Question 1

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 while trade restrictions may save some domestic jobs, they also raise the cost of goods for consumers. This means that while one group may benefit, another group will suffer the consequences, leading to negative economic impacts in the long run.

Question 2

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

The statement that is true is that the U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas. This is because the elimination of trade restrictions would lead to increased competition, which would result in lower prices for consumers and increased efficiency for producers. Additionally, it would promote economic growth and expansion, which would create new jobs and stimulate investment. Therefore, eliminating tariffs and quotas unilaterally would benefit the United States economy.

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

Eliminating tariffs and quotas would lower the cost of production for businesses in the United States, increase competition, and give consumers more choices. This would lead to increased economic activity, job growth, and higher living standards for Americans. While other countries may not immediately reduce their tariffs and quotas, the elimination of barriers in the U.S. would still have a positive impact on the domestic economy.

Question 4

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 goods that can be imported. They are two different measures used by governments to protect domestic industries.

Question 5

Which of the following is the best example of a tariff?
A) a limit imposed 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 garment manufacturers so they can compete more effectively with foreign garment 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 tariff is a tax imposed on imported goods. Option D describes a $5,000 per-car fee imposed on all SUVs imported into the US, which is the best example of a tariff. Option A describes a quota, which is a limit imposed on the quantity of imported goods. Option B describes a subsidy, which is financial assistance granted by the government to domestic producers to help them compete with foreign producers. Option C describes a sales tax, which is levied on all goods sold in the domestic market.

Question 6

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

Accepted Answer

A quota is a quantitative restriction on imports, setting a limit on the quantity of a good that can be imported. Therefore, it is a numerical limit.

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 do this by making imported goods more expensive, while quotas limit the amount of imports that can enter the country.

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 allows for trade between countries to occur without government-imposed tariffs, quotas, or other restrictions.

Question 10

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 would limit the options available to consumers and potentially increase prices due to reduced competition. Producer surplus, on the other hand, would increase for industries that produced protected products in the United States due to increased demand for their goods.

Question 11

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

Question 12

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

While U.S. steel companies and workers would benefit from a "Buy American" provision, taxpayers would likely face higher costs for goods and services as a result of the restriction on imports. This could potentially lead to an overall loss for taxpayers, outweighing the gains for the steel industry.

Question 13

If the U.S. government implements a tariff on Chinese tire imports, the price of Chinese-made tires will ________, the quantity demanded will ________, and consumer surplus will ________.
A) increase; decrease; decrease
B) increase; not change; increase
C) decrease; increase; not change
D) increase; decrease; increase

Accepted Answer

When a tariff is implemented on Chinese tire imports, the price of Chinese-made tires will increase due to the additional cost of the tariff. As a result, the quantity demanded will decrease as consumers will seek alternative, cheaper options. Consumer surplus will also decrease as consumers will no longer have access to the lower-priced Chinese tires.

Question 14

A quota is the same as a voluntary export restraint.

Accepted Answer

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

Question 15

If the U.S. government implements a tariff on Chinese tire imports all of the following would be made worse off except
A) U.S. consumers.
B) American tire retailers.
C) Chinese tire manufacturers.
D) American tire manufacturing workers.

Accepted Answer

The answer of If the U.S. government implements a tariff...

Question 16

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 result in lower prices for American consumers and businesses, increased competition, and higher levels of trade and economic activity. Even if other countries do not reciprocate by reducing their own tariffs and quotas, the United States could still benefit from these advantages.

Question 17

Distinguish between a voluntary export restraint and a quota.

Accepted Answer

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

Question 18

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 agreements are called voluntary export restraints, where foreign producers voluntarily limit their exports to a country in order to avoid other types of trade barriers being imposed on them. Involuntary export restraints would be imposed by the importing country, while implicit quotas are not agreed upon by the exporting country. Sanctions are penalties or restrictions imposed on a country for political reasons, and are not related to trade agreements.

Question 19

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 garment manufacturers so they can compete more effectively with foreign garment 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 is when a country voluntarily limits the amount of a certain product it exports to another country. In this case, the Japanese government limits the number of sports utility vehicles that the United States can import from Japan.

Question 20

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 correct definition of a voluntary export restraint.

Quiz 9: Comparative Advantage and the Gains From International Trade

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?

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.

A tariff is the same as a quota.

Which of the following is the best example of a tariff?

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

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.

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

If the U.S. government implements a tariff on Chinese tire imports, the price of Chinese-made tires will , the quantity demanded will , and consumer surplus will .

A quota is the same as a voluntary export restraint.

If the U.S. government implements a tariff on Chinese tire imports all of the following would be made worse off except

The United States 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.

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?

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

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.