Deck 9: The Instruments of Trade Policy

Question 1

Ad valorem tariffs are

A)the same as import quotas.
B)import taxes stated in ads in industry publications.
C)import taxes calculated as a fraction of the value of the imported goods.
D)import taxes calculated as a fixed charge for each unit of imported goods.
E)import taxes calculated solely on the origin country.

Answer 1

C

Question 2

Which of the following is a fixed percentage of the value of an imported product?

A)infant industry tariff
B)ad valorem tariff
C)effective protection tariff
D)nominal tariff
E)specific tariff

Answer 2

B

Question 3

The excess supply curve of a product we (H)import from foreign countries (F)increases as

A)excess supply of country F decreases.
B)excess supply of country F increases.
C)excess demand of country H increases.
D)excess demand of country F increases.
E)excess supply of country H increases.

Answer 3

B

Question 4

A tax of 20 percent per unit of imported garlic is an example of a(n)

A)specific tariff.
B)ad valorem tariff.
C)nominal tariff.
D)a disadvantageous tariff
E)effective protection tariff.

Question 5

The most vocal political pressure for tariffs is generally made by

A)consumers lobbying for lower import tariffs.
B)producers lobbying for import tariffs.
C)consumers lobbying for import tariffs.
D)producers lobbying for export tariffs.
E)consumers lobbying for export tariffs.

Question 6

Tariff rates on products imported into the U.S.

A)were prohibited by the Constitution.
B)were the government's main source of income in 2006.
C)reached an all time high in 2002.
D)have risen steadily since 1920.
E)have dropped substantially over the past 50 years.

Question 7

A specific tariff provides home producers more protection when

A)it is applied to a commodity with many grade variations.
B)the home market buys cheaper products rather than expensive products.
C)the home supply outnumbers the foreign imports.
D)the home demand for a good is elastic with respect to price changes.
E)it is levied on manufactured goods rather than primary products.

Question 8

When a government allows raw materials and other intermediate products to enter a country duty free,this generally results in a(an)

A)fall in both nominal and effective tariff rates.
B)rise in only the effective tariff rate.
C)rise in both nominal and effective tariff rates.
D)nominal tariff rate less than the effective tariff rate.
E)effective tariff rate less than the nominal tariff rate.

Question 9

If the tariff on computers is not changed,but the government then adds hitherto nonexistent tariffs on imported semiconductor components,then the effective rate of protection in the computer industry will

A)decrease.
B)depend on whether computers are PCs or "Supercomputers."
C)no longer apply.
D)increase.
E)remain the same.

Question 10

If the tariff on computers is not changed,but domestic computer producers shift from domestically produced semiconductors to imported components,then the effective rate of protection in the computer industry will

A)decrease
B)no longer apply.
C)remain the same.
D)increase.
E)depend on whether computers are PCs or "Supercomputers."

Question 11

What is a TRUE statement concerning the imposition in the U.S.of a tariff on cheese?

A)It lowers the price of cheese domestically.
B)It raises revenue for the government.
C)It raises the price of cheese internationally.
D)It leads to higher domestic demand for cheese.
E)It will always result in retaliation from abroad.

Question 12

Specific tariffs are

A)import taxes calculated as a fixed charge for each unit of imported goods.
B)import taxes calculated as a fraction of the value of the imported goods.
C)the same as import quotas.
D)import taxes stated in specific legal statutes.
E)import taxes calculated based solely on the origin country.

Question 13

A lower tariff on imported steel would most likely benefit

A)foreign consumers of steel.
B)domestic consumers of steel.
C)foreign producers at the expense of domestic consumers.
D)workers in the steel industry.
E)domestic manufacturers of steel.

Question 14

In an inflationary environment,then over time

A)an import quota would raise more revenue than a specific tariff.
B)a tariff quota will tend to raise more revenue than a specific tariff.
C)a specific tariff will tend to raise more revenue than an ad valorem tariff.
D)an ad valorem tariff will tend to raise more revenue than a specific tariff.
E)an optimum tariff will tend to raise more revenue than an escalating tariff.

