21) Refer to Figure 7-2. Without the tariff in place, the United States produces
A) 12 million pounds of coffee.
B) 26 million pounds of coffee.
C) 33 million pounds of coffee.
D) 45 million pounds of coffee.
22) Refer to Figure 7-2. With the tariff in place, the United States consumes
A) 18 million pounds of coffee.
B) 20 million pounds of coffee.
C) 26 million pounds of coffee.
D) 38 million pounds of coffee.
23) Refer to Figure 7-2. With the tariff in place, the United States produces
A) 18 million pounds of coffee.
B) 20 million pounds of coffee.
C) 26 million pounds of coffee.
D) 38 million pounds of coffee.
24) Refer to Figure 7-2. With the tariff in place, the United States
A) imports 20 million pounds of coffee.
B) imports 12 million pounds of coffee.
C) imports 18 million pounds of coffee.
D) exports 38 million pounds of coffee.
25) Refer to Figure 7-2. As a result of the tariff, domestic producers increase their quantity supplied by
A) 6 million pounds of coffee.
B) 18 million pounds of coffee.
C) 26 million pounds or coffee.
D) 38 million pounds of coffee.
26) Refer to Figure 7-2. The increase in domestic producer surplus as a result of the tariff is equal to
A) $11.25 million.
B) $18 million.
C) $32.5 million.
D) $45 million.
27) Refer to Figure 7-2. The tariff causes domestic consumption of coffee
A) to fall by 27 million pounds.
B) to fall by 7 million pounds.
C) to rise by 6 million pounds.
D) to rise by 20 million pounds.
28) Refer to Figure 7-2. The loss in domestic consumer surplus as a result of the tariff is equal to
A) $5 million.
B) $19.875 million.
C) $24.875 million.
D) $31.125 million.
29) Refer to Figure 7-2. If the tariff was replaced by a quota which limited coffee imports to 20 million
pounds, the amount of revenue received by coffee importers would equal
A) $5 million.
B) $15 million.
C) $50 million.
D) $78 million.
30) A voluntary export restraint is an agreement negotiated by two countries that places ________ that
can be imported by one country from another country.
A) a tax on goods
B) a minimum quantity of a good
C) quality standards on goods
D) a numerical limit on the quantity of a good
31) In the 1980s, Japan agreed to limit the quantity of automobiles it would export to the United States.
Why did the Japanese government agree to this trade restriction?
A) Japanese automobile producers lobbied for the restrictions in order to increase the price of their
exports to the United States.
B) The Japanese government wanted to limit sales to the United States in order to make more
automobiles available for Japanese consumers.
C) The Japanese government feared that the alternative would be a tariff or quota on imports of
Japanese automobiles imposed by the U.S. government.
D) The Japanese government wanted more automobiles to be available for export to countries other
than the United States.
32) Which of the following is the best example of a tariff?
A) a limit imposed on the number of sports utility vehicles that the United States can import from Japan
B) a subsidy granted by the U.S. government to domestic sports utility vehicle manufacturers so they
can compete more effectively with foreign sports utility vehicle manufacturers
C) a tax placed on all sports utility vehicles sold in the domestic market
D) a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States
33) Which of the following is the best example of a voluntary export restraint?
A) a limit set by the Japanese government on the number of sports utility vehicles that the United States
can import from Japan
B) a subsidy granted by the U.S. government to domestic sports utility vehicle manufacturers so they
can compete more effectively with foreign sports utility vehicle manufacturers
C) a tax placed on all sports utility vehicles sold in the domestic market
D) a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States
34) In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes
agree to limit their exports to a country. What are these types of agreements called?
A) involuntary export restraints
B) voluntary export restraints
C) implicit quotas
D) sanctions
35) The “Buy American” provision in the 2009 stimulus package required that stimulus money be spent
only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being
spent. The “Buy American” provision would ________ consumer surplus and ________ producer
surplus for industries that produced protected products in the United States.
A) increase; increase
B) increase; decrease
C) decrease; increase
D) decrease; decrease
36) The “Buy American” provision in the 2009 stimulus package required that stimulus money be spent
only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being
spent. For the U.S. steel industry, a “Buy American” provision would create gains for all of the following
except
A) U.S. steel companies.
B) U.S. taxpayers.
C) U.S. steel workers.
D) All of the above would gain from the provision.
Figure 7-3
Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 7-3 illustrates
the impact of the quota.
37) Refer to Figure 7-3. Without the quota, the domestic price of peanuts equals the world price which is
$2.00 per pound. What is the quantity of peanuts demanded by domestic consumers in the absence of a
quota?
A) 10 million pounds
B) 28 million pounds
C) 30 million pounds
D) 40 million pounds
38) Refer to Figure 7-3. If there was no quota, how many pounds of peanuts would domestic producers
supply?
A) 10 million
B) 28 million
C) 30 million
D) 40 million
39) Refer to Figure 7-3. If there was no quota, how many pounds of peanuts would be imported?
A) 16 million
B) 28 million
C) 30 million
D) 40 million
40) Refer to Figure 7-3. What is the value of domestic producer surplus without a quota?
A) $5 million
B) $15.75 million
C) $38.5 million
D) $53.5 million
41) Refer to Figure 7-3. With a quota in place, what is the quantity consumed in the domestic market
and what portion of this is supplied by imports?
A) Domestic consumption equals 28 million pounds of which 18 million pounds are imports.
B) Domestic consumption equals 40 million pounds of which 22 million pounds are imports.
C) Domestic consumption equals 34 million pounds of which 16 million pounds are imports.
D) Domestic consumption equals 34 million pounds of which 18 million pounds are imports.
42) Refer to Figure 7-3. With a quota in place, what is the quantity supplied by domestic producers?
A) 16 million pounds
B) 18 million pounds
C) 28 million pounds
D) 34 million pounds
43) Refer to Figure 7-3. What is the reduction in value of consumer surplus after the imposition of the
quota?
A) $8 million
B) $26.25 million
C) $27.75 million
D) $30 million
44) Refer to Figure 7-3. What is the value of domestic producer surplus after the imposition of a quota?
A) $10.75 million
B) $15.75 million
C) $17.25 million
D) $27.75 million
45) Refer to Figure 7-3. What is the value of revenue to foreign producers who are granted permission to
sell in the U.S. market when there is a quota?
A) $12 million
B) $17.25 million
C) $20 million
D) $44 million
46) Refer to Figure 7-3. What is the value of the deadweight loss as a result of the quota?
A) $5.25 million
B) $8 million
C) $17.25 million
D) $20 million
47) Which of the following is common to both tariffs and quotas?
A) Tariffs and quotas are both used as a means to increase government revenue.
B) Tariffs and quotas both increase economic efficiency.
C) Tariffs and quotas are both designed to reduce foreign competition faced by domestic firms.
D) Tariffs and quotas are both examples of voluntary export restraints.
48) Trade restrictions are often motivated by a desire to save domestic jobs threatened by competition
from imports. Which of the following counter-arguments is made by economists who oppose trade
restrictions?
A) Statistics show that trade restrictions actually do not save jobs.
B) Consumers pay a high cost for jobs saved through trade restrictions.
C) Trade restrictions have a limited impact because most Americans prefer domestic goods over
imports.
D) Trade restrictions benefit consumers in the short run but not in the long run.
49) Which of the following statements is true?
A) Economic efficiency would be increased if the United States eliminated all of its trade restrictions,
but only if all other countries eliminated their trade restrictions too.
B) The U. S. economy would gain from the elimination of its tariffs but not from the elimination of its
quotas.
C) Eliminating its tariffs and quotas unilaterally would not benefit the United States because this would
remove the leverage it would have to persuade other countries to eliminate their trade restrictions.
D) The U.S. economy would gain from the elimination of tariffs and quotas even if other countries do
not reduce their tariffs and quotas.
50) Governments sometimes erect barriers to trade other than tariffs and quotas. Which of the following
is not an example of this type of trade barrier?
A) a requirement that the employees of domestic firms that engage in foreign trade pay income taxes
B) a requirement that imports meet health and safety requirements
C) restrictions on imports for national security reasons
D) a requirement that the U.S. government buy military uniforms only from U.S. manufacturers
51) Members of Congress promising to support each other’s legislation is known as
A) logrolling.
B) implicit collusion.
C) explicit collusion.
D) protectionism.
52) A quota is a numerical limit on the quantity of a good that can be imported.
53) A voluntary export restraint is an agreement negotiated between two countries that places a
numerical limit on the quantity of a good that can be imported by one country from the other country.
54) The United States would gain from the elimination of tariffs and quotas even if other countries do
not reduce their tariffs and quotas.
55) A tariff is the same as a quota.
56) a. Distinguish between a tariff and a quota.
b. In what ways are tariffs and quotas similar?
c. In what ways are tariffs and quotas different?
d. Why might a foreign producer prefer a quota rather than a tariff?
Figure 7-4
57) Refer to Figure 7-4. Suppose the U.S. government imposes a $0.25 per pound tariff on rice imports.
Figure 7-4 shows the demand and supply curves for rice and the impact of this tariff. Use the figure to
answer questions a-i.