Question

7) Studies show that benefits of trade barriers exceed their costs in high income nations. 3) it is impossible to estimate the benefits of trade barriers. costs of trade barriers exceed their benefits, creating an efficiency loss for society. b) costs and benefits of trade barriers are about equal. 8) For an increase in demand, the price effect is smallest and the quantity effect is largest A) in the immediate market period. B) in the long run. C) in the short run. D) when supply is least elastic. 9) We would expect the cross elasticity of demand between Pepsi and Coke to be A) positive, indicating normal goods. B) positive, indicating substitute goods. C) positive, indicating inferior goods. D) negative, indicating substitute goods. 10) 10) The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that A) the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic. B) both groups felt that the demand was elastic but for different reasons. C) the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic. D) both groups felt that the demand was inelastic but for different reasons. 11) 11) A tariff can best be described as A) a government payment to domestic producers to enable them to sell competitively in world markets. B) a law that sets a limit on the amount of a good that can be imported. C) an excise tax on an imported good. D) an excise tax on an exported good.

Answer 1

Ans) Trade barriers lead to inefficient outcome and leads to deadweightloss.

In long run, more substitutes become available and so the elasticity is more in long run than in short run.

Cross price elasticity is the responsiveness of quantity demanded of one product to change in price of another product. When goods are substitutes, cross price elasticity is positive and when goods are complementary, cross price elasticity is negative.

When demand is inelastic, it is beneficial to increase the price while when demand is elastic, it is beneficial to decrease the price.

7) Studies show that benefits of trade barriers exceed their costs in high income nations. 3) it is impossible to estimate the benefits of trade barriers. costs of trade barriers exceed their benefits, creating an efficiency loss for society. b) costs and benefits of trade barriers are about equal. 8) For an increase in demand, the price effect is smallest and the quantity effect is largest A) in the immediate market period. Bin the long run. las more C) in the short run. D) when supply is lenst elastic substtuleg become available in long run 9) We would expect the cross elasticity of demand hetween Pepsi and Coke to be A) positive, indicating normal goods. B) positive, indicating substitute goods. C) positive, indicating inferior goods. D) negative, indicating substitute goods. 10 10) The Illinois Central Railroad once asked the Illinois Commerce Commission for permission to increase its commuter rates by 20 percent. The railroad argued that declining revenues made this rate increase essential. Opponents of the rate increase contended that the railroad's revenues would fall because of the rate hike. It can be concluded that A) the railroad felt that the demand for passenger service was elastic and opponents of the rate increase felt it was inelastic. B) both groups felt that the demand was elastic but for different reasons. C) the railroad felt that the demand for passenger service was inelastic and opponents of the rate increase felt it was elastic. D) both groups felt that the demand was inelastic but for different reasons. 11) A tariff can best be described as A) a government payment to domestic producers to enable them to sell competitively in world markets. B) a law that sets a limit on the amount of a good that can be imported. C) an excise tax on an imported good. D) an excise tax on an exported good.