Deck 4: Tariffs

Question 1

Which of the following is a fixed percentage of the value of an imported product as it enters the country?

A) specific tariff
B) ad valorem tariff
C) nominal tariff
D) effective tariff

Answer 1

ad valorem tariff

Question 2

Developing nations often maintain that industrial countries permit raw materials to be imported at very low tariff rates while maintaining high tariff rates on manufactured imports.Which of the following refers to the above statement?

A) tariff-quota effect
B) nominal tariff effect
C) tariff escalation effect
D) protective tariff effect

Answer 2

tariff escalation effect

Question 3

The primary benefit of tariff protection goes to

A) domestic consumers of the good produced.
B) domestic producers of the good produced.
C) foreign producers of the good produced.
D) foreign consumers of the good produced.

Answer 3

domestic producers of the good produced.

Question 4

A beggar-thy-neighbor policy is the imposition of

A) free trade to increase domestic productivity.
B) trade barriers to increase domestic demand and employment.
C) import tariffs to curb domestic inflation.
D) revenue tariffs to make products cheaper for domestic consumers.

Question 5

A small nation places a tariff of $1000.00 on automobiles.If 40 autos are imported, the government collects $40,000 in duties.This is a calculation of the

A) redistributive effect.
B) protective effect.
C) revenue effect.
D) consumption effect.

Question 6

Suppose that the United States eliminates its tariff on steel imports, permitting foreign-produced steel to enter the U.S.market.Steel prices to U.S.consumers would be expected to

A) increase, and the foreign demand for U.S. exports would increase.
B) decrease, and the foreign demand for U.S. exports would increase.
C) increase, and the foreign demand for U.S. exports would decrease.
D) decrease, and the foreign demand for U.S. exports would decrease.

Question 7

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

A) revenue effect plus redistribution effect.
B) protective effect plus revenue effect.
C) consumption effect plus redistribution effect.
D) protective effect plus consumption effect.

Question 8

The price of a bag of chips is $1, but a customer is willing to pay up to $3.What would be the consumer surplus on this purchase?

A) $3
B) $1
C) $2
D) $4

Question 9

When the production of a commodity does NOT utilize imported inputs, the effective tariff rate

A) exceeds the nominal tariff rate on the commodity.
B) equals the nominal tariff rate on the commodity.
C) is less than the nominal tariff rate on the commodity.
D) is a percentage of the nominal tariff rate on the commodity.

Question 10

The deadweight loss of a tariff is

A) a welfare loss since it promotes inefficient production.
B) a welfare loss since it reduces the revenue for the government.
C) not a welfare loss because society as a whole doesn't pay for the loss.
D) not a welfare loss since only business firms suffer revenue losses.

Question 11

An importer of computers is required to pay a duty to the government of $100 per computer regardless of the price of the computer.Which type of tariff is described in this example?

A) tariff quota
B) compound tariff
C) specific tariff
D) ad valorem tariff

Question 12

The redistributive effect of an import tariff is the transfer of income from the domestic

A) producers to domestic buyers of the good.
B) buyers to domestic producers of the good.
C) buyers to the domestic government.
D) government to the domestic buyers.

Question 13

Which of the following is NOT a rationale for tariffs?

A) They improve the terms of trade for small and large nations.
B) They protect jobs and reduce unemployment.
C) They promote growth and development of young industries.
D) They promote a level playing field in terms of trade.

Question 14

If Canada imposes a tariff on imports, Canada's

A) terms of trade will improve and volume of imports will decrease.
B) terms of trade will worsen and volume of imports will decrease.
C) terms of trade will improve and volume of imports will increase.
D) terms of trade will worsen and volume of imports will increase.

Question 15

A $100 specific tariff provides home producers more protection from foreign competition when

A) the home market buys cheaper products rather than expensive products.
B) it is applied to a commodity with many grade variations.
C) the home demand for a good is elastic with respect to price changes.
D) it is levied on manufactured goods rather than primary products.

Question 16

When a nation imports materials and other inputs for production duty free, its tariff policy generally results in

A) an effective tariff rate less than the nominal tariff rate.
B) a nominal tariff rate less than the effective tariff rate.
C) a rise in both nominal and effective tariff rates.
D) a fall in both nominal and effective tariff rates.

Question 17

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

A) domestic consumers will purchase the foreign good regardless of the tariff.
B) special interest groups may prevent the tariff's removal when the industry matures.
C) most industries require tariff protection when they are mature.
D) labor unions will capture the protective effect in higher wages.

