Question 1

U.S. consumers were hurt by the 2002 steel tariff; U.S. producers who use steel were also hurt, but the biggest outcry came from:

Accepted Answer

Exporters of steel to the United States, particularly those from Europe, Japan, and South Korea, experienced the biggest outcry as a result of the tariff. These countries saw it as a violation of free trade and ultimately responded with their own tariffs on U.S. goods. While U.S. consumers and producers who use steel were also hurt, they did not express the same level of outrage as foreign exporters.

Question 2

U.S. tire producers did not support the 2009 tariff on Chinese tire imports because U.S. producers that also produce tires in China would have experienced a(n) ___________ in their ___________.

Accepted Answer

If a tariff had been imposed on Chinese tire imports, it would have raised the price of these imports, but also would have given U.S. tire producers an opportunity to raise their prices. However, since some U.S. firms also produce tires in China, they would have experienced a decline in their producer surplus, which is the difference between the market price and the cost of production. Therefore, U.S. tire producers did not support the 2009 tariff on Chinese tire imports as it would have resulted in a decline in their producer surplus.

Question 3

In addition to deadweight losses, the 2009 tariff on Chinese tire imports shifted U.S. tire demand to other higher-cost import sources not subject to the tariff. What was the approximate value of the higher payments to these other higher-cost import sources?

Accepted Answer

According to a study by the Peterson Institute for International Economics, the tariff led to a shift in U.S. tire demand to other higher-cost import sources, resulting in approximately $817 million per year in higher payments to those sources.

Question 4

Suppose that the world price of resins is $100 per ton. Now suppose that the United States imposes a 10% tariff on imported resins. What is the U.S. domestic price of resins after the 10% tariff is imposed (rounded to the nearest dollar) if exporters bear half of the tariff?

Accepted Answer

With a 10% tariff on imports, the price of imported resins will increase from $100 to $110 per ton (i.e., a 10% increase on the original price). Since exporters bear half of the tariff, they will have to pay $5 per ton ($110-$100/2) and the U.S. domestic price of resins will increase to $105 per ton (i.e., $100 + $5).

Question 5

A large nation faces a(n) ____ foreign export supply curve, rather than a(n) ____ foreign export supply curve.

Accepted Answer

A large nation faces an upward-sloping foreign export supply curve because its demand can influence world prices, unlike a small nation which faces a flat (perfectly elastic) supply curve.

Question 6

(Figure: Home Market II) For the large-country in the graph, the free-trade price of the product is ______ and the amount imported is _________.

Accepted Answer

The answer of (Figure: Home Market II) For the large-country...

Question 7

If a large country imposes a tariff:

Accepted Answer

When a country imposes a tariff, it reduces imports and increases domestic production, leading to a shift in terms of trade in favor of the tariff-imposing country. This can potentially offset some of the deadweight losses caused by the tariff. However, the extent to which the terms-of-trade effect can offset deadweight losses depends on several factors, such as the elasticity of demand for imports and exports and the extent of market power held by the countries involved. Therefore, while the terms-of-trade effect may help to mitigate some of the negative effects of the tariff, it may not fully offset them.

Question 8

The United States applies a 25% tariff on imported pickup trucks (mainly from Japan). If the United States is considered to be a "large" country, then:

Accepted Answer

When a large country applies a tariff, the quantity of imports decreases and the domestic price increases. However, the increase in price is less than the tariff rate because the decrease in import quantity decreases the market power of foreign producers, and the domestic market becomes less competitive. Therefore, the U.S. price of imported Japanese pickup trucks will increase by less than 25%.

Question 9

How did the WTO react to the U.S. imposition of steel tariffs in 2002?

Accepted Answer

The WTO allowed other nations to impose tariffs on U.S. exports to retaliate, as the U.S. imposition of steel tariffs was seen as a violation of the organization's policies. This is known as "retaliatory tariffs" or "counter-tariffs."

Question 10

Who bears the burden of the terms-of-trade effect when a large country imposes a tariff?

Accepted Answer

Foreign producers bear the burden of the terms-of-trade effect when a large country imposes a tariff because it can cause the world price of the good to decrease, impacting the revenue of foreign producers.

Question 11

What is the term used to describe when one country retaliates to a tariff on its exports with tariffs on its imports?

Accepted Answer

When one country retaliates to a tariff on its exports with tariffs on its imports, it can lead to a cycle of increasing tariffs and counter-tariffs, also known as a tariff war. This can harm trade relations and potentially harm the economies of the countries involved.

Question 12

One difference between the tariffs on steel imports levied in 2002 and the tariffs on Chinese tire imports levied in 2009 was that:

Accepted Answer

U.S. steel producers supported the 2002 steel tariff to protect their industry, while U.S. tire producers did not support the 2009 tire tariff as it increased costs for them.

Question 13

If a large country imposes a tariff:

Accepted Answer

A large country may benefit from a tariff if it is able to reduce competition from foreign producers and support domestic industries, leading to increased domestic production and employment. This can result in increased economic welfare for the country. However, the effectiveness and impact of the tariff will depend on various factors such as the size of the tariff, the elasticity of demand for the product, and the response of foreign producers. Therefore, it is not always guaranteed that imposing a tariff will result in increased economic welfare, and the impact may differ from that of a small country.

