Question 1

Figure 5.3 illustrates the apple market for Sweden,assumed to be a "small" country that is unable to affect the world price.SSweden is the domestic supply and DSweden is the domestic demand.SSweden+Quota is Sweden's supply schedule with an import quota.
Figure 5.3.Sweden's Apple Market
 
-Consider Figure 5.3.As a result of the quota,Sweden's consumer surplus:

Accepted Answer

A)  Increases by $6 
B)  Increases by $8 
C)  Decreases by $6 
D)  Decreases by $8

Question 2

Compared to an import quota,an equivalent tariff may provide a less certain amount of protection for home producers since:

Accepted Answer

A)  A tariff has no deadweight loss in terms of production and consumption 
B)  Foreign firms may absorb the tariff by offering exports at lower prices 
C)  Tariffs are effective only if home demand is perfectly elastic 
D)  Quotas do not result in increases in the price of the imported good

Question 3

Subsidies to domestic firms may lead to

Accepted Answer

A)  An increase in prices 
B)  Higher volume of exports 
C)  Higher volume of imports 
D)  Increase in welfare of the trading partner

Question 4

An example of a nontariff trade barrier would be

Accepted Answer

A)  a tax on an imported product 
B)  a tax on an exported product 
C)  a minimum restriction on the quantity of imports 
D)  a subsidy granted to import-competing producers

Question 5

Describe some of the differences between tariffs and quotas?

Accepted Answer

The answer of Describe some of the differences between tariffs...

Question 6

An elimination of nontariff barriers on apples tends to increase apple imports,reduce profits of import-competing apple producers,and generate job losses for domestic apple workers.

Accepted Answer

A) True 
 B)False

Question 7

The United Auto Workers union attempted to win the approval of legislation that would moderate the practice of foreign sourcing on the part of American auto manufacturers.Which of the following best represents this legislation?

Accepted Answer

A)  Voluntary export quotas 
B)  Trigger price mechanism 
C)  Tariff quotas 
D)  Local content laws

Question 8

Which trade restriction stipulates the percentage of a product's total value that must be produced domestically in order for that product to be sold domestically?

Accepted Answer

A)  Import quota 
B)  Orderly marketing agreement 
C)  Local content requirement 
D)  Government procurement policy

Question 9

If the U.S.demand for Korean steel is price elastic,an export subsidy granted to Korean steel firms will increase Korea's export revenue.

Accepted Answer

A) True 
 B)False

Question 10

Today most industrial countries protect their industries via global import quotas rather than selective import quotas.

Accepted Answer

A) True 
 B)False

Question 11

Figure 5.2 illustrates the revenue and cost conditions of ABC Inc.which sells calculators in Canada and France.
Figure 5.2.International Dumping
 
-Consider Figure 5.2.Compared with the total revenue and total profit that ABC Inc.realizes in the absence of dumping,with dumping the firm attains a:

Accepted Answer

A)  Fall in revenue of $18; fall in profits of $15 
B)  Fall in revenue of $18,fall in profits of $18 
C)  Rise in revenue of $18,rise in profits of $15 
D)  Rise in revenue of $18,rise in profits of $18

Question 12

Figure 5.1 illustrates the steel market for Mexico,assumed to be a "small" country that is unable to affect the world price.Suppose the world price of steel is given and constant at $200 per ton.Now suppose the Mexican steel industry is able to obtain trade protection.
Figure 5.1.Alternative Nontariff Trade Barriers Levied by a "Small" Country
 
-Consider Figure 5.1.Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers,as indicated by the supply schedule SM (with subsidy).??The quantity of imports equals:

Accepted Answer

A)  1 ton 
B)  2 tons 
C)  3 tons 
D)  4 tons

Question 13

Import quotas can yield revenue for the domestic government if it auctions import licenses to the highest bidder in a competitive market.