Question 18

Which of the following is true concerning a specific tariff?

A) It is exclusively used by the U.S. in its tariff schedules.
B) It refers to a flat percentage duty applied to a good's market value.
C) It is plagued by problems associated with assessing import product values.
D) It gives less protection to home producers during eras of rising prices.

Question 19

Which argument in favor of tariffs states that developing industries should be initially shielded from competition?

A) infant-industry argument
B) cheap foreign labor argument
C) fair trade argument
D) national security argument

Question 20

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

A) protective effect and the consumption effect.
B) redistribution effect and the revenue effect.
C) revenue effect and the protective effect.
D) consumption effect and the redistribution effect.

Question 21

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.In the absence of trade, Mexico produces and consumes

A) 10 calculators.
B) 40 calculators.
C) 60 calculators.
D) 80 calculators.

Question 22

A tax of 15 percent per imported item is an example of a(an)

A) ad valorem tariff.
B) specific tariff.
C) compound tariff.
D) optimum tariff.

Question 23

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

-According to Figure 4.1, the deadweight cost of the tariff totals

A) $60.
B) $70.
C) $80.
D) $90.

Question 24

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

-According to Figure 4.1, the loss in Mexican consumer surplus due to the tariff equals

A) $225.
B) $265.
C) $285.
D) $325.

Question 25

Which type of tariff is prohibited by the United States Constitution?

A) import tariff
B) export tariff
C) specific tariff
D) ad valorem tariff

Question 26

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, the total value of Mexico's imports equal

A) $220.
B) $260.
C) $290.
D) $300.

Question 27

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.In the absence of trade, Mexico's producer surplus and consumer surplus respectively equal

A) $120 and $240.
B) $180 and $180.
C) $180 and $320.
D) $240 and $240.

Question 28

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

A) 40 calculators.
B) 60 calculators.
C) 80 calculators.
D) 100 calculators.

Question 29

An optimum tariff benefits

A) the importing nation.
B) exporting nations.
C) the world economy.
D) smaller nations.

Question 30

The United States imposes a tariff on imported stereos.This tariff would benefit

A) American consumers looking to purchase a stereo.
B) retail and shipping companies that import foreign-made stereos.
C) stereo producers in the United States.
D) the U.S. economy as a whole.

Question 31

Which statement is true of tariff reductions?

A) Reciprocal tariff liberalization has quickly become widespread to support free trade.
B) Tariff reductions primarily benefit import-competing industries within a nation.
C) Tariff reductions lead to increased foreign competition that undermines the welfare of a nation.
D) Tariff reductions can increase the overall welfare of a nation when affected industries are compensated for their losses.

Question 32

President Donald Trump declared a 20 percent border tax on imports from Mexico to pay for the border wall.Which is the MOST likely effect of the border tax?

A) It will result in Mexico paying for the wall.
B) It will result in American consumers paying for the wall.
C) Both Mexico and America will pay for the wall.
D) Mexico will avoid paying for the wall by raising their prices.

Question 33

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

-According to Figure 4.1, Mexican manufacturers gain ____ because of the tariff.

A) $75
B) $85
C) $95
D) $105

Question 34

A tax of 20 cents per unit of imported cheese would be an example of a(n)

A) compound tariff.
B) effective tariff.
C) ad valorem tariff.
D) specific tariff.

Question 35

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's producer surplus and consumer surplus respectively equal

A) $5 and $605.
B) $25 and $380.
C) $45 and $250.
D) $85 and $195.

Question 36

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 a per-unit tariff of $3, the quantity of imports decreases to

A) 20 calculators.
B) 40 calculators.
C) 50 calculators.
D) 70 calculators.

Question 37

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

-According to Figure 4.1, the tariff results in the Mexican government collecting

A) $100.
B) $120.
C) $140.
D) $160.

Question 38

The most vocal political pressure for tariffs is generally made by

A) consumers lobbying for export tariffs.
B) consumers lobbying for import tariffs.
C) producers lobbying for export tariffs.
D) producers lobbying for import tariffs.

Question 39

Which statement is true about the free trade argument?

A) It has been adopted by numerous nations around the world through reductions in trade barriers.
B) It argues that tariffs and other trade barriers force industries to continually adjust practices.
C) It advocates for the uninhibited flow of goods, services, and capital between nations.
D) It is praised for considering real-world economic conditions and noneconomic factors like national security.

