Question 1

Tariffs are considered to be a popular tax in the first world countries, who justify them on the basis of the revenue they generate for government spending.

Accepted Answer

A) True 
 B)False

Question 2

The figure below shows the demand (D)and supply (S)curves of a good produced domestically in an economy as well as traded in the international market. Figure 21.1   In the figure,
P1: Price of the good in the international market.
P2: Price of the good in the domestic market after the imposition of tariff by the government.
P3: No-trade price of the good in the domestic market.
According to Figure 21.1, the tariff revenue earned by the domestic government is equal to the:

Accepted Answer

A) area ABEFH. 
B) area FEQ4Q2. 
C) area ABH. 
D) area HFP1P2. 
E) area BEFH 
A) area ABEFH. 
B) area FEQ4Q2. 
C) area ABH. 
D) area HFP1P2. 
E) area BEFH

Question 3

The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 21.3   In Figure 21.3, suppose an import quota of 30 gallons of corn syrup is imposed.If the world price per gallon is $4:

Accepted Answer

A) there will be an excess domestic demand of approximately 35 gallons. 
B) the domestic market will be in equilibrium. 
C) there will be an excess domestic demand for 10 gallons. 
D) there will be an excess supply of 20 gallons. 
E) there will be an excess domestic demand for 20 gallons. 
A) there will be an excess domestic demand of approximately 35 gallons. 
B) the domestic market will be in equilibrium. 
C) there will be an excess domestic demand for 10 gallons. 
D) there will be an excess supply of 20 gallons. 
E) there will be an excess domestic demand for 20 gallons.

Question 4

As a result of the government procurement policy in the U.S.:

Accepted Answer

A) the domestic consumers are required to pay a higher price than the government for the domestically produced goods. 
B) the government wields the sole authority of importing goods from abroad. 
C) the government wields the sole authority of exporting goods. 
D) the government is required to buy the domestic goods if the domestic price is less than the world price. 
E) the government is required to sponsor research and development for the domestic firms. 
A) the domestic consumers are required to pay a higher price than the government for the domestically produced goods. 
B) the government wields the sole authority of importing goods from abroad. 
C) the government wields the sole authority of exporting goods. 
D) the government is required to buy the domestic goods if the domestic price is less than the world price. 
E) the government is required to sponsor research and development for the domestic firms.

Question 5

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2   According to Figure 21.2, if the world price per bushel of wheat is $25, what is the domestic production?

Accepted Answer

A) 300 bushels 
B) 450 bushels 
C) 400 bushels 
D) 150 bushels 
E) 200 bushels 
A) 300 bushels 
B) 450 bushels 
C) 400 bushels 
D) 150 bushels 
E) 200 bushels

Question 6

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2   In Figure 21.2, if the world price per bushel of wheat is $25 and a tariff of $10 is imposed by the domestic government, what is the domestic demand?

Accepted Answer

A) 400 bushels 
B) 450 bushels 
C) 200 bushels 
D) 300 bushels 
E) 150 bushels 
A) 400 bushels 
B) 450 bushels 
C) 200 bushels 
D) 300 bushels 
E) 150 bushels

Question 7

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2   In Figure 21.2, if the world price per bushel of wheat is $25, how much wheat will be imported?

Accepted Answer

A) 450 bushels 
B) 350 bushels 
C) 200 bushels 
D) 150 bushels 
E) 300 bushels 
A) 450 bushels 
B) 350 bushels 
C) 200 bushels 
D) 150 bushels 
E) 300 bushels

Question 8

Suppose the production of helicopters is an industry characterized by increasing returns to scale and an Argentine firm, Cicare, is the only player in this market.The firm caters to the global market and earns a profit of $10 million.Flettner, a German firm has been considering entering this market for a while, but it is aware that its entry will cause each firm to lose about $4 million.Although a government subsidy allows Flettner to enter the helicopter market, the company is unable to reap profits in the long run.Which of the following could have led to this outcome?

Accepted Answer

A) Flettner experienced high production costs due to inadequate supply of inputs. 
B) New firms had entered the helicopter industry. 
C) The German government ran a balance of payment deficit. 
D) The Argentine government retaliated by subsidizing Cicare. 
E) There was very low investment in research and development in this industry. 
A) Flettner experienced high production costs due to inadequate supply of inputs. 
B) New firms had entered the helicopter industry. 
C) The German government ran a balance of payment deficit. 
D) The Argentine government retaliated by subsidizing Cicare. 
E) There was very low investment in research and development in this industry.

Question 9

If average costs of production decline with increases in output for a particular firm:

Accepted Answer

A) many small firms will be more efficient than a single large firm. 
B) one large producer will be more efficient than many small producers. 
C) product diversification is necessary to spread the overhead. 
D) diseconomies of scale become significant as output increases. 
E) the variable cost of production must exceed the fixed costs. 
A) many small firms will be more efficient than a single large firm. 
B) one large producer will be more efficient than many small producers. 
C) product diversification is necessary to spread the overhead. 
D) diseconomies of scale become significant as output increases. 
E) the variable cost of production must exceed the fixed costs.

Question 10

The effect of an import quota on the domestic market is to shift the:

Accepted Answer

A) demand curve to the right by the amount of the quota. 
B) demand curve to the left by the amount of the quota. 
C) supply curve to the right by the amount of the quota. 
D) supply curve to the left by the amount of the quota. 
E) consumers' marginal utility curves if they prefer foreign goods to domestic goods. 
A) demand curve to the right by the amount of the quota. 
B) demand curve to the left by the amount of the quota. 
C) supply curve to the right by the amount of the quota. 
D) supply curve to the left by the amount of the quota. 
E) consumers' marginal utility curves if they prefer foreign goods to domestic goods.

