Question 1

Tariffs are$\underline { \text { not } }$defended on the ground that they:
A) Improve the terms of trade of foreign nations
B) Protect jobs and reduce unemployment
C) Promote growth and development of young industries
D) Prevent overdependence of a country on only a few industries

Accepted Answer

A

Question 2

A beggar-thy-neighbor policy is the imposition of:
A) Free trade to increase domestic productivity
B) Trade barriers to increase domestic demand and employment
C) Import tariffs to curb domestic inflation
D) Revenue tariffs to make products cheaper for domestic consumers

Accepted Answer

A beggar-thy-neighbor policy refers to trade policies that are designed to benefit one country while harming others. The imposition of trade barriers, such as tariffs, is an example of a beggar-thy-neighbor policy as it can increase domestic demand and employment, but at the expense of other countries who may face reduced demand for their goods and services. Free trade, on the other hand, is generally seen as a policy that benefits all countries involved by increasing overall economic efficiency and productivity. Import tariffs to curb domestic inflation or revenue tariffs to make products cheaper for domestic consumers may have unintended consequences and are not typically considered beggar-thy-neighbor policies.

Question 3

A $100 specific tariff provides home producers $\underline {  \text { more }  }$ protection from foreign competition when:
A) The home market buys cheaper products rather than expensive products
B) It is applied to a commodity with many grade variations
C) The home demand for a good is elastic with respect to price changes
D) It is levied on manufactured goods rather than primary products

Accepted Answer

A

Question 4

Assume the United States adopts a tariff quota on steel in which the quota is set at 2 million tons, the within-quota tariff rate equals 5 percent, and the over-quota tariff rate equals 10 percent. Suppose the U.S. imports 1 million tons of steel. The resulting revenue effect of the tariff quota would accrue to:
A) The U.S. government only
B) U.S. importing companies only
C) Foreign exporting companies only
D) The U.S. government and either U.S. importers or foreign exporters

Accepted Answer

The answer of Assume the United States adopts a tariff...

Question 5

The principal benefit of tariff protection goes to:
A) Domestic consumers of the good produced
B) Domestic producers of the good produced
C) Foreign producers of the good produced
D) Foreign consumers of the good produced

Accepted Answer

Tariff protection benefits domestic producers of the good produced by making their products relatively cheaper compared to the foreign producers. This leads to an increase in domestic output, employment, and profits for domestic producers. However, it comes at a cost to domestic consumers, who end up paying higher prices for the imported product or domestically produced substitute. Foreign producers are also negatively affected as they face reduced demand from the protected market. Foreign consumers may also face higher prices if they import the product from the protected market.

Question 6

Which of the following is a fixed percentage of the value of an imported product as it enters the country?
A) Specific tariff
B) Ad valorem tariff
C) Nominal tariff
D) Effective tariff

Accepted Answer

An ad valorem tariff is a fixed percentage of the value of an imported product as it enters the country. A specific tariff is a fixed amount of tax per unit of a product, while nominal and effective tariffs are not related to the value of the product.

Question 7

A problem encountered when implementing an "infant industry" tariff is that:
A) Domestic consumers will purchase the foreign good regardless of the tariff
B) Political pressure may prevent the tariff's removal when the industry matures
C) Most industries require tariff protection when they are mature
D) Labor unions will capture the protective effect in higher wages

Accepted Answer

The problem with implementing an infant industry tariff is that political pressure may prevent the tariff's removal when the industry matures. Once the industry is able to compete on its own, the tariff may no longer be necessary but it can be difficult to remove due to pressure from industry lobbyists and politicians who have a vested interest in keeping the tariff in place. This can lead to higher prices for consumers in the long run.

Question 8

When a government allows raw materials and other intermediate products to enter a country $\underline {   \text { duty free } }$, its tariff policy generally results in a:
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

Accepted Answer

The answer of When a government allows raw materials and...

