Question 1

Suppose the U.S. market for ethanol is in autarky (no trade). The equilibrium price is $$2.00 per gallon and the equilibrium quantity is 6 billion gallons. What is the effect on consumer and producer surplus if the U.S. opens to trade and the world price is 1.00 $$per gallon?

Accepted Answer

Consumer surplus increases, producer surplus decreases, and total economic surplus rises.

Question 2

If the U.S. government imposes a $$0.50 per gallon tariff on imported ethanol, raising the domestic price to 1.50 $$per gallon, what is the deadweight loss caused by the tariff?

Accepted Answer

Deadweight loss is represented by the areas $$C + D on $$the supply and demand diagram.

Question 3

Which of the following best describes the effect of a quota on the U.S. sugar market?

Accepted Answer

A quota raises the U.S. price of sugar above the world price, increasing producer surplus and reducing consumer surplus.

Question 4

If the U.S. sugar quota causes a loss of consumer surplus of $$2.59$$ billion and saves 3,000 jobs, what is the cost per job saved?

Accepted Answer

$$\863$$,333$

Question 5

Which of the following is a likely result of a tariff or quota imposed to protect a domestic industry?

Accepted Answer

It redistributes surplus from consumers to producers and the government, but creates deadweight loss.

Question 6

Suppose the U.S. unilaterally eliminates all tariffs and quotas, but other countries do not. According to economic theory, what is the likely effect on the U.S. economy?

Accepted Answer

The U.S. economy would still gain from the elimination of tariffs and quotas.

Question 7

Which of the following is NOT a common argument used by protectionists to justify trade barriers?

Accepted Answer

Increasing consumer surplus.

Question 8

What is the definition of 'dumping' in international trade?

Accepted Answer

Selling a product for a price below its cost of production.

Question 9

Which of the following best describes the difference between a quota and a voluntary export restraint (VER)?

Accepted Answer

A quota is imposed unilaterally by one country, while a VER is negotiated between countries.

Question 10

If the U.S. opens its ethanol market to imports at a world price of $1.00 per gallon, and domestic production falls from 6 billion to 3 billion gallons while consumption rises to 9 billion gallons, how many gallons are imported?

Accepted Answer

$$6$$ billion gallons

Question 11

Which of the following is an example of a normative statement regarding trade policy?

Accepted Answer

The government ought to protect domestic industries from foreign competition.

Question 12

Which of the following is a likely effect of a tariff on imported tires, based on the study materials?

Accepted Answer

It saves jobs in the tire industry but may cause job losses in other sectors due to higher prices.

Question 13

Which of the following best explains why special interest groups are often successful in lobbying for trade protection?

Accepted Answer

The benefits of protection are concentrated among a few, while the costs are spread across many.

Question 14

Which of the following is a positive analysis statement?

Accepted Answer

Tariffs increase the price of imported goods.

Question 15

If the U.S. imposes a quota on sugar imports, which of the following groups is most likely to benefit?

Accepted Answer

U.S. sugar producers

Question 16

Which of the following is a potential unintended consequence of imposing tariffs to protect domestic industries?

Accepted Answer

It may cause job losses in other domestic industries due to higher prices.

Question 17

Which of the following is a function of the World Trade Organization (WTO)?

Accepted Answer

To oversee international trade agreements and provide dispute resolution.

Question 18

Which of the following is an example of a non-tariff barrier to trade?

Accepted Answer

A government imposes higher health and safety standards on imports than on domestic goods.

Question 19

Why might economists argue that the U.S. should remove sugar quotas even if other countries do not?

Accepted Answer

Because the U.S. would still gain from lower prices and increased economic surplus.

Question 20

Which of the following best describes the concept of comparative advantage?

Accepted Answer

A country should produce goods for which it has the lowest opportunity cost.

International Trade, Tariffs, and Quotas: Microeconomic Analysis

Guida di studio - Domande di pratica

Study guide - Flashcard