9.3 Other Instruments of Trade Policy
1) An important difference between tariffs and quotas is that tariffs
A) raise the price of the good.
B) generate tax revenue for the government.
C) stimulate international trade.
D) help domestic producers.
E) are paid by foreign producers.
2) Throughout the post-World War II era, the importance of tariffs as a trade barrier has
A) increased.
B) decreased.
C) remained the same.
D) fluctuated wildly.
E) demonstrated a classic random walk with a mean-reversion tendency.
3) In the exporting country, an export subsidy will
A) help consumers and raise the overall economic welfare of the exporting country.
B) hurt consumers but raise the overall economic welfare of the exporting country.
C) hurt consumers and lower the overall economic welfare of the exporting country.
D) help consumers but lower economic welfare of the exporting country.
E) help consumers and have no effect on the economic welfare of the exporting country.
4) Economic theory in general, and trade theory in particular are replete with equivalencies. For example, it is argued that for any specific tariff one can find an equivalent ad valorem tariff; and that for any quota one can calculate a tariff equivalent. Discuss conditions or situations under which a specific and an ad valorem tariff are not equivalent. Discuss conditions or situations when a tariff and a quota are not equivalent.
5) An export subsidy is
A) a payment to a firm or individual that ships a good abroad.
B) a fee that is charged to a country that ships goods to the U.S.
C) a payment made to a foreign government in return for preferential trade treatment.
D) illegal in the U.S. but is fairly common in the rest of the world.
E) a limit on the quantity of a good or service that can be sold abroad.
6) An export subsidy differs from a tariff in each of the following ways EXCEPT
A) a tariff generates revenue.
B) a tariff is applied to imports.
C) a tariff results in an efficiency loss.
D) a tariff is a tax.
E) a tariff discourages imports.
7) The European Union’s Common Agricultural Policy (CAP) is, in effect
A) a tariff imposed on agricultural exports.
B) a tariff imposed on agricultural imports.
C) a subsidy that reduces the cost of agricultural exports.
D) a subsidy that increases the cost of agricultural exports.
E) a quota that limits production of agricultural goods by EU nations.
8) An import quota is similar to a ________ in its effect on imports, except that an import quota ________.
A) tariff; does not generate revenue
B) tariff; generates revenue
C) subsidy; does not generate revenue
D) subsidy; generates revenue
E) tariff; does not result in an efficiency loss.
9) The U.S. sugar quota
A) generates government revenue.
B) results in net welfare benefits to the U.S. economy.
C) results in benefits to sugar producers that exceed the cost to consumers.
D) results in costs to consumers that exceed the benefits to sugar producers.
E) does not result in an efficiency loss.
10) Which of the following are examples of goods that have been subject to voluntary export restraints?
A) Japanese cars and Chinese solar panels
B) Belgian chocolates and French wines
C) French wines and cheeses
D) Japanese sushi and German cars
E) Taiwanese electronics and Canadian barley
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