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Exam 4: Tariffs

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Question 61

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A tariff can increase the welfare of a "large" country if the favorable terms-of-trade effect is greater than the unfavorable protective effect and consumption effect.

A) True
B) False

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Question 62

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If Japan is a large country it cannot influence the terms of trade when it imposes a tariff on imports.

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B) False

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Question 63

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In the absence of international trade, assume that the equilibrium price and quantity of motorcycles in Canada is $14,000 and 10 units respectively. Assuming that Canada is a small country that is unable to affect the world price of motorcycles, suppose its market is opened to international trade. As a result, the price of motorcycles falls to $12,000 and the total quantity demanded rises to 14 units; out of this total, 6 units are produced in Canada while 8 units are imported. Now assume that the Canadian government levies an import tariff of $1,000 on motorcycles. With the tariff, 8 units are produced in Canada and quantity demanded is 12 units. -Figure 4.4 represents the market for gasoline in a small nation.The free trade world price of gasoline is $3.50.Suppose this small nation imposes a tariff on gasoline of $.50 per gallon.The change in consumer surplus would be

A country gains from international trade when its post-trade consumption point

Suppose that Germany levies a tariff on oranges, but none are grown in Germany.This tariff has

Although tariffs on imported steel may lead to job gains for domestic steel workers, they can lead to job losses for domestic auto workers.

Suppose that Japan levies a 40 percent tariff on pickup trucks and a 20 percent tariff on engines.The effective rate of protection on pickup trucks

According to the tariff escalation effect, industrial countries apply low tariffs to imports of finished goods and high tariffs to imports of raw materials.

An optimum tariff benefits

If a tariff reduces the quantity of Japanese autos imported by the United States, over time it reduces the ability of Japan to import goods from the United States.

Concerning U.S.tariff policy, the offshore assembly provision (OAP) provides unfavorable treatment to products assembled abroad from U.S.made components.

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 DU.S. and SU.S. in Figure 4.2. The overall (United States plus world) supply schedule of steel is denoted by SU.S.+W. Figure 4.2. Import Tariff Levied by a "Large" Country ? -Suppose that the production of $500,000 worth of steel in the United States requires $100,000 worth of iron ore.The U.S.nominal tariff rates are 15 percent for steel and 5 percent for iron ore.Given this information, the effective rate of protection for the U.S.steel industry is approximately

A tariff on steel imports tends to improve the competitiveness of domestic automobile companies.

During a recession, when consumers tend to purchase cheaper products, a specific tariff provides domestic producers a greater amount of protection against import-competing goods than other types of tariffs.

The deadweight losses of a tariff consist of the sum of the protective effect plus the consumption effect.

If Ecuador is considered a "small" country, a tariff will ______ increase its national welfare.

Graphically, consumer surplus is the area above the demand curve and below the product's market price.

A specific tariff is expressed as a fixed percentage of the total value of an imported product.

With a compound tariff, the "specific" portion neutralizes the cost disadvantage of domestic manufacturers that results from tariff protection granted to domestic suppliers of raw materials, and the "ad valorem" portion grants protection to the finished-goods industry.

For a "small" country, a tariff raises the domestic price of an imported product by the full amount of the tariff.