Question 1

Which of the following mandates that an import distributor must buy a certain percentage of the product locally?

Accepted Answer

A mixing requirement mandates that an import distributor must buy a certain percentage of the product locally.

Question 2

Which of the following is NOT true of the Uruguay Round of the multilateral trade negotiations?

Accepted Answer

The Uruguay Round actually expanded the set of NTB (non-tariff barrier) codes, making it more comprehensive and detailed than the codes established in the Kennedy Round and the Tokyo Round.

Question 3

The figure given below shows the market for moped imports in the country. D_M and S_X are the domestic demand for imports and export supply curves respectively. As a result of the quota being imposed on moped imports by this country, the world as a whole will:

Accepted Answer

With the quota imposed, the quantity of moped imports will decrease from Q1 to Q2. The domestic price of mopeds will increase from P1 to P3 while the world price will fall from P1 to P2. In this case, the domestic welfare will increase by area a+b+c but the world welfare will decrease by area a+b+c+d+e+f. Numerically, we can calculate:

Domestic welfare change = (P3-P1) x (DS1U1B1-Q2)
= ($2,000-$1,500) x (40,000-30,000)
= $500 x 10,000
= $5 million

World welfare change = (P2-P1) x (Q1-Q2) - (P2-P0) x (Q2-Q0)
= ($1,800-$1,500) x (60,000-30,000) - ($1,800-$2,200) x (30,000-10,000)
= $300 x 30,000 - $400 x 20,000
= $9 million - $8 million
= $1 million loss

Therefore, the world as a whole will lose $1 million.

Question 4

The Buy America Act of 1933 mandates that:

Accepted Answer

The Buy America Act of 1933 mandates that purchases funded by the U.S. government must favor domestic products. This means that when the government is purchasing goods or services, they must prioritize products that have been made in the United States.

Question 5

With a voluntary export restraint (VER), the economic rent created for the quantitatively limited on trade is collected by:

Accepted Answer

The economic rent created by a voluntary export restraint (VER) is typically collected by the exporting firms in the foreign countries. This is because the limitation on the quantity of goods that can be exported often allows these firms to raise prices, thereby capturing additional revenue.

Question 6

Which of the following NTBs may generate revenue for the government?

Accepted Answer

Import quotas can generate revenue for the government if the government auctions the quotas to the highest bidder or charges a fee for quota licenses. This mechanism can be a source of income for the government, unlike the other options which primarily aim to protect domestic industries without directly generating revenue.

Question 7

The figure given below shows the domestic demand (D_d) and supply (S_d) curves of mopeds in a country before an import quota is imposed by the government. After the imposition of quota, the total available supply curve becomes S_d + Q_Q. If the government auctions the quota licenses, the importing nation will:

Accepted Answer

The answer of The figure given below shows the domestic...

Question 8

In which of the following cases does an import quota result in a higher welfare loss than a tariff?

Accepted Answer

When import licenses are allocated through resource-using application procedures, it creates additional inefficiencies and costs for both domestic and foreign firms. Domestic firms, who have to apply for licenses, incur extra costs and may be less productive as they have to spend time and resources to navigate the application process. Foreign firms may also face additional costs and uncertainty in getting the licenses to export to the importing country. This results in a bigger welfare loss than a tariff, where there are no such administrative costs. A highly competitive domestic industry (option D) may lead to a smaller welfare loss as it can produce similar products at lower costs, but it is not necessarily better than a tariff in all cases. Option A and B do not necessarily affect the welfare loss from an import quota as they do not address the underlying inefficiencies created by the quota system.

Question 9

The figure given below shows the domestic demand (D_d) and supply (S_d) curves of mopeds in a country before an import quota is imposed by the government. After the imposition of quota, the total available supply curve becomes S_d + Q_Q. After the quota is imposed by the government, the domestic producers:

Accepted Answer

The answer of The figure given below shows the domestic...

Question 10

A domestic monopoly producing a close substitute of an imported product would prefer to be protected by a quota than a tariff that results in the same amount of imports because:

Accepted Answer

With a quota, the domestic monopoly can restrict the amount of imports and charge a higher price, leading to higher profits. With a tariff, the price of the imported good may still be lower than the domestic substitute, leading to less profit for the monopoly. The deadweight loss and government revenue are not relevant factors in this scenario.

Question 11

The figure given below shows the domestic demand (D_d) and supply (S_d) curves of mopeds in a country before an import quota is imposed by the government. After the imposition of quota, the total available supply curve becomes S_d + Q_Q. After the quota is imposed, the domestic consumers:

Accepted Answer

The answer of The figure given below shows the domestic...

