The imposition of tariffs on imports results in deadweight welfare losses for the home economy. These losses consist of the:

protective effect plus consumption effect

A $100 specific tariff provides home producers more protection from foreign competition when

the home market buys cheaper products rather than expensive products

When a government allows raw materials and other intermediate products to enter a country duty free, its tariff policy generally results in a

nominal tariff rate less than the effective tariff rate

Of the many arguments in favor of tariffs, the one that has enjoyed the most significant economic justification has been the

infant industry agreement

the redistribution effect of an import tariff is transfer of income from the domestic

buyers to domestic producers of the good

the principal benefit of tariff protection goes to

domestic producers of the good produced

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

when the production of a commodity does not utilize imported inputs, the effective tariff rate on the commodity

equals the nominal tariff rate on the commodity

Developing nations often maintain that industrial countries permit raw materials to be imported at very low tariff rates while maintaining high tariff rates on manufactured. Which of the following refers to the above statement?

tariff escalation effect

should canada impose a tariff on imports, one would expect canada's

terms of trade to improve and volume of trade to decrease

a beggar-thy-neighbor policy is the imposition of:

trade barriers to increase domestic demand and employment

a problem encountered when implementing an "infant industry" tariff is that

political pressures may prevent the tariff's removal when the industry matures

the deadweight loss of a tariff

is a social loss since it promotes inefficient production

which of the following is a fixed percentage of the value of an imported product as it enters the country

ad valorem tariff

a tax of 20 cents per unit of imported cheese would be an example of

specific tariff

a tax of 15 percent per imported item would be an example of

ad valorem tariff

which type of tariff is not used by the American government

export tariff

the most vocal political pressure for tariffs is generally made by

producers lobbying for import tariffs

if we consider the interests of both consumers and producers, then a policy of tariff reduction in the US auto industry is

in the interest of the US as a whole, but not in the interest of the auto-producing states

free traders point out that

there is usually an efficiency loss from having tariffs

a decrease in the import tariff will result in

an increase in imports but a decrease in domestic production

consider figure 4.1: in the absence of trade Mexico produces and consumes

60 calculators

consider figure 4.1: in the absence of trade, mexico's producer surplus and consumer surplus respectively equal

180, 180

consider figure 4.1: with free trade, mexico imports

100 calculators

consider figure 4.1: with free trade the total value of mexico's imports equal:

$300

according to figure 4.1: the tariff results in the mexican government collection

$120

according to figure 4.1: mexican manufacturers gain _____ because of the tariff

$75

according to figure 4.1, the deadweight cost of the tariff totals:

$90

suppose that production of $500,000 worth of steel in the US requires $100,000 worth of iron ore. The US nominal tariff rate for importing these goods are 15% for steel and 5% for iron ore. Given this information, the effective rate of protection for the Canadian automobile industry is approximately:

18%

SUppose that the production of a $30,000 automobile in Canada requires $10,000 worth of steel. The Canadian nominal tariff rates for importing these goods are 25% for automobiles and 10% for steel. Given this information, the effective rate of protection for the Canadian automobile industry is approx.

32%

Refer to Exhibit 4.1. In the absence of the Offshore Assembly Provision of US tariff policy, the price of an imported vehicle to the US consumer after the tariff has been levied is

$24,000

refer to exhibit 4.1: under the offshore assembly provision of US tariff policy, the price of an imported vehicle to the US consumer after the tariff has been levied is

$22,000

suppose that 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 (an)

compound tariff

A compound tariff is a combination of a (an)

specific tariff and an ad valorem tariff

consider table 4.1. Prior to the tariff, the total price of domestically-produced VCRs is

$200

consider table 4.1. Prior to the tariff, the total price of imported VCRs is:

$200

Consider table 4.1: the nominal tariff rate on imported vcrs equals

12.5%

consider table 4.1: prior to the tariff, domestic value added equals:

$50

consider table 4.1: the effective tariff rate equals:

50%

If the domestic value added before an import tariff for a product is $500 and the domestic value added after the tariff is $550, the effective rate of protection is

10%

the offshore assembly provision in the US

provides favorable treatment to products assembled abroad from US manufactured components

Arguments for US trade restrictions include all of the following except

improving incomes for developing countries

FOr the US, a foreign trade zone (FTZ) is

a site within the United States

Figure 4.3 represents the domestic market for gasoline in the US. What is the consumer surplus in this market?

$60

figure 4.3 represents the domestic market for gasoline in the US. What is the producer surplus in this market?

