Deck 8: Trade Restrictions: Tariffs

Question 1

If a small nation increases the tariff on its import commodity,its:

A) consumption of the commodity increases
B) production of the commodity decreases
C) imports of the commodity increase
D) domestic price of the commodity increases

Answer 1

D

Question 2

Which of the following statements is incorrect with respect to the rate of effective protection?

A) For given values of aᵢ and tᵢ, g is larger the greater is t.
B) For a given value of t and tᵢ, g is larger the greater is aᵢ.
C) The rate of effective protection, g, exceeds t when tᵢ is less than t.
D) When aᵢtᵢ exceeds t, the rate of effective protection is positive.

Answer 2

D

Question 3

The imposition of an import tariff by a small nation:

A) increases the nation's welfare
B) reduces the nation's welfare
C) leaves the nation's welfare unchanged
D) any of the above is possible

Answer 3

B

Question 4

A small nation is one which must have all of the following characteristics except:

A) It does not affect world price by its trading.
B) It faces an infinitely elastic world supply curve for its import commodity.
C) It faces an infinitely elastic world demand curve for its export commodity.
D) It has a small geographic area.

Question 5

The imposition of an import tariff by a nation results in:

A) an increase in relative price of the nation's import commodity
B) an increase in the nation's production of its importable commodity
C) reduces the real return of the nation's abundant factor
D) all of the above

Question 6

With aᵢ=50%,tᵢ=0,and t=20%,g is:

A) 40%
B) 20%
C) 80%
D) 0

Question 7

The optimum tariff is the tariff rate that

A) saved the most domestic jobs
B) generates the largest tax revenue
C) maximizes domestic production
D) maximizes the net benefit from improving the improvement in the terms of trade relative to loss from the reduction in the volume of trade

Question 8

In general,for the last 50 years tariff rates around the world have been

A) rising
B) falling
C) relatively unchanged
D) volatile - sometimes rising and sometimes falling quite dramatically

Question 9

Which of the following statements is incorrect?

A) An ad valorem tariff is expressed as a percentage of the value of the traded commodity
B) a specific tariff is expressed as a fixed sum of the value of the traded commodity.
C) export tariffs are prohibited by the U.S. Constitution
D) The U.S. uses exclusively the specific tariff

Question 10

The imposition of an import tariff by a large nation:

A) increases the nation's terms of trade
B) reduces the volume of trade
C) may increase or reduce the nation's welfare
D) all of the above

Question 11

The optimum tariff for a small nation is:

A) 100%
B) 50%
C) 0
D) depends on elasticities

Question 12

The imposition of an import tariff by a small nation:

A) increases the relative price of the import commodity for domestic producers and consumers
B) reduces the relative price of the import commodity for domestic producers and consumers
C) increases the relative price of the import commodity for the nation as a whole
D) any of the above is possible

Question 13

The increase in producer surplus when a small nation imposes a tariff is measured by the area:

A) to the left of the supply curve between the commodity price with and without the tariff
B) under the supply curve between the quantity produced with and without the tariff
C) under the demand curve between the commodity price with and without the tariff
D) none of the above.

Question 14

The imposition of an optimum tariff by a large nation:

A) improves its terms of trade
B) reduces the volume of trade
C) increases the nation's welfare
D) all of the above

Question 15

The imposition of an import tariff by a nation can be represented by a rotation of the:

A) nation's offer curve away from the axis measuring the commodity of its comparative advantage
B) the nation's offer curve toward the axis measuring the commodity of its comparative advantage
C) the other nation's offer curve toward the axis measuring the commodity of its comparative advantage
D) the other nation's offer curve away from the axis measuring the commodity of its comparative advantage

Question 16

According to the Stolper-Samuelson theorem,the imposition of a tariff by a nation:

A) increases the real return of the nation's abundant factor
B) increases the real return of the nation's scarce factor
C) reduces the real return of the nation's scarce factor
D) any of the above is possible

Question 17

If a small nation increases the tariff on its import commodity:

A) the rent of domestic producers of the commodity increases
B) the protection cost of the tariff decreases
C) the deadweight loss decreases
D) all of the above

Question 18

The imposition of a tariff will

A) increase imports, decrease domestic production, and increase consumption
B) decrease imports, increase domestic production, and decrease consumption
C) decrease imports, decrease domestic production, and increase consumption
D) increase imports, increase domestic production, and decrease consumption

Question 19

Which of the following statements is true?

A) an ad valorem tariff is a fixed sum per unit
B) the U.S. does not allow exports tariffs
C) in the case of a small country the cost of a tariff is split between the buyer and seller
D) a specific tariff is a % of the value of the unit

Question 20

If the tariff rate in inputs is the same as the tariff rate of finished goods the effective rate of protection will be

A) the same as the nominal rate of protection
B) zero
C) larger than the nominal rate of protection
D) maximized

Question 21

Tariffs result in a loss of national social welfare because

A) domestic consumption decreases and domestic production increases.
B) domestic consumption increases and foreign production increases.
C) foreign consumption decreases and domestic production decreases.
D) domestic consumption increases and domestic production decreases.

Question 22

A tariff in a small country will benefit

A) domestic consumers.
B) foreign producers.
C) the government imposing the tariff.
D) the world as a whole.

Question 23

Using the concept of effective protection,explain how and why tariffs tend to vary with the level of processing of goods (that is,raw materials,intermediate goods,and finished goods).

Question 24

Explain the redistribution effects of a tariff.

Question 25

A good is produced using $160 in imported inputs.The current domestic price of the good is $200.For each of the following cases,find the level of effective protection.
a. The nominal tariff rate on the good is 10%, and there is no tariff on the inputs.
b. The nominal tariff rate on the good is 10%, and there is a 10% tariff on the inputs.
c. The nominal tariff rate on the good is 0%, and there is a 10% tariff on the inputs.

Question 26

Is there such thing as an optimum tariff for a small nation?

Question 27

From the following figure,in which Dc and Sc refer,respectively to the domestic demand and supply curves of cloth,and SF and SF+T refer,respectively,to the world supply curve of cloth under free trade and with a 50% import tariff imposed by the nation on the importation of cloth,determine:
(a)the consumption,production effect,and the trade effect of the tariff.
(b)the reduction in consumer surplus,the increase in producer surplus or rent,the tariff revenue,and the protection cost or deadweight loss to the economy as a result of the tariff.

Question 28

A tariff in a large country

A) will not benefit the country or the world.
B) will benefit the country but not the world.
C) will benefit the world but not the country.
D) may benefit the country but not the world.

Question 29

Explain the difference between an ad valorem,specific and compound tariff

Question 30

Under what conditions can a tariff improve a nation's welfare?