Deck 7: Tariffs

Question 1

Use the graph below to answer the following questions:


-Without a tariff the price of imports would be:

A) a + b + c + d.
B) b + d.
C) P.
D) P_w.

Answer 1

P_w.

Question 2

The following figure illustrates the demand and supply curves for PCs in a small country. Use this figure to answer the following questions:


-With free trade the country imports:

A) Q₁.
B) Q₂.
C) Q₃.
D) Q₁ to Q₅.

Answer 2

Q₁ to Q₅.

Question 3

The following figure illustrates the demand and supply curves for PCs in a small country. Use this figure to answer the following questions:


-With a tariff imposed on PCs, the country imports:

A) Q₁.
B) Q₂.
C) Q₃.
D) Q₂ to Q₄.

Answer 3

Q₂ to Q₄.

Question 4

Which of the following is not a common argument for tariffs?

A) Increase the number of jobs in the economy.
B) National defense.
C) Infant industry.
D) Senile industry.

Question 5

Describe the different methods of valuing imports.

Question 6

Describe the concepts of consumer and producer surplus.

Question 7

A tariff tends to decrease consumer surplus and increase producer surplus. Show why this is true.

Question 8

Show how the government benefits from the imposition of a tariff.

Question 9

Suppose that a bottle of beer sells for $1 and contains $.20 of imported inputs. If the tariff on beer is 20 percent and the tariff on imported inputs is 5 percent, what is the effective rate of protection?

Question 10

Explain the various arguments for tariffs.

Question 11

Why is a production subsidy less costly than a tariff in expanding output in a particular industry?

Question 12

Explain why tariffs do not increase the overall level of employment in an economy.