Question 9

When the production of a commodity does $\underline {  \text { not }  }$utilize imported inputs, the effective tariff rate on the commodity:
A) Exceeds the nominal tariff rate on the commodity
B) Equals the nominal tariff rate on the commodity
C) Is less than the nominal tariff rate on the commodity
D) None of the above

Accepted Answer

The effective tariff rate is calculated as the percentage increase in the domestic price of the commodity due to the imposition of the tariff. When the production of a commodity does not utilize imported inputs, the domestic price of the commodity is not affected by the tariff directly. Therefore, the effective tariff rate is equal to the nominal tariff rate on the commodity.

Question 10

Which of the following is$\underline { \text { true }   }$ concerning a specific tariff?
A) It is exclusively used by the U.S. in its tariff schedules.
B) It refers to a flat percentage duty applied to a good's market value.
C) It is plagued by problems associated with assessing import product values.
D) It affords less protection to home producers during eras of rising prices.

Accepted Answer

The answer of Which of the following is\(\underline { \text...

Question 11

A $\underline {  \text { lower }  }$ tariff on imported aluminum would most likely benefit:
A) Foreign producers at the expense of domestic consumers
B) Domestic manufacturers of aluminum
C) Domestic consumers of aluminum
D) Workers in the domestic aluminum industry

Accepted Answer

The answer of A \(\underline {  \text { lower...

Question 12

Of the many arguments in favor of tariffs, the one that has enjoyed the $\underline {\text { most }  }$ significant economic justification has been the:
A) Infant industry argument
B) Cheap foreign labor argument
C) Balance of payments argument
D) Domestic living standard argument

Accepted Answer

The infant industry argument suggests that new and developing domestic industries need protection from foreign competition in order to grow and eventually become competitive in international markets. This argument has been supported by economic theory and used as a justification for tariffs by many countries throughout history. The other arguments listed (cheap foreign labor, balance of payments, and domestic living standard) have been used to favor tariffs but do not have as strong of an economic justification as the infant industry argument.

Question 13

The imposition of tariffs on imports results in deadweight welfare losses for the home economy. These losses consist of the:
A) Protective effect plus consumption effect
B) Redistribution effect plus revenue effect
C) Revenue effect plus protective effect
D) Consumption effect plus redistribution effect

Accepted Answer

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

Question 14

Which of the following policies permits a specified quantity of goods to be imported at one tariff rate and applies a higher tariff rate to imports above this quantity?
A) Tariff quota
B) Import tariff
C) Specific tariff
D) Ad valorem tariff

Accepted Answer

Tariff quota is a policy that allows a specified amount of goods to be imported at a lower tariff rate, typically a zero or low rate, which is known as the quota rate. Once the quota has been exceeded, a higher tariff rate is applied, known as the over-quota rate. This policy is used to balance the need for domestic production with the need for imports, by allowing a certain amount of imports without harming domestic producers, while at the same time encouraging domestic production by making imports more expensive beyond the quota.

Question 15

Suppose that the United States $\underline {   \text { eliminates } }$ its tariff on steel imports, permitting foreign-produced steel to enter the U.S. market. Steel prices to U.S. consumers would be expected to:
A) Increase, and the foreign demand for U.S. exports would increase
B) Decrease, and the foreign demand for U.S. exports would increase
C) Increase, and the foreign demand for U.S. exports would decrease
D) Decrease, and the foreign demand for U.S. exports would decrease

Accepted Answer

Eliminating the tariff on steel imports would increase competition in the U.S. market, leading to a decrease in steel prices for U.S. consumers. This would also make U.S. steel less expensive for foreign buyers, increasing the demand for U.S. exports.

Question 16

Should Canada impose a tariff on imports, one would expect Canada's:
A) Terms of trade to improve and volume of trade to decrease
B) Terms of trade to worsen and volume of trade to decrease
C) Terms of trade to improve and volume of trade to increase
D) Terms of trade to worsen and volume of trade to increase

Accepted Answer

The answer of Should Canada impose a tariff on imports,...

