Question 1

Developing countries often justify imposition of tariffs because:

Accepted Answer

A) it creates a burden on government budget. 
B) it is easy to collect direct taxes from people in the developing countries. 
C) a large number of people in the developing countries earn a taxable income. 
D) developing countries find income taxes difficult to levy and collect. 
E) the volume of imports of these countries is considerably low. 
A) it creates a burden on government budget. 
B) it is easy to collect direct taxes from people in the developing countries. 
C) a large number of people in the developing countries earn a taxable income. 
D) developing countries find income taxes difficult to levy and collect. 
E) the volume of imports of these countries is considerably low.

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.
Refer to Figure 21.1.If the government imposes a tariff such that the price of the good in the domestic market is P2 while the international price is P1, the dollar value of the tariff is equal to:

Accepted Answer

A) P3 - P1. 
B) P2 - P3. 
C) P2 - P1. 
D) P1 - P2. 
E) P1 - P3. 
A) P3 - P1. 
B) P2 - P3. 
C) P2 - P1. 
D) P1 - P2. 
E) P1 - P3.

Question 3

By restricting the amount of a good that may be imported, quotas:

Accepted Answer

A) increase the price, thus causing domestic producers to sell less than they would with free trade. 
B) lower the price, thus allowing domestic producers to sell more than they would with free trade. 
C) increase the price and allow domestic producers to sell more at a higher price than they would with free trade. 
D) lower the price, thus causing domestic producers to realize lower total revenue from the quota item. 
E) simply replace foreign production with domestic production. 
A) increase the price, thus causing domestic producers to sell less than they would with free trade. 
B) lower the price, thus allowing domestic producers to sell more than they would with free trade. 
C) increase the price and allow domestic producers to sell more at a higher price than they would with free trade. 
D) lower the price, thus causing domestic producers to realize lower total revenue from the quota item. 
E) simply replace foreign production with domestic production.

Question 4

Which of the following statements about an increasing-returns-to-scale industry is not true?

Accepted Answer

A) It will tend to concentrate production in the hands of a very few large firms. 
B) Firms in the industry face higher costs per unit of production as their level of output increases. 
C) Opportunity costs may fall with the level of output. 
D) Proponents of strategic trade policy contend that tariffs can be used to stimulate production by a domestic industry capable of achieving increasing returns to scale. 
E) The costs of producing a unit of output fall as more output is produced. 
A) It will tend to concentrate production in the hands of a very few large firms. 
B) Firms in the industry face higher costs per unit of production as their level of output increases. 
C) Opportunity costs may fall with the level of output. 
D) Proponents of strategic trade policy contend that tariffs can be used to stimulate production by a domestic industry capable of achieving increasing returns to scale. 
E) The costs of producing a unit of output fall as more output is produced.

Question 5

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

Accepted Answer

A) True 
 B)False

Question 6

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 of wheat is $25 and a tariff of $25 is imposed by the domestic government, the total tariff revenue collected by the government is:

Accepted Answer

A) $2, 000. 
B) $0. 
C) $200. 
D) $100. 
E) $4, 000 
A) $2, 000. 
B) $0. 
C) $200. 
D) $100. 
E) $4, 000

Question 7

When production does not proceed on the basis of comparative advantage, resources are expended on their most efficient uses.

Accepted Answer

A) True 
 B)False

Question 8

Typically, restrictions to "save domestic jobs" simply redistribute jobs by creating:

Accepted Answer

A) employment in the protected industry and reducing employment elsewhere. 
B) employment in nonprotected industries and reducing employment in the protected industry. 
C) inflation in the overall economy. 
D) employment in the primary sector at the expense of the secondary sector. 
E) labor unions in the protected industries at the expense of employment in nonunionized industries 
A) employment in the protected industry and reducing employment elsewhere. 
B) employment in nonprotected industries and reducing employment in the protected industry. 
C) inflation in the overall economy. 
D) employment in the primary sector at the expense of the secondary sector. 
E) labor unions in the protected industries at the expense of employment in nonunionized industries

Question 9

Steel producers in the United States observe that foreign sales of U.S.steel has drastically declined due to stringent trade policies adopted by the foreign governments and unfair treatment of U.S.steel exports in foreign countries.The lobbying efforts of such loss making U.S.steel manufacturers induces the domestic government to restrict the entry of imported steel and help stimulate the sales of domestically produced steel.Which of the following is most similar to the example mentioned above?

Accepted Answer

A) A tariff imposed by the government to stimulate domestic production of a high-technology good with positive spillover effects 
B) A tariff imposed by the government on the import of cotton textiles because it is an infant industry in the domestic country 
C) An import tariff applied against a foreign monopoly supplying the domestic market 
D) Taxes imposed by the government on an import competing industry that generates a negative production externality 
E) Reciprocal tariffs introduced by the government of Mexico on tobacco imports from Brazil in retaliation to unfair treatment of Mexican tobacco exports to the latter 
A) A tariff imposed by the government to stimulate domestic production of a high-technology good with positive spillover effects 
B) A tariff imposed by the government on the import of cotton textiles because it is an infant industry in the domestic country 
C) An import tariff applied against a foreign monopoly supplying the domestic market 
D) Taxes imposed by the government on an import competing industry that generates a negative production externality 
E) Reciprocal tariffs introduced by the government of Mexico on tobacco imports from Brazil in retaliation to unfair treatment of Mexican tobacco exports to the latter

Exam 40: International Trade Restrictions

Developing countries often justify imposition of tariffs because:

By restricting the amount of a good that may be imported, quotas:

Which of the following statements about an increasing-returns-to-scale industry is not true?

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

When production does not proceed on the basis of comparative advantage, resources are expended on their most efficient uses.

Typically, restrictions to "save domestic jobs" simply redistribute jobs by creating:

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

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