Exam 9: The Instruments of Trade Policy

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

-Refer to above figure. With a specific tariff of $3 per unit, what is the quantity of Widgets imported?

The two deadweight triangles are the Consumption distortion and Production distortion losses. It is easy to understand why the Consumption distortion constitutes a loss for society. After all it raises the prices of goods to consumers, and even causes some consumers to drop out of the market altogether. It seems paradoxical that the Production distortion is considered an equivalent burden on society. After all, in this case, profits increase, and additional production (with its associated employment) comes on line. This would seem to be an offset rather than an addition to the burden or loss borne by society. Explain why the Production distortion is indeed a loss to society, and what is wrong with the logic that leads to the apparent paradox.

A problem encountered when implementing an "infant industry" tariff is that

Suppose the United States eliminates its tariff on ball bearings used in producing exports. Ball bearing prices in the United States would be expected to

A tax of 20 cents per unit of imported garlic is an example of a(n)

A specific tariff provides home producers more protection when

If an import-competing firm is imperfectly competitive, than under free trade an import quota will ________ domestic market price, ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare.

-Refer to above figure. In the absence of trade, how many Widgets does this country produce?

A voluntary export restraint will ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare.

The main redistribution effect of a tariff is the transfer of income from

-Refer to above figure. With free trade and no tariffs, what is the quantity of Widgets consumed domestically?

An import quota will ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare.

If the tariff on computers is not changed, but domestic computer producers shift from domestically produced semiconductors to imported components, then the effective rate of protection in the computer industry will

Tariff rates on products imported into the U.S.

A policy of tariff reduction in the computer industry is

In the country levying the tariff, the tariff will

Throughout the post-World War II era, the importance of tariffs as a trade barrier has

A lower tariff on imported steel would most likely benefit

In the exporting country, an export subsidy will