Assignment 4 (Chapter 4)

1. A lower tariff on imported aluminum would most likely benefit:

Foreign producers at the expense of domestic consumers
Domestic manufacturers of aluminum
Domestic consumers of aluminum
Workers in the domestic aluminum industry

2. When a government allows raw materials and other intermediate products to enter a country duty free, its tariff policy generally results in a(n):

Effective tariff rate less than the nominal tariff rate
Nominal tariff rate less than the effective tariff rate
Rise in both nominal and effective tariff rates
Fall in both nominal and effective tariff rates

3. The principal benefit of tariff protection goes to:

Domestic consumers of the good produced
Domestic producers of the good produced
Foreign producers of the good produced
Foreign consumers of the good produced

4. Which of the following policies permits a specified quantity of goods to be imported at one tariff rate and applies a higher tariff rate to imports above this quantity?

Tariff quota
Import tariff
Specific tariff
Ad valorem tariff

5. Should Canada impose a tariff on imports, one would expect Canada's:

Terms of trade to improve and volume of trade to decrease
Terms of trade to worsen and volume of trade to decrease
Terms of trade to improve and volume of trade to increase
Terms of trade to worsen and volume of trade to increase

6. A beggar-thy-neighbor policy is the imposition of:

Free trade to increase domestic productivity
Trade barriers to increase domestic demand and employment
Import tariffs to curb domestic inflation
Revenue tariffs to make products cheaper for domestic consumers

7. A problem encountered when implementing an "infant industry" tariff is that:

Domestic consumers will purchase the foreign good regardless of the tariff
Political pressure may prevent the tariff's removal when the industry matures
Most industries require tariff protection when they are mature
Labor unions will capture the protective effect in higher wages

8. The deadweight loss of a tariff is:

A social loss since it promotes inefficient production
A social loss since it reduces the revenue for the government
Not a social loss because society as a whole doesn't pay for the loss
Not a social loss since only business firms suffer revenue losses

9. A tax of 20 cents per unit of imported cheese would be an example of:

Compound tariff
Effective tariff
Ad valorem tariff
Specific tariff

10. The most vocal political pressure for tariffs is generally made by:

Consumers lobbying for export tariffs
Consumers lobbying for import tariffs
Producers lobbying for export tariffs
Producers lobbying for import tariffs

11. Figure 4.1 illustrates the demand and supply schedules for pocket calculators in Mexico, a "small" nation that is unable to affect the world price. Answer the question(s) on the basis of this figure.

Figure 4.1. Import Tariff Levied by a "Small" Country

Consider Figure 4.1. In the absence of trade, Mexico's producer surplus and consumer surplus respectively equal:

$120, $240
$180, $180
$180, $320
$240, $240

12. Figure 4.1 illustrates the demand and supply schedules for pocket calculators in Mexico, a "small" nation that is unable to affect the world price. Answer the question(s) on the basis of this figure.

Figure 4.1. Import Tariff Levied by a "Small" Country

Consider Figure 4.1. With free trade, Mexico's producer surplus and consumer surplus respectively equal:

$5, $605
$25, $380
$45, $250
$85, $195

13. Figure 4.1 illustrates the demand and supply schedules for pocket calculators in Mexico, a "small" nation that is unable to affect the world price. Answer the question(s) on the basis of this figure.

Figure 4.1. Import Tariff Levied by a "Small" Country

According to Figure 4.1, the loss in Mexican consumer surplus due to the tariff equals:

$225
$265
$285
$325

14. Figure 4.1 illustrates the demand and supply schedules for pocket calculators in Mexico, a "small" nation that is unable to affect the world price. Answer the question(s) on the basis of this figure.

Figure 4.1. Import Tariff Levied by a "Small" Country

According to Figure 4.1, Mexican manufacturers gain ____ because of the tariff.

$75
$85
$95
$105

15. Figure 4.1 illustrates the demand and supply schedules for pocket calculators in Mexico, a "small" nation that is unable to affect the world price. Answer the question(s) on the basis of this figure.

Figure 4.1. Import Tariff Levied by a "Small" Country

According to Figure 4.1, the deadweight cost of the tariff totals:

16. Assume the United States is a large consumer of steel that is able to influence the world price. Its demand and supply schedules are respectively denoted by D_U.S. and S_U.S. in Figure 4.2. The overall (United States plus world) supply schedule of steel is denoted by S_U.S.+W. Answer the question(s) on the basis of this information.