Question 17

Developing nations often maintain that industrial countries permit raw materials to be imported at very low tariff rates while maintaining high tariff rates on manufactured imports. Which of the following refers to the above statement?
A) Tariff-quota effect
B) Nominal tariff effect
C) Tariff escalation effect
D) Protective tariff effect

Accepted Answer

Tariff escalation effect refers to the situation where high tariffs are placed on processed or manufactured goods while raw materials or goods in their unprocessed form are taxed at lower rates. This has the effect of protecting domestic processors while making it difficult for producers in developing countries to compete with their counterparts in industrialized nations.

Question 18

The deadweight loss of a tariff:
A) Is a social loss since it promotes inefficient production
B) Is a social loss since it reduces the revenue for the government
C) Is not a social loss because society as a whole doesn't pay for the loss
D) Is not a social loss since only business firms suffer revenue losses

Accepted Answer

A deadweight loss of a tariff is a social loss because it causes inefficiencies in production, reducing the overall welfare of society. This loss is not only borne by business firms, but also by consumers who end up paying higher prices. Furthermore, the revenue collected by the government through tariffs is often lost due to the inefficiencies caused by the tariff.

Question 19

The redistribution effect of an import tariff is the transfer of income from the domestic:
A) Producers to domestic buyers of the good
B) Buyers to domestic producers of the good
C) Buyers to the domestic government
D) Government to the domestic buyers

Accepted Answer

An import tariff increases the price of the imported good, which leads to a decrease in demand for it. Domestic producers of the same good would benefit from the reduced competition and may increase their prices to match the higher price of the imported good. Therefore, the transfer of income occurs from the buyers of the imported good to the domestic producers of the same good.

Question 20

Should the home country be "large" relative to the world, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms-of-trade effect $\underline {  \text { exceeds }  }$ the sum of the:
A) Revenue effect plus redistribution effect
B) Protective effect plus revenue effect
C) Consumption effect plus redistribution effect
D) Protective effect plus consumption effect

Accepted Answer

The answer of Should the home country be "large" relative...

Quiz 4: Tariffs

Tariffs are $\underline { \text { not } }$ defended on the ground that they:

A beggar-thy-neighbor policy is the imposition of:

A $100 specific tariff provides home producers $\underline { \text { more } }$ protection from foreign competition when:

The principal benefit of tariff protection goes to:

Which of the following is a fixed percentage of the value of an imported product as it enters the country?

A problem encountered when implementing an "infant industry" tariff is that:

When a government allows raw materials and other intermediate products to enter a country $\underline { \text { duty free } }$ , its tariff policy generally results in a:

When the production of a commodity does $\underline { \text { not } }$ utilize imported inputs, the effective tariff rate on the commodity:

Which of the following is $\underline { \text { true } }$ concerning a specific tariff?

A $\underline { \text { lower } }$ tariff on imported aluminum would most likely benefit:

Of the many arguments in favor of tariffs, the one that has enjoyed the $\underline {\text { most } }$ significant economic justification has been the:

The imposition of tariffs on imports results in deadweight welfare losses for the home economy. These losses consist of the:

Which of the following policies permits a specified quantity of goods to be imported at one tariff rate and applies a higher tariff rate to imports above this quantity?

Suppose that the United States $\underline { \text { eliminates } }$ its tariff on steel imports, permitting foreign-produced steel to enter the U.S. market. Steel prices to U.S. consumers would be expected to:

Should Canada impose a tariff on imports, one would expect Canada's:

Developing nations often maintain that industrial countries permit raw materials to be imported at very low tariff rates while maintaining high tariff rates on manufactured imports. Which of the following refers to the above statement?

The deadweight loss of a tariff:

The redistribution effect of an import tariff is the transfer of income from the domestic:

Should the home country be "large" relative to the world, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms-of-trade effect $\underline { \text { exceeds } }$ the sum of the:

Quiz 4: Tariffs

Tariffs are not ‾\underline { \text { not } } not ​ defended on the ground that they: