Question 1

In 1930,the U.S.government attempted to help domestic firms that were harmed by the Great Depression by

Accepted Answer

The Smoot-Hawley Tariff was passed in an attempt to protect domestic firms from foreign competition during the Great Depression, but it ended up backfiring and exacerbating the economic downturn by reducing international trade. The other options were established much later, with GATT established in 1947, the WTO established in 1995, and NAFTA implemented in 1994.

Question 2

Figure 19-6
  Suppose the U.S. government imposes a $0.50 per pound tariff on sugar imports. Figure 19-6 shows the demand and supply curves for sugar and the impact of this tariff.
-Use Figure 19-6 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 19-6
  Suppose the U.S. government...

Question 3

Figure 19-7
  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 19-7 shows the estimated demand and supply curves for almonds in Bragabong and the results of imposing the quota.
-Use Figure 19-7 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 19-7
  Bragabong currently both produces...

Question 4

Free trade refers to trade between countries without government restrictions.

Accepted Answer

Free trade is characterized by the absence of government-imposed barriers such as tariffs, quotas, and regulations, allowing for the free flow of goods and services between countries.

Question 5

Disagreements about whether the U.S.government should regulate international trade

Accepted Answer

The answer of Disagreements about whether the U.S.government should regulate...

Question 6

________ raised average tariff rates by over 50 percent in the United States in 1930.

Accepted Answer

The Smoot-Hawley Tariff, also known as the Tariff Act of 1930, raised average tariff rates by over 50 percent in the United States. It was signed into law by President Herbert Hoover and is widely regarded as one of the causes of the Great Depression. The GATT (General Agreement on Tariffs and Trade) and the WTO (World Trade Organization) were formed later to promote free trade and reduce tariff barriers, while NAFTA (North American Free Trade Agreement) is a trade agreement between the United States, Canada, and Mexico that eliminated most tariffs between the three countries.

Question 7

Free trade ________ living standards by ________ economic efficiency.

Accepted Answer

Free trade leads to increased competition and specialization, which increases economic efficiency and productivity, leading to higher living standards.

Question 8

Figure 19-9
 
-Refer to Figure 19-9.Fenwick currently both produces and imports pistachios.The government of Fenwick decides to restrict international trade in pistachios by imposing a quota that allows imports of only 5 million pounds each year.Figure 9-9 shows the estimated demand and supply curves for pistachios in Fenwick and the results of imposing the quota.Answer questions a-j using the figure.
a.If there is no quota what is the domestic price of pistachios and what is the quantity of pistachios demanded by consumers?
b.If there is no quota how many pounds of pistachios 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 Fenwick?
e.If there is no quota what is the revenue received by foreign producers who supply pistachios to Fenwick?
f.With a quota in place what is the price that consumers of Fenwick 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 Fenwick? Are domestic producers better off?
i.Calculate the revenue to foreign producers who are granted permission to sell in Fenwick after the imposition of the quota.
j.Calculate the deadweight loss as a result of the quota.

Accepted Answer

The answer of Figure 19-9
 
-Refer to Figure 19-9.Fenwick currently...

Question 9

Imposing trade barriers does all of the following except

Accepted Answer

Imposing trade barriers typically results in higher domestic prices as the barriers make foreign goods more expensive. Therefore, option C is incorrect. The other three options (reducing economic efficiency, lowering incomes, and inviting retaliation from foreign governments) are all negative consequences of trade barriers.

Question 10

Figure 19-8
 
-Refer to Figure 19-8.Suppose the U.S.government imposes a $0.25 per pound tariff on rice imports.Figure 19-8 shows the demand and supply curves for rice and the impact of this tariff.Use the figure 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 rice growers with the tariff in place?
d.Calculate the value of producer surplus received by U.S.rice growers with the tariff in place.
e.What is the quantity of rice 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 19-8
 
-Refer to Figure 19-8.Suppose the...

Question 11

Protectionism

Accepted Answer

Protectionism involves the use of trade barriers such as tariffs, quotas, and subsidies to protect domestic firms from foreign competition. It is aimed at shielding domestic producers from cheap imports and promoting local industries.

Question 12

In 1995 ________,which was established in 1948,was replaced by ________.

Accepted Answer

The General Agreement on Tariffs and Trade (GATT), which was established in 1948, was replaced by the World Trade Organization (WTO) in 1995. NAFTA is a trade agreement between Canada, the United States, and Mexico, and the Smoot-Hawley Tariff was a protectionist trade policy implemented by the United States in 1930.

Question 13

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

Accepted Answer

A quota is a restriction on the quantity of a good that can be imported into a country. It sets a specific limit on the maximum amount of a certain product that can enter a country during a specific time period.

Question 14

a.Distinguish between a tariff and a quota.
b.In what ways are tariffs and quotas similar?
c.In what ways are tariffs and quotas different?
d.Why might a foreign producer prefer a quota rather than a tariff?

Accepted Answer

The answer of a.Distinguish between a tariff and a quota.
b.In...

Question 15

Distinguish between a voluntary export restraint and a quota.

Accepted Answer

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

Question 16

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

Accepted Answer

A tariff is a tax imposed on imported goods, not a numerical limit on the quantity of imports.

Question 17

A quota is the same as a voluntary export restraint.

Accepted Answer

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

Question 18

A tariff is the same as a quota.

Accepted Answer

A tariff is a tax on imported goods, while a quota is a limit on the amount of a specific good that can be imported. They are different measures used to protect domestic industries and control international trade.

Question 19

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

A voluntary export restraint (VER) is a type of trade restriction typically used as a bargaining chip in international trade negotiations. It involves an agreement between two countries whereby the exporting country voluntarily limits its exports of a particular product to the importing country. The importing country, in turn, typically agrees to not impose additional trade barriers, such as tariffs or quotas, on the product in question. VERs are viewed by some as a way to maintain fair trade practices and protect domestic industries, although others argue that they can lead to higher prices for consumers and encourage protectionist policies.

Question 20

The World Trade Organization (WTO)promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.One reason for these anti-globalization protests is

Accepted Answer

Protesters believe that globalization promotes cultural homogenization and destroys the diversity of local cultures. They argue that multinational corporations and free trade policies undermine traditional practices and exploit natural resources, thus leading to cultural, social, and environmental degradation. Protesters also argue that globalization benefits the wealthy and powerful, while leaving the poor and marginalized behind. While intellectual property concerns are a legitimate issue, they are not the primary reason for the anti-globalization movement. Additionally, globalization is not a zero-sum game; it can create benefits for all parties involved. The idea that globalization leads to communism in developing countries is a flawed argument that lacks empirical evidence.

Quiz 19: Comparative Advantage, International Trade, and Exchange Rates