Question 1

If the United States removed the tariffs and quotas on sugar, in the U.S. market for sugar:

Accepted Answer

If tariffs and quotas on sugar were removed, the domestic sugar producers would face stiff competition from foreign producers who can sell sugar at a lower price. As a result, the quantity demanded of domestic sugar would decrease, and the domestic sugar producers would have to lower their prices to compete. This would lead to a decrease in producer surplus. Although consumers would benefit from lower prices, consumer surplus would not change because there is not a shift in the demand curve. Total surplus would likely decrease as the decrease in producer surplus may not be offset by the increase in consumer surplus.

Question 2

In 2002, the steel industry argued that higher tariffs on steel were necessary to help fight the war on terrorism. This is an example of the _____ argument.

Accepted Answer

The argument made by the steel industry in 2002 that higher tariffs on steel were necessary to fight terrorism is an example of the national security argument. This argument suggests that certain industries must be protected because they are necessary for national security purposes. In this case, the steel industry argued that steel was needed for military purposes, such as building weapons and vehicles, and that higher tariffs were necessary to ensure a steady supply of domestic steel.

Question 3

If quota rents do not accrue to the government, then the net loss to the government from an import quota is _____ the deadweight loss from an equivalent tariff.

Accepted Answer

The answer of If quota rents do not accrue to...

Question 4

Which of the following is an example of an import quota?

Accepted Answer

An import quota places a limit on the quantity of a specific good that can be imported into a country. Option A states a limit on the total number of shoes that can be imported from Italy, which is an example of an import quota. The other options describe either regulations on imports or taxes on specific goods, which are not the same as import quotas.

Question 5

Which of the following is a common argument for trade protection?

Accepted Answer

National security is a common argument for trade protection because it can be seen as a way to protect domestic industries from foreign competition and ensure that essential goods and services remain available during times of conflict or crisis.

Question 6

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that the military should have an unrestricted domestic supply of silicon chips, they are using the _____ argument.

Accepted Answer

The argument being used here is the national security argument, which is based on the premise that the military needs an unrestricted domestic supply of silicon chips to ensure national security. This argument is frequently used to justify protectionist measures and restrictions on imports, as it is believed that reliance on foreign sources of vital resources could put the country's security at risk.

Question 7

The infant industry argument for trade protection states that:

Accepted Answer

The infant industry argument advocates for the protection of new industries until they become established in the market. This protection can take the form of tariffs or quotas on imported goods. The argument is that these new industries need time to grow and develop in order to become competitive with established industries. Once they have become established, the protection can be removed.

Question 8

A tariff or quota will _____ prices and _____ the consumption of the protected goods in the importing country.

Accepted Answer

A tariff or quota will raise prices because it restricts the amount of goods available in the market, leading to an increase in consumer demand, which drives up prices. A tariff or quota will also decrease the consumption of the protected goods in the importing country because their higher prices will discourage people from buying them, leading to a decrease in demand.

Question 9

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the _____ argument.

Accepted Answer

The argument of the U.S. silicon chip industry executives for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency is an example of the infant industry argument. The infant industry argument suggests that new and emerging industries may require temporary protection from foreign competition until they become technologically efficient and can compete on the global market.

Question 10

Assume that the United States imposes an import quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of import quotas, the equilibrium price of shoes in the United States will most likely _____, and the equilibrium price of shoes in Italy will most likely _____.

Accepted Answer

When the United States imposes an import quota on Italian shoes, the supply of Italian shoes in the US market decreases, causing an increase in price. Therefore, the equilibrium price of shoes in the United States will increase. On the other hand, the supply of shoes in Italy increases due to the restriction on US imports, leading to a decrease in the equilibrium price of shoes in Italy. Hence, the equilibrium price of shoes in Italy will most likely decrease.

Question 11

Tariffs and import quotas tend to:

Accepted Answer

Tariffs and import quotas both increase the price of imported goods, which reduces the quantity of imports and shifts demand towards domestically produced goods. This reduces the overall quantity of goods traded and creates deadweight loss, leading to a reduction in total surplus compared to free trade. While they may generate government revenue, this revenue is often offset by the costs associated with implementing and enforcing the policies. Furthermore, they may reduce consumer surplus as domestic prices increase.

Question 12

If the United States imposes an import quota on French wines, the result in the short run is likely to be _____ profits for American wine producers and _____ profits for French wine producers.

Accepted Answer

By imposing an import quota on French wines, it limits the amount of French wines that can be imported into the US. This decrease in supply will lead to an increase in the price of French wine, making it more expensive for American consumers to buy. As a result, American wine producers will see an increase in their profits as consumers shift their demand towards American wines, while French wine producers will see a decrease in their profits due to the decrease in demand for their wines.

Question 13

The main difference between a tariff and an import quota is that:

Accepted Answer

A tariff is a tax on imports, which generates revenue for the government. An import quota, on the other hand, restricts the quantity of imports and creates a limited number of licenses that can be used to import. These licenses are often sold to firms, generating rents for the license holders. Therefore, a tariff generates tax revenue while an import quota generates rents to the license holders. The other options are incorrect, as tariffs and import quotas can both impact prices and reduce imports to different degrees.

Question 14

Assume that the United States imposes an import quota on Scottish wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _____ and the equilibrium price of suits in Scotland will most likely _____.

Accepted Answer

When the United States imposes an import quota on Scottish wool suits, the supply of Scottish wool suits will decrease as the quantity imported is limited. This shift in supply leads to an increase in the price of Scottish wool suits.

On the other hand, the demand for suits in the United States remains unchanged. As the supply decreases, the price of suits in the United States will increase. Therefore, the equilibrium price in the United States and Scotland will move in opposite directions, with the price increasing in Scotland and decreasing in the United States.

Thus, the best choice is D, where the equilibrium price of suits in the United States will most likely increase, and the equilibrium price of suits in Scotland will most likely decrease.

Question 15

Assume that the United States imposes an import quota on Columbian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _____ and the equilibrium price of coffee in Columbia will _____.

Accepted Answer

When the US imposes an import quota on Colombian coffee, the supply of Colombian coffee to the US market decreases. This leads to a higher price of coffee in the US market since the remaining supply is limited. On the other hand, the decrease in demand for Columbian coffee in the US lowers the price of coffee in the Columbian market due to the oversupply. Therefore, the equilibrium price of coffee in the US will increase, while the equilibrium price of coffee in Columbia will decrease.

Question 16

The most likely effects of tariffs and/or import quotas are to _____ prices and to _____ consumption of the protected goods in the importing country.

Accepted Answer

Tariffs and/or import quotas increase the cost of importing goods, which ultimately leads to increased prices for the protected goods. This makes them less competitive compared to domestically produced goods, which results in lower consumption of the protected goods in the importing country.

Question 17

Suppose the United States auctioned off all import quotas, the auctions were perfectly competitive, and the government received the revenues from the auction. In this case, the deadweight loss from a quota would be _____ the deadweight loss from an equivalent tariff.

Accepted Answer

When the United States auctions off all import quotas in a perfectly competitive market and receives the revenues, the economic effect is similar to that of a tariff. In both cases, the government collects revenue, either through tariffs or through auction proceeds. This means that the deadweight loss, which is the loss of economic efficiency when the equilibrium outcome is not achieved, would be the same for both a quota and an equivalent tariff, assuming other conditions are equal.

Question 18

In the case of U.S. trade protection, quota rents for the most important import licenses are earned by:

Accepted Answer

The answer of In the case of U.S. trade protection,...

Question 19

According to the infant industry argument, import protection is needed because:

Accepted Answer

The infant industry argument states that import protection is needed to enable new industries to develop and achieve technological efficiency, allowing them to become competitive with established foreign industries. This can then lead to a stronger domestic economy and increased employment opportunities.

Question 20

A direct restriction on the quantity of an import is called a(n):

Accepted Answer

An import quota is a direct restriction on the quantity of an import, limiting the amount that can enter a country.

Quiz 8: International Trade

If the United States removed the tariffs and quotas on sugar, in the U.S. market for sugar:

In 2002, the steel industry argued that higher tariffs on steel were necessary to help fight the war on terrorism. This is an example of the _____ argument.

If quota rents do not accrue to the government, then the net loss to the government from an import quota is _____ the deadweight loss from an equivalent tariff.

Which of the following is an example of an import quota?

Which of the following is a common argument for trade protection?

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that the military should have an unrestricted domestic supply of silicon chips, they are using the _____ argument.

The infant industry argument for trade protection states that:

A tariff or quota will _ prices and _ the consumption of the protected goods in the importing country.

If the executives of the U.S. silicon chip industry lobby Congress for protection from imports on the grounds that theirs is a new industry that needs time to develop technological efficiency, they are using the _____ argument.

Assume that the United States imposes an import quota on Italian shoes. Relative to the equilibrium world price that would exist in the absence of import quotas, the equilibrium price of shoes in the United States will most likely _, and the equilibrium price of shoes in Italy will most likely _.

Tariffs and import quotas tend to:

If the United States imposes an import quota on French wines, the result in the short run is likely to be _ profits for American wine producers and _ profits for French wine producers.

The main difference between a tariff and an import quota is that:

Assume that the United States imposes an import quota on Scottish wool suits. Relative to the equilibrium price that would prevail in the absence of quotas, the equilibrium price of suits in the United States will most likely _ and the equilibrium price of suits in Scotland will most likely _.

Assume that the United States imposes an import quota on Columbian coffee. Relative to the equilibrium world price that would prevail in the absence of import quotas, it is likely that the equilibrium price of coffee in the United States will _ and the equilibrium price of coffee in Columbia will _.

The most likely effects of tariffs and/or import quotas are to _ prices and to _ consumption of the protected goods in the importing country.

Suppose the United States auctioned off all import quotas, the auctions were perfectly competitive, and the government received the revenues from the auction. In this case, the deadweight loss from a quota would be _____ the deadweight loss from an equivalent tariff.

In the case of U.S. trade protection, quota rents for the most important import licenses are earned by:

According to the infant industry argument, import protection is needed because:

A direct restriction on the quantity of an import is called a(n) :