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81
Copyright © 2011 Pearson Education, Inc.
The figure above shows the U.S. market for T-shirts, where SUS is the domestic supply curve
and DUS is the domestic demand curve. The world price of a T-shirt is $5. The U.S. government
imposes a $2 per unit tariff on imported T-shirts.
13) The figure above shows that as a result of the tariff, the price of a T-shirt in the United States
________, and the quantity of T-shirts bought ________.
A) rises by $2; decreases by 15 million per year
B) rises by $2; increases by 15 million per year
C) falls by $2; increases by 5 million per year
D) does not change; decreases by 5 million per year
E) does not change; does not change
Skill: Level 3: Using models
Section: Checkpoint 9.3
Author: CO
AACSB: Analytical reasoning
82
Copyright © 2011 Pearson Education, Inc.
14) The figure above shows that as a result of the tariff, the quantity of T-shirts produced in the
United States ________, and the quantity of T-shirts imported ________.
A) increases by 15 million per year; decreases by 30 million per year
B) increases by 15 million per year; increases by 15 million per year
C) decreases by 15 million per year; decreases by 30 million per year
D) decreases by 30 million per year; increases by 30 million per year
E) does not change; decreases by 15 million per year
Skill: Level 3: Using models
Section: Checkpoint 9.3
Author: CO
AACSB: Analytical reasoning
15) The figure above shows that as a result of the tariff, consumer surplus in the United States
A) decreases by $105 million per year.
B) increases by $55 million per year.
C) decreases by $30 million per year.
D) decreases by $20 million per year.
E) remains unchanged.
Skill: Level 3: Using models
Section: Checkpoint 9.3
Author: CO
AACSB: Analytical reasoning
16) The figure above shows that as a result of the tariff, producer surplus in the United States
A) decreases by $105 million per year.
B) increases by $55 million per year.
C) decreases by $30 million per year.
D) decreases by $20 million per year.
E) remains unchanged.
Skill: Level 3: Using models
Section: Checkpoint 9.3
Author: CO
AACSB: Analytical reasoning
83
Copyright © 2011 Pearson Education, Inc.
17) The figure above shows that the government revenue from the tariff is
A) $20 million per year.
B) $30 million per year.
C) $15 million per year.
D) $55 million per year.
E) zero.
Skill: Level 3: Using models
Section: Checkpoint 9.3
Author: CO
AACSB: Analytical reasoning
18) The figure above shows that the deadweight loss from the tariff is
A) $20 million per year.
B) $30 million per year.
C) $15 million per year.
D) $55 million per year.
E) zero.
Skill: Level 3: Using models
Section: Checkpoint 9.3
Author: CO
AACSB: Analytical reasoning
19) The figure above shows that the U.S. net ________ surplus from the tariff is ________.
A) loss of; 30 million per year
B) gain in; $20 million per year
C) loss of; $10 million per year
D) gain in; $55 million per year
E) gain in; zero
Skill: Level 3: Using models
Section: Checkpoint 9.3
Author: CO
AACSB: Analytical reasoning
84
Copyright © 2011 Pearson Education, Inc.
9.6 Integrative Questions
1) Assume that the state of Missouri decided to place a tariff on every product produced outside
the state in an effort to increase the state's revenue and increase employment in the state. If
Missouri did so,
A) the state's total output would definitely increase.
B) workers with jobs in new firms replacing out-of-state imports would earn high income.
C) the standard of living within Missouri would decrease.
D) other states would begin to dump in Missouri.
E) the prices of goods imported into Missouri would fall.
Skill: Level 4: Applying models
Section: Integrative
Author: TPS
AACSB: Reflective thinking
2) During the 1980s, Harley-Davidson, the American motorcycle maker asked Congress for tariff
protection from large motorcycles imported from Japan. Harley-Davidson argued that their
company needed protection so the company could reorganize and, after some time had passed,
could become more competitive. Harley Davidson's argument is similar to the ________
argument for protection.
A) save domestic jobs
B) national security
C) anti-dumping
D) infant-industry
E) bring diversity and stability
Skill: Level 4: Applying models
Section: Integrative
Author: TPS
AACSB: Reflective thinking
3) In the 1950s, crude oil and natural gas imports were restricted to keep the domestic industries
viable in case of a war. The rationale for this protection is the ________ argument for protection.
A) save domestic jobs
B) national security
C) anti-dumping
D) infant-industry
E) penalizing lax environmental standards
Skill: Level 4: Applying models
Section: Integrative
Author: TPS
AACSB: Reflective thinking
85
Copyright © 2011 Pearson Education, Inc.
4) In the 1980s, the U.S. government forced Japanese automakers to limit their exports to the
United States. The union representing the autoworkers (UAW), argued that otherwise the U.S.
auto industry would have contracted. The UAW's argument is the ________ argument for
protection.
A) save domestic jobs
B) national security
C) anti-dumping
D) infant-industry
E) bringing diversity and stability
Skill: Level 4: Applying models
Section: Integrative
Author: TPS
AACSB: Reflective thinking
5) In 2002, President Bush imposed a tariff on imported steel. He did so in response to rent
seeking by
A) domestic steel consumers.
B) domestic steel producers.
C) foreign steel consumers.
D) foreign steel producers.
E) foreign politicians.
Skill: Level 4: Applying models
Section: Integrative
Author: TPS
AACSB: Reflective thinking
6) Which of the following is true?
i. Comparative advantage drives international trade.
ii. Compared to a no-trade situation, in a market with imports, producer surplus is larger.
iii. Tariffs lower the domestic price of imported goods.
A) Only i
B) Only ii
C) Only iii
D) i and ii
E) i and iii
Skill: Level 2: Using definitions
Section: Integrative
Author: CO
AACSB: Reflective thinking
