Deck 4: Regulating International Trade: Trade Policies and Their Effects

Question 1

A tariff on imported goods results in an upward or vertical shift of the supply curve.

Answer 1

True

Question 2

In a large country, a tariff on an imported product:

A) is shared by being both backward shifted onto domestic producers and forward shifted onto domestic consumers.
B) is backward shifted onto foreign producers.
C) is backward shifted onto domestic producers.
D) is entirely forward shifted onto domestic consumers.

Answer 2

B

Question 3

Policymakers in a small country impose a specific tariff of $2.00 per unit. Prior to the tariff, the country imported 10,000 units; after the tariff, 8,000 units. The amount of tariff revenue generated by the domestic government is:

A) 16000
B) 4000
C) 10000
D) There is no tariff revenue as this is a small country.

Answer 3

A

Question 4

Policymakers in a small country impose a specific tariff of $2.00 per unit. Prior to the tariff the country imported 10,000 units and after the tariff 8,000 units. The redistributive effects of the tariff are:

A) impossible to determine with the information given.
B) shared equally between domestic producers and domestic consumers.
C) such that $16,000 is forward shifted onto domestic consumers.
D) such that $4,000 is backward shifted onto domestic producers.

Question 5

_________ is when a firm charges foreign customers a price that is lower than the price it charges its domestic customers.

A) Deadweight loss
B) Countervailing duty
C) Export subsidy
D) Dumping

Question 6

The main difference between a tariff imposed in a large country versus one imposed in a small country is that the tariff is the large country is:

A) entirely forward shifted onto domestic consumers.
B) entirely backward shifted onto foreign producers.
C) both partially forward shifted onto domestic consumers and partially backward shifted onto foreign producers.
D) ineffective as it does not generate any tariff revenue for the domestic government.

Question 7

A tariff that blends together a specific tariff and an ad valorem tariff is called a:

A) combination tariff.
B) prohibitive tariff.
C) countervailing duty.
D) VER.

Question 8

A policy designed to deal directly with a problem that policymakers seek to remedy is referred to as:

A) first-best trade policy.
B) second-best trade policy.
C) dumping.
D) countervailing duty.

Question 9

Export subsidies:

A) are a first-best policy approach to remedy a problem.
B) are not costly to domestic consumers.
C) are less expensive than the value of the incomes of workers protected.
D) are a second-best policy approach.

Question 10

A policy action that benefits one nation-s economy but worsens economic performance in another nation is called:

A) deadweight loss
B) beggar-thy-neighbor policy
C) quota rent
D) second-best policy

Question 11

The economic costs of protecting a domestic industry are typically much smaller than the income that each worker whose job is protected would receive.

Question 12

An agreement between policymakers and producers in two nations to restrict the exports of a good from one nation to the other is referred to as a "voluntary export restraint" (VER)

Question 13

A tariff imposed by a small country has only a small impact on global prices.

Question 14

A voluntary export restraint (VER) is a bilateral agreement and therefore has no impact on trade with a third nation.

Question 15

A tariff on imported goods designed to offset the domestic price effect of foreign export subsidies is call a countervailing duty (CVD)

Question 16

A tariff imposed by a large country affects the domestic price in the large country but not the global price.

Question 17

Dumping is necessarily harmful to domestic firms.

Question 18

A tariff specified as an amount of money per unit of the good sold is referred to as a "specific tariff."

Question 19

A large-country tariff necessarily increases the large country-s welfare.

Question 20

In a large country a tariff does not result in any deadweight loss.

Question 21

A tariff in a large country negatively affects foreign producers.

Question 22

A quota that allows a specified quantity of a good to enter a country at a reduced tariff rate while all other amounts are subject to a high rate is referred to as:

A) a tariff-rate quota.
B) an absolute quota.
C) a quota-rate tariff.
D) a large-country tariff.