Chapter 8

Question 1

11. Which of the following is an impact of tariffs on the country imposing them?
    a. The domestic producers of import-competing products are forced to charge a lower price for their products to retain market share.
    b. The supply of the domestic import-competing products declines.
    c. The domestic consumers pay a higher price for the imported products.
    d. The demand for the imported goods by the domestic consumers increases

Answer 1

C

Question 2

13. If a small country imposes a tariff on imported motorcycles, the world price of motorcycles will _____ and the domestic price of motorcycles will _____.
    a. rise; fall
    b. fall; rise
    c. remain constant; rise
    d. remain constant; fall

Answer 2

C

Question 3

14. If a large country imposes a tariff on imported motorcycles, the world price of motorcycles will _____ and the domestic price of motorcycles will _____.
    a. rise; fall
    b. fall; rise
    c. remain constant; rise
    d. remain constant; fall

Answer 3

B

Question 3

20. The nationally optimal tariff for a large country is the tariff for which:
    a. the price in the importing country is the lowest.
    b. the government collects the highest tariff revenue.
    c. deadweight loss from the tariff is the lowest
    d. total surplus of the importing country is the highest

Answer 3

D

Question 3

21. Which of the following has overseen the global rules of government policy toward international trade since 1995?
    a. The World Trade Organization
    b. The General Agreement on Tariffs and Trade
    c. The International Monetary Fund
    d. The World Bank

Answer 3

A

Question 4

22. Which of the following oversaw the global rules of government policy toward international trade between 1947 and 1995?
    a. The World Trade Organization
    b. The General Agreement on Tariffs and Trade
    c. The International Monetary Fund
    d. The World Bank

Answer 4

B

Question 5

23. Country A is a large country that imports good-quality processed chicken from country B. Suddenly, country A’s government decides to impose a tariff on this import. Who among the following will be adversely affected by this policy?
    a. Consumers of chicken in country B
    b. Consumers of ham in country B
    c. Producers of chicken in country B
    d. Suppliers of chicken in Country A

Answer 5

C

Question 6

25. Which of the following is NOT true of nontariff barriers to imports?
    a. Nontariff barriers can limit imports with greater certainty than tariffs.
    b. Unlike tariffs, the nontariff barriers do not increase the price of the imported goods in the domestic markets.
    c. Some nontariff barriers create uncertainty about the conditions under which imports will be permitted.
    d. Like tariffs, nontariff barriers also result in a net welfare loss in a small country

Answer 6

B

Question 7

26. One of the reasons that protectionists and government officials may favor using a quota instead of a tariff is:
    a. quotas generate more revenue for the government than tariffs.
    b. quotas ensure that the quantities of imports are strictly limited.
    c. quotas create less market distortions than tariffs.
    d. quotas give less power to politicians than tariffs.

Answer 7

B

Question 8

Why does the economic background matter in the context of trade policies?
A) It affects the size of the country’s population
B) It determines the level of government intervention in the economy
C) It influences the economic effects of quotas and tariffs
D) It dictates the level of international cooperation

Answer 8

C. large vs small countries

Question 9

What is monopsony power?
A) The ability of a seller to influence prices in the market
B) The ability of a small importing country to control international trade policies
C) The ability of a buyer (importer) to influence prices with their actions
D) The ability of a country to produce goods efficiently

Answer 9

C

Question 10

Why does a small importing country lack monopsony power?
A) Because it has significant influence in international markets
B) Because it represents a substantial amount of global demand for products
C) Because it cannot influence the world price of a product with its trade policy
D) Because it imposes high tariffs on imported goods

Answer 10

C

Question 11

What distinguishes a large importing country in terms of monopsony power?
A) It has no influence on world prices
B) It represents a small fraction of global demand for products
C) It can influence the world price of a product with its trade policy
D) It lacks control over its trade policies

Answer 11

C

Question 12

Which type of country can influence the world price of a product with its trade policy?
A) Small importing country
B) Large exporting country
C) Small exporting country
D) Large importing country

Answer 12

D

Question 13

What is the definition of a tariff?
A) A subsidy provided by the government to local producers
B) A tax on imported products
C) A financial incentive for exporting companies
D) A quota limiting the quantity of imported good

Answer 13

B

Question 14

How do current tariff rates compare to those of previous decades?
A) Current tariff rates are higher than those of previous decades
B) Current tariff rates are about the same as those of previous decades
C) Current tariff rates are lower than those of previous decades
D) Current tariff rates vary significantly across different product categories

Answer 14

C

Question 15

What is the average tariff rate on imports in developed countries today?
A) 5%-10% of the value of all imports
B) 2%-5% of the value of all imports
C) 1%-2% of the value of all imports
D) 20%-30% of the value of all imports

