Multiple-Choice Questions for International Economics

by

Dr. Bob Carbaugh

Department of Economics
Central Washington University

Chapter 4: Tariffs

1. A tax of 20 cents per unit of imported cheese would be an example of a (an):

a. Compound tariff
b. Effective tariff
c. Ad valorem tariff
*d. Specific tariff

2. A tax of 15 percent per imported item would be an example of a (an):

*a. Ad valorem tariff
b. Specific tariff
c. Effective tariff
d. Compound tariff

3. Which type of tariff is expressly forbidden by the U.S. Constitution?

a. Import tariff
*b. Export tariff
c. Specific tariff
d. Ad valorem tariff

4. Which trade policy results in the government levying both a specific tariff and an ad-
valorem tariff on imported goods:
*a. Compound tariff
b. Nominal tariff
c. Effective tariff
d. Revenue tariff

5. For advanced countries such as the United States, tariffs on imported raw materials tend to be
a. equal to tariffs on imported manufactured goods
*b. lower than tariffs on imported manufactured goods
c. higher than tariffs on imported manufactured goods
d. the highest of all tariffs

8. Ad valorem tariffs are collected as

a. fixed amounts of money per unit traded
*b. a percentage of the price of the product
c. a percentage of the quantity of imports
d. all of the above

9. Specific tariffs are collected as

*a. fixed amount of money per unit traded
b. a percentage of the price of the product
c. a percentage of the quantity of imports
d. all of the above

10. Most tariffs have

a. only revenue effects
b. only protective effects
*c. both protective and revenue effects
d. neither protective or revenue effects

11. The effective rate of protection

a. distinguishes between tariffs that are effective and those that are ineffective
b. is the minimum level at which a tariff becomes effective in limiting imports
c. shows how effective a tariff is in raising revenue for the government
*d. shows the increase in value added for domestic production that a particular tariff structure
makes possible, in percentage terms

13. A tariff that prohibits imports has only

a. a revenue effect and redistribution effect
b. revenue effect and protection effect
*c. consumption effect and protection effect
d. redistribution effect and consumption effect

14. If a nation fitting the criteria for the small nation model imposes a 10 percent tariff on imports of
autos
*a. the price of autos within the nation will rise by 10 percent
b. the price of autos within the nation will rise by less than 10 percent
c. the price of autos within the nation will rise by more than 10 percent
d. the price of autos will not rise because of internal competition

15. According to the argument for protection, tariffs can shield new industries from import
competition until they have grown strong and efficient enough to withstand the competition by
foreign producers.
a. scientific tariff argument
*b. infant industry argument
c. beggar they neighbor argument
d. foreign dumping argument

16. represents the difference between what consumers have to pay for a product and
what they are willing and able to pay.
a. producer surplus
b. deadweight surplus
c. government surplus
*d. consumer surplus

17. If a nation fitting the criteria for the large nation model imposes an import tariff
a. the domestic price of the product will increase by more than the tariff itself
b. the domestic price of the product will increase by the same amount as the tariff
*c. the domestic price of the product will increase by less than the tariff
d. none of the above

18. The difference between what consumers have to pay for a particular and what they are
willing to pay is known as
*a. consumer surplus
b. producer surplus
c. deadweight costs
d. deadweight surplus
19. A tariff can raise a country’s welfare
a. never
*b. sometimes
c. always

20. In developed countries, tariffs on raw materials tend to be

a. highest of all
b. higher than on manufactured goods
c. equal to tariffs on manufactured goods
*d. lower than on manufactured goods

Answer the next seven questions based upon the following diagram for Mexico, assumed to be a
small country in the world calculator market.

21. With free trade, the total quantity of imports would equal
a. 10,000 units
*b. 40,000 units
c. 42,000 units
d. 50,000 units

22. With free trade, the total value of imports would equal
a. $100,000
*b. $400,000.
c. $600,000
d. $800,000.

23. With the tariff, the quantity of imports falls to

a. 12,000 units
*b. 20,000 units
c. 30,000 units
d. 42,000 units

24. With the tariff, the government collects

a. $75,000.
*b. $100,000.
c. $125,000.
d. $150,000.
31. If a country an imposes an import tariff, its welfare can improve if
a. the country is a "small country" rather than a "large country‖
*b. its terms of trade improve enough
c. the tariff enhances the welfare of its trading partners
d. its government's tax revenue increases because of the tariff

32. Suppose that the United States imposes a tariff on ballpoint pens of 25 cents per pen plus 12
percent of the pen's value. This is an example of a (an)
a. specific tariff
b. ad valorem tariff
*c. compound tariff
d. effective tariff

33. A tariff increase a country’ overall welfare.

a. will always
b. will never
*c. can sometimes

34. Suppose that the nominal tariff rate on finished computers is 12 percent and that the
weighted average of the nominal tariff rates on the inputs used in producing computers is 18
percent. Thus, the effective rate of protection for the computer industry must
*a. be less than 12 percent, and can be negative
b. be less than 12 percent, but must be greater than zero
c. equal 6 percent
d. exceed 30 percent

35. Suppose that the offshore assembly provisions (OAP) of the United States are granted to
finished computers that are imported and also produced domestically. This policy will tend to
a. cause foreign assemblers of computers to use more computer components that are
supplied by countries other than the United States
b. increase the price of computers to consumers in the United States
c. Increase the production of computers in the United States
*d. increase the production of computer components in the United States

36. Concerning a government's trade policy, all of the following generally apply except
a. economic downturn and recession generally result in greater protectionism
*b. because domestic consumers outnumber domestic producers, policy makers usually enact
Free-trade policies to satisfy the consumer majority
c. when domestic exporting companies are organized, policy tends to favor freer trade
d. policy tends to favor freer trade in countries whose imports are inputs into critical
industries

37. If no imported inputs (hard-disk drive) go into the domestic production of a final
product (desktop computer), then the
*a. nominal tariff rate on the final product equals the effective tariff rate on the product
b. nominal tariff rate on the final product is greater than the effective tariff rate on the
product
c. nominal tariff rate on the final product is less than the effective tariff rate on the final
product
d. none of the above

38. Concerning import tariffs of the United States, empirical studies tend to conclude that
these tariffs are
a. progressive and thus bear down on the wealthy
*b. regressive and thus bear down on the poor
c. proportional and thus bear down on all consumers in the same manner
d. deflationary and thus result in reductions in the price of imports