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Exam 9: International Trade

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Question 71

Multiple Choice

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A tariff is a:

A) tax on imports.
B) subsidy on exports.
C) restriction on the quantity of domestic goods consumed by foreigners.
D) restriction on the quantity of imports from foreign producers.

E) All of the above
F) C) and D)

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Question 72

Multiple Choice

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Which of the following results from a tariff on imported goods? I. domestic production increases II. domestic consumption increases III. government revenues increase

A) I and III only
B) II and III only
C) I and II only
D) I, II, and III

E) A) and C)
F) B) and C)

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Question 73

Multiple Choice

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Use the following to answer questions: Figure: Costs of Tariffs -(Figure: Costs of Tariffs) Refer to the figure. From left to right, the first triangle, rectangle, and second triangle in the diagram for analyzing a tariff represent:

In most cases, trade restrictions will:

Use the following to answer questions: Figure: Foreign Trade 2 -(Figure: Foreign Trade 2) Refer to the figure. What is the dollar value of wasted resources as a result of prohibiting trade in this market?

With free trade, the domestic price of a good must be equal to the world price of a good.

According to the text, in a typical month in the United States:

Use the following to answer questions: Figure: International Trade 2 -(Figure: International Trade 2) Refer to the figure. How much revenue does the tariff in this figure generate for the government?

Use the following to answer questions: Figure: Foreign Trade Market -(Figure: Foreign Trade Market) Refer to the figure. What is the dollar value of the lost consumer surplus as a result of prohibiting trade in this market?

Removing tariffs and quotas will ensure that goods are sold by the low-cost producers and increase the sum of consumer and producer surplus.

Use the following to answer questions: Figure: Costs of Tariffs -(Figure: Costs of Tariffs) Refer to the figure. In the figure representing the market for leather, domestic suppliers are the high-cost producers of leather. However, import restrictions push the domestic price up to $100. Which area represents the deadweight loss that results?

Economic growth requires job destruction, since the destroyed jobs free up resources for more productive activities.

Although domestic consumers gain more from free trade than domestic producers lose, the matter may not be that simple. Why might domestic producers also gain from free trade policies over those that impose tariffs on all goods?

Sugar production is highly protected in the United States. Sugar importers must pay such high tariffs that it is hardly profitable for them to sell any sugar in the United States. Who are the winners and losers from such protectionism? Is the resulting market economically efficient? Why? If not, why would the government continue import restrictions that promote economic inefficiency?

If Tyler and Alex are trading partners, do their gains from trade depend on whether Tyler and Alex live in the same country?

As a result of tariffs, domestic producers tend to:

A tariff benefits domestic producers but hurts domestic consumers.

The prevalence of child labor tends to increase as countries get richer.

Use the following to answer questions: Figure: Foreign Trade 2 -(Figure: Foreign Trade 2) Refer to the figure. What is the dollar value of the producer surplus gained as a result of prohibiting trade in this market?

Use the following to answer questions: Figure: World Imports -(Figure: World Imports) Refer to the figure. An imposition of extreme trade restrictions that eliminated all trade in that market, would generate wasted resources of: