1. Use the figure in the PDF above to answer questions
1-4.
Refer to the figure. How many MP3 players can be imported from abroad after the
quota is imposed?
2 million.
5 million.
12 million.
17 million.
1 points
QUESTION 2
1. Refer to the figure in question 1. The quota on MP3
players will cause domestic producers to:
gain $150 million.
lose $100 million.
gain $110 million.
lose $120 million.
1 points
QUESTION 3
1. Refer to the figure in question 1. If the government
auctions the import licenses, the quota on MP3 players will result in a(n)
_____ in the national well-being by _____.
decrease; $35 million
decrease; $85 million
increase; $70 million
increase; $195 million
1 points
QUESTION 4
1. Referring to the figure in question 1, if instead of
using a quota to limit imports they were limited by a voluntary export
restraint (VER), the loss to the nation would be:
$35 million.
$50 million.
$85 million.
$195 million.
1 points
QUESTION 5
1. Use the following information to answer questions 5 and
6.
A small country imports T-shirts. With free trade at a world
price of $10, domestic production is 10 million T-shirts and domestic
consumption is 42 million T-shirts. The country’s government now decides to
impose a quota to limit T-shirt imports to 20 million per year. With the import
quota in place, the domestic price rises to $12 per T-shirt and domestic
production rises to 15 million T-shirts per year.
The quota on T-shirts causes domestic consumers to:
gain $7 million.
lose $7 million.
lose $70 million.
lose $77 million.
1 points
QUESTION 6
1. Refer to the previous question. If the government
auctions the quota licenses, calculate the revenue collected by the government.
$40 million
$70 million
$200 million
$240 million
1 points
QUESTION 7
1. In which of the following cases does an import quota
result in a higher welfare loss than a tariff?
The domestic firms producing an import-competing product set
the product’s price equal to the marginal cost of producing it.
The government auctions the import licenses to the highest
bidders.
The quota licenses are allocated through resource-using
application procedures.
The domestic industry in the importing country is highly
competitive.
1 points
QUESTION 8
1. The World Trade Organization has rules that try to limit
the use of tariffs but not the use of NTBs.
True
False
1 points
QUESTION 9
1. When an importing country compels the foreign exporting
country to agree “voluntarily” to restrict its exports to this
country, the exporting firms in the foreign country suffer a net welfare loss.
True
False
1 points
QUESTION 10
1. Whenever the benefits of group effort fall on every
member of a large dispersed group, regardless of individual contributions,
there can be a:
sudden-damage effect.
spillover effect.
free-rider problem.
negative externality.
1 points
QUESTION 11
1. Which of the following statements reflects a situation in
which there are external benefits?
John paints his house and cleans his paintbrushes in the
stream.
John pays 5 percent of his income as taxes.
John’s decision to get vaccinated for smallpox reduces the
chances that his neighbor Pete will get smallpox.
John sells his car to his neighbor Pete at half the
first-hand price.
1 points
QUESTION 12
1. Suppose that the domestic production of computer games
creates enjoyment for those who play the games. Domestic production of computer
games also results in knowledge spillovers that positively impact many other
industries. One possible policy that could be employed to encourage increased
production of computer games by domestic firms is:
to impose tariffs on computer game imports.
to tax the production of computer games.
to tax the consumption of computer games.
to eliminate all restrictions on the importation of computer
games.
1 points
QUESTION 13
1. Use the figure in the PDF above to answer questions
13-16. Refer to the figure. The increase in external benefits to the nation of
the increased production of mopeds because of the tariff is:
$13.25 million.
$2.5 million.
$5 million.
$7.5 million.
1 points
QUESTION 14
1. Refer to the figure in the previous question. The overall
impact of the tariff on the nation would be:
a loss of $15 million.
a loss of $20.75 million.
a gain of $13.25 million.
a gain of $5.75 million.
1 points
QUESTION 15
1. Refer to the figure in question13. If there is initially
free trade, and then a $50 per unit subsidy is given to the domestic producers
of mopeds, domestic production will increase by:
100,000 units.
600,000 units.
700,000 units.
1,200,000 units.
1 points
QUESTION 16
1. Refer to the figure in question 13. What will be the
DIFFERENCE in the effects on the national well-being if, instead of imposing a
tariff of $50 per unit, the government provides a subsidy of $50 per unit to
the domestic manufacturers of mopeds? Note: this is the change in national
well-being from the subsidy minus the change in national well-being from the
tariff.
The national welfare will increase by $5 million.
The national welfare will decline by $2.5 million.
The national welfare will increase by $10.75 million.
The national welfare will decline by $5 million.
1 points
QUESTION 17
1. Tariffs are more likely to be imposed when:
the lobbying efforts of the consumer advocacy groups are
much stronger than those of the producers.
the average gain per proponent far exceeds the average cost
per opponent.
the number of people who are hurt by protectionist measures
exceeds the number of people who gain from protectionist measures.
import-competing producers are unorganized.
1 points
QUESTION 18
1. If there is something extra bad about local consumption
of a product, then a tariff can be good for the country because:
the tariff makes all residents richer.
the tariff brings down the domestic price of the product.
the tariff leads to higher domestic price for the product.
the tariff revenue is invested in the production of
substitute products.
1 points
QUESTION 19
1. Suppose manufacturing of paper results in substantial
ground water pollution. One possible policy that can be used to fix this
externality is:
to subsidize the production of paper by the domestic firms.
to impose tax on the production of paper.
to raise tariff barriers on paper imports.
to provide tax benefits to the firms exporting paper.
1 points
QUESTION 20
1. Under which of the following situations will the infant
industry argument for protection stand to be valid?
New firms are unable to obtain funds from the financial
owing to inherent imperfections in the banking system.
The benefits from the early business investments accrue to
the firms making these early investments.
Firms that produce important military hardware cannot be
established without government support.
The more a country exports, the more the price of its
exports fall relative to its imports.
1 points
QUESTION 21
1. According to the documentary TTIP: Might is Right, the ISDS clause in NAFTA has allowed the
shale oil company ____________ to sue the Canadian government.
SandRidge Energy
ExxonMobil
Lone Pine
Chevron
1 points
QUESTION 22
1. According to the documentary TTIP: Might is Right, this
country has nearly 100 bilateral investment treaties.
Canada
Netherlands
Germany
China
1 points
QUESTION 23
1. According to the documentary TTIP: Might is Right, these
two countries have (or are in the process of) pulled out of treaties containing
ISDS clauses.
Canada, Guatemala
Nigeria, Brazil
China, Germany
Indonesia, South Africa
1 points
QUESTION 24
1. Which of the following is NOT true of nontariff barriers
to imports?
Nontariff barriers can limit imports with greater certainty
than tariffs.
Unlike tariffs, the nontariff barriers do not increase the
price of the imported goods in the domestic markets.
Some nontariff barriers create uncertainty about the
conditions under which imports will be permitted.
Like tariffs, nontariff barriers also result in a net
welfare loss in a small country.
1 points
QUESTION 25
1. The United States produces some of the electronic
components for use in its fighter planes, but due to the limited number of
companies that produce these items it is forced to import these parts from
Japan as well. There is concern that in the case of a prolonged war, these
important imports may not be available. Fearing that the air force may be
unable to fulfill its tasks in the case of a long war, the United States
should:
Ban the importation of these electronics parts in order to
ensure the vitality of the domestic means of electronics production.
Impose tariffs on the imports of these electronic parts.
subsidize the domestic production of these electronics
parts.
tax private consumers of these electronics parts.