Question 11

Government standards for products sold in the domestic market can have the effect of protecting domestic producers from foreign competition.

Accepted Answer

A) True 
 B)False

Question 12

When the world price of the traded good is lower than the domestic no-trade equilibrium price, free trade causes domestic production to fall and domestic consumption to rise.

Accepted Answer

A) True 
 B)False

Question 13

International trade on the basis of comparative advantage maximizes world output and allows consumers to access better-quality products at lower prices than would be available in the domestic market alone.

Accepted Answer

A) True 
 B)False

Question 14

According to empirical observations, the cost of restricting international trade in the U.S.is much greater than the benefits generated from restriction.In the light of the above observation, which of the following statements is true?

Accepted Answer

A) The benefits of protecting domestic jobs typically outweigh the costs. 
B) Consumers end up paying much more for the goods they buy in order to subsidize the relatively inefficient domestic producer. 
C) U.S.GDP would be over $14 billion higher with import restrictions than without restrictions. 
D) Protection of the U.S.textile and sugar industries means that all consumers pay a lower price for clothing and sugar. 
E) Protection of the domestic industries enable the producers to charge lower prices for their products. 
A) The benefits of protecting domestic jobs typically outweigh the costs. 
B) Consumers end up paying much more for the goods they buy in order to subsidize the relatively inefficient domestic producer. 
C) U.S.GDP would be over $14 billion higher with import restrictions than without restrictions. 
D) Protection of the U.S.textile and sugar industries means that all consumers pay a lower price for clothing and sugar. 
E) Protection of the domestic industries enable the producers to charge lower prices for their products.

Question 15

Protection of an infant industry should be withdrawn once that industry:

Accepted Answer

A) charges the same price as foreign competitors. 
B) goes public on the stock exchange. 
C) raises a large amount of sales revenue. 
D) achieves sufficient size to compete with foreign firms. 
E) earns enough profit as a result of the subsidies to remain in business. 
A) charges the same price as foreign competitors. 
B) goes public on the stock exchange. 
C) raises a large amount of sales revenue. 
D) achieves sufficient size to compete with foreign firms. 
E) earns enough profit as a result of the subsidies to remain in business.

Question 16

The notion of reciprocity means that one nation will impose import restrictions on another in order to:

Accepted Answer

A) stimulate an increase in trade restrictions in the latter. 
B) stimulate a decrease in trade restrictions in the latter. 
C) eliminate trade restrictions immediately in both countries. 
D) improve the government revenue collections through tariffs in both countries. 
E) enforce standards of product quality in the latter. 
A) stimulate an increase in trade restrictions in the latter. 
B) stimulate a decrease in trade restrictions in the latter. 
C) eliminate trade restrictions immediately in both countries. 
D) improve the government revenue collections through tariffs in both countries. 
E) enforce standards of product quality in the latter.

Question 17

Which of the following countries is forbidden to impose export tariff by its constitution?

Accepted Answer

A) The United States 
B) Brazil 
C) United Kingdom 
D) Japan 
E) Mexico 
A) The United States 
B) Brazil 
C) United Kingdom 
D) Japan 
E) Mexico

Question 18

In the United States, a "buy American" act was passed in 1933 to create larger markets for domestic goods.

Accepted Answer

A) True 
 B)False

Question 19

Many economists believe that the collapse of world trade and the depression in the 1930s were linked by a decrease in real income caused by producing on the basis of comparative advantage.

Accepted Answer

A) True 
 B)False

Question 20

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2   According to Figure 21.2, if the world price per bushel of wheat is $25, how much is the domestic demand?

Accepted Answer

A) 400 bushels 
B) 450 bushels 
C) 200 bushels 
D) 300 bushels 
E) 150 bushels 
A) 400 bushels 
B) 450 bushels 
C) 200 bushels 
D) 300 bushels 
E) 150 bushels

Exam 40: International Trade Restrictions

Tariffs are considered to be a popular tax in the first world countries, who justify them on the basis of the revenue they generate for government spending.

The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 21.3 In Figure 21.3, suppose an import quota of 30 gallons of corn syrup is imposed.If the world price per gallon is $4:

As a result of the government procurement policy in the U.S.:

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 According to Figure 21.2, if the world price per bushel of wheat is $25, what is the domestic production?

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 In Figure 21.2, if the world price per bushel of wheat is $25 and a tariff of $10 is imposed by the domestic government, what is the domestic demand?

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 In Figure 21.2, if the world price per bushel of wheat is $25, how much wheat will be imported?

If average costs of production decline with increases in output for a particular firm:

The effect of an import quota on the domestic market is to shift the:

Government standards for products sold in the domestic market can have the effect of protecting domestic producers from foreign competition.

When the world price of the traded good is lower than the domestic no-trade equilibrium price, free trade causes domestic production to fall and domestic consumption to rise.

International trade on the basis of comparative advantage maximizes world output and allows consumers to access better-quality products at lower prices than would be available in the domestic market alone.

According to empirical observations, the cost of restricting international trade in the U.S.is much greater than the benefits generated from restriction.In the light of the above observation, which of the following statements is true?

Protection of an infant industry should be withdrawn once that industry:

The notion of reciprocity means that one nation will impose import restrictions on another in order to:

Which of the following countries is forbidden to impose export tariff by its constitution?

In the United States, a "buy American" act was passed in 1933 to create larger markets for domestic goods.

Many economists believe that the collapse of world trade and the depression in the 1930s were linked by a decrease in real income caused by producing on the basis of comparative advantage.

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 According to Figure 21.2, if the world price per bushel of wheat is $25, how much is the domestic demand?

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

Filters