Answer 15

C

Question 16

How have tariffs been negotiated lower in recent years?
A) Through increased government subsidies to local producers
B) Through the imposition of strict import quotas
C) Through negotiations in international trade agreements like GATT/WTO/free trade agreements
D) Through the implementation of higher tariffs on imports

Answer 16

C

Question 17

What happens to the domestic price of a product when a small importing country imposes an import tariff?
a) It decreases
b) It increases
c) It remains constant
d) It fluctuates randomly

Answer 17

B

Question 18

How does the imposition of an import tariff affect consumers in the small importing country?
a) Consumers benefit from lower prices
b) Consumers face higher prices
c) Consumers experience no change in prices
d) Consumers receive subsidies from the government

Answer 18

B

Question 19

What is the primary benefit of an import tariff for the government and domestic producers in the small importing country?
a) Increased competition
b) Reduced production costs
c) Higher revenue
d) Lower taxes

Answer 19

C

Question 20

What happens to the overall surplus in a small importing country when an import tariff is imposed?
a) It increases
b) It decreases
c) It remains unchanged
d) It becomes unpredictable

Answer 20

B

Question 21

What happens to the exporter when a large country imposes a small tariff?
a) The exporter gains more than the importer loses
b) The exporter loses more than the importer gains
c) The exporter and importer both gain equally
d) The exporter experiences no change in profits

Answer 21

B

Question 22

How does the imposition of a small tariff affect the world price of the product?
a) It remains constant
b) It rises
c) It falls
d) It fluctuates randomly

Answer 22

C

Question 23

What is the definition of a “nationally optimal tariff”?
a) A tariff that maximizes government revenue
b) A tariff that maximizes consumer surplus
c) A tariff that maximizes total surplus for the importing country
d) A tariff that minimizes producer surplus

Answer 23

C

Question 24

How is total surplus calculated in the context of a nationally optimal tariff?
a) Total Surplus = Consumer Surplus + Producer Surplus
b) Total Surplus = Consumer Surplus + Producer Surplus + Tax Revenue
c) Total Surplus = Tax Revenue - Deadweight Loss
d) Total Surplus = Government Revenue - Exporter Loss

Answer 24

B

Question 25

What happens to consumer surplus when the price of imported goods increases due to a tariff?
a) It increases
b) It remains constant
c) It decreases
d) It fluctuates randomly

Answer 25

C

Question 26

How does a tariff affect producer surplus?
a) It decreases
b) It remains constant
c) It increases
d) It becomes unpredictable

Answer 26

C

Question 27

According to the provided information, when is a small to mid-level tariff beneficial for the importer?
a) When it maximizes consumer surplus
b) When it minimizes producer surplus
c) When it maximizes government revenue
d) When it maximizes total surplus for the importing country

Answer 27

D

Question 28

What happens to total surplus in the exporting country as the tariff imposed by the importing country rises?
a) It increases
b) It remains constant
c) It decreases
d) It becomes unpredictable

Answer 28

C

Question 29

when does the total surplus rise for the importer in the context of imposing a tariff?
a) When the importer’s share of deadweight loss exceeds the burden shifted to the exporter
b) When the burden shifted to the exporter is greater than the importer’s share of deadweight loss
c) When the importer’s share of deadweight loss equals the burden shifted to the exporter
d) When there is no deadweight loss experienced by either the importer or the exporter

Answer 29

B

Question 30

When an imported country imposes tariffs on goods from other countries, what is one expected outcome on domestic production?
a) Domestic production decreases
b) Domestic production remains constant
c) Domestic production increases
d) Domestic production becomes unpredictable

Answer 30

C

Question 31

What is one primary reason for a country to impose tariffs on imports?
a) To decrease domestic production
b) To lower consumer prices
c) To protect domestic industries
d) To increase government expenditure

Answer 31

C

Question 32

what aspect does the statement fail to consider regarding the imposition of tariffs?
a) The increase in domestic production
b) The protection of domestic industries
c) The impact on consumer well-being due to higher prices
d) The decrease in government revenue due to tariff collection

Answer 32

C

Question 33

Under what condition can a country potentially gain by imposing a tariff?
a) When it imposes a tariff regardless of its size
b) When it is large enough to influence the international price of the imported product
c) When it imposes a tariff only on specific industries
d) When it imposes a tariff without considering its trading partners

Answer 33

B

Question 34

What caution should be exercised when advising government officials on implementing tariffs?
a) To impose tariffs without considering their influence on international prices
b) To implement tariffs without considering retaliation from trading partners
c) To carefully consider the impact on international prices and potential retaliation from trading partners
d) To implement tariffs without assessing their effects on domestic industries

Answer 34

C

Question 35

Which of the following states that any trade concession given to any foreign country must be
given to all other countries having the same status?
a. The principle of retaliation
b. The structural adjustment program
c. The most favored nation principle
d. The purchasing power parity theory

Answer 35

C