Question 1

When a tariff is imposed on imported goods or services, the consumer surplus in the domestic market _____ and producer surplus in the domestic market _____ .
A) rises; falls
B) rises; rises
C) falls; falls
D) falls; rises
E) falls; stays the same

Accepted Answer

When a tariff is imposed, the price of imported goods or services increases. This leads to a decrease in consumer surplus because consumers have to pay more for the goods or services. On the other hand, domestic producers benefit from reduced competition from imports, which can lead to an increase in producer surplus as they can sell more goods or services at higher prices.

Question 2

When a tariff is imposed on imported goods and services, the _____ in consumer surplus is _____ the ______ in producer surplus.
A) increase; less than, increase
B) increase; less than, decrease
C) decrease; greater than, increase
D) decrease; less than, increase
E) increase; the same as; decrease

Accepted Answer

When a tariff is imposed, the price of imported goods and services increases. This leads to a decrease in consumer surplus because consumers have to pay more for these goods and services or reduce their consumption. On the other hand, domestic producers benefit from reduced competition, leading to an increase in producer surplus. The decrease in consumer surplus is typically greater than the increase in producer surplus because the tariff-induced price increase affects all consumers, while only certain producers benefit.

Question 3

When a tariff is imposed on imports, domestic producer surplus:
A) falls.
B) rises.
C) stays the same.
D) becomes negative.
E) is indeterminate.

Accepted Answer

When a tariff is imposed on imports, domestic producer surplus rises because the tariff makes imported goods more expensive, reducing competition for domestic producers, which can lead to higher prices and sales for them.

Question 4

Tariffs cause a redistribution of income from:
A) the government to producers and consumers.
B) consumers and the government to producers.
C) producers and consumers to the government.
D) consumers to producers and the government.
E) producers to governments.

Accepted Answer

Tariffs are taxes on imported goods that are paid by consumers, which increases the cost of these goods. This leads to a redistribution of income from consumers to producers (who may benefit from reduced competition) and the government (which collects the tariff revenue).

Question 5

If a small country imposes a tariff:
A) the imported product price rises by more than the tariff.
B) the imported product price rises by exactly the amount of the tariff.
C) the imported product price rise by less than the amount of the tariff.
D) the imported product price falls by the amount of the tariff.
E) the effects are the same for a large country.

Accepted Answer

The price of the imported product typically rises by exactly the amount of the tariff, as the cost of the tariff is passed directly onto consumers in the form of higher prices.

Question 6

-With no trade the amount of domestically produced PCs is: A) Q₁. B) Q₂. C) Q₃. D) Q₄. E) Q₁ to Q₃.

Accepted Answer

The answer of 
-With no trade the amount of domestically...

Question 7

-With no trade the country's producer surplus is:
A) area a.
B) area b.
C) area c.
D) areas b + c.
E) areas b + c + g.

Accepted Answer

The answer of 
-With no trade the country's producer surplus...

Question 8

-With no trade the country's consumer surplus is:
A) area a.
B) area a + b.
C) area b.
D) area c.
E) area a + b + c.

Accepted Answer

The consumer surplus is the difference between the price consumers are willing to pay for a good and the price they actually pay. With no trade, the price of the good is determined by the domestic supply and demand. The consumer surplus is the area below the demand curve and above the supply curve. In this case, the consumer surplus is area a.

Question 9

-With free trade the country imports:
A) Q1.
B) Q2.
C) Q3.
D) Q1 to Q2.
E) Q1 to Q5.

Accepted Answer

The answer of 
-With free trade the country imports:
A) Q1.
B)...

Question 10

-With free trade the country's producers surplus is:
A) area a.
B) area b.
C) area c.
D) area d.
E) area g.

Accepted Answer

The answer of 
-With free trade the country's producers surplus...

Question 11

-With a tariff imposed on PCs, the country imports:
A) Q1.
B) Q2.
C) Q3.
D) Q4.
E) Q2 to Q4.

Accepted Answer

With a tariff imposed on PCs, the country would import the quantity between Q2 and Q4. This is because the tariff increases the cost of imported PCs, reducing the quantity demanded from the higher, pre-tariff level (Q4) but still above the quantity that would be demanded without any imports (Q2).

Question 12

-The loss of consumer surplus due to the tariff is:
A) area c.
B) area d.
C) area c + d.
D) area c + d + e.
E) area c + d + e + f.

Accepted Answer

The answer of 
-The loss of consumer surplus due to...

Question 13

-The amount of producer surplus domestic producers gain as a result of the tariff is:
A) area c.
B) area c + d.
C) area d.
D) area f.
E) area c + d + e.