Question 14

Because a large nation can force the nation exporting the product to pay a substantial amount of the tariff, its _________ may improve after the tariff is imposed.

Accepted Answer

Terms of trade refer to the ratio between a country's export prices and its import prices. By imposing a tariff, the importing country can increase the cost of the exported product, forcing the exporting country to pay more for trade. This can result in an improvement in the importing country's terms of trade.

Question 15

What is a difference between a tariff imposed by a large country and a tariff imposed by a small country?

Accepted Answer

A tariff imposed by a large country has a terms-of-trade effect because it can influence world prices by reducing its demand for imports and increasing its supply of exports. In contrast, a small country has little market power and cannot affect world prices. Therefore, a tariff imposed by a small country may only result in deadweight consumption and production losses without any positive terms-of-trade effect. Option A and D are incorrect because both large and small countries can experience deadweight consumption losses due to tariffs.

Question 16

Foreign supply curves facing a large country differ from those facing a small country. Large countries face _____________ foreign supply curves, and small countries face ______________ foreign supply curves.

Accepted Answer

Large countries can affect world prices by increasing or decreasing demand in international markets. As a result, foreign suppliers adjust their production levels in response to price changes, which creates an upward-sloping supply curve for the large country. However, small countries cannot affect world prices, so they face perfectly price elastic supply curves.

Question 17

When a large nation imposes a tariff on a smaller nation and causes its terms of trade to deteriorate, the tariff is sometimes referred to as:

Accepted Answer

A beggar-thy-neighbor tariff is a protectionist trade policy that hurts other countries' economies and benefits the imposing country's economy. By imposing a tariff on a smaller nation, the larger nation is effectively making it harder for the smaller nation to trade on equal footing, thus making the smaller nation worse off. This policy is seen as harmful to overall global economic growth and is often criticized by policymakers and economists alike.

Question 18

When a large country imposes a tariff, the burden is often shared by:

Accepted Answer

When a large country imposes a tariff, it ultimately leads to an increase in the price of the import. This results in a decrease in the quantity demanded of the import, causing a reduction in the quantity supplied by foreign producers. Consequently, the burden falls on domestic consumers who face higher prices, while domestic producers benefit from the reduced competition and increased price. Therefore, the burden is shared by domestic consumers and foreign producers.

Question 19

How does a tariff imposed by a large country differ from a tariff imposed by a small country?

Accepted Answer

A small country's tariff will have a negligible effect on the world price of the good, whereas a large country's tariff can decrease the quantity demanded of the product and reduce the world price of the good since it has a bigger influence on the global market. Option A may be true but is not exclusive to large countries as small countries can also generate revenue from tariffs. Option B is not entirely correct as there might still be an effect on the domestic market, and option D is not a reasonable solution as it involves violating international property rights.

Question 20

When the United States imposed tariffs of 30% on many steel imports in March 2002, the estimated total cost to the United States over the period of March 2002 to December 2003 was:

Accepted Answer

According to a report by the Congressional Research Service, the estimated total cost to the United States over the period of March 2002 to December 2003 was $185 million.

Quiz 8: Import Tariffs and Quotas Under Perfect Competition

U.S. consumers were hurt by the 2002 steel tariff; U.S. producers who use steel were also hurt, but the biggest outcry came from:

U.S. tire producers did not support the 2009 tariff on Chinese tire imports because U.S. producers that also produce tires in China would have experienced a(n) _ in their _.

In addition to deadweight losses, the 2009 tariff on Chinese tire imports shifted U.S. tire demand to other higher-cost import sources not subject to the tariff. What was the approximate value of the higher payments to these other higher-cost import sources?

Suppose that the world price of resins is $100 per ton. Now suppose that the United States imposes a 10% tariff on imported resins. What is the U.S. domestic price of resins after the 10% tariff is imposed (rounded to the nearest dollar) if exporters bear half of the tariff?

A large nation faces a(n) foreign export supply curve, rather than a(n) foreign export supply curve.

(Figure: Home Market II) For the large-country in the graph, the free-trade price of the product is and the amount imported is ___.

If a large country imposes a tariff:

The United States applies a 25% tariff on imported pickup trucks (mainly from Japan) . If the United States is considered to be a "large" country, then:

How did the WTO react to the U.S. imposition of steel tariffs in 2002?

Who bears the burden of the terms-of-trade effect when a large country imposes a tariff?

What is the term used to describe when one country retaliates to a tariff on its exports with tariffs on its imports?

One difference between the tariffs on steel imports levied in 2002 and the tariffs on Chinese tire imports levied in 2009 was that:

If a large country imposes a tariff:

Because a large nation can force the nation exporting the product to pay a substantial amount of the tariff, its _________ may improve after the tariff is imposed.

What is a difference between a tariff imposed by a large country and a tariff imposed by a small country?

Foreign supply curves facing a large country differ from those facing a small country. Large countries face _ foreign supply curves, and small countries face __ foreign supply curves.

When a large nation imposes a tariff on a smaller nation and causes its terms of trade to deteriorate, the tariff is sometimes referred to as:

When a large country imposes a tariff, the burden is often shared by:

How does a tariff imposed by a large country differ from a tariff imposed by a small country?

When the United States imposed tariffs of 30% on many steel imports in March 2002, the estimated total cost to the United States over the period of March 2002 to December 2003 was: