Question 1

To the extent that domestic importing companies organize as a monopoly buyer,and foreign exporting companies behave as competitive sellers,the importing companies capture the revenue effect of a quota.

Accepted Answer

When domestic importing companies organize as a monopoly buyer, they have the power to negotiate lower prices with foreign exporting companies, who behave as competitive sellers. This results in the domestic importers capturing the revenue effect of a quota, as they can restrict the supply of goods and raise prices to increase their profits.

Question 2

A voluntary export agreement

Accepted Answer

A voluntary export agreement is a trade agreement between two or more countries where exporting countries voluntarily limit the quantity of goods they export to another country in exchange for some trade concessions. These agreements are typically negotiated by the world's most important exporting nation(s) (such as the U.S. or China) to avoid facing more restrictive trade measures such as tariffs or import quotas imposed by the importing country. Therefore, option A is the correct answer. Options B and C are incorrect statements.

Question 3

Today most industrial countries protect their industries via global import quotas rather than selective import quotas.

Accepted Answer

Most industrial countries now protect their industries via selective import quotas, which target specific countries or products, rather than global import quotas, which apply to all countries and products. This allows for more targeted and effective protection of domestic industries while minimizing negative impacts on trade relations with other countries.

Question 4

When voluntary export limits are imposed on the world's chief exporter

Accepted Answer

When voluntary export limits are imposed on the world's chief exporter, the exports of the non-restrained suppliers may be stimulated due to reduced competition, leading to the trade diversion effect. Therefore, both (a) and (b) options are correct.

Question 5

A global import quota permits a specified number of goods to be imported each year,but does not specify where the product is shipped from and who is permitted to import.

Accepted Answer

A global import quota sets a limit on the quantity of a product that can be imported into a country or region each year, without specifying the source of the product or who can import it. This allows importers from different countries to compete for a share of the quota and can make the import process more equitable.

Question 6

An import quota is a physical restriction on the quantity of goods that may be imported during a specified time period.

Accepted Answer

An import quota is indeed a physical restriction on the quantity of goods that may be imported during a specified time period.

Question 7

Figure 5.6 Domestice Supply and demand for Wine - US
 
-Consider Figure 5.6.In the global market for wine,the EU is willing to supply as much wine as the US demands at $8 per bottle.IF the US imposes a quota of 15 bottles of wine what will happen to consumer surplus?

Accepted Answer

The answer of Figure 5.6 Domestice Supply and demand for...

Question 8

An import quota tends to reduce the overall welfare of the importing nation by an amount equal to the protective effect,consumption effect,and the portion of the revenue effect that is captured by the domestic government.

Accepted Answer

An import quota tends to reduce the overall welfare of the importing nation, but the portion of the revenue effect captured by the domestic government (in the form of tariffs or taxes) does not reduce welfare; instead, it represents a transfer within the economy. The welfare loss is primarily due to the protective effect and consumption effect, along with any inefficiencies or distortions created in the market.

Question 9

Import tariffs and import quotas yield identical protection effects,consumption effects,redistribution effects,and revenue effects.

Accepted Answer

While both import tariffs and import quotas aim to protect domestic industries from foreign competition, they have different effects on consumers, importers, and the government. Import tariffs generate revenue for the government but also increase prices for consumers and reduce the quantity of imports. Import quotas, on the other hand, allocate a limited amount of import licenses to selected importers, which can lead to higher prices and rents for those licenses, but do not generate revenue for the government. Therefore, import tariffs and import quotas have different distributional effects and economic efficiency properties.

Question 10

Subsidies to domestic firms may lead to

Accepted Answer

Subsidies to domestic firms can lower production costs, making their goods more competitive internationally, potentially increasing the volume of exports.

Question 11

Figure 5.6 Domestice Supply and demand for Wine - US
 
-Consider Figure 5.6.In the global market for wine,the EU is willing to supply as much wine as the US demands at $8 per bottle.What will happen to the price of a bottle of wine in the US if a quota of 15 bottles of wine is imposed?

Accepted Answer

The answer of Figure 5.6 Domestice Supply and demand for...

Question 12

Figure 5.4 illustrates the calculator market for Venezuela,assumed to be a "small" country that is unable to affect the world price.SVenezuela is the domestic supply schedule and DVenezuela is the domestic demand schedule.
Figure 5.4.Venezuelan Calculator Market
 
-Consider Figure 5.4.The increase in Venezuelan producer surplus under the production subsidy totals:

Accepted Answer

Producer surplus increases by the area of the rectangle formed by the subsidy amount per unit (vertical distance between the supply curves before and after the subsidy) multiplied by the new quantity produced and sold.

Question 13

In the post-World War II era,Nontariff trade barriers have decreased in importance relative to tariff barriers.

Accepted Answer

Nontariff trade barriers have increased in importance as countries have reduced tariffs through international agreements, leading to a rise in other forms of trade restrictions.

Question 14

Import quotas can yield revenue for the domestic government if it auctions import licenses to the highest bidder in a competitive market.

Accepted Answer

When the government auctions import licenses to the highest bidder, they can generate revenue in the form of license fees paid by the winning bidders. This can provide a significant source of income for the domestic government.

Question 15

Figure 5.4 illustrates the calculator market for Venezuela,assumed to be a "small" country that is unable to affect the world price.SVenezuela is the domestic supply schedule and DVenezuela is the domestic demand schedule.
Figure 5.4.Venezuelan Calculator Market
 
-Consider Figure 5.4.The production subsidy results in an overall welfare loss for Venezuela totaling:

Accepted Answer

The answer of Figure 5.4 illustrates the calculator market for...

Question 16

Concerning international dumping,many economists argue that "fair value" should be based on

Accepted Answer

The answer of Concerning international dumping,many economists argue that "fair...

Question 17

Figure 5.6 Domestice Supply and demand for Wine - US
 
-Consider Figure 5.6.In the global market for wine,the EU is willing to supply as much wine as the US demands at $8 per bottle.How much will the US produce and import in these circumstances?

Accepted Answer

At the price of $8 per bottle, the U.S. domestic supply curve intersects with the demand curve at a quantity of 5 bottles. This means that the U.S. will produce 5 bottles domestically. However, at the same price, the EU is willing to supply an additional 35 bottles, which means that the U.S. will import 35 bottles from the EU. Therefore, the total quantity of wine that the U.S. will produce and import is 5 bottles domestically and 35 bottles from the EU, for a total of 40 bottles.

Question 18

Figure 5.6 Domestice Supply and demand for Wine - US
 
-Consider Figure 5.6.In the global market for wine,the EU is willing to supply as much wine as the US demands at $8 per bottle.IF the US imposes a quota of 15 bottles of wine,how much wine will US consumers demand,how much wine will US producers produce and how much wine will be imported?

Accepted Answer

With the quota of 15 bottles, the domestic demand will be at the intersection of the demand curve and the quota line, which is 30 bottles. 
Since the domestic supply curve intersects the quantity axis at 15 bottles, the domestic producers will produce 15 bottles. 
To meet the remaining demand of 30-15=15 bottles, the US will import 15 bottles from the EU. Therefore, the total import will be 15 bottles. 
So, the correct choice is D) 30 bottles, 15 bottles, 15 bottles.

Question 19

Figure 5.6 Domestice Supply and demand for Wine - US
 
-Consider Figure 5.6.In the global market for wine,the EU is willing to supply as much wine as the US demands at $8 per bottle.If the US imposes a quota of 15 bottles of wine ,how much revenue will the US government collect?

Accepted Answer

Quotas limit the quantity of goods that can be imported but do not directly generate revenue for the government. Tariffs, not quotas, are what generate revenue through taxes on imported goods.

Question 20

The sugar import quotas of the U.S.government have tended to increase the market price of sugar,thus reducing the costs to the government of maintaining sugar price supports for domestic growers.

Accepted Answer

The import quotas limit the amount of sugar that can be imported into the U.S., creating a smaller supply of sugar and increasing market prices. This in turn reduces the costs to the government of maintaining price supports for domestic growers, as they are able to sell their sugar at a higher price.

Quiz 5: Nontariff Trade Barriers