Question

1) Specific tariffs are
a) import taxes stated in specific legal statutes
b) import taxes calculated as a fixed charge for each unit of imported goods c) import taxes calculated as a fraction of the value of the imported goods d) import taxes calculated based on the origin country

2) Ad valorem tariffs are
a) import taxes stated in advertisements in industry publications
b) import taxes calculated as a fixed charge for each unit of imported goods

c) import taxes calculated as a fraction of the value of the imported goods

d) the same as import quotas

3) The most vocal political pressure for tariffs is generally made by

a) consumers lobbying for export tariffs
b) consumers lobbying for import tariffs
c) consumers lobbying for lower import tariffs

d) producers lobbying for import tariffs

4) The Metzler paradox
a) could theoretically happen when a small country levies a tariff
b) refers to a situation when an optimal tariff hurts a country’s economic welfare c) refers to a situation when the imposition of a tariff lowers domestic prices
d) refers to a situation when the imposition of a tariff helps foreign exporters

5) The imposition in the US of a tariff on cheese will a) lower the price of cheese domestically
b) raise the price of cheese internationally
c) raise revenue for the government

d) will always result in retaliation from abroad

6) If a small country imposes a tariff then a) the producers must suffer a loss
b) the consumers must suffer a loss
c) government revenues must decrease

d) the demand curve must shift to the right

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7) Internal economies of scale will_____average cost when output is_____by_____ a) reduce, increased, a firm
b) increase, increased, a firm
c) reduce, increased, the industry

d) increase, increased, the industry

8) The existence of internal economies of scale
a) cannot be associated with a perfectly competitive industry
b) may be associated with a perfectly competitive industry
c) is associated only with sophisticated products such as aircraft d) focuses more on the industry than on individual firms

9) Our model of outsourcing showed that
a) Skilled labor in both Home and Foreign benefit
b) All factors of production in both Home and Foreign gain
c) Low skilled labor in Home loses but low skilled labor in Foreign gains
d) the gains and losses could not be determined without conducting analysis with real data

10) Consider the production function where q=sqrt(kl) (q, k, l) denote output, capital, and labor. This

a) production function displays constant returns to scale b) production function displays increasing returns to scale c) production function displays decreasing returns to scale d) production function does not display any scale property

Answer 1

1.

B

specific tariff refers to the tariff that is fixed on a per unit basis of the product. For example, fixing $5 tariff per unit of mobile handset is the example of specific tariff.

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2.

C

Ad Valorem tariff is applied on a percentage basis. For example, a tariff of 5% on the value of each mobile handset is the example of Ad Valorem tariff.

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3.

D

It is the producers who want o apply import tariff upon the imported goods. It will increase the price and they will get benefits from it.

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4.

C

It is a paradox that says that applying tariff upon imports, can lead to decrease in domestic price of the goods. It is the more of theoretical nature.

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5.

C

It will help government earn revenues from the tariff collected from the import of cheese.

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6.

B

It increases the price and consumers have to pay higher price for the same goods. Hence, consumers suffer losses.

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7.

C

It happens with the internal economy of scale.

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