Question 1

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

Accepted Answer

An export tariff increases producer surplus because it provides them with additional revenue or protection, decreases consumer surplus as it raises the prices of goods, increases government revenue through the collected tariffs, and has an ambiguous effect on overall domestic national welfare because the benefits to producers and the government might offset the losses to consumers, but the overall impact depends on the specific market conditions and the size of the tariff.

Question 2

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.

Accepted Answer

In free trade, the domestic price decreases due to competition from imports, reducing producer surplus but increasing consumer surplus. Overall domestic national welfare increases due to gains from trade.

Question 3

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

Accepted Answer

Voluntary export restraints have historically been applied to Japanese cars and Chinese solar panels to limit their export quantities to certain countries, often to protect domestic industries in those countries.

Question 4

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

Accepted Answer

A voluntary export restraint (VER) is an agreement between two countries that limits the quantity of a good that one exports to the other.

The VER will increase producer surplus since it limits foreign competition and allows domestic producers to increase their prices. However, it will decrease consumer surplus since consumers will have to pay higher prices for the now limited supply of the good.

A VER does not generate government revenue, so it will have no effect on government revenue.

Overall domestic national welfare will decrease since the decrease in consumer surplus exceeds the increase in producer surplus.

Question 5

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.

Accepted Answer

Replacing an export tariff with an import quota in an imperfectly competitive market typically increases market price and producer surplus while decreasing consumer surplus, government revenue, and overall domestic national welfare.

Question 6

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

Accepted Answer

An import quota increases producer surplus by protecting domestic industries from foreign competition, decreases consumer surplus because consumers have to pay higher prices due to reduced competition, has no effect on government revenue because quotas are not a tax, and its effect on overall domestic national welfare is ambiguous because it depends on the specific circumstances of the economy, such as the efficiency of the domestic producers and the importance of the good in question.

Question 7

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.

Accepted Answer

An export tariff can increase domestic market prices as it restricts supply, leading to decreased consumer surplus and increased producer surplus and government revenue. However, overall domestic national welfare typically decreases due to inefficiencies introduced by the tariff.

Question 8

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.

Accepted Answer

An import quota limits the quantity of goods that can be imported, reducing competition and allowing domestic firms to raise prices. This increases producer surplus but decreases consumer surplus. Government revenue is not directly affected by quotas, and overall welfare decreases due to inefficiencies and loss of consumer surplus.

Question 9

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

Accepted Answer

An export subsidy will increase producer surplus by providing them with financial assistance. However, it will decrease consumer surplus as the price will remain high due to the subsidy. The government revenue will decrease as it is providing the subsidy. Overall domestic national welfare will also decrease as it is distorting the market and causing inefficiency.

Quiz 9: The Instruments of Trade Policy