Question 1

Which of the following statements is true?

Accepted Answer

Economic theory suggests that the elimination of tariffs and quotas leads to greater economic efficiency, as it allows for a more free flow of goods and services across borders. While eliminating trade restrictions globally would be ideal, the United States can still benefit from eliminating its own restrictions, even if other countries do not follow suit. This is because it would result in lower prices for consumers and increased competition for domestic producers. The other options (A, B, and C) either make assumptions that are not necessarily true or do not align with economic theory.

Question 2

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.Without the quota,the domestic price of peanuts equals the world price which is $2.00 per pound.What is the quantity of peanuts demanded by domestic consumers in the absence of a quota?

Accepted Answer

The answer of Figure 7-3  Since 1953 the United...

Question 3

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports.Which of the following counter-arguments is made by economists who oppose trade restrictions?

Accepted Answer

Economists who oppose trade restrictions argue that while these restrictions may save some domestic jobs, consumers end up paying a higher cost for the goods they purchase because of higher prices resulting from the restrictions. This can lead to reduced consumer spending and eventually, job losses in other sectors. Therefore, the cost of preserving a few jobs through trade restrictions is not worth the overall economic cost to society.

Question 4

If the U.S.government implements a tariff on Chinese tire imports all of the following would be made worse off except

Accepted Answer

American tire manufacturing workers would benefit from the tariff as it would likely lead to increased demand for domestically produced tires, potentially resulting in more jobs and higher wages in the U.S. tire manufacturing industry.

Question 5

If the U.S.government implements a tariff on Chinese tire imports,the price of Chinese-made tires will ________,the quantity demanded will ________,and consumer surplus will ________.

Accepted Answer

When a tariff is implemented on Chinese tire imports, the price of Chinese-made tires will increase due to the additional cost of the tariff. As a result, the quantity demanded will decrease as consumers will seek alternative, cheaper options. Consumer surplus will also decrease as consumers will no longer have access to the lower-priced Chinese tires.

Question 6

Which of the following is common to both tariffs and quotas?

Accepted Answer

Both tariffs and quotas are protectionist measures used to restrict imports and reduce foreign competition faced by domestic firms. Tariffs do this by placing a tax on imported goods, while quotas limit the quantity of imported goods that can enter a country. Neither tariffs nor quotas are designed to increase government revenue (choice A), increase economic efficiency (choice B), or are examples of voluntary export restraints (choice D).

Question 7

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.With a quota in place,what is the quantity supplied by domestic producers?

Accepted Answer

Looking at the intersection of the domestic supply curve and the quota line, we can see that the quantity supplied by domestic producers with the quota is 18 million pounds.

Question 8

The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods,effectively acting as a quota of zero imports when stimulus money was being spent.For the U.S.steel industry,a "Buy American" provision would create gains for all of the following except

Accepted Answer

The "Buy American" provision would only benefit U.S. steel companies and U.S. steel workers by creating demand for their products and potentially increasing jobs. However, since the provision requires using stimulus money, it is ultimately the U.S. taxpayers who foot the bill and may end up paying more for domestic products than they would for imported ones. Therefore, U.S. taxpayers would not gain from this provision.

Question 9

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.What is the value of revenue to foreign producers who are granted permission to sell in the U.S.market when there is a quota?

Accepted Answer

The area of the rectangle above the quota line and to the right of the intersection point is the revenue to foreign producers. The height of the rectangle is the price per ton in the U.S. market, which is $1,100. The width of the rectangle is the difference between the quota and the domestic demand, which is 40,000 – 25,000 = 15,000 tons. Therefore, the revenue to foreign producers is $1,100/ton × 15,000 tons = $16.5 million, which is closest to D) $44 million.

Question 10

The United States would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Accepted Answer

If the United States eliminates tariffs and quotas, it would lead to a decrease in prices for imported goods, making them cheaper for consumers and businesses in the US. This would increase competition among domestic producers, driving them to become more efficient and cost-effective. Additionally, it could also incentivize other countries to reduce their tariffs and quotas on US goods, leading to increased exports for the US.

Question 11

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.If there was no quota,how many pounds of peanuts would be imported?

Accepted Answer

At the point where the world price intersects with the domestic supply curve, the quantity demanded is 30 million pounds. This is the quantity that would be imported if there were no quota restricting imports.

Question 12

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.What is the value of the deadweight loss as a result of the quota?

Accepted Answer

The answer of Figure 7-3  Since 1953 the United...

Question 13

A voluntary export restraint is an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country.

Accepted Answer

A voluntary export restraint (VER) is a trade policy tool used by governments to limit the quantity of a product that can be exported to another country voluntarily. VERs are negotiated between exporting and importing countries and usually limit the volume or value of exports for a specific period.

Question 14

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.With a quota in place,what is the quantity consumed in the domestic market and what portion of this is supplied by imports?

Accepted Answer

The answer of Figure 7-3  Since 1953 the United...

Question 15

A quota is a numerical limit on the quantity of a good that can be imported.

Accepted Answer

A quota is a numerical limit on the quantity of a good that can be imported.

Question 16

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.What is the value of domestic producer surplus after the imposition of a quota?

Accepted Answer

The answer of Figure 7-3  Since 1953 the United...

Question 17

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.If there was no quota,how many pounds of peanuts would domestic producers supply?

Accepted Answer

The answer of Figure 7-3  Since 1953 the United...

Question 18

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.What is the value of domestic producer surplus without a quota?

Accepted Answer

Without a quota, the domestic quantity supplied would be the same as the domestic quantity demanded (point E on the graph). At this point, the price would be $400 per ton and the domestic producer surplus would be the triangle between the price line ($400), the supply curve (which represents domestic costs), and the quantity axis. This area is equal to 12,500 tons x (800 - 400)/2 = $5 million.

Question 19

Governments sometimes erect barriers to trade other than tariffs and quotas.Which of the following is not an example of this type of trade barrier?

Accepted Answer

Requiring employees of domestic firms to pay income taxes is not a trade barrier, as it does not directly affect international trade or the flow of goods and services across borders. It is a domestic tax policy that applies to all workers, regardless of whether their employers engage in foreign trade or not. B, C, and D are all examples of trade barriers: health and safety requirements may be used to restrict or prohibit imports, restrictions on imports for national security reasons can also limit trade, and requirements that the government buy only from domestic manufacturers can effectively exclude foreign competitors.

Question 20

Figure 7-3  Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota.
-Refer to Figure 7-3.What is the value of consumer surplus after the imposition of the quota?

Accepted Answer

The answer of Figure 7-3  Since 1953 the United...

Quiz 7: Comparative Advantage and the Gains From International Trade

Which of the following statements is true?

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports.Which of the following counter-arguments is made by economists who oppose trade restrictions?

If the U.S.government implements a tariff on Chinese tire imports all of the following would be made worse off except

If the U.S.government implements a tariff on Chinese tire imports,the price of Chinese-made tires will ,the quantity demanded will ,and consumer surplus will .

Which of the following is common to both tariffs and quotas?

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.With a quota in place,what is the quantity supplied by domestic producers?

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.What is the value of revenue to foreign producers who are granted permission to sell in the U.S.market when there is a quota?

The United States would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.If there was no quota,how many pounds of peanuts would be imported?

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.What is the value of the deadweight loss as a result of the quota?

A voluntary export restraint is an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country.

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.With a quota in place,what is the quantity consumed in the domestic market and what portion of this is supplied by imports?

A quota is a numerical limit on the quantity of a good that can be imported.

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.What is the value of domestic producer surplus after the imposition of a quota?

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.If there was no quota,how many pounds of peanuts would domestic producers supply?

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.What is the value of domestic producer surplus without a quota?

Governments sometimes erect barriers to trade other than tariffs and quotas.Which of the following is not an example of this type of trade barrier?

Figure 7-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts.Figure 7-3 illustrates the impact of the quota. -Refer to Figure 7-3.What is the value of consumer surplus after the imposition of the quota?