Exam 8: Analysis of a Tariff

A country can actually improve its well-being if it is in a position to impose a non-zero "optimal tariff". Explain what an optimal tariff is, what conditions must be in place in order to implement an optimal tariff, and how such a tariff will increase national welfare. Assuming a country could impose an optimal tariff, would you suggest it do so? Justify your answer.

The figure given below shows the market for shoes in the U.S. The domestic price line with tariff lies above the international price line. D_d and S_d are the domestic demand and supply curves of shoes respectively. The production effect of the tariff on shoes is measured by the area _____.

A(n)_____ is a tax on imports that is stipulated as a money amount per unit.

Which of the following is defined as the percentage by which the entire set of a nation's trade barriers raises an industry's value added per unit of output?

Suppose that the world price of automobiles is $20,000 and automobile manufacturers in country A use $10,000 worth of imported inputs and no domestic inputs. What is the effective rate of protection for the automobile industry in country A, if there is a tariff of 25 percent on imported automobiles and a tariff of 50 percent on imported inputs used in this industry?

Which of the following correctly identifies the impact of tariffs on the producers of import-competing products in the imposing country?

If a small country imposes a tariff on imported motorcycles:

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?

When a tariff is imposed on an imported good, the prices of the similar products produced within the country also increases.

At free-trade prices, a bicycle in country X sells for $100 when the per-unit cost of material inputs is $90. Country X has a nominal tariff rate of 15% on bicycles, and 10% on the material inputs. Based on this information, calculate the effective rate of protection for the bicycle industry in country X. Assume that country X is a small country.

The nationally optimal tariff is the tariff for which:

A competitive producer supplies an additional unit of a good as long as the price is greater than the per unit cost.

The one-dollar, one-vote metric implies that every dollar of gain or loss is just as important as every other dollar of gain or loss, regardless of who the gainers or losers are.

The figure given below shows the market for shoes in the U.S. The domestic price line with tariff lies above the international price line. D_d and S_d are the domestic demand and supply curves of shoes respectively. Following the imposition of tariff, the domestic consumer surplus _____ by the area _____.

The figure given below shows the market for computers in the U.S. The domestic price line inclusive of the tariff lies above the international price line. D_d and S_d are the domestic demand and supply curves of computers respectively. The imposition of a tariff on computers caused the surplus of the domestic producers to _____ by _____.

Within a country, a tariff causes a redistribution of well-being only between the domestic producers and the government.

The figure given below shows the market for shoes in the U.S. The domestic price line with tariff lies above the international price line. D_d and S_d are the domestic demand and supply curves of shoes respectively. The tariff revenue of the U.S. government is shown by area _____.

For a small country, the sum of the production and the consumption effects indicate the net loss in economic welfare due to the imposition of a tariff.

When a small country imposes a tariff, the domestic price of the good increases. This causes a "production" and a "consumption" effect. Explain carefully these two effects, and discuss whether they increase or decrease the country's well-being.

Which of the following refers to the consumption effect of a tariff on imported automobiles?