Question

What is the main difference between a quota and a voluntary export restraint?

a) The importing country administers a quota; the exporting country administers a voluntary export restraint.

b) A quota has deadweight losses, while a voluntary export restraint has no deadweight losses.

c) There are no differences between a quota and a voluntary export restraint.

d) A quota affects a country's imports, while a voluntary export restraint affects its exports.

In Europe, the Common Agricultural Policy is a form of:

a) subsidy, regardless of whether the crop is sold domestically or internationally.

b) regulation and supervision by the WTO in assuring that tariffs are applied fairly.

c) tax on domestic production of agricultural products.

d) a purchase program whereby government buys unusable products.

How might an export tariff in a large country improve the country's economic welfare?

a) The export tariff will improve the country's welfare if terms of trade gains are larger than deadweight consumption and production losses.

b) The export tariff will never improve the country's welfare, since deadweight consumption and production losses always outweigh terms of trade gains.

c) The export tariff will improve the country's welfare if deadweight consumption and production losses are greater than terms of trade gains.

d) The export tariff will always improve the country's welfare, since there are no deadweight consumption and production losses.

Answer 1

1. a) The importing country administers a quota; the exporting country administers a voluntary export restraint.
(Quota is administered by importing country and VER by exporting country.)

2. a) subsidy, regardless of whether the crop is sold domestically or internationally.
(CAP provides subsidies.)

3. d) The export tariff will always improve the country's welfare, since there are no deadweight consumption and production losses.
(Export tariff will always improve the welfare.)