Question 1

Although tariff and quota protections for China auto imports were very costly to consumers, which of the following was a benefit?

Accepted Answer

A)  Auto prices, compared with other prices in the economy, actually fell. 
B)  Auto consumption skyrocketed, but there were environmental effects. 
C)  Firms that were involved in joint ventures were able to "learn" and to significantly lower their costs. 
D)  China's government realized it had to keep its hands off entrepreneurial concerns. 
A)  Auto prices, compared with other prices in the economy, actually fell. 
B)  Auto consumption skyrocketed, but there were environmental effects. 
C)  Firms that were involved in joint ventures were able to "learn" and to significantly lower their costs. 
D)  China's government realized it had to keep its hands off entrepreneurial concerns.

Question 2

Why might imperfect competition lead to small countries imposing positive optimal tariffs against imports?

Accepted Answer

Imperfect competition refers to market s

Question 3

Under the voluntary export restraints, the Japanese government allocated each Japanese auto producer a certain number of cars that they could export to the United States. As a result, Japanese auto producers exported:

Accepted Answer

A)  fewer and more luxurious cars to the United States. 
B)  fewer and less luxurious cars to the United States. 
C)  more luxurious cars to the United States. 
D)  less luxurious cars to the United States. 
A)  fewer and more luxurious cars to the United States. 
B)  fewer and less luxurious cars to the United States. 
C)  more luxurious cars to the United States. 
D)  less luxurious cars to the United States.

Question 4

(Scenario: Discriminating Monopolist) The demand curve in its home market is P = 200 - Q; the demand curve in its foreign market is P = 160 - 2Q; and its marginal cost is a constant $20 per unit. Its marginal revenue in the home market is MR =200 - 2Q and is MR = 160 - 4Q in the foreign market. What is the discriminating monopolist's profit-maximizing output in the foreign market?

Accepted Answer

A)  90 
B)  110 
C)  70 
D)  35 
A)  90 
B)  110 
C)  70 
D)  35

Question 5

(Scenario: A Monopolist) A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. Now suppose that the country in which this monopolist is located decides to engage in international trade. The world price of the product produced by the monopolist is $12. What is its profit-maximizing price?

Accepted Answer

A)  $20 
B)  $15 
C)  $12 
D)  $10 
A)  $20 
B)  $15 
C)  $12 
D)  $10

Question 6

How does the demand curve facing a home monopolist compare in a no-trade situation to a situation in which a quota protects the monopolist's output?

Accepted Answer

A)  They are identical. 
B)  The quota-protected demand curve lies to the right of the no-trade demand curve. 
C)  The quota-protected demand curve lies to the left of the no-trade demand curve. 
D)  The no-trade demand curve is perfectly price elastic at the world price; the quota-protected demand curve has a negative slope. 
A)  They are identical. 
B)  The quota-protected demand curve lies to the right of the no-trade demand curve. 
C)  The quota-protected demand curve lies to the left of the no-trade demand curve. 
D)  The no-trade demand curve is perfectly price elastic at the world price; the quota-protected demand curve has a negative slope.

Question 7

The no-trade equilibrium in a perfectly competitive market occurs where:

Accepted Answer

A)  marginal revenue = price. 
B)  marginal cost = total revenue. 
C)  market quantity demanded = market quantity supplied. 
D)  average revenue = price. 
A)  marginal revenue = price. 
B)  marginal cost = total revenue. 
C)  market quantity demanded = market quantity supplied. 
D)  average revenue = price.

Question 8

Under the VER of the 1980s, Japan's automakers received:

Accepted Answer

A)  additional quota rents of about $2.2 billion. 
B)  approximately 10% lower prices. 
C)  censure by the WTO for failing to behave in a competitive manner. 
D)  wage concessions from their U.S. employees to keep plants open in the United States. 
A)  additional quota rents of about $2.2 billion. 
B)  approximately 10% lower prices. 
C)  censure by the WTO for failing to behave in a competitive manner. 
D)  wage concessions from their U.S. employees to keep plants open in the United States.

Question 9

An analysis of the case of Harley-Davidson reveals that the deadweight loss of import protection ___________ the gain in future producer surplus.

Accepted Answer

A)  was slightly less than 
B)  slightly exceeded 
C)  vastly exceeded 
D)  was roughly the same as 
A)  was slightly less than 
B)  slightly exceeded 
C)  vastly exceeded 
D)  was roughly the same as

Question 10

(Scenario: A Monopolist) A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. Now suppose that the country in which this monopolist is located decides to engage in international trade. The world price of the product produced by the monopolist is $12. The profit-maximizing output level is 6, and the profit-maximizing price equals $12. What are its monopoly profits at this price and quantity?

Accepted Answer

A)  $25 
B)  $36 
C)  $50 
D)  $75 
A)  $25 
B)  $36 
C)  $50 
D)  $75

Question 11

If the marginal revenue curve is twice as steep as the demand curve, a tariff imposed on a foreign monopoly seller will raise the domestic price by _______________ of the tariff and lower the seller's net price by _______________ of the tariff.