Accepted Answer

A) True 
 B)False

Question 14

Figure 5.6 Domestice Supply and demand for Wine - US
 
-Consider Figure 5.6.In the global market for wine,the EU is willing to supply as much wine as the US demands at $8 per bottle.What will happen to the price of a bottle of wine in the US if a quota of 15 bottles of wine is imposed?

Accepted Answer

A)  increase to $15 
B)  increase to $10 
C)  stay the same at $8 
D)  decrease to $5

Question 15

A subsidy granted to import-competing producers results in a welfare loss to the economy by an amount equal to the protective effect plus the consumption effect.

Accepted Answer

A) True 
 B)False

Question 16

A firm that faces problems of falling sales and excess productive capacity might resort to international dumping if it:

Accepted Answer

A)  Can charge higher prices in markets that are elastic to price changes 
B)  Earns revenues on foreign sales that at least cover variable costs 
C)  Can sell at that price where domestic and foreign demand elasticities equate 
D)  Is able to force foreign prices below marginal production costs

Question 17

Antidumping duties result in an increase in consumer surplus.

Accepted Answer

A) True 
 B)False

Question 18

A licensing requirement,or an unreasonable standard regulating the safety or quality of a product that is imported into a country,is called a

Accepted Answer

A)  nontariff barrier to trade 
B)  voluntary export restriction 
C)  protective tariff 
D)  customs duty

Question 19

With a quota placed on imported sugar,increased domestic demand leads to increased sugar imports but not to higher sugar prices.

Accepted Answer

A) True 
 B)False

Question 20

Suppose the government grants a subsidy to domestic producers of an import-competing good.The subsidy tends to result in deadweight losses for the domestic economy in the form of the:

Accepted Answer

A)  Consumption effect 
B)  Redistribution effect 
C)  Revenue effect 
D)  Protective effect

Exam 5: Nontariff Trade Barriers

Compared to an import quota,an equivalent tariff may provide a less certain amount of protection for home producers since:

Subsidies to domestic firms may lead to

An example of a nontariff trade barrier would be

Describe some of the differences between tariffs and quotas?

An elimination of nontariff barriers on apples tends to increase apple imports,reduce profits of import-competing apple producers,and generate job losses for domestic apple workers.

The United Auto Workers union attempted to win the approval of legislation that would moderate the practice of foreign sourcing on the part of American auto manufacturers.Which of the following best represents this legislation?

Which trade restriction stipulates the percentage of a product's total value that must be produced domestically in order for that product to be sold domestically?

If the U.S.demand for Korean steel is price elastic,an export subsidy granted to Korean steel firms will increase Korea's export revenue.

Today most industrial countries protect their industries via global import quotas rather than selective import quotas.

Figure 5.2 illustrates the revenue and cost conditions of ABC Inc.which sells calculators in Canada and France. Figure 5.2.International Dumping -Consider Figure 5.2.Compared with the total revenue and total profit that ABC Inc.realizes in the absence of dumping,with dumping the firm attains a:

Import quotas can yield revenue for the domestic government if it auctions import licenses to the highest bidder in a competitive market.

Figure 5.6 Domestice Supply and demand for Wine - US -Consider Figure 5.6.In the global market for wine,the EU is willing to supply as much wine as the US demands at $8 per bottle.What will happen to the price of a bottle of wine in the US if a quota of 15 bottles of wine is imposed?

A subsidy granted to import-competing producers results in a welfare loss to the economy by an amount equal to the protective effect plus the consumption effect.

A firm that faces problems of falling sales and excess productive capacity might resort to international dumping if it:

Antidumping duties result in an increase in consumer surplus.

A licensing requirement,or an unreasonable standard regulating the safety or quality of a product that is imported into a country,is called a

With a quota placed on imported sugar,increased domestic demand leads to increased sugar imports but not to higher sugar prices.

Suppose the government grants a subsidy to domestic producers of an import-competing good.The subsidy tends to result in deadweight losses for the domestic economy in the form of the: