Question 1

If the United States imposes an import quota on French wines, the result in the short run is likely to be _____ profits for American wine producers and _____ profits for French wine producers.

Accepted Answer

A quota on French wines would limit the supply of French wines in the US market, causing an increase in demand for American wines. This would result in higher prices and profits for American wine producers. On the other hand, French wine producers would see a decrease in demand and lower profits due to restricted access to the US market.

Question 2

If quota rents do not accrue to the government, then the net loss to the government from an import quota is _____ the deadweight loss from an equivalent tariff.

Accepted Answer

The answer of If quota rents do not accrue to...

Question 3

Which of the following is an example of an import quota?

Accepted Answer

An import quota is a restriction on the quantity of a particular good that is allowed into a country. In this case, the limit on the total number of shoes imported from Italy is an example of an import quota.

Question 4

According to the infant industry argument, import protection is needed because:

Accepted Answer

The infant industry argument suggests that new industries need to be protected from international competition initially to achieve technological efficiency and become competitive in the long run. This justification is based on the assumption that mature foreign industries have already achieved economies of scale and technological efficiency, thus making it difficult for new industries to compete without protection in the initial stages.

Question 5

In the case of U.S. trade protection, quota rents for the most important import licenses are earned by:

Accepted Answer

The answer of In the case of U.S. trade protection,...

Question 6

If the United States removed the tariffs and quotas on sugar, in the U.S. market for sugar:

Accepted Answer

The answer of If the United States removed the tariffs...

Question 7

In 2002, the steel industry argued that higher tariffs on steel were necessary to help fight the war on terrorism. This is an example of the _____ argument.

Accepted Answer

The argument that higher tariffs on steel were necessary to help fight the war on terrorism is an example of the national security argument. The steel industry claimed that domestic production of steel was necessary for national security, as a strong domestic steel industry would ensure a steady supply in the event of a disruption in international trade due to terrorist attacks.

Question 8

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the _____ argument.

Accepted Answer

The "infant industry" argument is used to protect new industries that are still developing and need protection from foreign competition in order to grow and become technologically efficient.

Question 9

A direct restriction on the quantity of an import is called a(n):

Accepted Answer

An import quota is a direct restriction on the quantity of an import, limiting the amount that can be imported during a certain time period. Tariffs are taxes placed on imported goods, import subsidies are financial incentives given to domestic producers to compete with imports, and import restrictions are a broad term that can refer to any government policy aimed at limiting imports.

Question 10

Suppose the United States auctioned off all import quotas, the auctions were perfectly competitive, and the government received the revenues from the auction. In this case, the deadweight loss from a quota would be _____ the deadweight loss from an equivalent tariff.

Accepted Answer

When the United States auctions off all import quotas in a perfectly competitive market and receives the revenues, the economic effect is similar to that of a tariff. In both cases, the government collects revenue, either through tariffs or through auction proceeds. This means that the deadweight loss, which is the loss of economic efficiency when the equilibrium outcome is not achieved, would be the same for both a quota and an equivalent tariff, assuming other conditions are equal.

Question 11

Assume that the United States imposes an import quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of import quotas, the equilibrium price of shoes in the United States will most likely _____, and the equilibrium price of shoes in Italy will most likely _____.

Accepted Answer

When the United States imposes an import quota on Italian shoes, the supply of Italian shoes in the US market will decrease, causing an increase in their price compared to the world price. At the same time, the supply of Italian shoes in the Italian market will increase due to lower demand in the US, leading to a decrease in their price. Therefore, the equilibrium price in the US will increase, while the equilibrium price in Italy will decrease.

Question 12

Which of the following is a common argument for trade protection?

Accepted Answer

A common argument for trade protection is national security. Countries may use trade protection measures to protect key industries that are deemed critical for national security, such as defense or energy industries. This may include imposing tariffs or quotas on imported goods in order to protect domestic industries from foreign competition.

Question 13

The main difference between a tariff and an import quota is that:

Accepted Answer

A tariff is a tax imposed on imported goods, while an import quota limits the quantity of a particular good that can be imported. Thus, a tariff generates tax revenue for the government, while an import quota generates rents to the license holders who are allowed to import the limited quantity of the good. The other statements in the options are not necessarily true and may depend on various factors.

Question 14

Assume that the United States imposes an import quota on Scottish wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _____ and the equilibrium price of suits in Scotland will most likely _____.