Accepted Answer

A)  one-fourth; three-fourths 
B)  10%; 90% 
C)  one-half; one-half 
D)  100%; 0% 
A)  one-fourth; three-fourths 
B)  10%; 90% 
C)  one-half; one-half 
D)  100%; 0%

Question 12

A monopolist's price is "less than fair value" when it sells in export markets at prices ________ prices in its domestic markets or at prices _________ its average costs of production.

Accepted Answer

A)  above; above 
B)  above; below 
C)  below; above 
D)  below; below 
A)  above; above 
B)  above; below 
C)  below; above 
D)  below; below

Question 13

Countervailing duties are used to offset any advantages that foreign exporters might gain over domestic producers because of foreign:

Accepted Answer

A)  tariffs. 
B)  subsidies. 
C)  infant industry protection. 
D)  quotas. 
A)  tariffs. 
B)  subsidies. 
C)  infant industry protection. 
D)  quotas.

Question 14

Use this information for a discriminating monopolist to answer this question: The home market demand curve is P = 200 - Q; the foreign market demand curve is P = 160 - 2Q; and the firm's marginal cost is a constant $20 per unit.
I. Find the discriminating monopolist's price and quantity in each market.
II. Find the discriminating monopolist's profit in each market.
III. Suppose the foreign country imposes an antidumping tariff. How large is the tariff?
IV. What is the discriminating monopolist's profit in the foreign market after the antidumping tariff is applied?

Accepted Answer

I. To find the discriminating monopolist

Question 15

Measuring the impact of the protection on the U.S. economy and on Harley-Davidson:

Accepted Answer

A)  is very clear-it was a success. 
B)  is very clear-it was a failure. 
C)  is not as black and white as the numbers might show, but saving a profitable company at a low cost has some merit for the U.S. economy. 
D)  should take into consideration that Harley-Davidson was a private firm with private stockholders. Most economists disagree with government efforts to save it from bankruptcy. 
A)  is very clear-it was a success. 
B)  is very clear-it was a failure. 
C)  is not as black and white as the numbers might show, but saving a profitable company at a low cost has some merit for the U.S. economy. 
D)  should take into consideration that Harley-Davidson was a private firm with private stockholders. Most economists disagree with government efforts to save it from bankruptcy.

Question 16

(Scenario: Discriminating Monopolist) The demand curve in its home market is P = 200 - Q; the demand curve in its foreign market is P = 160 - 2Q; and its marginal cost is a constant $20 per unit. Its marginal revenue in the home market is MR =200 - 2Q and is MR = 160 - 4Q in the foreign market. What is the discriminating monopolist's profit-maximizing output in the domestic market?

Accepted Answer

A)  90 
B)  110 
C)  70 
D)  35 
A)  90 
B)  110 
C)  70 
D)  35

Question 17

Rank the following in ascending order of welfare for the country imposing the duty or quota. If two items are equivalent, indicate this accordingly.
I. tariff t in a small country with perfect competition
II. tariff t in a small country with a domestic monopoly
III. quota with the same imports M as under the tariff, in a small country with a home monopoly

Accepted Answer

To rank the given scenarios in ascending

Question 18

The WTO opposes quotas. Why did the WTO not stop the U.S.-Japanese quota during the 1980s?

Accepted Answer

A)  There was a loophole in the GATT (at the time) that did not restrict nations from "voluntarily" curtailing their own exports. 
B)  Quotas are permitted under the GATT and WTO-as long as they are implemented for an approved reason. 
C)  The political situation at the time was tense; the GATT did not want to take on the powerhouses of the United States and Japan over such a small issue. 
D)  The WTO operates by consensus; all parties wanted the quotas. 
A)  There was a loophole in the GATT (at the time) that did not restrict nations from "voluntarily" curtailing their own exports. 
B)  Quotas are permitted under the GATT and WTO-as long as they are implemented for an approved reason. 
C)  The political situation at the time was tense; the GATT did not want to take on the powerhouses of the United States and Japan over such a small issue. 
D)  The WTO operates by consensus; all parties wanted the quotas.

Question 19

With free trade, the demand curve facing a small-country monopolist:

Accepted Answer

A)  is horizontal at the world price. 
B)  shifts upward by the amount of imports demanded. 
C)  shifts downward by the amount of imports demanded. 
D)  is horizontal at the firm's MC. 
A)  is horizontal at the world price. 
B)  shifts upward by the amount of imports demanded. 
C)  shifts downward by the amount of imports demanded. 
D)  is horizontal at the firm's MC.

Question 20

(Figure: The Home Market) Under conditions of no-trade, the domestic monopolist will produce and sell _______ at a price of _________.

Accepted Answer

A)  18; $15 
B)  28; $15 
C)  12; $25 
D)  12; $15 
A)  18; $15 
B)  28; $15 
C)  12; $25 
D)  12; $15

Although tariff and quota protections for China auto imports were very costly to consumers, which of the following was a benefit?

Why might imperfect competition lead to small countries imposing positive optimal tariffs against imports?

Under the voluntary export restraints, the Japanese government allocated each Japanese auto producer a certain number of cars that they could export to the United States. As a result, Japanese auto producers exported:

How does the demand curve facing a home monopolist compare in a no-trade situation to a situation in which a quota protects the monopolist's output?

The no-trade equilibrium in a perfectly competitive market occurs where:

Under the VER of the 1980s, Japan's automakers received:

An analysis of the case of Harley-Davidson reveals that the deadweight loss of import protection ___________ the gain in future producer surplus.

If the marginal revenue curve is twice as steep as the demand curve, a tariff imposed on a foreign monopoly seller will raise the domestic price by _ of the tariff and lower the seller's net price by _ of the tariff.

A monopolist's price is "less than fair value" when it sells in export markets at prices prices in its domestic markets or at prices _ its average costs of production.

Countervailing duties are used to offset any advantages that foreign exporters might gain over domestic producers because of foreign:

Measuring the impact of the protection on the U.S. economy and on Harley-Davidson:

The WTO opposes quotas. Why did the WTO not stop the U.S.-Japanese quota during the 1980s?

With free trade, the demand curve facing a small-country monopolist:

(Figure: The Home Market) Under conditions of no-trade, the domestic monopolist will produce and sell _ at a price of ___.

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Increasing Returns to Scale and Monopolistic Competition

Offshoring of Goods and Services

Import Tariffs and Quotas Under Perfect Competition

Export Subsidies in Agriculture and High-Technology Industries

International Agreements: Trade, Labor, and the Environment

The Global Macroeconomy

Introduction to Exchange Rates and the Foreign Exchange Market

Exchange Rates I: the Monetary Approach in the Long Run

Exchange Rates II: the Asset Approach in the Short Run

National and International Accounts: Income, Wealth, and the Balance of Payments

Balance of Payments I: the Gains From Financial Globalization

Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short Run

Fixed Versus Floating: International Monetary Experience

Exchange Rate Crises: How Pegs Work and How They Break

The Euro

Topics in International Macroeconomics

Filters

Exam 9: Import Tariffs and Quotas Under Imperfect Competition

Although tariff and quota protections for China auto imports were very costly to consumers, which of the following was a benefit?

Why might imperfect competition lead to small countries imposing positive optimal tariffs against imports?

Under the voluntary export restraints, the Japanese government allocated each Japanese auto producer a certain number of cars that they could export to the United States. As a result, Japanese auto producers exported:

How does the demand curve facing a home monopolist compare in a no-trade situation to a situation in which a quota protects the monopolist's output?

The no-trade equilibrium in a perfectly competitive market occurs where:

Under the VER of the 1980s, Japan's automakers received:

An analysis of the case of Harley-Davidson reveals that the deadweight loss of import protection ___________ the gain in future producer surplus.

If the marginal revenue curve is twice as steep as the demand curve, a tariff imposed on a foreign monopoly seller will raise the domestic price by _______________ of the tariff and lower the seller's net price by _______________ of the tariff.

A monopolist's price is "less than fair value" when it sells in export markets at prices ________ prices in its domestic markets or at prices _________ its average costs of production.

Countervailing duties are used to offset any advantages that foreign exporters might gain over domestic producers because of foreign:

Measuring the impact of the protection on the U.S. economy and on Harley-Davidson:

The WTO opposes quotas. Why did the WTO not stop the U.S.-Japanese quota during the 1980s?

With free trade, the demand curve facing a small-country monopolist:

(Figure: The Home Market) Under conditions of no-trade, the domestic monopolist will produce and sell _______ at a price of _________.

Trade in the Global Economy

Trade and Technology: The Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Increasing Returns to Scale and Monopolistic Competition

Offshoring of Goods and Services

Import Tariffs and Quotas Under Perfect Competition

Export Subsidies in Agriculture and High-Technology Industries

International Agreements: Trade, Labor, and the Environment

The Global Macroeconomy

Introduction to Exchange Rates and the Foreign Exchange Market

Exchange Rates I: the Monetary Approach in the Long Run

Exchange Rates II: the Asset Approach in the Short Run

National and International Accounts: Income, Wealth, and the Balance of Payments

Balance of Payments I: the Gains From Financial Globalization

Balance of Payments II: Output, Exchange Rates, and Macroeconomic Policies in the Short Run

Fixed Versus Floating: International Monetary Experience

Exchange Rate Crises: How Pegs Work and How They Break

The Euro

Topics in International Macroeconomics

Filters

If the marginal revenue curve is twice as steep as the demand curve, a tariff imposed on a foreign monopoly seller will raise the domestic price by _ of the tariff and lower the seller's net price by _ of the tariff.

A monopolist's price is "less than fair value" when it sells in export markets at prices prices in its domestic markets or at prices _ its average costs of production.

(Figure: The Home Market) Under conditions of no-trade, the domestic monopolist will produce and sell _ at a price of ___.