Question 1

Figure 5.4 illustrates the calculator market for Venezuela, assumed to be a "small" country that is unable to affect the world price. SS1U1B1VenezuelaS1U1B0 is the domestic supply schedule and DS1U1B1VenezuelaS1U1B0 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 2

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

Question 3

Subsidies to domestic firms may lead to

Accepted Answer

The answer of Subsidies to domestic firms may lead to
...

Question 4

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 5

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

By limiting the amount of sugar that can be imported, the government reduces the supply and increases demand, driving up the price of sugar in the domestic market. This higher price makes it easier for the government to maintain price supports for domestic growers, as the market price is closer to the supported price.

Question 6

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 import quotas are implemented, the domestic government may choose to auction import licenses to the highest bidder. This can create revenue for the government, as the highest bidder pays for the license to import a certain quantity of goods.

Question 7

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

Accepted Answer

Import tariffs and import quotas have different effects on consumption, revenue and distribution. Import tariffs generate revenue for the government, while import quotas do not. Import tariffs also result in higher prices for consumers, while import quotas can lead to shortages and higher prices for consumers. Additionally, import quotas may benefit a small group of domestic producers at the expense of consumers, while import tariffs distribute the costs and benefits more evenly across society.

Question 8

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 US demand curve shifts to the right until it intersects with the supply curve at a quantity of 30 bottles. At this quantity, US producers will produce 15 bottles and US consumers will demand 30 bottles, leaving a shortage of 15 bottles. Since the EU is willing to supply as much wine as the US demands at $8 per bottle, the remaining 15 bottles will be imported from the EU. Therefore, the amounts produced, consumed, and imported will be 15, 30, and 15 bottles respectively.

Question 9

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

Accepted Answer

In the post-World War II era, nontariff trade barriers have actually increased in importance relative to tariff barriers. This is due to the fact that countries have turned to nontariff barriers, such as quotas and regulations, to protect their domestic industries and limit imports, instead of relying solely on tariffs.

Question 10

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 total amount of a product that can be imported into a country, without specifying the countries or importers who are permitted to import it. This allows for more flexibility in trade and allows different countries and importers to compete for a share of the limited quota.

Question 11

During periods of growing demand, a tariff more effectively restricts the volume of imports than an equivalent import quota.

Accepted Answer

A tariff increases the price of imported goods, which might reduce demand but does not directly limit the quantity of imports. An import quota specifically limits the quantity of goods that can be imported, directly restricting the volume of imports regardless of demand changes.

Question 12

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 and a trade diversion effect may occur. The non-restrained suppliers may take advantage of the reduced supply from the chief exporter to increase their own exports, leading to a stimulation effect. At the same time, the trade diversion effect may occur as the importers who previously relied on the chief exporter may shift to the non-restrained suppliers. Therefore, both options A and B are correct.

Question 13

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

Accepted Answer

Most industrial countries protect their industries through selective import quotas and tariffs targeted at specific products or countries, rather than global import quotas that would apply uniformly to all imports regardless of their origin or type.

Question 14

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 can negotiate with foreign exporting companies for lower prices, allowing them to capture the revenue effect of a quota. Meanwhile, foreign exporting companies behave as competitive sellers and do not have the power to influence prices, leading to lower profits for them.

Question 15

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 16

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 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

A voluntary export agreement

Accepted Answer

A voluntary export agreement typically applies only to the world's most important exporting nation(s) and is a type of bilateral agreement between two countries, where the exporting country agrees to limit its exports of a certain product to the importing country in order to avoid imposition of trade barriers like tariffs or import quotas.

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

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...

Quiz 5: Nontariff Trade Barriers

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

Subsidies to domestic firms may lead to

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.

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.

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

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

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

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.

During periods of growing demand, a tariff more effectively restricts the volume of imports than an equivalent import quota.

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

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

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.

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?

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?

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?

A voluntary export agreement

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?

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