ECON335 Midterm 2

Which of the following is an impact of tariffs on the country imposing them?

The domestic consumers pay a higher price for the imported products.

Which of the following correctly identifies the impact of tariffs on the producers of import-

competing products in the imposing country?

They can expand their production and sales

If a small country imposes a tariff on imported motorcycles, the world price of motorcycles

will _____ and the domestic price of motorcycles will _____.

remain constant; rise

If a large country imposes a tariff on imported motorcycles, the world price of motorcycles

will _____ and the domestic price of motorcycles will _____.

fall; rise

The nationally optimal tariff for a large country is the tariff for which:

total surplus of the importing country is the highest.

Which of the following has overseen the global rules of government policy toward

international trade since 1995?

The World Trade Organization

Which of the following oversaw the global rules of government policy toward international

trade between 1947 and 1995?

The General Agreement on Tariffs and Trade

Country A is a large country that imports good-quality processed chicken from country B.

Suddenly, country A’s government decides to impose a tariff on this import. Who among the

following will be adversely affected by this policy?

Producers of chicken in country B

Restricting imports into a small country by the government

protects domestic producers from foreign competition

Which of the following is NOT true of nontariff barriers to imports?

Unlike tariffs, the nontariff barriers do not increase the price of the imported goods in the

domestic markets.

One of the reasons that protectionists and government officials may favor using a quota

instead of a tariff is:

quotas ensure that the quantities of imports are strictly limited.

Which of the following is true of a quota:

A quota is a quantitative restriction on imports.

Which of the following is a means of allocating import licenses by assigning the licenses

without competition, applications, or negotiation?

Fixed favoritism

With a voluntary export restraint (VER), the economic rent created for the quantitatively

limited on trade is collected by

the exporting firms in the foreign countries

Which of the following mandates that an import distributor must buy a certain percentage of

the product locally?

A mixing requirement

Which of the following NTBs may generate revenue for the government?

Import quota

Which of the following refers to dumping?

Selling domestic goods in the international market at much lower prices.

Which of the following features does a free trade area necessarily have?

Absence of any trade barriers among the member nations

Which of the following is true of an economic union?

Harmonization of all economic policies in the member countries

Which of the following features does a customs union have?

Common set of external tariffs

Formation of trade blocs can be considered beneficial because it

encourages increased total trade by each member country.

Which of the following states that any trade concession given to any foreign country must be

given to all other countries having the same status?

The most favored nation principle

_____ determine(s) which products have been produced within a free-trade area and which products have been produced outside the area and therefore are subject to trade barriers.

Rules of origin

Embargoes are likely to be effective when:

the sanctions are sudden and comprehensive when first imposed.

A trade embargo harms

both the target country and the country initiating the embargo

Which of the following is said to occur when a firm lowers its price in order to sell off excess

inventories of a product?

Seasonal dumping

Which of the following is said to occur when a firm with market power uses price

discrimination between markets to increase its total profit?

Persistent dumping

Which of the following statements about an export subsidy on a particular product is

accurate?

An export subsidy reduces the amount available in the domestic market of the exporting

country and increase the amount imported by the foreign country.

Which of the following subsidies is prohibited under WTO rules?

Subsidies to encourage firms in a developed country to export more.

The impact on world welfare of an export subsidy and a countervailing duty (of the same size

as the subsidy) is

zero

An export subsidy can be good for a country if:

the subsidy allows the country’s only exporting firm to capture the entire world market.