Accepted Answer

The correct answer is A because area c represents the amount of producer surplus domestic producers gain as a result of the tariff.

Question 14

-The amount of revenue the government collects as a result of the tariff is:
A) area c.
B) area d.
C) area e.
D) area f.
E) area e + f.

Accepted Answer

The answer of 
-The amount of revenue the government collects...

Question 15

-The dead-weight loss of the tariff to the country is:
A) area c + d + e + f.
B) area d + e + f.
C) area d + f.
D) area d.
E) None of the above

Accepted Answer

The dead-weight loss of a tariff to the country imposing it is represented by the areas of consumer and producer surplus that are lost and not transferred to any party, which are typically the areas of the triangles formed due to the reduction in quantity traded. These areas are generally labeled as d and f in standard economic diagrams illustrating the effects of tariffs.

Question 16

If a large country imposes a tariff:
A) the imported product price rises by more than the tariff.
B) the imported product price rises by exactly the amount of the tariff.
C) the imported product price rises by less than the amount of the tariff.
D) the imported product price falls by the amount of the tariff.
E) the effects are same as for a small country.

Accepted Answer

When a large country imposes a tariff, it can influence world prices. The price of the imported product in the domestic market rises by less than the tariff because the foreign exporters may lower their prices to maintain competitiveness.

Question 17

The imposition of an import tariff by a large country can cause:
A) a decrease in imports.
B) an increase in the country's welfare.
C) a decrease in the country's welfare.
D) All of the above
E) None of the above

Accepted Answer

An import tariff can lead to a decrease in imports as goods become more expensive, potentially increase the country's welfare by protecting domestic industries and generating government revenue, but it can also decrease welfare by leading to higher prices and less efficient resource allocation.

Question 18

Assume that domestic calculators are made with foreign parts that cost $80 and that the calculators retail for $90. If in a small country situation if a tariff of $1 is placed on the foreign parts, then the effective rate of protection is:
A) -10%.
B) 10%.
C) 50%.
D) 80%.
E) 100%.

Accepted Answer

The answer of Assume that domestic calculators are made with...

Question 19

Assume that U.S.-assembled computers are made with $1,000 of components and sell for $2,000 in the U.S. Now, a $200 tariff is imposed on foreign computers. The nominal tariff is ______ and the effective rate of protection is ________ .
A) 10%; 10%
B) 5%; 20%
C) 20%; 50%
D) 10%; 20%

Accepted Answer

The answer of Assume that U.S.-assembled computers are made with...

Question 20

Consider three goods: raw leather, leather wallets, and tanned leather. Assume that an industrial country employs a tariff structure using these ad valorem tariff rates on imports of 0%, 4.5%, and 7.9%. If this hypothetical industrial country uses a tariff structure similar to most other industrial countries, these rates will be placed on _____, _____, and ____, respectively.
A) raw leather, leather wallets, tanned leather
B) leather wallets, raw leather, tanned leather
C) raw leather, tanned leather, leather wallets
D) tanned leather, leather wallets, raw leather
E) domestic producers, importers, exporters

Accepted Answer

Raw leather, tanned leather, and leather wallets are placed under tariffs of 0%, 7.9%, and 4.5%, respectively, following the logic of increasing complexity and value addition in the production process. Raw materials often have the lowest tariffs to encourage domestic production, followed by semi-processed goods, and finished goods have a moderate rate to protect domestic industries.

Quiz 8: Tariffs

When a tariff is imposed on imported goods or services, the consumer surplus in the domestic market _ and producer surplus in the domestic market _ .

When a tariff is imposed on imported goods and services, the ___ in consumer surplus is _ the ____ in producer surplus.

When a tariff is imposed on imports, domestic producer surplus:

Tariffs cause a redistribution of income from:

If a small country imposes a tariff:

-With no trade the amount of domestically produced PCs is:

-With no trade the country's producer surplus is:

-With no trade the country's consumer surplus is:

-With free trade the country imports:

-With free trade the country's producers surplus is:

-With a tariff imposed on PCs, the country imports:

-The loss of consumer surplus due to the tariff is:

-The amount of producer surplus domestic producers gain as a result of the tariff is:

-The amount of revenue the government collects as a result of the tariff is:

-The dead-weight loss of the tariff to the country is:

If a large country imposes a tariff:

The imposition of an import tariff by a large country can cause:

Assume that domestic calculators are made with foreign parts that cost $80 and that the calculators retail for $90. If in a small country situation if a tariff of $1 is placed on the foreign parts, then the effective rate of protection is:

Assume that U.S.-assembled computers are made with $1,000 of components and sell for $2,000 in the U.S. Now, a $200 tariff is imposed on foreign computers. The nominal tariff is and the effective rate of protection is __ .