Question 1

Which of the following restricts the volume of international trade?

Accepted Answer

Tariffs restrict the volume of international trade by making imported goods more expensive and less competitive in the domestic market. This leads to a decrease in demand for imports and an increase in demand for domestically produced goods. Tariffs are a type of trade barrier that countries use to protect their domestic industries from foreign competition.

Question 2

Which of the following is the best example of a tariff?

Accepted Answer

A tariff is a tax imposed on imported goods, so the $100-per-car fee imposed on all small cars imported is the best example of a tariff. Option A is not a tariff but a domestic tax, option B is a quota not a tariff, and option C is a subsidy not a tariff.

Question 3

If opening up international trade resulted in the U.S.becoming a wheat exporter,relative to the prior no-trade situation,the U.S.domestic price of wheat:

Accepted Answer

When a country becomes an exporter of a good, it means that the domestic price of that good was lower than the world price before trade. Opening up to international trade allows the country to sell the good at the higher world price, which increases the domestic price. As the domestic price rises, producers are incentivized to increase output to take advantage of the higher prices, leading to an increase in both the domestic price and output of wheat.

Question 4

If opening up international trade resulted in the U.S.importing ballpoint pens,what would tend to happen to the U.S.price of ballpoint pens?

Accepted Answer

Opening up international trade would increase the supply of ballpoint pens in the U.S. market, which would drive down the price of ballpoint pens domestically.

Question 5

A tariff on shoes would lead to:

Accepted Answer

When a tariff is imposed on shoes, foreign shoes become more expensive due to the additional tax, so there will be a decrease in imports and an increase in the demand for domestic shoes. This creates an opportunity for domestic producers to increase their prices and sell more shoes at a higher price. Therefore, both A and B are correct. Additionally, with the increase in price of foreign shoes, there will be a decrease in sales of foreign shoes, leading to C being correct as well.

Question 6

Which of the following is not an argument favoring tariffs?

Accepted Answer

Tariffs typically lead to higher prices for imported goods, which decreases consumer surplus for domestic consumers.

Question 7

An import quota or tariff on French wine that raises the prices for wine will probably

Accepted Answer

An import quota or tariff on French wine would increase the price of imported wine, making domestic wine relatively cheaper or more attractive in comparison. This could hurt domestic wine drinkers due to higher prices overall but benefit domestic wineries by reducing competition from imported wines, potentially increasing their sales and market share.

Question 8

Tariffs and other trade restrictions increase the domestic scarcity of products from abroad.Such policies benefit domestic producers of the restricted products at the expense of domestic consumers.This statement:

Accepted Answer

The statement is essentially correct. Tariffs and trade restrictions restrict the amount of foreign products that can enter the domestic market, thus increasing the scarcity of those products within the country. This benefits domestic producers by reducing competition, allowing them to charge higher prices, but it harms domestic consumers by reducing their access to the cheaper foreign products.

Question 9

A tariff can be defined simply as a

Accepted Answer

A tariff is a tax on imports, typically imposed by a government as a way to protect domestic industries and raise revenue. It is not a tax on exports, nor is it a legal limit on imports or exports.

Question 10

A major difference between a tariff and a quota is that a tariff

Accepted Answer

Tariffs are taxes imposed on imported goods, which generate revenue for the government imposing them. Quotas, on the other hand, are limits on the quantity of goods that can be imported and do not generate tax revenue; they simply restrict the amount of goods that can enter a country.

Question 11

Tariffs result in a decrease in consumer surplus because:

Accepted Answer

Tariffs increase the price of the protected good, which leads to a decrease in the quantity consumed. This reduces consumer surplus as consumers have to pay higher prices for the same quantity of the good.

Question 12

Which of the following would be expected if the tariff on foreign-produced automobiles was increased?

Accepted Answer

Increasing the tariff on foreign-produced automobiles would make them more expensive for domestic consumers, thereby reducing the demand for these automobiles. As a result, the supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise. This would be beneficial for domestic automobile producers, as they would face less competition from foreign producers. However, this would not necessarily lead to a fall in the domestic price of automobiles or an increase in the demand for foreign-produced automobiles in other nations. Additionally, it is possible that the number of unemployed workers in the domestic automobile industry would rise if foreign producers responded to the tariff increase by reducing their production capacity or moving operations to countries with lower tariffs.

Question 13

After the U.S.introduces of a tariff in the market for phones,the price of phones in the U.S.will

Accepted Answer

When a tariff is introduced, it increases the cost of importing goods into the country, which leads to increased prices for consumers. Therefore, the price of phones in the U.S. will increase.

Question 14

A tax levied on imported goods is called a(n)

Accepted Answer

A tax levied on imported goods is called a tariff.

Question 15

Suppose the Swiss government subsidized its watch-making industry,enabling Swiss producers to undersell foreign watch producers.The law of comparative advantage indicates that watch-importing nations would best take advantage of the Swiss subsidization policy by

Accepted Answer

The answer of Suppose the Swiss government subsidized its watch-making...

Question 16

Restrictions on the importation of tomatoes reduce the supply available to the U.S.domestic market.Studies indicate that the demand for tomatoes is elastic.Compared to a free-trade situation,the import restrictions cause

Accepted Answer

When there are restrictions on the importation of tomatoes, the domestic supply decreases, leading to a decrease in quantity and an increase in price. As the demand for tomatoes is elastic, consumers might not be willing to pay the higher price, resulting in a reduction in consumer expenditure on tomatoes. Therefore, the import restrictions cause higher tomato prices and a reduction in consumer expenditure on tomatoes in the United States.

Question 17

When both exports and imports are considered,the major advantage of international trade is that it allows us to:

Accepted Answer

International trade allows countries to specialize in producing goods and services that they have a comparative advantage in, and then trade with other countries for goods and services they do not specialize in. This leads to a larger, more diverse quantity of goods and services available to consumers at lower prices than would be possible without trade.

Question 18

Which of the following is not a result we would expect to result from a tariff on leather shoes?

Accepted Answer

Tariffs on imported goods like leather shoes typically make these goods more expensive, which can lead to an increase in the price of leather shoes in the domestic market (A), a decline in the amount of shoes imported (B), and potentially fewer pairs of shoes being sold overall due to higher prices (C). However, domestic producers might actually sell more shoes at the higher prices because the tariff makes imported shoes less competitive, contradicting option (D).

Question 19

A tariff differs from a quota in that a tariff is

Accepted Answer

A tariff is a tax on imports, whereas a quota is a physical limit on the quantity of goods that can be imported. Therefore, the best choice is D, which states that a tariff is a tax imposed on imports and a quota is an absolute limit on the number of units of a good that can be imported.

Question 20

Economically speaking,tariffs:

Accepted Answer

Tariffs limit voluntary exchanges between countries by imposing taxes on imported goods, thus making them more expensive and less attractive to domestic consumers. This creates an artificial competitive advantage for domestic producers, which may ultimately harm foreign producers and may also lead to retaliation by foreign governments, resulting in a vicious circle of escalating trade barriers. Tariffs do not protect domestic consumers or foreign producers, nor do they protect domestic producers of exported goods, as they make it harder for them to sell their products abroad.

Quiz 28: International Trade