Figure 4.2. Import Tariff Levied by a "Large" Country

Consider Figure 4.2. With free trade, the United States achieves market equilibrium at a price of $____. At this price, ____ tons of steel are produced by U.S. firms, ____ tons are bought by U.S. buyers, and ____ tons are imported.

$450, 5 tons, 60 tons, 55 tons
$475, 10 tons, 50 tons, 40 tons
$525, 5 tons, 60 tons, 55 tons
$630, 30 tons, 30 tons, 0 tons

17. Assume the United States is a large consumer of steel that is able to influence the world price. Its demand and supply schedules are respectively denoted by D_U.S. and S_U.S. in Figure 4.2. The overall (United States plus world) supply schedule of steel is denoted by S_U.S.+W. Answer the question(s) on the basis of this information.

Figure 4.2. Import Tariff Levied by a "Large" Country

Consider Figure 4.2. Of the $100 tariff, $____ is passed on to the U.S. consumer via a higher price, while $____ is borne by the foreign exporter; the U.S. terms of trade ____.

$25, $75, improve
$25, $75, worsen
$75, $25, improve
$75, $25, worsen

18. Assume the United States is a large consumer of steel that is able to influence the world price. Its demand and supply schedules are respectively denoted by D_U.S. and S_U.S. in Figure 4.2. The overall (United States plus world) supply schedule of steel is denoted by S_U.S.+W. Answer the question(s) on the basis of this information.

Figure 4.2. Import Tariff Levied by a "Large" Country

According to Figure 4.2, the tariff leads to the overall welfare of the United States:

Rising by $250
Rising by $500
Falling by $250
Falling by $500

19. Answer the question(s) on the basis of the following information. Assume that the United States imports automobiles from South Korea at a price of $20,000 per vehicle and that these vehicles are subject to an import tariff of 20 percent. Also assume that U.S. components are used in the vehicles assembled by South Korea and that these components have a value of $10,000.

In the absence of the Offshore Assembly Provision of U.S. tariff policy, the price of an imported vehicle to the U.S. consumer after the tariff has been levied is:

$22,000
$23,000
$24,000
$25,000

20. Suppose an importer of steel is required to pay a tariff of $20 per ton plus 5 percent of the value of steel. This is an example of a(n):

Specific tariff
Ad valorem tariff
Compound tariff
Tariff quota

21. Use the data in Table 4.1 to answer the question(s).

Table 4.1. Production Costs and Prices of Imported and Domestic VCRs

Imported VCRs		Domestic VCRs
Component parts	$150	Imported component parts	$150
Assembly cost/profit	50	Assembly cost	50
Nominal tariff	25	Profit	25
Import price after tariff	$225	Domestic price after tariff	$225

Consider Table 4.1. Prior to the tariff, the total price of domestically-produced VCRs is:

$150
$200
$225
$250

22. Use the data in Table 4.1 to answer the question(s).

Table 4.1. Production Costs and Prices of Imported and Domestic VCRs

Imported VCRs		Domestic VCRs
Component parts	$150	Imported component parts	$150
Assembly cost/profit	50	Assembly cost	50
Nominal tariff	25	Profit	25
Import price after tariff	$225	Domestic price after tariff	$225

Consider Table 4.1. The nominal tariff rate on imported VCRs equals:

11.1 percent
12.5 percent
16.7 percent
50.0 percent

23. Use the data in Table 4.1 to answer the question(s).

Table 4.1. Production Costs and Prices of Imported and Domestic VCRs

Imported VCRs		Domestic VCRs
Component parts	$150	Imported component parts	$150
Assembly cost/profit	50	Assembly cost	50
Nominal tariff	25	Profit	25
Import price after tariff	$225	Domestic price after tariff	$225

Consider Table 4.1. After the tariff, domestic value added equals:

$25
$50
$75
$100

24. Use the data in Table 4.1 to answer the question(s).

Table 4.1. Production Costs and Prices of Imported and Domestic VCRs

Imported VCRs		Domestic VCRs
Component parts	$150	Imported component parts	$150
Assembly cost/profit	50	Assembly cost	50
Nominal tariff	25	Profit	25
Import price after tariff	$225	Domestic price after tariff	$225

Consider Table 4.1. The effective tariff rate equals:

11.1 percent
16.7 percent
50.0 percent
100.0 percent

25. Arguments for U.S. trade restrictions include all of the following except:

Job protection
Infant industry support
Maintenance of domestic living standard
Improving incomes for developing countries

Citation: admin. (2009, January 27). Assignment 4 (Chapter 4). Retrieved March 20, 2010, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/international-economics/Assignment4.htm.