Question 1

Briefly discuss different methods of allocating quota licenses to the importers by the government. Also explain the inefficiency implications of each method.

Accepted Answer

The answer of Briefly discuss different methods of allocating quota...

Question 2

The figure given below shows the market for moped imports in the country. DM and SX are the domestic demand for imports and export supply curves respectively.  As a result of the quota being imposed on moped imports by this country, the world as a whole will:

Accepted Answer

A) lose $7 million. 
B) gain $10 million. 
C) lose $17 million. 
D) gain $31.5 million.

Question 3

Suppose a country's government is deciding whether or not to impose an import quota to protect the domestic automobile industry. Will the domestic steel-producing firms be in favor of a quota designed to protect the local automobile producers? Why or why not?

Accepted Answer

The answer of Suppose a country's government is deciding whether...

Question 4

Which of the following mandates that an import distributor must buy a certain percentage of the product locally?

Accepted Answer

A) An import quota 
B) A mixing requirement 
C) A voluntary export restraint 
D) A domestic content requirement

Question 5

What is the percent reduction in import quantity in a country due to the tariffs imposed by the government, if the country's import tariffs are all 10 percent. The total imports affected by the tariffs are 40 percent of the GDP and the net national loss from the tariffs as a percentage of GDP is 0.6 percent.

Accepted Answer

A) 50 percent 
B) 40 percent 
C) 30 percent 
D) 20 percent

Question 6

Explain how the cost of a country's tariffs is calculated as a percentage of GDP. Which effects are captured in this process? Why is the true cost of import protection probably larger than what can be shown in simple graphs or as calculated by the net national loss formula?

Accepted Answer

The answer of Explain how the cost of a country's...

Question 7

Which of the following is a means of allocating import licenses by assigning the licenses without competition, applications, or negotiation?

Accepted Answer

A) Fixed favoritism 
B) Resource-using application procedures 
C) Import-license auctions 
D) Domestic content requirements

Question 8

When a large country imposes an import quota:

Accepted Answer

A) the product's world price rises. 
B) the product's world price falls. 
C) the product's domestic price falls. 
D) domestic production of the product falls.

Question 9

Governments choose to use voluntary export restraints rather than tariffs because:

Accepted Answer

A) voluntary export restraints have the potential to generate higher revenue. 
B) voluntary export restraints do not generate any welfare loss in the importing country. 
C) tariffs more obviously violate the international rules of the WTO. 
D) the increase in the price of the imported good in the domestic market is much lower in case of VERs than tariffs.

Question 10

The figure given below shows the domestic demand (Dd) and supply (Sd) curves of mopeds in a country before an import quota is imposed by the government. After the imposition of quota, the total available supply curve becomes Sd + QQ.  If the government auctions the quota licenses, the importing nation will:

Accepted Answer

A) lose $10 million. 
B) lose $29.75 million. 
C) gain $31.5 million. 
D) gain $21.5 million.

Question 11

The Buy America Act of 1933 mandates that:

Accepted Answer

A) the sales taxes on goods manufactured by the local labor force must be lower than the sales taxes on goods manufactured by the immigrant workers. 
B) durable goods produced locally must be priced lower than comparable imported goods. 
C) purchases funded by the U.S.government must favor domestic products. 
D) household consumers buying more of local products will be given suitable tax incentives.

Question 12

With a voluntary export restraint (VER), the economic rent created for the quantitatively limited on trade is collected by:

Accepted Answer

A) the government of the importing county. 
B) the consumers in the importing country. 
C) the producers in the importing country. 
D) the exporting firms in the foreign countries

Question 13

A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $12 per T-shirt and domestic production rises to 15 million T-shirts per year. If the government auctions the quota licenses, calculate the revenue collected by the government.

Accepted Answer

A) $40 million 
B) $70 million 
C) $200 million 
D) $240 million

Question 14

Which of the following allows the president of the United States to negotiate to eliminate unfair trade practices put in place by foreign governments?