Question 15

A tax of 20 cents per unit of imported garlic is an example of a(n)

A)ad valorem tariff.
B)nominal tariff.
C)effective protection tariff.
D)specific tariff.
E)a disadvantageous tariff.

Question 16

Suppose the United States eliminates its tariff on ball bearings used in producing exports.Ball bearing prices in the United States would be expected to

A)decrease,and the foreign demand for U.S.exports would increase.
B)increase,and the foreign demand for U.S.exports would increase.
C)decrease,and the foreign demand for U.S.exports would decrease.
D)increase,and the foreign demand for U.S.exports would decrease.
E)decrease,and the foreign demand would be unchanged.

Question 17

Tariffs are NOT defended on the grounds that they

A)protect domestic producers from foreign low prices.
B)promote growth and development of young industries.
C)improve the terms of trade of foreign nations.
D)protect jobs and reduce unemployment.
E)prevent over- dependence of a country on only a few industries.

Question 18

The effective rate of protection measures

A)the difference between domestic and foreign prices of the import.
B)the efficiency with which the tariff is collected at the customhouse.
C)the "true" ad valorem value of a tariff.
D)the protection given by the tariff to domestic value added.
E)the quota equivalent value of a tariff.

Question 19

As globalization tends to increase the proportion of imported inputs relative to domestically supplied components

A)the nominal tariff automatically decreases.
B)the amount of tariffs levied increases.
C)the nominal tariff automatically increases.
D)the rate of (effective)protection automatically decreases.
E)the rate of (effective)protection automatically increases.

Question 20

The tariff levied in a "large country" (Home),lowers the world price of the imported good.This causes

A)foreign consumers to demand less of the good on which was levied a tariff.
B)foreign suppliers to produce less of the good on which was levied a tariff.
C)domestic demand for imports to increase.
D)domestic demand for imports to decrease.
E)no change in the foreign price of the good it imports.

Question 21

An export subsidy differs from a tariff in each of the following ways EXCEPT

A)a tariff is applied to imports.
B)a tariff results in an efficiency loss.
C)a tariff discourages imports.
D)a tariff is a tax.
E)a tariff generates revenue.

Question 22

A policy of tariff reduction in the computer industry is

A)in the interest of the United States as a whole and in the interest of computer producing regions of the country.
B)in the interest of the United States as a whole but not in the interest of computer producing regions of the country.
C)not in the interest of the United States as a whole but in the interests of computer producing regions of the country.
D)not in the interest of the United States as a whole but in the interests of foreign computer producers.
E)not in the interest of the United States as a whole and not in the interests of computer consumers.

Question 23

The deadweight loss of a tariff

A)is not a social loss because it aids domestic consumers.
B)is not a social loss because it merely redistributes revenue from one sector to another.
C)is a social loss because it reduces the revenue of the government.
D)is a social loss because it promotes inefficient use of national resources.
E)is not a social loss because it is paid for by rich corporations.

Question 24

An important difference between tariffs and quotas is that tariffs

A)help domestic producers.
B)raise the price of the good.
C)stimulate international trade.
D)generate tax revenue for the government.
E)are paid by foreign producers.

Question 25

Should the home country be "large" relative to its trade partners,its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms of the trade rectangle exceed the sum of the

A)consumption effect plus redistribution effect.
B)revenue effect plus redistribution effect.
C)protective effect plus revenue effect.
D)terms of trade gain.
E)production distortion effect plus consumption distortion effect.

Question 26

The main redistribution effect of a tariff is the transfer of income from

A)domestic buyers to domestic producers.
B)domestic producers to domestic buyers.
C)domestic government to domestic consumers.
D)domestic producers to domestic government.
E)foreign producers to domestic consumers.

Question 27

In the exporting country,an export subsidy will

A)help consumers and raise the overall economic welfare of the exporting country.
B)hurt consumers and lower the overall economic welfare of the exporting country.
C)help consumers and have no effect on the economic welfare of the exporting country.
D)help consumers but lower economic welfare of the exporting country.
E)hurt consumers but raise the overall economic welfare of the exporting country.

Question 28

The principle benefit of tariff protection goes to

A)the domestic government.
B)foreign consumers of the good produced.
C)domestic consumers of the good produced.
D)foreign producers of the good produced.
E)domestic producers of the good produced.

Question 29

If a good is imported into (large)country H from country F,then the imposition of a tariff in country H

A)lowers the price of the good in H and could raise it in F.
B)raises the price of the good in H and lowers it in F.
C)raises the price in country H and cannot affect its price in country F.
D)raises the price of the good in both countries (the "Law of One Price").
E)lowers the price of the good in both countries.

Question 30

Throughout the post- World War II era,the importance of tariffs as a trade barrier has

A)increased.
B)decreased.
C)fluctuated wildly.
D)remained the same.
E)demonstrated a classic random walk with a mean- reversion tendency.

Question 31

The imposition of tariffs will help a nation attain which of the following goals?

A)increased amount and variety of goods available for consumers
B)increased competition between domestic and foreign producers
C)gains for domestic producers
D)decreased domestic consumer prices
E)increased domestic employment

Question 32

The fact that industrialized countries levy very low or no tariff on raw materials and semi processed goods

A)helps developing countries export manufactured products.
B)hurts developing country efforts to export raw materials.
C)hurts developing country efforts to export manufactured goods.
D)does not affect industrialized countries' exports.
E)has no effect on developing country exports.

Question 33

An export subsidy is

A)a payment to a firm or individual that ships a good abroad.
B)a limit on the quantity of a good or service that can be sold abroad.
C)a fee that is charged to a country that ships goods to the U.S.
D)a payment made to a foreign government in return for preferential trade treatment.
E)illegal in the U.S.but is fairly common in the rest of the world.

Question 34

The European Union's Common Agricultural Policy (CAP)is,in effect

A)a tariff imposed on agricultural imports.
B)a tariff imposed on agricultural exports.
C)a subsidy that increases the cost of agricultural exports.
D)a quota that limits production of agricultural goods by EU nations.
E)a subsidy that reduces the cost of agricultural exports.

Question 35

If a small country imposes a tariff,then

A)the government revenue must suffer a loss.
B)the world price on that item will shift.
C)the consumers must suffer a loss.
D)the demand curve must shift to the left.
E)the producers must suffer a loss.

Question 36

The change in the economic welfare of a country associated with an increase in a tariff equals

A)efficiency loss + tax revenue gain.
B)efficiency gain - terms of trade loss.
C)efficiency loss - tax revenue gain.
D)efficiency loss - terms of trade gain.
E)efficiency loss + tax revenue gain + terms of trade gain.

Question 37

An import quota is similar to a _ in its effect on imports,EXCEPT that an import quota .

A)tariff; generates revenue
B)subsidy; does not generate revenue
C)subsidy; generates revenue
D)tariff; does not result in an efficiency loss.
E)tariff; does not generate revenue

Question 38

The U.S.sugar quota

A)generates government revenue.
B)does not result in an efficiency loss.
C)results in benefits to sugar producers that exceed the cost to consumers.
D)results in costs to consumers that exceed the benefits to sugar producers.
E)results in net welfare benefits to the U.S.economy.

Question 39

If a good is imported into (small)country H from country F,then the imposition of a tariff In country H

A)raises the price in country H and does not affect its price in country F.
B)lowers the price of the good in both countries.
C)raises the price of the good in both countries (the "Law of One Price").
D)raises the price of the good in H and lowers it in F.
E)lowers the price of the good in H and could raise it in F.

Question 40

The imposition of tariffs on imports results in deadweight (triangle)losses.These are

A)efficiency effects.
B)production and consumption distortion effects.
C)revenue effects
D)redistribution effects.
E)distortion of incentives.

Question 41

An export tariff will _ producer surplus,consumer surplus,government revenue,and overall domestic national welfare.

A)increase; decrease; increase; have an ambiguous effect on
B)increase; decrease; decrease; decrease
C)increase; decrease; have no effect on; have an ambiguous effect on
D)increase; decrease; have no effect on; decrease
E)increase; increase; decrease; have an ambiguous effect on

Question 42

If an import- competing firm is the only domestic producer of a good,then a transition from autarky to free trade will domestic price,producer surplus,consumer surplus,and _ overall domestic national welfare.

A)increase; increase; increase; increase
B)increase; increase; decrease; increase
C)decrease; decrease; decrease; decrease
D)decrease; decrease; increase; increase
E)increase; increase; decrease; decrease

Question 43

Which of the following are examples of goods that have been subject to voluntary export restraints?

A)Belgian chocolates and French wines
B)French wines and cheeses
C)Taiwanese electronics and Canadian barley
D)Japanese sushi and German cars
E)Japanese cars and Chinese solar panels

Question 44

A voluntary export restraint will producer surplus,consumer surplus, government revenue,and overall domestic national welfare.

A)increase; decrease; increase; have an ambiguous effect on
B)increase; decrease; decrease; decrease
C)increase; decrease; have no effect on; have an ambiguous effect on
D)increase; decrease; have no effect on; decrease
E)increase; increase; decrease; have an ambiguous effect on

Question 45

Suppose an import- competing firm is imperfectly competitive.Replacement of an export tariff with an import quota that yields the same level of imports will market price, producer surplus,consumer surplus,_ government revenue,and overall domestic national welfare.

A)have no effect on; have no effect on; have no effect on; decrease; decrease
B)increase; increase; increase; decrease; have an ambiguous effect on
C)increase; have no effect on; decrease; decrease; increase
D)increase; increase; decrease; decrease; decrease
E)decrease; decrease; increase; decrease; increase

Question 46

An import quota will producer surplus,_ consumer surplus,_ government revenue,and overall domestic national welfare.

A)increase; decrease; increase; have an ambiguous effect on
B)increase; decrease; decrease; decrease
C)increase; decrease; have no effect on; have an ambiguous effect on
D)increase; decrease; have no effect on; decrease
E)increase; increase; decrease; have an ambiguous effect on

Question 47

If an import- competing firm is imperfectly competitive,then under free trade an export tariff will domestic market price,_ _ producer surplus,_ consumer surplus, government revenue,and overall domestic national welfare.

A)have no effect on; have no effect on; decrease; increase; decrease
B)decrease; decrease; increase; decrease; have no effect on
C)increase; have no effect on; decrease; increase; decrease
D)increase; have no effect on; increase; decrease; increase
E)decrease; increase; decrease; increase; decrease

Question 48

If an import- competing firm is imperfectly competitive,than under free trade an import quota will domestic market price,_ _ producer surplus,_ consumer surplus, government revenue,and overall domestic national welfare.

A)decrease; increase; decrease; increase; decrease
B)increase; increase; decrease; have no effect on; decrease
C)have no effect on; have no effect on; decrease; increase; decrease
D)increase; have no effect on; decrease; increase; decrease
E)decrease; decrease; increase; decrease; have no effect on

Question 49

An export subsidy will producer surplus,consumer surplus, government revenue,and overall domestic national welfare.

A)increase; decrease; increase; have an ambiguous effect on
B)increase; decrease; decrease; decrease
C)increase; decrease; have no effect on; have an ambiguous effect on
D)increase; decrease; have no effect on; decrease
E)increase; increase; decrease; have an ambiguous effect on