Question 1

The effective rate of protection measures
A) the "true" ad valorem value of a tariff.
B) the quota equivalent value of a tariff.
C) the efficiency with which the tariff is collected at the customhouse.
D) the protection given by the tariff to domestic value added.
E) the difference between domestic and foreign prices of the import.

Accepted Answer

The effective rate of protection measures the protection given by a tariff to domestic value added, taking into account not only the tariff on the final imported product, but also the tariffs on the intermediate goods used in the production process. It is calculated as the percentage increase in value added due to the tariff protection.

Question 2

If a good is imported into (small)country H from country F,then the imposition of a tariff In country H
A) raises the price of the good in both countries (the "Law of One Price").
B) raises the price in country H and does not affect its price in country F.
C) lowers the price of the good in both countries.
D) lowers the price of the good in H and could raise it in F.
E) raises the price of the good in H and lowers it in F.

Accepted Answer

Imposing a tariff in country H will increase the cost of importing the good from country F, thus raising the price of the good in country H. However, it will not affect the price of the good in country F, as F has no control over H's tariff policies. Therefore, the correct option is B.

Question 3

-Refer to above figure.The lowest specific tariff which would be considered prohibitive is ________.

Accepted Answer

The answer of 
-Refer to above figure.The lowest specific tariff...

Question 4

Some argue that tariffs always hurt the imposing country's economic welfare,and are typically designed to shift resources from one sector to another,protected or preferred one,within an economy.Find and discuss a counter example to this argument.

Accepted Answer

The answer of Some argue that tariffs always hurt the...

Question 5

If a good is imported into (large)country H from country F,then the imposition of a tariff in country H
A) raises the price of the good in both countries (the "Law of One Price").
B) raises the price in country H and cannot affect its price in country F.
C) lowers the price of the good in both countries.
D) lowers the price of the good in H and could raise it in F.
E) raises the price of the good in H and lowers it in F.

Accepted Answer

The answer of If a good is imported into (large)country...

Question 6

When a government allows raw materials and other intermediate products to enter a country duty free,this generally results in a(an)
A) effective tariff rate less than the nominal tariff rate.
B) nominal tariff rate less than the effective tariff rate.
C) rise in both nominal and effective tariff rates.
D) fall in both nominal and effective tariff rates.
E) rise in only the effective tariff rate.

Accepted Answer

Allowing raw materials and other intermediate products to enter a country duty-free reduces the cost of production for domestic industries. As a result, the nominal tariff rate (the rate set by the government) is usually lower than the effective tariff rate (the actual rate paid by importers). Therefore, the answer is B - nominal tariff rate less than the effective tariff rate.

Question 7

Of the many arguments in favor of tariffs,the one that has enjoyed significant economic justification has been the
A) cheap foreign labor argument.
B) infant industry argument.
C) even playing field argument.
D) balance of payments argument.
E) domestic living standard argument.

Accepted Answer

The infant industry argument suggests that new industries need protection from foreign competition through tariffs or other trade barriers until they become established and can compete on their own. This argument is based on the belief that protecting these industries will lead to job creation and economic growth in the long term. While other arguments for tariffs may also be made, the infant industry argument is the most widely accepted by economists.

Question 8

The imposition of tariffs on imports results in deadweight (triangle)losses.These are
A) production and consumption distortion effects.
B) redistribution effects.
C) revenue effects
D) efficiency effects.
E) distortion of incentives.

Accepted Answer

The answer of The imposition of tariffs on imports results...

Question 9

If the tariff on computers is not changed,but the government then adds hitherto nonexistent tariffs on imported semi-conductor components,then the effective rate of protection in the computer industry will
A) increase.
B) decrease.
C) remain the same.
D) depend on whether computers are PCs or "Supercomputers."
E) no longer apply.

Accepted Answer

The answer of If the tariff on computers is not...

Question 10

If the tariff on computers is not changed,but domestic computer producers shift from domestically produced semiconductors to imported components,then the effective rate of protection in the computer industry will
A) increase.
B) decrease
C) remain the same.
D) depend on whether computers are PCs or "Supercomputers."
E) no longer apply.

Accepted Answer

The answer of If the tariff on computers is not...

Question 11

-Refer to above figure.With a specific tariff of $3 per unit,what is the quantity of Widgets produced domestically?

Accepted Answer

The answer of 
-Refer to above figure.With a specific tariff...

Question 12

-Refer to above figure.With free trade and no tariffs,what is the quantity of Widgets consumed domestically?

Accepted Answer

The answer of 
-Refer to above figure.With free trade and...

Question 13

The main redistribution effect of a tariff is the transfer of income from
A) domestic producers to domestic buyers.
B) domestic buyers to domestic producers.
C) domestic producers to domestic government.
D) domestic government to domestic consumers.
E) foreign producers to domestic consumers.

Accepted Answer

A tariff is a tax levied on imported goods. This tax increases the price of the imported goods, making them more expensive for domestic buyers. Domestic producers of similar goods can increase their prices to match the higher price of foreign goods, and as a result, they benefit from the increased demand for their products. Therefore, the main redistribution effect of a tariff is the transfer of income from domestic buyers to domestic producers, making B the correct choice.

Question 14

-Refer to above figure.With a specific tariff of $3 per unit,what is the quantity of Widgets imported?

Accepted Answer

The answer of 
-Refer to above figure.With a specific tariff...

Question 15

-Refer to above figure.With a specific tariff of $3 per unit,what is the quantity of Widgets consumed domestically?

Accepted Answer

The answer of 
-Refer to above figure.With a specific tariff...

Question 16

As globalization tends to increase the proportion of imported inputs relative to domestically supplied components
A) the nominal tariff automatically increases.
B) the rate of (effective) protection automatically decreases.
C) the nominal tariff automatically decreases.
D) the rate of (effective) protection automatically increases.
E) the amount of tariffs levied increases.

Accepted Answer

The answer of As globalization tends to increase the proportion...

Question 17

-Refer to above figure.With free trade and no tariffs,what is the quantity of Widgets produced domestically?

Accepted Answer

The answer of 
-Refer to above figure.With free trade and...

Question 18

If a small country imposes a tariff,then
A) the producers must suffer a loss.
B) the consumers must suffer a loss.
C) the government revenue must suffer a loss.
D) the demand curve must shift to the left.
E) the world price on that item will shift.

Accepted Answer

When a small country imposes a tariff, it increases the price of imported goods, which in turn reduces the quantity demanded by domestic consumers. This reduction in demand causes a loss for consumers, who must now pay a higher price for the same goods. Producers may benefit initially from the higher prices, but they may also suffer from reduced demand in the long run. The government may gain revenue from the tariff, but this does not necessarily result in a loss for the government. The demand curve may shift to the left, but this depends on the specific circumstances of the tariff. The world price may also shift, but this is not necessarily a direct consequence of the tariff itself.

Question 19

The effective rate of protection is a weighted average of nominal tariffs and tariffs on imported inputs.It has been noted that in most industrialized countries,the nominal tariffs on raw materials or intermediate components or products are lower than on final-stage products meant for final markets.Why would countries design their tariff structures in this manner? Who tends to be helped,and who is harmed by this cascading tariff structure?

Accepted Answer

The answer of The effective rate of protection is a...

Question 20

In an inflationary environment,then over time
A) a specific tariff will tend to raise more revenue than an ad valorem tariff.
B) an ad valorem tariff will tend to raise more revenue than a specific tariff.
C) an optimum tariff will tend to raise more revenue than an escalating tariff.
D) a tariff quota will tend to raise more revenue than a specific tariff.
E) an import quota would raise more revenue than a specific tariff.

Accepted Answer

In an inflationary environment, an ad valorem tariff (which is a percentage of the value of the imported goods) will tend to raise more revenue than a specific tariff (which is a fixed amount per unit), as the value of imported goods will also increase with inflation. Therefore, the revenue raised by an ad valorem tariff will increase proportionally.

Quiz 9: The Instruments of Trade Policy

The effective rate of protection measures

If a good is imported into (small) country H from country F,then the imposition of a tariff In country H

-Refer to above figure.The lowest specific tariff which would be considered prohibitive is ________.

Some argue that tariffs always hurt the imposing country's economic welfare,and are typically designed to shift resources from one sector to another,protected or preferred one,within an economy.Find and discuss a counter example to this argument.

If a good is imported into (large) country H from country F,then the imposition of a tariff in country H

When a government allows raw materials and other intermediate products to enter a country duty free,this generally results in a(an)

Of the many arguments in favor of tariffs,the one that has enjoyed significant economic justification has been the

The imposition of tariffs on imports results in deadweight (triangle) losses.These are

If the tariff on computers is not changed,but the government then adds hitherto nonexistent tariffs on imported semi-conductor components,then the effective rate of protection in the computer industry will

If the tariff on computers is not changed,but domestic computer producers shift from domestically produced semiconductors to imported components,then the effective rate of protection in the computer industry will

-Refer to above figure.With a specific tariff of $3 per unit,what is the quantity of Widgets produced domestically?

-Refer to above figure.With free trade and no tariffs,what is the quantity of Widgets consumed domestically?

The main redistribution effect of a tariff is the transfer of income from

-Refer to above figure.With a specific tariff of $3 per unit,what is the quantity of Widgets imported?

-Refer to above figure.With a specific tariff of $3 per unit,what is the quantity of Widgets consumed domestically?

As globalization tends to increase the proportion of imported inputs relative to domestically supplied components

-Refer to above figure.With free trade and no tariffs,what is the quantity of Widgets produced domestically?

If a small country imposes a tariff,then

In an inflationary environment,then over time