Question

TARIFFS AND PROTECTIONISM

1. Protectionist policies are those that:

A. burden domestic producers but not foreign producers.

B. burden foreign producers but not domestic producers.

C. burden domestic buyers but not foreign buyers.

D. burden foreign buyers but not domestic buyers.

2. How are the demand and supply curves labeled when analyzing international trade?

A. We label them as "private demand" and "private supply" respectively.

B. We label them as "export demand" and "import supply" respectively.

C. We label them as "domestic demand" and "domestic supply" respectively.

D. We label them as "world demand" and "world supply" respectively.

3. With completely free trade, the world supply curve is shown as:

A. a line parallel to and above the domestic supply curve.

B. a horizontal line at the domestic equilibrium price.

C. a line parallel to and below the domestic supply curve.

D. a horizontal line at the prevailing world price.

4. With free trade and a world price that is lower than the domestic market equilibrium price:

A. domestic consumption will fall and domestic production will rise.

B. domestic consumption and domestic production will both rise.

C. domestic consumption will rise and domestic production will fall.

D. domestic consumption and domestic production will both fall.

5. The amount of imports under completely free international trade can be calculated as:

A. quantity supplied minus quantity demanded, at the domestic market equilibrium price.

B. quantity demanded minus quantity supplied, at the prevailing world price.

C. quantity demanded minus quantity supplied, at the domestic market equilibrium price.

D. domestic quantity supplied minus quantity demanded, at the prevailing world price.

6. A tariff is a _______, and it is shown on the demand and supply diagram as _______.

A. tax on imports; an upward shift of the world supply curve

B. tax on exports; an upward shift of the world supply curve

C. tax on exports; a downward shift of the world supply curve

D. tax on imports; a downward shift of the world supply curve

7. Which of the following is NOT one of the results of a tariff?

A. The domestic quantity supplied rises.

B. The domestic quantity demanded falls.

C. The total gains from trade rises.

D. The amount of imports falls.

8. A tariff is a tax that consumers pay to the government. What impact does the act of paying this tax have on total gains from trade?

A. It reduces total gains from trade because consumer surplus falls as a result of the tax payment.

B. It has no impact because tariffs are also paid by producers, so the two payments cancel each other out.

C. It has no impact because the gains from trade are transferred from consumers to the government.

D. It increases total gains from trade because the government earns tax revenue.

9. As a result of a tariff, domestic consumption _______, and this causes total gains from trade to _______.

A. rises; fall

B. rises; rise

C. falls; fall

D. falls; rise

10. What are the two results of a tariff on sugar?

A. Domestic resources are wasted producing sugar, and some domestic buyers are willing to pay for sugar but can't buy it.

B. Domestic resources are wasted producing sugar, and too much sugar is consumed.

Answer 1

(1) (B)

Protectionist policies protect domestic producers at the cost of foreign producers.

(2) (C)

Effects of trade (and restrictions) are analyzed using domestic demand and supply curves of the importer and exporter.

(3) (D)

World supply is a horizontal straight line at world price. For an importing country, world price is lower than domestic equilibrium price. For an exporting country, world price is higher than domestic equilibrium price.

(4) (C)

When world price < domestic equilibrium price, domestic demand increases and domestic supply decreases, the difference being equal to imports.

NOTE: As per Chegg Answering Policy, 1st 4 questions have been answered.