Question

In response to claims from U.S. steel producers that Chinese producers were dumping their product in the U.S. market, the United States responded by imposing tariffs on steel imports from China. A tariff is

Multiple Choice

• used to establish unit limits on imports.

• a tax levied on imports.

• an effective mechanism to encourage imports.

• a way to lower prices.

• usually negotiated between two or more countries.

Which is true of tariffs like those the United States assessed on steel imported from China?

Multiple Choice

• They benefit consumers in the form of lower prices.

• They encourage the efficient utilization of resources.

• They increase the overall efficiency of the world economy.

• They are pro-producer and anti-consumer.

• They encourage domestic efficiency.

The 13 percent tariff the European Union imposed on imports of Chinese steel is

Multiple Choice

• a specific tariff.

• an ad valorem tariff.

• a transit tariff.

• a quota.

• a nontariff barrier.

Answer 1

a) Government imposes tariffs on goods importing from others such that they can raise their domestic economic efficiency. It makes the price for importing good high such that consumers purchase less of it. If the world price is $350 and country imposes tariffs on importing good and raise price equal to $410 which reduces the demand for imports. You can see that after tariffs, units imports reduces which is an example of unit limit of imports. Thus option A is correct.

47013---- Intrariff 350 AD 320 5 15 35 45 Import After Tariff Importing befort

b) As the price of good rises from 350 to 410, consumers pays higher prices and are not benefitted. Option A is incorrect.

Government do enable efficient utilization of resources by helping producers to produce more goods otherwise the resources to produce the goods would remains idle. Option B is correct.

They do not increase the welfare of world economy as by imposing tariffs, welfare of one country falls while it rises for other country. Additionally there is deadweight loss of G+J area of domestic economy which is the reduction in welfare for domestic economy. Option C is incorrect.

They are pro producer as they are trying to benefit their domestic producer by helping in raising their sales but they are not anti-consumer. Option D is incorrect.

They reduce domestic efficiency by reducing the competition from foreign products which reduces the zeal of domestic producers to innovate. Option E is incorrect.

47013---- Intrariff 350 AD 320 5 15 35 45 Import After Tariff Importing befort

c) Option A is incorrect as specific tariff is imposed per unit.

Option B is correct as it is tax imposed on total bill of imports. The total amount of tariff collected from specific and ad valorem may be same but ad valorem reduces the benefit of large importers by large.

Option C is incorrect as it is imposed when the commodities are passing through custom areas.

Option D is incorrect as quota constraints the number of goods imported while 13% tariff means there is rise in price of steel by 13% but you can import any amount possible.

Option E is incorrect as it is a form of tariff consisting of quota, embargo etc.