Question 1

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

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

Question 2

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

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

Question 3

If a small country imposes a tariff, then

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When a small country imposes a tariff, the price of imported goods will increase, making it harder for people to buy them. This means that the consumers will suffer a loss, as they will end up paying more for the same goods than before. The producers, on the other hand, may benefit from the tariff as it protects them from foreign competition. The government may also benefit from the tariff, as it can collect revenue from the tax imposed. However, in most cases, the revenue generated is not enough to cover the loss suffered by the consumers, so the government may also end up suffering a loss. The demand curve may shift to the left as a result of the tariff, but this depends on the elasticity of demand. The world price may also shift, as the tariff may make the product less competitive in the international market.

Question 4

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

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

Question 5

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

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

Question 6

Throughout the post-World War II era, the importance of tariffs as a trade barrier has

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Throughout the post-World War II era, the importance of tariffs as a trade barrier has decreased as countries have increasingly adopted more open trade policies and negotiated trade agreements to reduce or eliminate tariffs.

Question 7

In an inflationary environment, then over time

Accepted Answer

In an inflationary environment, the prices of goods increase over time. An ad valorem tariff is a percentage of the value of the good being imported, so as the price of the good increases, the revenue generated by the tariff will also increase. On the other hand, a specific tariff is a fixed amount regardless of the price of the good, so in an inflationary environment, it will generate less revenue in real terms.

Question 8

The principle benefit of tariff protection goes to

Accepted Answer

Tariff protection allows domestic producers to increase their prices, increase their market share, and potentially earn higher profits. This benefit primarily goes to domestic producers of the good produced, as foreign producers may be priced out of the market or face increased competition. Domestic consumers of the good produced may face higher prices, while foreign consumers may be forced to seek alternative suppliers. The domestic government may also benefit from tariff revenue, but this is not the primary benefit of tariff protection.

Question 9

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?

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

Question 10

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

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A tariff is a tax on imported goods. When a tariff is imposed, the price of the foreign goods increases, making them less attractive to domestic buyers. Domestic buyers then switch to buying from domestic producers, who are able to charge higher prices due to the reduced competition. This results in a transfer of income from domestic buyers to domestic producers.

Question 11

Should the home country be "large" relative to its trade partners, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms of the trade rectangle exceed the sum of the

Accepted Answer

The correct answer is D) production distortion effect plus consumption distortion effect. Imposing a tariff can lead to an increase in domestic welfare if the terms of trade gain (improvement in the price of exports relative to imports) exceeds the sum of the production distortion effect (inefficient allocation of resources towards the production of goods now protected by the tariff) and the consumption distortion effect (changes in consumption patterns away from what would be optimal without the tariff). This is because the terms of trade gain can offset the welfare losses from distortions in production and consumption, leading to a net increase in domestic welfare.

Question 12

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

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

Question 13

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

Accepted Answer

The imposition of a tariff in country H raises the price of the good in country H, but it does not affect its price in country F. Therefore, option B is the correct answer. Option A is incorrect because the "Law of One Price" refers to the idea that the same good should have the same price in different locations when all other factors are equal, so a tariff would not necessarily affect this. Option C is incorrect because a tariff would not lower the price of the good in both countries. Option D could be true in some cases, but it is not always the case. Option E is incorrect because it implies that the tariff has opposite effects in the two countries, which is not necessarily true.

Question 14

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

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

Question 15

The effective rate of protection measures

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The effective rate of protection measures the protection given by the tariff to domestic value added. It takes into account not only the direct impact of the tariff on the imported good but also the indirect impact on the domestic production of inputs used to produce the imported good.

Question 16

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

Accepted Answer

The effective rate of protection will decrease because the cost of imported components will rise, reducing the value added by domestic production in the computer industry.

Question 17

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

Accepted Answer

A tariff imposed by a large country like H raises the price of the good domestically due to the added cost of the tariff. However, it can lower the price in the exporting country F because the demand from H decreases, leading to a surplus in F, which can drive prices down.

Question 18

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

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

Question 19

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.

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

Question 20

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

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