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The Instruments of Trade Policy

1. A tax of 20 cents per unit of imported cheese would be an example of 7. The effective rate of protection
a (an): a. distinguishes between tariffs that are effective and those that are
a. Compound tariff ineffective
b. Effective tariff b. is the minimum level at which a tariff becomes effective in limiting
c. Ad valorem tariff imports
d. Specific tariff c. shows how effective a tariff is in raising revenue for the government
d. shows the increase in value added for domestic production that a
2. A tax of 15 percent per imported item would be an example of a (an): particular tariff structure makes possible, in percentage terms
a. Ad valorem tariff
b. Specific tariff 8. If a nation fitting the criteria for the small nation model imposes a 10
c. Effective tariff percent tariff on imports of autos
d. Compound tariff a. the price of autos within the nation will rise by 10 percent
b. the price of autos within the nation will rise by less than 10 percent
3. For advanced countries such as the United States, tariffs on imported c. the price of autos within the nation will rise by more than 10 percent
raw materials tend to be d. the price of autos will not rise because of internal competition
a. equal to tariffs on imported manufactured goods
b. lower than tariffs on imported manufactured goods 9. According to the ______ argument for protection, tariffs can shield new
c. higher than tariffs on imported manufactured goods industries from import competition until they have grown strong and
d. the highest of all tariffs efficient enough to withstand the competition by foreign producers.
a. scientific tariff argument
4. Ad valorem tariffs are collected as b. infant industry argument
a. fixed amounts of money per unit traded c. beggar they neighbor argument
b. a percentage of the price of the product d. foreign dumping argument
c. a percentage of the quantity of imports
d. all of the above 10. _____ represents the difference between what consumers have to pay
for a product and what they are willing and able to pay.
5. Specific tariffs are collected as a. producer surplus
a. fixed amount of money per unit traded b. deadweight surplus
b. a percentage of the price of the product c. government surplus
c. a percentage of the quantity of imports d. consumer surplus
d. all of the above
11. If a nation fitting the criteria for the large nation model imposes an
6. Most tariffs have import tariff
a. only revenue effects a. the domestic price of the product will increase by more than the tariff
b. only protective effects itself
c. both protective and revenue effects b. the domestic price of the product will increase by the same amount as
d. neither protective or revenue effects the tariff
c. the domestic price of the product will increase by less than the tariff
d. none of the above d. the protected industry provides invaluable goods during periods of war

12. If a country an imposes an import tariff, its welfare can improve if 17. During periods of growing domestic demand, an import quota
a. the country is a "small country" rather than a "large country" a. is less restrictive on a country’s imports than a tariff
b. its terms of trade improve enough b. is more restrictive on a country’s imports than a tariff
c. the tariff enhances the welfare of its trading partners c. has the same restrictive effect on a country’s imports as a tariff
d. its government's tax revenue increases because of the tariff d. will always generate increased tax revenue for the government

13. Suppose that the United States imposes a tariff on ballpoint pens of 18. Export subsidies levied by foreign governments on products in which
25 cents per pen plus 12 percent of the pen's value. This is an example of the United States has comparative disadvantage:
a (an) a. lower the welfare of all Americans
a. specific tariff b. lead to increases in U.S. consumer surplus
b. ad valorem tariff c. encourage U.S. production of competing goods
c. compound tariff d. encourage U.S. workers to demand higher wages
d. effective tariff
19. In certain industries, Japanese employers hesitate to lay off workers.
14. Concerning a government's trade policy, all of the following Therefore, they sometimes have excess supplies of goods that they cannot
generally apply except sell on the home market without lowering prices. To hold down losses,
a. economic downturn and recession generally result in greater they sell goods in overseas markets at prices well beneath those in Japan.
protectionism This practice is best referred to as:
b. because domestic consumers outnumber domestic producers, policy a. orderly marketing
makers usually enact Free-trade policies to satisfy the consumer majority b. trigger pricing
c. when domestic exporting companies are organized, policy tends to c. domestic content pricing
favor freer trade d. dumping
d. policy tends to
20. ________ are quotas that lead to a complete abolishment of trade.
15. Concerning import tariffs of the United States, empirical studies tend a. embargoes
to conclude that these tariffs are b. voluntary export restraints
a. progressive and thus bear down on the wealthy c. nontariff barriers
b. regressive and thus bear down on the poor d. orderly marketing agreements
c. proportional and thus bear down on all consumers in the same manner
d. deflationary and thus result in reductions in the price of imports

16. The national security argument for protection is more likely to be


valid when
a. the purpose is to maintain protection for an indefinite time period
b. the industry is characterized by increasing returns to scale
c. the economy operates during a recession