Accepted Answer

A) Tariff-quota requirements 
B) The General Agreement on Tariffs and Trade 
C) Section 301 of the Trade Act of 1974 
D) The United Nations

Question 15

The figure given below shows the market for MP3 players in a small country. Dd and Sd are the domestic demand and domestic supply curves of the MP3 players before the imposition of the quota. (Sd + QQ) is the total available domestic supply curve after the quota has been imposed. According to the figure, if import licenses are allocated based on a resource-using procedure, the loss to the economy will be:

Accepted Answer

A) $35 million. 
B) less than $10 million. 
C) greater than $35 million. 
D) $25 million.

Question 16

In the case of a small country, the effects of a quota and a tariff are (almost) identical if:

Accepted Answer

A) the government allocates licenses for free to importers using a rule or process that involves (almost) no resource cost. 
B) the government auctions off import licenses to the highest bidder. 
C) the government allocates licenses to importers through application and selection procedures that require the use of substantial resources. 
D) the government allocates import licenses directly to the public using a free lottery system.

Question 17

Which of the following is NOT true of the Uruguay Round of the multilateral trade negotiations?

Accepted Answer

A) The Uruguay Round initiated the process of liberalizing trade in services. 
B) The Uruguay Round agreements began the process of liberalizing trade in agricultural products. 
C) The Uruguay Round included agreement requiring member countries to provide minimum levels of ownership protection for intellectual property. 
D) The Uruguay Round narrowed down the set of NTB codes as set up by the Kennedy Round and the Tokyo Round.

Question 18

The revenue earned by the government in allocating quota licenses through resource-using application procedures is approximately equal to the revenue that it would earn from a tariff that resulted in the same import quantity.

Accepted Answer

A) True 
 B)False

Question 19

In an attempt to restrict imports in a country, imposition of a tariff is likely to be more efficient than using voluntary export restraints.

Accepted Answer

A) True 
 B)False

Question 20

A small country imports T-shirts. With free trade at a world price of $10, domestic production is 10 million T-shirts and domestic consumption is 42 million T-shirts. The country's government now decides to impose a quota to limit T-shirt imports to 20 million per year. With the import quota in place, the domestic price rises to $12 per T-shirt and domestic production rises to 15 million T-shirts per year. The quota on T-shirts causes domestic consumers to:

Accepted Answer

A) gain $7 million. 
B) lose $7 million. 
C) lose $70 million. 
D) lose $77 million.

Exam 9: Nontariff Barriers to Imports

Briefly discuss different methods of allocating quota licenses to the importers by the government. Also explain the inefficiency implications of each method.

The figure given below shows the market for moped imports in the country. D_M and S_X are the domestic demand for imports and export supply curves respectively. As a result of the quota being imposed on moped imports by this country, the world as a whole will:

Suppose a country's government is deciding whether or not to impose an import quota to protect the domestic automobile industry. Will the domestic steel-producing firms be in favor of a quota designed to protect the local automobile producers? Why or why not?

Which of the following mandates that an import distributor must buy a certain percentage of the product locally?

Explain how the cost of a country's tariffs is calculated as a percentage of GDP. Which effects are captured in this process? Why is the true cost of import protection probably larger than what can be shown in simple graphs or as calculated by the net national loss formula?

Which of the following is a means of allocating import licenses by assigning the licenses without competition, applications, or negotiation?

When a large country imposes an import quota:

Governments choose to use voluntary export restraints rather than tariffs because:

The Buy America Act of 1933 mandates that:

With a voluntary export restraint (VER) , the economic rent created for the quantitatively limited on trade is collected by:

Which of the following allows the president of the United States to negotiate to eliminate unfair trade practices put in place by foreign governments?

In the case of a small country, the effects of a quota and a tariff are (almost) identical if:

Which of the following is NOT true of the Uruguay Round of the multilateral trade negotiations?

The revenue earned by the government in allocating quota licenses through resource-using application procedures is approximately equal to the revenue that it would earn from a tariff that resulted in the same import quantity.

In an attempt to restrict imports in a country, imposition of a tariff is likely to be more efficient than using voluntary export restraints.