Exam 4: Tariffs

Assume the United States is a large consumer of steel that is able to influence the world price.Its demand and supply schedules are respectively denoted by DU.S.and SU.S.in Figure 4.2.The overall (United States plus world) supply schedule of steel is denoted by SU.S.+W. Figure 4.2.Import Tariff Levied by a "Large" Country -Consider Figure 4.2.With free trade,the United States achieves market equilibrium at a price of $____.At this price,____ tons of steel are produced by U.S.firms,____ tons are bought by U.S.buyers,and ____ tons are imported.

Exhibit 4.2 In the absence of international trade,assume that the equilibrium price and quantity of motorcycles in Canada is $14,000 and 10 units respectively.Assuming that Canada is a small country that is unable to affect the world price of motorcycles,suppose its market is opened to international trade.As a result,the price of motorcycles falls to $12,000 and the total quantity demanded rises to 14 units; out of this total,6 units are produced in Canada while 8 units are imported.Now assume that the Canadian government levies an import tariff of $1,000 on motorcycles. -Refer to Exhibit 4.2.All of the import tariff is shifted to the Canadian consumer via a higher price of motorcycles.

Throughout the world,most countries tend to have about the same tariff levels.

For developing countries,import tariffs generally are ______ than tariff levels in advanced countries

Assume that the United States imports televisions from Taiwan at a price of $300 per unit and that these televisions are subject to an import tariff of 25 percent.Also assume that U.S.components are used in the televisions assembled by Taiwan and that these components have a value of $100.Under the Offshore Assembly Provision of U.S.tariff policy,the price of an imported television to the U.S.consumer after the tariff has been levied is $375

For a small country,free trade results in a higher level of national welfare than tariff protection.

If Japan is a large country,it cannot influence the terms of trade when it imposes a tariff on imports.

Figure 4.1 illustrates the demand and supply schedules for pocket calculators in Mexico,a "small" nation that is unable to affect the world price. Figure 4.1.Import Tariff Levied by a "Small" Country -Consider Figure 4.1.With free trade,Mexico imports:

In general,tariffs tend to have

With a compound duty,its "specific" portion neutralizes the cost disadvantage of domestic manufacturers that results from tariff protection granted to domestic suppliers of raw materials,and the "ad valorem" portion of the duty grants protection to the finished-goods industry.

According to the tariff escalation effect,industrial countries apply low tariffs to imports of finished goods and high tariffs to imports of raw materials.

When material inputs enter a country at a very low duty while the final imported product is protected by a high duty,the result tends to be a high rate of protection for domestic producers of the final product.

With a specific tariff,the degree of protection afforded domestic producers varies directly with changes in import prices.

The offshore assembly provision in the U.S.

A tariff on steel imports tends to improve the competitiveness of domestic automobile companies.

The deadweight losses of an import tariff consist of the protection effect plus the consumption effect.

Which of the following is true concerning a specific tariff?

If a "large" country levies a tariff on an imported good,its overall welfare increases if the monetary value of the tariff's consumption effect plus protective effect exceeds the monetary value of the terms-of-trade effect.

Assume the United States is a large consumer of steel that is able to influence the world price.Its demand and supply schedules are respectively denoted by DU.S.and SU.S.in Figure 4.2.The overall (United States plus world) supply schedule of steel is denoted by SU.S.+W. Figure 4.2.Import Tariff Levied by a "Large" Country -Consider Figure 4.2.Suppose the United States imposes a tariff of $100 on each ton of steel imported.With the tariff,the price of steel rises to $____ and imports fall to ____ tons.

Arguments for U.S.trade restrictions include all of the following except