Question 1

A difference between a quota and a tariff is that

Accepted Answer

A)  a tariff generates a higher price than does a quota. 
B)  a tariff generates a greater reduction in exports than does a quota. 
C)  a quota increases profits of domestic producers more than does a tariff. 
D)  the government collects revenue from a tariff but does not collect revenue from a quota. 
A)  a tariff generates a higher price than does a quota. 
B)  a tariff generates a greater reduction in exports than does a quota. 
C)  a quota increases profits of domestic producers more than does a tariff. 
D)  the government collects revenue from a tariff but does not collect revenue from a quota.

Question 2

Prior to international trade, the price of good X is lower in country A than in country B. This means that we know that

Accepted Answer

A)  country B has an absolute advantage in the production of product X. 
B)  country B has a comparative advantage in the production of product X. 
C)  country A has an absolute advantage in the production of product X. 
D)  country A has a comparative advantage in the production of product X. 
A)  country B has an absolute advantage in the production of product X. 
B)  country B has a comparative advantage in the production of product X. 
C)  country A has an absolute advantage in the production of product X. 
D)  country A has a comparative advantage in the production of product X.

Question 3

Average tariff levels in the United States in the last decade are

Accepted Answer

A)  about equal to the average since 1930. 
B)  above the average since 1930. 
C)  positive, but below the average since 1930. 
D)  zero, as there are no longer any tariffs in the United States. 
A)  about equal to the average since 1930. 
B)  above the average since 1930. 
C)  positive, but below the average since 1930. 
D)  zero, as there are no longer any tariffs in the United States.

Question 4

Voluntary export restraints (VERs)

Accepted Answer

A)  do not protect domestic producers. 
B)  raise revenue for the governments involved. 
C)  raise the prices paid by domestic consumers. 
D)  Both answers B and C are correct. 
A)  do not protect domestic producers. 
B)  raise revenue for the governments involved. 
C)  raise the prices paid by domestic consumers. 
D)  Both answers B and C are correct.

Question 5

Currently, the United States has an import quota on the amount of sugar that is allowed to be imported into the United States. What would happen to the price of sugar in the United States if the import quota was removed? What would happen to U.S. consumption and U.S. production of sugar?

Accepted Answer

If the import quota is removed

Question 6

When a group lobbies for the prevention of free trade, the most likely reason is

Accepted Answer

A)  rent seeking. 
B)  tariff revenue. 
C)  defense against expensive domestic labor. 
D)  preservation of the environment. 
A)  rent seeking. 
B)  tariff revenue. 
C)  defense against expensive domestic labor. 
D)  preservation of the environment.

Question 7

A country specializes in the production of goods for which it has a comparative advantage, so

Accepted Answer

A)  some producers and consumers win, some lose, but overall the gains exceed the losses. 
B)  all producers win. 
C)  all consumers win. 
D)  producers win, consumers lose, but overall the gains exceed the losses. 
A)  some producers and consumers win, some lose, but overall the gains exceed the losses. 
B)  all producers win. 
C)  all consumers win. 
D)  producers win, consumers lose, but overall the gains exceed the losses.

Question 8

The figure shows the market for shirts in the United States, where D is the U.S demand curve and S is the U.S. supply curve. The world price is $20 per shirt. The United States imposes a tariff on imported shirts, $4 per shirt.
-In the figure above, the U.S. government's revenue from the tariff is ________.

Accepted Answer

A)  $64 million 
B)  $32 million 
C)  $128 million 
D)  $48 million 
A)  $64 million 
B)  $32 million 
C)  $128 million 
D)  $48 million

Question 9

How does a tariff affect the government's revenue? How does an import quota affect the government's revenue?

Accepted Answer

A tariff is a tax on an imported good. L

Question 10

When does the domestic government gain the MOST revenue?

Accepted Answer

A)  when it imposes a tariff 
B)  when it imposes an import quota 
C)  when it negotiates a voluntary export restraint 
D)  The amount of revenue it gains is the same with a tariff and a voluntary export restraint. 
A)  when it imposes a tariff 
B)  when it imposes an import quota 
C)  when it negotiates a voluntary export restraint 
D)  The amount of revenue it gains is the same with a tariff and a voluntary export restraint.

Question 11

The figure shows the market for helicopters in the United States, where D is the domestic demand curve and S is the domestic supply curve. The United States trades helicopters with the rest of the world at a price of $36 million per helicopter.
-In the figure above, with international trade ________ helicopters per year are produced in the United States.

Accepted Answer

A)  360 
B)  480 
C)  720 
D)  240 
A)  360 
B)  480 
C)  720 
D)  240

Question 12

Almost all economists support protectionist policies because protection

Accepted Answer

A)  saves jobs. 
B)  prevents rich countries from exploiting poorer countries. 
C)  is a good way for governments in developed nations to raise revenue. 
D)  Economists would not support any of the above reasons. 
A)  saves jobs. 
B)  prevents rich countries from exploiting poorer countries. 
C)  is a good way for governments in developed nations to raise revenue. 
D)  Economists would not support any of the above reasons.

Question 13

Which of the following reasons explains why rich countries persistently restrict textile imports from poor countries?

Accepted Answer

A)  The trade restrictions make textile consumers better off. 
B)  The trade restrictions make workers in poor countries better off. 
C)  The trade restrictions benefit an organized visible special interest in rich countries. 
D)  Rich countries have a strong need for the revenue from these trade restrictions. 
A)  The trade restrictions make textile consumers better off. 
B)  The trade restrictions make workers in poor countries better off. 
C)  The trade restrictions benefit an organized visible special interest in rich countries. 
D)  Rich countries have a strong need for the revenue from these trade restrictions.

Question 14

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt.
-In the figure above, with international trade ________ million shirts per year are produced in the United States.

Accepted Answer

A)  48 
B)  32 
C)  16 
D)  20 
A)  48 
B)  32 
C)  16 
D)  20

Question 15

An import quota is

Accepted Answer

A)  a tariff that is a fixed percentage of the price of a good. 
B)  a tariff that is a fixed dollar amount per unit of a good. 
C)  an agreed upon price for a good to be imported at a specified future date. 
D)  a restriction that specifies the maximum amount of a good that may be imported. 
A)  a tariff that is a fixed percentage of the price of a good. 
B)  a tariff that is a fixed dollar amount per unit of a good. 
C)  an agreed upon price for a good to be imported at a specified future date. 
D)  a restriction that specifies the maximum amount of a good that may be imported.

Question 16

Over the past 70 years, the United States has reduced its average tariff rate so today it is less than 5 percent.

Accepted Answer

A) True 
 B)False

Question 17

In 2006, European Union tariff on imported bananas from Latin America was €176 a ton. Suppose 2.5 million tons of bananas were imported in 2006 but then the tariff decreased to €152 a ton in 2007 and as a result, 3 million tons were imported in 2007. What is the tariff revenue in 2007?

Accepted Answer

A)  €445,000,000 
B)  €528,000,000 
C)  €440,000,000 
D)  €375,000,000 
A)  €445,000,000 
B)  €528,000,000 
C)  €440,000,000 
D)  €375,000,000

Question 18

Trade war occurs when, after a tariff is imposed, other countries retaliate with their own tariff.

Accepted Answer

A) True 
 B)False

Question 19

When the United States imposes a tariff on a good, the amount of the ________ in U.S. consumer surplus is ________ the amount of the ________ in U.S. producer surplus .

Accepted Answer

A)  increase; smaller than; increase 
B)  decrease; larger than; decrease 
C)  decrease; larger than; increase 
D)  decrease; equal to; increase 
A)  increase; smaller than; increase 
B)  decrease; larger than; decrease 
C)  decrease; larger than; increase 
D)  decrease; equal to; increase

Question 20

When a foreign firm sells its exports at a lower price than its cost of production, the firm is

Accepted Answer

A)  imposing an economies of scale cost. 
B)  dumping. 
C)  avoiding a tariff. 
D)  competing in an infant industry. 
A)  imposing an economies of scale cost. 
B)  dumping. 
C)  avoiding a tariff. 
D)  competing in an infant industry.

Exam 7: Global Markets in Action

A difference between a quota and a tariff is that

Prior to international trade, the price of good X is lower in country A than in country B. This means that we know that

Average tariff levels in the United States in the last decade are

Voluntary export restraints (VERs)

Currently, the United States has an import quota on the amount of sugar that is allowed to be imported into the United States. What would happen to the price of sugar in the United States if the import quota was removed? What would happen to U.S. consumption and U.S. production of sugar?

When a group lobbies for the prevention of free trade, the most likely reason is

A country specializes in the production of goods for which it has a comparative advantage, so

How does a tariff affect the government's revenue? How does an import quota affect the government's revenue?

When does the domestic government gain the MOST revenue?

Almost all economists support protectionist policies because protection

Which of the following reasons explains why rich countries persistently restrict textile imports from poor countries?

The figure shows the market for shirts in the United States, where D is the domestic demand curve and S is the domestic supply curve. The world price is $20 per shirt. -In the figure above, with international trade ________ million shirts per year are produced in the United States.

An import quota is

Over the past 70 years, the United States has reduced its average tariff rate so today it is less than 5 percent.

In 2006, European Union tariff on imported bananas from Latin America was €176 a ton. Suppose 2.5 million tons of bananas were imported in 2006 but then the tariff decreased to €152 a ton in 2007 and as a result, 3 million tons were imported in 2007. What is the tariff revenue in 2007?

Trade war occurs when, after a tariff is imposed, other countries retaliate with their own tariff.

When the United States imposes a tariff on a good, the amount of the ________ in U.S. consumer surplus is ________ the amount of the ________ in U.S. producer surplus .

When a foreign firm sells its exports at a lower price than its cost of production, the firm is

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopoly

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

When the United States imposes a tariff on a good, the amount of the in U.S. consumer surplus is the amount of the in U.S. producer surplus .