Accepted Answer

Imposing an import quota on Scottish wool suits reduces the supply of suits in the United States, causing the price of suits to increase. Meanwhile, in Scotland, the reduced demand for suits from the United States causes an oversupply of suits, leading to a decrease in price. Therefore, the equilibrium price of suits in the United States will most likely increase, while the equilibrium price of suits in Scotland will most likely decrease.

Question 15

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that the military should have an unrestricted domestic supply of silicon chips, they are using the _____ argument.

Accepted Answer

The argument that the military should have an unrestricted domestic supply of silicon chips falls under the national security argument. This argument is used to justify protectionist measures in order to ensure that the country's security is not compromised by relying on foreign producers for critical goods.

Question 16

Tariffs and import quotas tend to:

Accepted Answer

Tariffs and import quotas both place barriers on international trade, reducing the quantity of imports and potentially increasing the price of goods for consumers. This reduction in trade leads to a decrease in total surplus (the sum of consumer and producer surplus). While tariffs can generate revenue for the government, this does not necessarily offset the decrease in total surplus caused by the trade barrier.

Question 17

A tariff or quota will _____ prices and _____ the consumption of the protected goods in the importing country.

Accepted Answer

A tariff or quota restricts the supply of imported goods, and as a result, the prices of the protected goods in the importing country increase due to reduced competition. Also, the limited supply of the protected goods increases their value, and thus, consumers tend to decrease their consumption, as it becomes more expensive. Therefore, a tariff or quota raises the prices and decreases the consumption of the protected goods in the importing country.

Question 18

Assume that the United States imposes an import quota on Columbian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _____ and the equilibrium price of coffee in Columbia will _____.

Accepted Answer

When the US imposes an import quota on Colombian coffee, the supply of coffee in the US will decrease, causing the equilibrium price in the US to increase. At the same time, there will be an excess supply of coffee in Colombia, causing the equilibrium price in Colombia to decrease. Therefore, the equilibrium price of coffee in the US will increase, while the equilibrium price of coffee in Colombia will decrease.

Question 19

The most likely effects of tariffs and/or import quotas are to _____ prices and to _____ consumption of the protected goods in the importing country.

Accepted Answer

Tariffs and import quotas result in increased domestic prices of protected goods which leads to reduced demand and consumption, especially as consumers switch to cheaper alternatives. Therefore, tariffs and import quotas raise prices and lower consumption of protected goods in the importing country.

Question 20

The infant industry argument for trade protection states that:

Accepted Answer

The infant industry argument argues that new industries should be protected from foreign competition until they become established. This is because they may not yet have the economies of scale or experience necessary to compete with foreign firms. Once they have become established, they can then compete on a level playing field with other firms.

Quiz 8: International Trade

If the United States imposes an import quota on French wines, the result in the short run is likely to be _ profits for American wine producers and _ profits for French wine producers.

If quota rents do not accrue to the government, then the net loss to the government from an import quota is _____ the deadweight loss from an equivalent tariff.

Which of the following is an example of an import quota?

According to the infant industry argument, import protection is needed because:

In the case of U.S. trade protection, quota rents for the most important import licenses are earned by:

If the United States removed the tariffs and quotas on sugar, in the U.S. market for sugar:

In 2002, the steel industry argued that higher tariffs on steel were necessary to help fight the war on terrorism. This is an example of the _____ argument.

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the _____ argument.

A direct restriction on the quantity of an import is called a(n) :

Suppose the United States auctioned off all import quotas, the auctions were perfectly competitive, and the government received the revenues from the auction. In this case, the deadweight loss from a quota would be _____ the deadweight loss from an equivalent tariff.

Assume that the United States imposes an import quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of import quotas, the equilibrium price of shoes in the United States will most likely _, and the equilibrium price of shoes in Italy will most likely _.

Which of the following is a common argument for trade protection?

The main difference between a tariff and an import quota is that:

Assume that the United States imposes an import quota on Scottish wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _ and the equilibrium price of suits in Scotland will most likely _.

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that the military should have an unrestricted domestic supply of silicon chips, they are using the _____ argument.

Tariffs and import quotas tend to:

A tariff or quota will _ prices and _ the consumption of the protected goods in the importing country.

Assume that the United States imposes an import quota on Columbian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _ and the equilibrium price of coffee in Columbia will _.

The most likely effects of tariffs and/or import quotas are to _ prices and to _ consumption of the protected goods in the importing country.

The infant industry argument for trade protection states that: