Exam 4: Tariffs

If a "small" 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 is less than the monetary value of the terms-of-trade effect.

The imposition of tariffs on imports results in deadweight welfare losses for the home economy.These losses consist of the

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.With free trade, the United States achieves market equilibrium at a price of ____.At this price, ____ of steel are produced by U.S.firms, ____ are bought by U.S.buyers, and ____ are imported.

Assume that the United States imports automobiles from South Korea at a price of $20,000 per vehicle and that these vehicles are subject to an import tariff of 20 percent. Also assume that U.S. components are used in the vehicles assembled by South Korea and that these components have a value of $10,000. -Refer to Exhibit 4.1.Under the Offshore Assembly Provision of U.S.tariff policy, the price of an imported vehicle to the U.S.consumer after the tariff has been levied is

The redistribution effect is the transfer of producer surplus to domestic consumers of the import-competing product.

Research has shown that preserving American jobs through tariffs and other trade protections costs approximately _______________ annually per job.

A decrease in the import tariff will result in

Frederic Bastiat's "Petition of the Candle Makers" was a satire that illustrated the disadvantages of free trade as opposed to protectionism.

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

Under the Offshore Assembly Provision of U.S.tariff policy, U.S.import duties apply only to the value added in the foreign assembly process if U.S.-made components are used by overseas companies in their assembly operations.

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.With free trade, Mexico imports

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

The difference between the maximum amount buyers are willing to pay for a given quantity of a good and the amount actually paid is called

For developing countries, import tariffs generally are ______ than tariff levels in advanced countries

For industrial nations, tariffs on raw materials are generally

Suppose an importer of steel is required to pay a tariff of $20 per ton plus 5 percent of the value of steel.This is an example of

Tariff avoidance is the legal utilization of the tariff system to one's own advantage in order to reduce the amount of tariff that is payable by means that are within the law.

In the absence of international trade, assume that the equilibrium price and quantity of motorcycles in Canada is $14,000 and 10 units respectively. Assuming that Canada is a small country that is unable to affect the world price of motorcycles, suppose its market is opened to international trade. As a result, the price of motorcycles falls to $12,000 and the total quantity demanded rises to 14 units; out of this total, 6 units are produced in Canada while 8 units are imported. Now assume that the Canadian government levies an import tariff of $1,000 on motorcycles. With the tariff, 8 units are produced in Canada and quantity demanded is 12 units. -Refer to Exhibit 4.2.All of the import tariff is shifted to the Canadian consumer via a higher price of motorcycles.

Changes in a "large" country's economic conditions or trade policies can affect the terms at which it trades with other countries.

Should the home country be "large" relative to the world, its imposition of a tariff on imports would lead to an increase in domestic welfare if the terms-of-trade effect exceeds the sum of the