$60

which trade policy results in the government levying a two-tier tariff on imported goods?

tariff quota

the following are how to measure the welfare effects of a tariff except

nominal effect

the following are types of tariffs, except

developing tariff

the following are arguments for trade restrictions, except

outsourcing

which of the following represents inefficiency

deadweight loss

a primary reason why nations conduct international trade is because

resources are not equally distributed among all trading nations

a main advantage of specialization results from

economies of scale production

if a nation has an open economy, it means that the nation

conducts trade with other countries

international trade forces domestic firms to become more competitive in terms of:

all of the above

International trade in goods and services tends to

increase the amount of competition facing home manufacturers

increased globalization is fostered by

reduced transportation costs

a closed economy is one in which

the home economy is isolated from foreign trade

the first wave of globalization was brought to an end by

the first world war

multilateral trade negotiations have led to

all of the above

the mercantilists would have objected to

international trade based on open markets

unlike the mercantilists, adam smith maintained that

all nations can gain from free international trade

the trading principle formulated by adam smith maintained that

absolute cost differences determine the immediate basis for trade

unlike adam smith, david ricardo's trading principle emphasizes the

role of comparative costs

referring to table 2.1 the US has the absolute advantage in the production of

both steel and televisions

referring to table 2.1 the UK has a comparative advantage in the production of

steel

refer to table 2.1 if trade opens up between the US and the UK american firms should specialize in producing

televisions

referring to table 2.1 the opportunity cost of producing one ton of steel in the US is

3 tvs

if a production possibilities curve is bowed out (concave) in appearance, production occurs under conditions of

increasing opportunity costs

increasing opportunity costs suggest that

resources are not perfectly shiftable between the production of two goods

the trading triangle concept is used to indicate a nation's

terms of trade, exports, imports

referring to table 2.2, the opportunity cost of one VCR in Japan is

1 ton of steel

referring to table 2.2, the opportunity cost of one VCR in south korea is

2 tons of steel

the earliest statement of the principle of comparative advantage is associated with

david ricardo

the terms of trade is given by the prices:

received for exports and paid for imports

the terms of trade is given by:

(price of exports/price of imports) X 100

Ricardo's model of comparative advantage assumed all of the following except

transportation costs rise as distance increases between countries

Adam Smith

all of the above

Which of the following suggests that a nation will export the commodity in the production of which a great deal of its relatively abundant and cheap factor is used

the heckscher ohlin theory

which of the following is a long-run theory, emphasizing changes in the trading position of a nation over a number of years

theory of product cycle

the leontief paradox questioned the validity of the theory of

factor endowments

which of the following would least likely apply to the product life cycle theory

coal and crude oil

eli heckscher and bertil ohlin are associated with the theory of comparative advantage that stresses differences in

resource endowments among countries

Hong Kong is relatively abundant in labor while Canada is relatively abundant in capital. In both countries, the production of shirts is relatively more labor intensive than the production of computers. According to the factor endowment theory, Hong Kong will have a

comparative advantage in the production of shirts

which trade theory suggests that a newly produced good, once exported, could ultimately end up being imported as the technology is transferred to lower-cost nations

product life cycle theory

a firm is said to enjoy economies of scale over the range of output for which the long-run average cost is

decreasing

which of the following suggests that by widening the market's size, international trade can permit longer production runs for manufacturers, which leads to increasing efficiency?

economies of scale

the leontief paradox

suggested that the US exports labor-intensive goods

the heckscher-ohlin theory explains comparative advantage as the result of differences in countries'

relative abundance of various resources

According to factor endowment model, countries heavily endowed with land will

export products that are land-intensive

the leontief paradox provided:

evidence against the factor endowment model

which trade theory suggests that comparative advantage tends to shift from one nation to another as a product matures

product life cycle theory

economists agree that wages of unskilled workers are being held down by

a combination of a,b, and c

the factor endowment theory states that comparative advantage is explained

exclusively by differences in relative supply conditions

the factor endowment theory assumes

all of the above

in explaining international trade, the product life cycle theory focuses on

the role of technological innovation

concerning the influence that transportation costs have on the location of industry, which of the following industries has generally attempted to locate production facilities close to resource supplies

steel

assume that country a, in the absence of trade, finds itself relatively abundant in labor and relatively scarce in land. the factor endowment theory reasons that with free trade the internal distribution of national income in COuntry a will change in favor of

labor

when considering the effects of transportation costs, the conclusions of our trade model must be modified. this is because transportation costs result in

lower trade volume, higher import prices, smaller gains from trade

most economists maintain that the major factor underlying wage stagnation in the US in the 1990s has been

technological change

assume that the cost of transporting autos from Japan to Canada exceeds the pre-trade price difference for autos between Japan and Canada. Trade in autos is

impossible

The European Union is primarily intended to permit:

free movement of resources and products among member nations

which of the following represents the stage where economic integration is most complete

monetary union

which of the following represents the stage where economic integration is least complete

free trade area

which economic integration scheme is solely intended to abolish trade restrictions among member countries while setting up common tariffs against nonmembers

customs union

by 1992 the european union had become a full fledged

common market

which organization of nations permits free trade among its members in industrial goods, while each member maintains freedom in its trade policies toward non-member countries

north american free trade association

which of the following organizations is considered a regional trading arrangement?

council for mutual economic assistance

which form of economic integration occurs when participating countries abolish tariffs on trade among themselves, establish a common tariff on imports from nonmembers and permit free movement of capital and labor within the organization

common market

which organization was founded in 1957 whose objective was to create an economic union among its members

european union

the common agriculture policy of the european union has supported European farmers via

export subsidies and variable levies

which nation is not a member of the north american free trade association

greenland

NAFTA is a

free trade area

members of the european union find that "trade creation" is fostered when their economies are

highly competitive

the european union has achieved all of the following except

adopted a common fiscal policy for member nations

which country is not a member of the european union

iceland

the implementation of the european union has

made is harder for americans to compete against the Germans in the British market

the common agricultural policy of the european union has

decreased american farm exports to the EU

under the common agricultural policy, exports of any surplus quantities of EU produce are encourage through the usage of

export subsidies

at the Maastricht Summit of 1991, european union negotiators called for the pursuit of a

monetary union

suppose that steel from Japan faces a 20% tariff in france and a 25% tariff in Italy, while france and italy maintain free trade between each other. France and Italy are therefor part of a

free trade area

suppose that mexico and canada form a free-trade area and Canada begins importing steel from mexico rather than from Germany. There occurs:

trade diversion

suppose that mexico and canada form a free-trade area. Mexicans then decrease auto manufacturing and increase imports of autos from Canada, while the canadians decrease computer production and import more computers from Mexico. this is an example of

trade creation

if the united states and canada abolish are tariffs on each other's goods and implement a common tariff on goods imported from other countries, there occurs a (an):

customs union

suppose that the united kingdom and italy abolish all tariffs on each other's goods and all restrictions on movements of factors of production between them. they also implement a common protectionist policy toward other countries. this is an example of a (an):

common market

the north american free trade agreement was expected to benefit ____ the most

Mexico

on the balance of payments statements, merchandise imports are classified in the

current account

which of the following is considered a capital inflow?

a sale of US financial assets to foreign buyer

in a country's balance of payments, which of the following transactions are debits?

domestic bank balances owned by foreigners are decreased

which of the following is classified as a credit in the US balance of payments

us exports

referring to table 10.1 the goods and services balance equals:

$20 billion

referring to table 10.1, the current account balance equals

$5 billion

which of the following indicates the international investment position of a country at a given moment in time

the balance of international indebtedness

If an American receives dividends from the shares of stock she or he owns in Toyota, Inc, a Japanese firm, the transaction would be recorded on the US balance of payments as a:

current account credit

if the US government sells military hardware to Saudi Arabia, the transaction would be recored on the US balance of payments as a

current account credit

the US balance of trade is determined by

all of the above

US military aid granted to foreign countries is entered in the

current account

the current account of the US balance of payments does not include

the sale of securities to foreigners

the US has a balance of trade deficit when its

merchandise imports exceed its merchandise exports

consider table 10.2 the US balance of international indebtedness suggests that the US is a net

creditor

For the first time since world war 1, in 1985 the US became a net international

debtor

credit(+) items in balance of payments correspond to anything that:

involves receipts from foreigners

debt (-) items in the balance of payments correspond to anything that

involves payments to foreigners

when all of the debit or credit items in the balance of payments are combined

the total surplus or deficit equals equals

in the balance of payments, the statistical discrepancy is used to:

ensure that the sum of all debits matches the sum of all credits

all of the following are credit items in the balance of payments, except

private gifts to foreign residents

all of the following are debit items in the balance of payments, except

merchandise exports

which of the following tends to cause the US dollar to appreciate in value

rapid economic growth in foreign countries

suppose that real incomes increase more rapidly in the US than in mexico. in the US this situation would most likely result in a (an)

increase in the demand for pesos

if canadian speculators believed the swiss franc was going to appreciate against the US dollar, they would

purchase swiss francs

suppose that a Swiss watch that costs 400 francs in Switzerland costs $200 in the united states, the exchange rate between the franc and the dollar is

2 francs per dollar