If a tariff in a small country reduces consumer surplus by $100,
increases tariff revenue by $50, and increases producer surplus by
$20, then which of the following is incorrect?
a. National welfare falls by $30.
b. National welfare falls by $50.
c. Deadweight loss is $30.
d. The protection cost is $30.
If a tariff of $10 per unit reduces the world price by $4,
a. The nation imposing the tariff must be a small nation.
b. Domestic consumers pay $6 of the $10 per unit tariff.
c. Foreign producers pay $6 per unit of the $10 per unit tariff.
d. The nation imposing the tariff as a whole must necessarily lose
Given that a tariff will improve the welfare of a large nation,
which of the following is true?
a. World welfare will increase.
b. The large nation's gains are equal to its trading partners' losses.
c. World welfare will fall.
d. Large nations should impose a prohibitive tariff
A quota is more restrictive than a tariff because
a. the quota may not have revenue effect.
b. imports under a quota will be less than those under a tariff as the domestic demand increases
c. domestic producers prefer tariffs.
d. domestic consumers prefer quotas.
An increase in the demand of the imported commodity subject to a
given import quota:
a. reduces the domestic quantity demanded of the commodity
b. increases the domestic production of the commodity
c. reduces the domestic price of the commodity
d. reduces the producers' surplus
Trade protection in Chinais usually provided to
a. capital-intensive industries
b. technology-intensive industries.
c. high-technology industries
d. all of the above
Trade protectionin developed countries is usually provided
a. labor-intensive industries
b. capital-intensive industries
c. skilled workers
d. technology-intensive industries
Those who gain from imports do not lobby government for free
trade while those who lose from imports tend do lobby for
a. The gains are very widely distributed while the losses are concentrated.
b. The gains are small relative to losses.
c. Both the gains and losses are concentrated.
d. The gains are apparent while the losses are less obvious.
1) Option B because welfare is decreased by 100 and increased by (20 + 50) = 70 so net welfare loss is -100+70 = -30. This is also the deadweight loss due to tariff
2) Option B because world price is reduced by $4 and domestic price is increased by $6 so that tariff is shared. This generally happens when the country is large.
3) a. World welfare will increase.
4) a. the quota may not have revenue effect.
5) b. increases the domestic production of the commodity
6) d. all of the above
7) a. labor-intensive industries
8) a. The gains are very widely distributed while the losses are concentrated.
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