less than those in country B,

The diagram below shows the demand and supply curves for refrigerators in Canada. FIGURE 34- 1 -Refer to Figure 34- 1, and assume the world price is P0. The Canadian government now imposes an import quota of the amount Q2Q4. The result would be that the price in Canada would:

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market. Assume that all bicycles are identical. FIGURE 34- 4 -Refer to Figure 34- 4. Assume there is free trade in bicycles. At a world price of $300, Canada's Will be bicycles per year.

Suppose you are an economist advising the Canadian government as to whether to erect trade barriers for the protection of Canada's textile industry. You would study the gains to be realized in this industry and weigh those against

The North American Free Trade Agreement (NAFTA) is guided by the principle of