Exam 4: Tariffs

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.The tariff would be prohibitive (i.e.,eliminate imports)if it equaled:

A tariff can increase the welfare of a "large" levying country if the favorable terms-of-trade effect more than offsets the unfavorable protective effect and consumption 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.

A lower tariff on imported aluminum would most likely benefit:

When a tariff on imported inputs exceeds that on the finished good,

Table 4.1. Production Costs and Prices of Imported and Domestic VCRs -Consider Table 4.1.Prior to the tariff,the total price of domestically-produced VCRs is:

A specific tariff is expressed as a fixed percentage of the total value of an imported product.

For a "large" country,a tariff on an imported product may be partially absorbed by the domestic consumer via a higher purchase price and partially absorbed by the foreign producer via a lower export price.

The nominal tariff rate signifies the total increase in domestic productive activities compared to what would occur under free-trade conditions.

Assume that the United States imports VCRs from South Korea at a price of $200 per unit and that these VCRs are subject to an import tariff of 20 percent.Also assume that U.S.components are used in the VCRs assembled by South Korea and that these components have a value of $100.Under the Offshore Assembly Provision of U.S.tariff policy,the price of an imported VCR to the U.S.consumer after the tariff has been levied is $220.

The redistribution effect of an import tariff is the transfer of income from the domestic:

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.

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 -According to Figure 4.1,the deadweight cost of the tariff totals:

The deadweight loss of a tariff:

Refer to Exhibit 4.2.The tariff's redistribution effect equals $7,000.

Developing nations often maintain that industrial countries permit raw materials to be imported at very low tariff rates while maintaining high tariff rates on manufactured imports.Which of the following refers to the above statement?

Refer to Exhibit 4.2.As a result of the tariff,the price of imported motorcycles equals $13,000 and imports total 4 cycles.

Is it possible for a low nominal tariff rate to understate the effective rate of protection? What is tariff escalation?

The protective effect of a tariff occurs to the extent that less efficient domestic production is substituted for more efficient foreign production.

For the United States,a foreign trade zone (FTZ)is