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United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Small Nation Model
127. Suppose that Mexico is a small country and it imposes a tariff on imports. This results in
an improving terms of trade for Mexico
a worsening terms of trade for Mexico
no change in the terms of trade for Mexico
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Small Nation Model
128. A country gains from international trade when its post-trade consumption point
lies outside its production possibilities curve
lies along its production possibilities curve
lies inside its production possibilities curve
129. Suppose that Canada levies a tariff on imports that is a fixed percentage of the product’s price. This refers
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United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: Costs of production
130. Suppose that Mexico levies a tariff on steel that is collected as a fixed amount of money per ton imported. This refers
to
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: Costs of production
131. In general, tariffs tend to have
revenue effects, protective effects, and consumption effects
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Small Nation Model
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132. Suppose that Germany levies a tariff on oranges, but none are grown in Germany. This tariff has
both a protective effect and revenue effect
neither a protective effect nor revenue effect
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: The role of money
Tariff Welfare Effects: Small Nation Model
133. If Brazil levies a tariff that prohibits imports of oil, the tariff has
both a revenue effect and a protective effect
neither a revenue effect nor a protective effect
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Small Nation Model
134. The revenue that producers receive over and above the minimum necessary for production is called
United States – BUSPROG: Promotion – BUSPROG: Analytic
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United States – PA – DISC: Productivity and growth
Tariff Welfare Effects: Consumer Surplus and Producer Surplus
135. 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
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: The role of money
Tariff Welfare Effects: Consumer Surplus and Producer Surplus
136. If Ecuador is considered to be a “small” country, a tariff will ______ increase its national welfare.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Small Nation Model
137. If Germany is considered to be a “large” country, a tariff will ______ increase its national welfare.
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United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Large Nation Model
138. Suppose that Japan levies a 40 percent on pickup trucks and a 20 percent on engines. The effective rate of protection
on pickup trucks
more than the nominal rate of protection on pickup trucks
less than the nominal rate of protection on pickup trucks
is equal to the nominal rate of protection on pickup trucks
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: Costs of production
Effective Rate of Protection
139. For industrial nations, tariffs on raw materials generally are
higher than on manufactured products
lower than on manufactured products
equal to tariffs on manufactured products
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: Costs of production
140. The U.S. constitution allows the country to levy tariffs
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on both exports and imports
on neither exports nor imports
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
141. For developing countries, import tariffs generally are ______ than tariff levels in advanced countries
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
142. For a large nation, the levying of an import tariff on steel
necessarily causes the nation’s welfare to decline
causes price of steel on the world market to decline
causes the price of steel for domestic consumers to rise by the full amount of the tariff
necessarily causes the nation’s welfare to increase
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Large Nation Model
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143. When no imported inputs are used in the production of computers, the effective tariff rate on computers
exceeds the nominal tariff rate on computers
is less than the nominal tariff rate on computers
equals the nominal tariff rate on computers
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Effective Rate of Protection
144. If the world price is $40, a specific tariff of $10 is equivalent to an ad valorem tariff of
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
145. When a manufacturing firm uses some imported inputs in the production process, the appropriate measure of
protection is the nominal tariff.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: Costs of production
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Effective Rate of Protection
146. Assume that Japan is a large country and levies an “optimal tariff.” Therefore, the tariff’s terms of trade effect more
than offsets the consumption and production losses and results in an overall welfare gain.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: Gains from trade, speciali – DISC: Gains from trade,
specialization and trade
Tariff Welfare Effects: Large Nation Model
147. If Venezuela is a small country, its terms of trade will improve when it levies a tariff on imports.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Small Nation Model
148. If Japan is a large country, it cannot influence the terms of trade when it imposes a tariff on imports.
United States – BUSPROG: Promotion – BUSPROG: Analytic
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United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Large Nation Model
149. If a small country levies a tariff on imports, its overall national welfare necessarily falls.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Small Nation Model
150. The placing of a tariff on imports will necessarily improve the national welfare of a large country, but it will worsen
the national welfare of a small country.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Tariff Welfare Effects: Large Nation Model
151. For a small country, free trade results in a higher level of national welfare than tariff protection.
United States – BUSPROG: Promotion – BUSPROG: Analytic
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United States – PA – DISC: International trade and fi – DISC: International trade and finance
Arguments for Trade Restrictions
152. Throughout the world, most countries tend to have about the same tariff levels.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
153. The deadweight losses of a tariff consist of the sum of the protective effect plus the consumption effect.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: Costs of production
Tariff Welfare Effects: Small Nation Model
154. For many industrial countries, import tariffs tend to increase with stages of processing and manufacturing.
United States – BUSPROG: Promotion – BUSPROG: Analytic
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United States – PA – DISC: International trade and fi – DISC: International trade and finance
155. During the Great Recession of 2007-2009, countries increased import tariffs to protect their producers damaged by
foreign competition.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
156. Concerning U.S. tariff policy, the offshore assembly provision (OAP) provides unfavorable treatment to products
assembled abroad from U.S. made components.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: Productivity and growth
Outsourcing and Offshore Assembly Provision
157. Tariff avoidance is the legal utilization of the tariff system to one’s own advantage in order to reduce the amount of
tariff that is payable by means that are within the law.
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United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: The role of government
Dodging Import Tariffs: Tariff Avoidance and Tariff Evasion
158. Tariff evasion occurs when individuals or firms escape tariffs by illegal means such as smuggling imported goods
into a country.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: The role of government
Dodging Import Tariffs: Tariff Avoidance and Tariff Evasion
159. A foreign-trade zone (FTZ) is an area within the United States where business can operate without the responsibility
of paying customs duties on imported products or materials for as long as they remain within this area and do not enter the
U.S. marketplace.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Postponing Import Tariffs
160. Empirical studies show that virtually all U.S. import tariffs are “progressive” in that they bear down harder on upper
income groups than lower income groups.
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United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
161. Frederic Bastiat’s “Petition of the Candle Makers” was a satire that illustrated the disadvantages of free trade as
opposed to protectionism.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: International trade and fi – DISC: International trade and finance
Arguments for Trade Restrictions
162. A worker is likely to benefit from a tariff in the short run if the worker is employed in the industry that is protected
by the tariff.
United States – BUSPROG: Promotion – BUSPROG: Analytic
United States – PA – DISC: Labor markets
How a Tariff Burdens Exporters