Question 1

Which of the following statements is true?
A) Economic efficiency would be increased if the United States eliminated all of its trade restrictions, but only if all other countries eliminated their trade restrictions too.
B) The U. S. economy would gain from the elimination of its tariffs but not from the elimination of its quotas.
C) Eliminating its tariffs and quotas unilaterally would not benefit the United States because this would remove the leverage it would have to persuade other countries to eliminate their trade restrictions.
D) The U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Accepted Answer

Economic studies have shown that the U.S. economy would benefit from the elimination of both tariffs and quotas, regardless of what other countries do. The removal of these restrictions would increase efficiency, lower prices for consumers, and stimulate greater competition among businesses. While it is true that eliminating trade restrictions unilaterally may remove some leverage the U.S. has in negotiations with other countries, the economic benefits of free trade outweigh this concern.

Question 2

The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being spent. The "Buy American" provision would ________ consumer surplus and ________ producer surplus for industries that produced protected products in the United States.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease

Accepted Answer

The Buy American provision would decrease consumer surplus because it limits choice and competition, meaning consumers would have to pay higher prices for American-made goods. It would increase producer surplus for industries that produced protected products in the United States because they would have less competition and be able to charge higher prices, resulting in more profit.

Question 3

The U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Accepted Answer

The elimination of tariffs and quotas would lead to lower prices for consumers, increased competition, and increased efficiency and productivity for domestic producers. This would ultimately result in economic growth and benefits for the U.S. economy, even if other countries do not reciprocate with their own tariff reductions.

Question 4

Distinguish between a voluntary export restraint and a quota.

Accepted Answer

The answer of Distinguish between a voluntary export restraint and...

Question 5

The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being spent. For the U.S. steel industry, a "Buy American" provision would create gains for all of the following except
A) U.S. steel companies.
B) U.S. taxpayers.
C) U.S. steel workers.
D) All of the above would gain from the provision.

Accepted Answer

The "Buy American" provision would likely increase the cost of goods for the government, which would ultimately be funded by taxpayers. Therefore, U.S. taxpayers would not gain from the provision, even if it does create gains for U.S. steel companies and workers.

Question 6

A voluntary export restraint is an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country.

Accepted Answer

This is the definition of a voluntary export restraint.

Question 7

Which of the following is common to both tariffs and quotas?
A) Tariffs and quotas are both used as a means to increase government revenue.
B) Tariffs and quotas both increase economic efficiency.
C) Tariffs and quotas are both designed to reduce foreign competition faced by domestic firms.
D) Tariffs and quotas are both examples of voluntary export restraints.

Accepted Answer

Both tariffs and quotas are designed to reduce foreign competition faced by domestic firms. Tariffs increase the cost of imported goods, making them less competitive with domestic goods, while quotas restrict the quantity of imported goods, also reducing foreign competition. Neither tariffs nor quotas necessarily increase government revenue or increase economic efficiency, and they are not examples of voluntary export restraints, which are agreements made between countries to limit exports to each other.

Question 8

Governments sometimes erect barriers to trade other than tariffs and quotas. Which of the following is not an example of this type of trade barrier?
A) a requirement that the employees of domestic firms that engage in foreign trade pay income taxes
B) a requirement that imports meet health and safety requirements
C) restrictions on imports for national security reasons
D) a requirement that the U.S. government buy military uniforms only from U.S. manufacturers

Accepted Answer

Requiring employees to pay income taxes does not directly affect international trade, whereas the other options all involve regulations that affect the import or export of goods and services.

Question 9

Free trade refers to trade between countries without government restrictions.

Accepted Answer

Free trade is the exchange of goods and services between countries without government-imposed barriers such as tariffs, quotas, and restrictions.

Question 10

The United States would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Accepted Answer

The elimination of tariffs and quotas would lower prices for consumers, increase competition and innovation, and promote trade and economic growth in the United States. It would also make US exports more competitive in international markets, even if other countries do not reciprocate the move. However, ideally, it would be better for all countries to reduce their trade barriers to maximize the benefits of free trade.

Question 11

A quota is a numerical limit on the quantity of a good that can be imported.

Accepted Answer

A quota is a numerical limit on the quantity of a good that can be imported.

Question 12

Figure 9-6  Suppose the U.S. government imposes a $0.50 per pound tariff on sugar imports. Figure 9-6 shows the demand and supply curves for sugar and the impact of this tariff.
-Use Figure 9-6 to answer questions a-i.
a. Following the imposition of the tariff, what is the price that domestic consumers must now pay and what is the quantity purchased?
b. Calculate the value of consumer surplus with the tariff in place.
c. What is the quantity supplied by domestic sugar producers with the tariff in place?
d. Calculate the value of producer surplus received by U.S. sugar producers with the tariff in place.
e. What is the quantity of sugar imported with the tariff in place?
f. What is the amount of tariff revenue collected by the government?
g. The tariff has reduced consumer surplus. Calculate the loss in consumer surplus due to the tariff.
h. What portion of the consumer surplus loss is redistributed to domestic producers? To the government?
i. Calculate the deadweight loss due to the tariff.

Accepted Answer

The answer of Figure 9-6  Suppose the U.S. government...

Question 13

In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes agree to limit their exports to a country. What are these types of agreements called?
A) involuntary export restraints
B) voluntary export restraints
C) implicit quotas
D) sanctions

Accepted Answer

These types of agreements are called voluntary export restraints. They are agreements made between countries where the exporting country agrees to limit its exports to the importing country in order to avoid the imposition of other types of trade barriers.

Question 14

Figure 9-7  Bragabong currently both produces and imports almonds. The government of Bragabong decides to restrict international trade in almonds by imposing a quota that allows imports of only 10 million kilos each year. Figure 9-7 shows the estimated demand and supply curves for almonds in Bragabong and the results of imposing the quota.
-Use Figure 9-7 to answer questions a-j.
a. If there is no quota what is the domestic price of almonds and what is the quantity of almonds demanded by consumers?
b. If there is no quota how many kilos of almonds would domestic producers supply and what quantity would be imported?
c. If there is no quota what is the dollar value of consumer surplus?
d. If there is no quota what is the dollar value of producer surplus received by producers in Bragabong?
e. If there is no quota what is the revenue received by foreign producers who supply almonds to Bragabong?
f. With a quota in place what is the price that consumers of Bragabong must now pay and what is the quantity demanded?
g. With a quota in place what is the dollar value of consumer surplus? Are consumers better off?
h. With a quota in place what is the dollar value of producer surplus received by producers in Bragabong? Are domestic producers better off?
i. Calculate the revenue to foreign producers who are granted permission to sell in Bragabong after the imposition of the quota.
j. Calculate the deadweight loss as a result of the quota.

Accepted Answer

The answer of Figure 9-7  Bragabong currently both produces...

Question 15

A tariff is the same as a quota.

Accepted Answer

A tariff is a tax imposed on imported goods, while a quota is a limit on the quantity of a good that can be imported. They are not the same thing.

Question 16

Which of the following is the best example of a voluntary export restraint?
A) a limit set by the Japanese government on the number of sports utility vehicles that the United States can import from Japan
B) a subsidy granted by the U.S. government to domestic sports utility vehicle manufacturers so they can compete more effectively with foreign sports utility vehicle manufacturers
C) a tax placed on all sports utility vehicles sold in the domestic market
D) a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States

Accepted Answer

A voluntary export restraint (VER) is when a country voluntarily limits the quantity or value of goods or services it exports to another country. In this case, Japan is limiting the number of sports utility vehicles it exports to the United States, which is an example of a VER. The other choices either involve subsidies, taxes, or fees, which are not examples of a VER.

Question 17

Members of Congress promising to support each other's legislation is known as
A) logrolling.
B) implicit collusion.
C) explicit collusion.
D) protectionism.

Accepted Answer

Logrolling is the practice of exchanging support for each other's proposed legislation. It is a common practice in Congress where members help each other get bills passed, even if it is not their own preferred legislation. This practice is also known as reciprocal trade or quid pro quo. It is done to build alliances, gain political favors, and advance their own agendas. Thus, option A is the correct answer. Options B, C, and D are not relevant to the given context.

Question 18

A quota is the same as a voluntary export restraint.

Accepted Answer

The answer of A quota is the same as a...

Question 19

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports. Which of the following counter-arguments is made by economists who oppose trade restrictions?
A) Statistics show that trade restrictions actually do not save jobs.
B) Consumers pay a high cost for jobs saved through trade restrictions.
C) Trade restrictions have a limited impact because most Americans prefer domestic goods over imports.
D) Trade restrictions benefit consumers in the short run but not in the long run.

Accepted Answer

Economists who oppose trade restrictions argue that consumers end up paying more for domestic goods because of trade restrictions, which ultimately hurts the economy as a whole. Additionally, trade restrictions can lead to retaliation from trading partners, causing harm to industries that rely on exports.

Question 20

A tariff is a numerical limit on the quantity of a good that can be imported.

Accepted Answer

A tariff is a tax on imported goods, not a numerical limit on the quantity that can be imported.

Quiz 9: Comparative Advantage and the Gains From International Trade

Which of the following statements is true?

The U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Distinguish between a voluntary export restraint and a quota.

A voluntary export restraint is an agreement negotiated between two countries that places a numerical limit on the quantity of a good that can be imported by one country from the other country.

Which of the following is common to both tariffs and quotas?

Governments sometimes erect barriers to trade other than tariffs and quotas. Which of the following is not an example of this type of trade barrier?

Free trade refers to trade between countries without government restrictions.

The United States would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

A quota is a numerical limit on the quantity of a good that can be imported.

In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes agree to limit their exports to a country. What are these types of agreements called?

A tariff is the same as a quota.

Which of the following is the best example of a voluntary export restraint?

Members of Congress promising to support each other's legislation is known as

A quota is the same as a voluntary export restraint.

Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition from imports. Which of the following counter-arguments is made by economists who oppose trade restrictions?

A tariff is a numerical limit on the quantity of a good that can be imported.