Question 40

A decrease in the import tariff will result in

A) an increase in imports but a decrease in domestic production.
B) a decrease in imports but an increase in domestic production.
C) an increase in price but a decrease in quantity purchased.
D) a decrease in price and a decrease in quantity purchased.

Question 41

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

A) $22,000.
B) $23,000.
C) $24,000.
D) $25,000.

Question 42

For the United States, a foreign trade zone (FTZ) is

A) a site within the United States.
B) a site outside the United States.
C) always located in poorer developing countries.
D) is used to discourage trade.

Question 43

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 ?

-According to Figure 4.2, the tariff changes the overall welfare of the United States by

A) rising by $250.
B) rising by $500.
C) falling by $250.
D) falling by $500.

Question 44

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.The tariff would be prohibitive (i.e., eliminate imports) if it equaled

A) $2.
B) $3.
C) $4.
D) $5.

Question 45

The offshore assembly provision in the U.S.

A) provides favorable treatment to U.S. trading partners.
B) discriminates against primary product importers.
C) provides favorable treatment to products assembled abroad from U.S. manufactured components.
D) hurts the U.S. consumer.

Question 46

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 ?

-According to Figure 4.2, the tariff's terms-of-trade effect equals

A) $300.
B) $400.
C) $500.
D) $600.

Question 47

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

A) a specific tariff.
B) an ad valorem tariff.
C) a compound tariff.
D) a tariff quota.

Question 48

Figure 4.3 Domestic Market for Gasoline in the United States ​
Figure 4.3 represents the domestic market for gasoline in the United States.What is the consumer surplus in this market?

A) 60 gallons of gasoline
B) $120
C) $60
D) $3

Question 49

When a tariff on imported inputs exceeds the tariff on the finished good,

A) the nominal tariff rate on the finished product would tend to overstate its protective effect.
B) the nominal tariff rate on the finished product would tend to understate it's protective effect.
C) it is impossible to determine the protective effect of a tariff on the finished product.
D) the tariff on the finished good would have significant protective effects.

Question 50

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 ?

-Referring to Figure 4.2, the tariff's deadweight welfare loss to the United States totals

A) $450.
B) $550.
C) $650.
D) $750.

Question 51

Figure 4.3 Domestic Market for Gasoline in the United States ​
Figure 4.3 represents the domestic market for gasoline in the United States.What is the producer surplus in this market?

A) 60 gallons of gasoline
B) $120
C) $60
D) $3

Question 52

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.Of the $100 tariff, ____ is passed on to the U.S.consumer via a higher price, while ____ is borne by the foreign exporter.

A) $25, $75
B) $25, $75.
C) $75, $25.
D) $75, $25

Question 53

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 ?

-Suppose that the production of a $30,000 automobile in Canada requires $10,000 worth of steel.The Canadian nominal tariff rates for importing these goods are 25 percent for automobiles and 10 percent for steel.Given this information, the effective rate of protection for the Canadian automobile industry is approximately

A) 15 percent.
B) 32 percent.
C) 48 percent.
D) 67 percent.

Question 54

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.

A) $450, 5 tons, 60 tons, 55 tons
B) $475, 10 tons, 50 tons, 40 tons
C) $525, 5 tons, 60 tons, 55 tons
D) $630, 30 tons, 30 tons, 0 tons

Question 55

A compound tariff is a combination of a(n)

A) tariff quota and a two-tier tariff.
B) revenue tariff and a protective tariff.
C) import tariff and an export tariff.
D) specific tariff and an ad valorem tariff.

Question 56

If the domestic value added before an import tariff for a product is $500 and the domestic value added after the tariff is $550, the effective rate of protection is

A) 5 percent.
B) 8 percent.
C) 10 percent.
D) 15 percent.

Question 57

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.In the absence of 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

A) $22,000.
B) $23,000.
C) $24,000.
D) $25,000.

Question 58

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.Suppose the United States imposes a tariff of $100 on each ton of steel imported.With the tariff, the price of steel rises to ____ and imports fall to ____ .

A) $550, 20 tons
B) $550, 30 tons
C) $575, 20 tons
D) $575, 30 tons

Question 59

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 ?

-Suppose that the production of $500,000 worth of steel in the United States requires $100,000 worth of iron ore.The U.S.nominal tariff rates are 15 percent for steel and 5 percent for iron ore.Given this information, the effective rate of protection for the U.S.steel industry is approximately

A) 6 percent.
B) 12.5 percent.
C) 18 percent.
D) 17.5 percent.

Question 60

Arguments for U.S.trade restrictions include all of the following except

A) job protection.
B) infant industry support.
C) maintenance of domestic living standard.
D) improving incomes for developing countries.

Question 61

Figure 4.4 Market for Gasoline in a Small Nation?
? ?

-Figure 4.4 represents the market for gasoline in a small nation.The free trade world price of gasoline is $3.50.Suppose this small nation imposes a tariff on gasoline of $.50 per gallon.The change in producer surplus would be

A) $15.
B) $12.50.
C) $47.50.
D) $57.50.

Question 62

The revenue that producers receive over and above the minimum necessary for production is called

A) deadweight loss.
B) deadweight gain.
C) producer surplus.
D) consumer surplus.

Question 63

A country gains from international trade when its post-trade consumption point

A) lies outside its production possibilities frontier.
B) lies along its production possibilities frontier.
C) lies inside its production possibilities frontier.
D) is the same as the pre-trade consumption point.

Question 64

If Ecuador is considered a "small" country, a tariff will ______ increase its national welfare.

A) never
B) always
C) sometimes
D) only slightly

Question 65

Suppose that Germany levies a tariff on oranges, but none are grown in Germany.This tariff has

A) only a protective effect.
B) only a revenue effect.
C) both a protective effect and revenue effect.
D) no effects on trade.

Question 66

Figure 4.4 Market for Gasoline in a Small Nation​
​ ​
Figure 4.4 represents the market for gasoline in a small nation.The free trade world price of gasoline is $3.50.Suppose this small nation imposes a tariff on gasoline of $.50 per gallon.The change in consumer surplus would be

A) $15.
B) $12.50.
C) $27.50.
D) $57.50.

Question 67

If Germany is considered a "large" country, a tariff will ______ increase its national welfare.

A) never
B) always
C) sometimes
D) have limited ability to

Question 68

Suppose that Japan levies a 40 percent tariff on pickup trucks and a 20 percent tariff on engines.The effective rate of protection on pickup trucks

A) is higher with the tariff on engines.
B) is lower with the tariff on engines.
C) is the same with or without the tariff on engines.
D) is equal to the tariff on engines.

Question 69

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

A) higher
B) lower
C) the same as
D) less protective

Question 70

In general, tariffs tend to have

A) only protective effects.
B) only consumption effects.
C) only revenue effects.
D) revenue effects, protective effects, and consumption effects.

Question 71

For a large nation, the levying of an import tariff on steel

A) necessarily causes the nation's welfare to decline.
B) causes the price of steel on the world market to decline.
C) causes the price of steel for domestic consumers to rise by the full amount of the tariff.
D) necessarily causes the nation's welfare to increase.

Question 72

Suppose that Canada levies a tariff on imports that is a fixed percentage of the product's price.This refers to

A) a compound tariff.
B) an ad valorem tariff.
C) a specific tariff.
D) an effective tariff.

Question 73

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

A) $20,000
B) $40,000
C) $200,000
D) $1,000,000

Question 74

Which of the following is an implication of President Obama's tariffs on Chinese tariffs?

A) American workers are more efficient than their Chinese counterparts.
B) China is willing to levy similar tariffs to make international trade more fair.
C) There is little demand for low-cost tires.
D) Trade decisions are sometimes made with more political than economic consideration.

Question 75

If Brazil levies a tariff on oil that is so high that it effectively prohibits imports of oil, the tariff has

A) only a protective effect.
B) only a revenue effect.
C) both a revenue effect and a protective effect.
D) no effect on trade.

Question 76

Suppose that Mexico is a small country and it imposes a tariff on imports.This results in

A) an improving terms of trade for Mexico.
B) a worsening terms of trade for Mexico.
C) no change in the terms of trade for Mexico.
D) better protection from competition for Mexico.

Question 77

The U.S.constitution allows the country to levy tariffs

A) only on exports.
B) only on imports.
C) on both exports and imports.
D) on neither exports nor imports.

Question 78

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

A) deadweight loss.
B) deadweight gain.
C) producer surplus.
D) consumer surplus.

Question 79

For industrial nations, tariffs on raw materials are generally

A) higher than on agricultural products.
B) lower than on manufactured products.
C) equal to tariffs on manufactured products.
D) lower than on agricultural products.

Question 80

Suppose that Mexico levies a tariff on steel that is collected as a fixed amount of money per ton imported.This refers to

A) a compound tariff.
B) an ad valorem tariff.
C) a specific tariff.
D) an effective tariff.