Question 12

Suppose a small country sets all of its tariffs at 40% which causes a reduction in imports by 20%. If the total imports affected by the tariffs are 40% of GDP, the net national loss from the tariffs as a percentage of GDP is:

Accepted Answer

The net national loss from the tariffs can be calculated by considering the reduction in imports and the percentage of GDP affected. If imports are reduced by 20% and the affected imports are 40% of GDP, the direct impact on GDP is 20% of 40%, which is 8% of GDP. However, since the tariffs are set at 40%, the cost of the remaining imports increases, which does not represent a loss but a transfer from consumers to the government. Therefore, the net loss is not the full impact of the reduced imports. The question seems to aim at calculating the direct loss from reduced trade, not accounting for the tariff revenue or the economic distortions it causes, which would be more complex to calculate without additional information. Given the options and the information provided, none of the answers directly correspond to the calculation described, suggesting a possible misunderstanding of the question's intent or a need for clarification. The correct approach to calculate the net national loss as a percentage of GDP would involve more detailed economic analysis, including the effects of reduced imports on domestic production, prices, and consumption, as well as the distributional effects of the tariff revenue. Without further information, a precise calculation cannot be provided.

Question 13

What is the percent reduction in import quantity in a country due to the tariffs imposed by the government, if the country's import tariffs are all 10 percent. The total imports affected by the tariffs are 40 percent of the GDP and the net national loss from the tariffs as a percentage of GDP is 0.6 percent.

Accepted Answer

The answer of What is the percent reduction in import...

Question 14

The figure given below shows the domestic demand (D_d) and supply (S_d) curves of mopeds in a country before an import quota is imposed by the government. After the imposition of quota, the total available supply curve becomes S_d + Q_Q. If the government auctions the quota licenses, how much will it collect as revenue?

Accepted Answer

To find the revenue collected by the government through auctioning the quota licenses, we need to first find the quantity of quota licenses that are being auctioned off. This is equal to the difference between the total available supply curve (S_d + Q_Q) and the original supply curve (S_d) at the quota limit. From the graph, we can see that the quota limit is at a quantity of 9 million mopeds. At that point, the original supply curve intersects the demand curve, and the total available supply curve intersects the demand curve at a point that is 3 million mopeds higher (at a quantity of 12 million mopeds). Therefore, the quantity of quota licenses being auctioned off is 3 million mopeds. To find the revenue collected by the government through auctioning these licenses, we can use the formula: Revenue = Quota price x Quantity of quota licenses From the graph, we can see that the equilibrium price of mopeds without the quota is $10.5 per moped. With the quota, the price will increase to $12 per moped (as shown by the new supply curve intersecting the demand curve at a quantity of 9 million mopeds). Therefore, the quota price is $1.5 per moped ($12 - $10.5). The quantity of quota licenses being auctioned off is 3 million mopeds. Revenue = $1.5 x 3 million = $4.5 million However, we need to remember that the quota price is paid by the domestic producers who receive the quota licenses, not by the government. Therefore, the revenue collected by the government through auctioning the licenses is equal to the rent that is generated by the quota. The formula for rent generated by a quota is: Rent = (Quota price - Marginal cost) x Quantity of quota licenses From the graph, we can see that the marginal cost of producing mopeds is $9 per moped (as shown by the original supply curve). Therefore, the rent generated by the quota is: Rent = ($1.5 - $9) x 3 million = -$22.5 million Note that the rent is negative, which means that domestic producers are worse off because of the quota. However, the government still collects this rent as revenue through auctioning the quota licenses. Therefore, the answer is C) $76.5 million.

Question 15

Which of the following is true of a voluntary export restraint (VER)?

Accepted Answer

A voluntary export restraint is an agreement between two countries where one country agrees to limit its exports to the other country. It is voluntary because it is not imposed by the importing country. The exporting country may agree to a VER to avoid the imposition of more restrictive measures such as quotas or tariffs. In general, a VER requires the exporting firms to act like a cartel, restricting sales and raising prices, as they have limited access to the foreign market. This leads to increased prices for the importing country's consumers and increased profits for the exporting firms.

Question 16

Which of the following is the least efficient method of allocating import licenses by the government?

Accepted Answer

Resource-using application procedures are the least efficient as they require significant time and resources from applicants, leading to wasted economic resources and inefficiencies.

Question 17

The general formula used for calculating the net national loss from a trade barrier as a percentage of GDP may fail to account for:

Accepted Answer

The general formula for calculating the net national loss from a trade barrier typically includes the production and consumption effects, as well as government revenue generated from the trade barrier. However, it may fail to account for the rent-seeking costs of local firms, which are the resources expended by firms to maintain or establish trade barriers for their benefit.

Question 18

When a large country imposes an import quota:

Accepted Answer

When a large country imposes an import quota, it reduces the demand for the product on the world market, leading to a decrease in the world price.

