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16) Imposing a tariff on a good leads to a ________ in the price of the product and ________ in
imports.
A) rise; an increase
B) rise; a decrease
C) fall; an increase
D) fall; a decrease
E) rise; no change
17) As a result of U.S. tariffs on fishnets produced in other nations, the quantity of fishnets
purchased in the United States has
A) not been affected.
B) increased.
C) decreased but not to zero.
D) fallen to zero.
E) probably changed but whether it has increased or decreased is ambiguous.
18) If the United States imposes a tariff on foreign chocolate, how are U.S. buyers of chocolate
affected?
A) The price they pay for chocolate rises.
B) Their demand for chocolate increases because the U.S. production chocolate increases.
C) The quantity they consume is unchanged.
D) The price they pay for chocolate falls but they consume less chocolate because less is
imported.
E) The price they pay for chocolate falls and they consume more chocolate.
19) If the United States imposes a tariff on a good, then
A) domestic consumption of the good decreases.
B) foreign consumption of the good decreases.
C) foreign production of the good increases.
D) domestic production of the good decreases.
E) the government makes less revenue than it would have gained if it imposed a quota.
20) When the United States imposes a tariff on an imported good, the
A) price of the good in the United States falls.
B) quantity of the good purchased in the United States decreases.
C) quantity of the good produced in the United States decreases.
D) outcome becomes more efficient.
E) amount imported increases.
21) U.S. tariffs on Canadian lumber have led to ________ production of lumber within the
United States.
A) no change in
B) an increase in
C) the elimination of
D) a decrease in
E) making illegal the
22) If the government decides to impose a new tariff on orange juice from Brazil, the tariff
would lead to ________ the tariff revenue collected by the U.S. government.
A) no change in
B) an increase in
C) a decrease in
D) an elimination of
E) making illegal
23) The imposition of a tariff will typically ________ government revenue and ________
domestic production of the good.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
24) Country A imports 1,000 cars per month. After imposing a $50 per car tariff, imports fall to
800 cars per month. How much does Country A's government collect in tariff revenue?
A) $90,000
B) $50,000
C) $40,000
D) $10,000
E) $60,000
25) Of the following, which group is hurt by a tariff?
A) domestic producers of the good
B) foreign consumers of the good
C) domestic consumers of the good
D) domestic government
E) foreign government
26) Of the following, who is harmed by a tariff?
A) domestic buyers of the good or service
B) the overall domestic economy
C) the foreign exporter of the good or service
D) domestic producers of the good or service
E) Both answers A and B are correct.
27) If a tariff is imposed on imports of shrimp into the United States, U.S. consumer surplus
from shrimp will ________ and U.S. producer surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
28) If a tariff is imposed on imports of shrimp into the United States, U.S. consumer surplus
from shrimp will ________ and U.S. total surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
29) If a tariff is imposed on imports of shrimp into the United States, U.S. producer surplus from
shrimp will ________ and U.S. total surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
30) A tariff makes the total economy
A) better off because it increases the domestic production of the good.
B) better off because it decreases the deadweight loss from international trade.
C) worse off because it creates a deadweight loss.
D) worse off because it creates revenue for the government.
E) worse off because it decreases both domestic consumer surplus and domestic producer
surplus.
31) Of the following, who gains because of tariffs and why?
A) domestic producers of protected goods because they can sell at a higher price
B) domestic buyers because they can be sure of buying high-quality products
C) foreign producers because they earn more total revenue
D) foreign government because they gain more revenue
E) domestic buyers because they pay a lower price
32) If the United States imposes a tariff on foreign chocolate, how are foreign producers of
chocolate affected?
A) Their supply increases because they have to pay the tariff.
B) They export less to the United States.
C) They earn more profit because their chocolate sells for a higher price.
D) Their supply is unaffected because the quota must be met by U.S. producers.
E) The tariff has no effect on foreign producers because U.S. consumers must pay the higher
price.
33) If the United States imposes a tariff on foreign chocolate, how are U.S. producers of
chocolate affected?
A) The quantity of chocolate they sell decreases because U.S. consumption of chocolate
decreases.
B) The quantity of chocolate they produce increases.
C) The price at which they sell their chocolate falls.
D) They are harmed because foreign exporters of chocolate increase their supply in response to
the higher price.
E) They are unaffected because the quota applies to foreign producers, not to U.S. producers.
34) The above figure shows the U.S. market for replacement cell phone batteries. When there is
no international trade, the equilibrium price is ________ per battery and when there is
international trade the equilibrium price is ________ per battery.
A) $16; $14
B) $14; $12
C) $12; $14
D) $12; $16
E) $16; $12
35) The above figure shows the U.S. market for replacement cell phone batteries. With free
international trade, the United States
A) exports 300,000 batteries.
B) imports 400,000 batteries.
C) imports 500,000 batteries.
D) imports 800,000 batteries.
E) exports 700,000 batteries.
36) The above figure shows the U.S. market for replacement cell phone batteries. Suppose the
U.S. government imposes the tariff illustrated in the figure. The tariff is equal to ________ and
the price U.S. consumers pay ________ compared to the price paid when there was free trade.
A) $2; decreases
B) $14; decreases
C) $2; increases
D) $12; increases
E) $14; increases
37) The above figure shows the U.S. market for replacement cell phone batteries. With free
trade, the United States imports ________ batteries and once the tariff illustrated in the figure is
imposed, the United States imports ________ batteries.
A) 900,000; 700,000
B) 800,000; 400,000
C) 300,000; 100,000
D) 700,000; 300,000
E) 900,000; 100,000
38) The above figure shows the U.S. market for replacement cell phone batteries. With free
trade, U.S. production is equal to ________ batteries per year. When a $2 tariff is in place, U.S.
production is equal to ________ batteries per year.
A) 100,000; 300,000
B) 100,000; 500,000
C) 300,000; 100,000
D) 300,000; 500,000
E) 900,000; 700,000
49
39) The above figure shows the U.S. market for replacement cell phone batteries. The U.S.
government collects tariff revenue of ________ on each battery imported.
A) $4
B) $14
C) $12
D) $6
E) $2
40) The above figure shows the U.S. market for replacement cell phone batteries. Area C is the
A) deadweight loss from tariff.
B) decrease in consumer surplus due to the tariff.
C) increase in producer surplus due to the tariff.
D) tariff revenue.
E) loss in total surplus because of the tariff.
41) The above figure shows the U.S. market for replacement cell phone batteries. Area B + area
D is the
A) tariff revenue.
B) decrease in consumer surplus due to the tariff.
C) deadweight loss from tariff.
D) increase in producer surplus due to the tariff.
E) gain in total surplus due to the tariff.
42) The above figure shows the U.S. market for replacement cell phone batteries. Area A + area
E is the
A) consumer surplus when there is a tariff.
B) producer surplus when there is a tariff.
C) tariff revenue.
D) increase in producer surplus due to the tariff.
E) gain in total surplus due to the tariff.
43) The above figure shows the U.S. market for replacement cell phone batteries. Area E is the
A) producer surplus when there is free trade.
B) deadweight loss from tariff.
C) tariff revenue.
D) increase in producer surplus due to the tariff.
E) gain in total surplus due to the tariff.
44) Of the following, who gains with a tariff?
A) domestic buyers of the good or service
B) the importer of the good or service
C) the foreign exporter of the good or service
D) the government of the importing nation
E) the government of the exporting nation
45) If the U.S. government imposes a tariff on imported steel, who else besides U.S. steel
producers gains from the tariff?
A) U.S. steel consumers
B) the U.S. government
C) U.S. importers of steel
D) foreign exporters of steel
E) the foreign government
46) Of the following, who gains from a tariff?
A) the government of the importing country
B) the government of the exporting country
C) consumers in the importing country
D) producers in the exporting country
E) both the government of the exporting country and the government of the importing country
47) Which type of policy raises the most revenue for the government?
A) tariff
B) quota
C) voluntary export restraints
D) If they are set at the same level, all of the above raise the same amount of revenue.
E) None of the above answers is correct because none of the policies raise revenue for the
government.
48) The difference between a tariff and a quota is that the tariff revenue goes to the
A) domestic consumer.
B) domestic producer.
C) domestic government.
D) holder of the quota license.
E) foreign government.
49) The table above gives the domestic demand and supply schedules for a good. Suppose the
world price of the good is $40 and the government imposes a $20 per unit tariff. How much will
the government collect as tariff revenue?
A) $160
B) $320
C) $80
D) $240
E) $360
50) A quota is
A) a tax on imports.
B) a specified minimum amount that must be imported.
C) a specified maximum amount that can be imported.
D) a tariff on exports.
E) the minimum amount that domestic firms can dump.
51) A quota is a
A) quantitative restriction on an import imposed by the importing country.
B) quantitative restriction on an import imposed by the exporting country.
C) restriction on how much a customer can buy of a scarce good imposed by the seller.
D) tax that is imposed on a good when it crosses an international boundary.
E) trade barrier that does not harm domestic consumers of the good or service.
52) When governments specify the maximum amount of a good that may be imported in a given
period of time, they are establishing a
A) tariff.
B) quota.
C) dynamic tariff.
D) tax.
E) dumping limit.
53) A specified maximum amount of the good that may be imported in a given period of time is
a
A) forcible limit.
B) quota.
C) tariff.
D) sanction.
E) dumping limit.
54) The imposition of a quota ________ domestic production, ________ imports, and ________
domestic purchases.
A) increases; decreases; decreases
B) increases; decreases; increases
C) decreases; increases; decreases
D) decreases; decreases; decreases
E) increases; increases; increases
55) Of the following, who gains with a quota?
A) domestic buyers of the good or service
B) the importer of the good or service
C) the foreign exporter of the good or service
D) the government of the importing nation
E) the government of the exporting nation
56) If the United States imposed a quota on the amount of salmon imported from Chile, the result
would be ________ salmon prices in the United States and ________ in the quantity of salmon
demanded in the United States.
A) higher; an increase
B) higher; a decrease
C) lower; an increase
D) lower; a decrease
E) higher; no change
57) If a quota is imposed on imports of shrimp into the United States, U.S. consumer surplus
from shrimp will ________ and U.S. producer surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
58) If an import quota is imposed on imports of shrimp into the United States, U.S. consumer
surplus from shrimp will ________ and U.S. total surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
59) If an import quota is imposed on imports of shrimp into the United States, U.S. producer
surplus from shrimp will ________ and U.S. total surplus from shrimp will ________.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
E) increase; not change
60) A quota ________ a deadweight loss and a tariff ________ a deadweight loss.
A) creates; creates
B) creates; does not create
C) does not create; creates
D) does not create; does not create
E) might create;might create
61) The above figure shows the U.S. market for 1 carat diamonds. With free trade, Americans
buy ________ diamonds and pay a price of ________ per diamond.
A) 500,000; $4,000
B) 300,000; $3,000
C) 700,000; $3,000
D) 300,000; $4,000
E) 900,000; $2,000
62) The above figure shows the U.S. market for 1 carat diamonds. With free trade, the United
States produces ________ diamonds and imports ________ diamonds.
A) 300,000; 600,000
B) 0; 900,000
C) 100,000; 900,000
D) 100,000; 800,000
E) 500,000; 400,000
63) The above figure shows the U.S. market for 1 carat diamonds. Suppose the United States
imposes the import quota shown in the figure. With the import quota, how many diamonds can
be imported?
A) 500,000
B) 700,000
C) 400,000
D) 900,000
E) 300,000
64) The above figure shows the U.S. market for 1 carat diamonds. The free trade, the price in
the United States for diamonds is equal to ________ and with the quota illustrated in the figure,
the price in the United States is equal to ________.
A) $4,000; $2,000
B) $2,000; $3,000
C) $4,000; $3,000
D) $2,000; $2,000
E) $2,000; $4,000
65) The above figure shows the U.S. market for 1 carat diamonds. With free trade, U.S.
production of diamonds is equal to ________ diamonds. When the quota illustrated in the figure
is in place, U.S. production is equal to ________ diamonds.
A) 100,000; 300,000
B) 100,000; 500,000
C) 300,000; 100,000
D) 300,000; 500,000
E) 900,000; 700,000
66) The above figure shows the U.S. market for 1 carat diamonds. Area B + area D is the
A) decrease in consumer surplus due to the import quota.
B) importers' profit from the quota.
C) gain in total surplus due to the import quota.
D) deadweight loss from the import quota.
E) increase in producer surplus due to the import quota.
67) The above figure shows the U.S. market for 1 carat diamonds. Area A + area B + area C +
area D is the
A) deadweight loss from the import quota.
B) importers' profit from the quota.
C) decrease in consumer surplus due to the import quota.
D) gain in total surplus due to the import quota.
E) increase in producer surplus due to the import quota.
68) The above figure shows the U.S. market for 1 carat diamonds. Area C is the
A) decrease in consumer surplus due to the import quota.
B) importers' profit from the quota.
C) deadweight loss from the import quota.
D) increase in producer surplus due to the import quota.
E) gain in total surplus due to the import quota.
69) The above figure shows the U.S. market for 1 carat diamonds. Area A is the
A) increase in producer surplus due to the import quota.
B) importers' profit from the import quota.
C) decrease in consumer surplus due to the import quota.
D) deadweight loss from the import quota.
E) gain in total surplus due to the import quota.
70) If the United States negotiates a voluntary export restraint with international sugar producing
nations, then
A) U.S. sugar buyers pay a lower price for sugar.
B) U.S. sugar producers produce a smaller quantity.
C) imports of sugar increase.
D) the U.S. government collects less revenue than if it imposed a tariff on sugar.
E) the foreign governments collect more revenue than if a tariff is imposed on sugar.
71) Which of the following methods of restricting trade does NOT create a deadweight loss?
A) a tariff
B) a quota
C) a voluntary export restraint
D) Both answers A and B are correct.
E) None of the above answers are correct because all the methods create a deadweight loss