Question 19

Governments choose to use voluntary export restraints rather than tariffs because:

Accepted Answer

Voluntary export restraints (VERs) are less likely to be challenged under the World Trade Organization (WTO) rules compared to tariffs, which are more transparent and thus more easily identified as protectionist measures. This makes VERs a more attractive option for countries looking to protect their domestic industries without openly violating international trade agreements.

Question 20

Which of the following allows the president of the United States to negotiate to eliminate unfair trade practices put in place by foreign governments?

Accepted Answer

Section 301 of the Trade Act of 1974 allows the president to investigate and take action against any foreign government's unfair trade practices. It includes negotiating with the foreign government to eliminate the said practices. A is incorrect because tariff-quota requirements refer to a trade policy wherein a country sets a limit on the amount of a particular product that can be imported with a lower tariff rate. B is incorrect because the General Agreement on Tariffs and Trade (GATT) is an international agreement that aimed to reduce barriers to international trade, but it does not specifically address the issue of unfair trade practices. D is also incorrect because the United Nations is an international organization that focuses on promoting peace and cooperation among nations, but it does not have direct authority over trade policies.

Quiz 9: Nontariff Barriers to Imports

Which of the following mandates that an import distributor must buy a certain percentage of the product locally?

Which of the following is NOT true of the Uruguay Round of the multilateral trade negotiations?

The figure given below shows the market for moped imports in the country. D_M and S_X are the domestic demand for imports and export supply curves respectively. As a result of the quota being imposed on moped imports by this country, the world as a whole will:

The Buy America Act of 1933 mandates that:

With a voluntary export restraint (VER) , the economic rent created for the quantitatively limited on trade is collected by:

Which of the following NTBs may generate revenue for the government?

In which of the following cases does an import quota result in a higher welfare loss than a tariff?

A domestic monopoly producing a close substitute of an imported product would prefer to be protected by a quota than a tariff that results in the same amount of imports because:

The figure given below shows the domestic demand (D_d) and supply (S_d) curves of mopeds in a country before an import quota is imposed by the government. After the imposition of quota, the total available supply curve becomes S_d + Q_Q. After the quota is imposed, the domestic consumers:

Suppose a small country sets all of its tariffs at 40% which causes a reduction in imports by 20%. If the total imports affected by the tariffs are 40% of GDP, the net national loss from the tariffs as a percentage of GDP is:

Which of the following is true of a voluntary export restraint (VER) ?

Which of the following is the least efficient method of allocating import licenses by the government?

The general formula used for calculating the net national loss from a trade barrier as a percentage of GDP may fail to account for:

When a large country imposes an import quota:

Governments choose to use voluntary export restraints rather than tariffs because:

Which of the following allows the president of the United States to negotiate to eliminate unfair trade practices put in place by foreign governments?

Quiz 9: Nontariff Barriers to Imports

Which of the following mandates that an import distributor must buy a certain percentage of the product locally?

Which of the following is NOT true of the Uruguay Round of the multilateral trade negotiations?

The figure given below shows the market for moped imports in the country. DM and SX are the domestic demand for imports and export supply curves respectively. As a result of the quota being imposed on moped imports by this country, the world as a whole will:

The Buy America Act of 1933 mandates that:

With a voluntary export restraint (VER) , the economic rent created for the quantitatively limited on trade is collected by:

Which of the following NTBs may generate revenue for the government?

In which of the following cases does an import quota result in a higher welfare loss than a tariff?

A domestic monopoly producing a close substitute of an imported product would prefer to be protected by a quota than a tariff that results in the same amount of imports because:

The figure given below shows the domestic demand (Dd) and supply (Sd) curves of mopeds in a country before an import quota is imposed by the government. After the imposition of quota, the total available supply curve becomes Sd + QQ. After the quota is imposed, the domestic consumers:

Suppose a small country sets all of its tariffs at 40% which causes a reduction in imports by 20%. If the total imports affected by the tariffs are 40% of GDP, the net national loss from the tariffs as a percentage of GDP is:

Which of the following is true of a voluntary export restraint (VER) ?

Which of the following is the least efficient method of allocating import licenses by the government?

The general formula used for calculating the net national loss from a trade barrier as a percentage of GDP may fail to account for:

When a large country imposes an import quota:

Governments choose to use voluntary export restraints rather than tariffs because:

Which of the following allows the president of the United States to negotiate to eliminate unfair trade practices put in place by foreign governments?

The figure given below shows the market for moped imports in the country. D_M and S_X are the domestic demand for imports and export supply curves respectively. As a result of the quota being imposed on moped imports by this country, the world as a whole will:

The figure given below shows the domestic demand (D_d) and supply (S_d) curves of mopeds in a country before an import quota is imposed by the government. After the imposition of quota, the total available supply curve becomes S_d + Q_Q. After the quota is imposed, the domestic consumers: