Self-Test Quiz

02. The welfare effects of the imposition of a tariff on an imported good in a small country include:
A. a rise in consumer surplus.
B. a fall in producer surplus.
C. a rise in government revenue.

03. The net effect of an increase in tariffs on an imported good by a small country is:
A. a decrease in welfare.
B. an increase in welfare.
C. no change in welfare.

04. When a small country imposes a tariff on an imported good, domestic consumers will buy less of the good while domestic firms will:
A. produce less of it.
B. produce the same amount as before.
C. produce more of it.

05. An import tariff in a small country will cause consumer surplus to:
A. increase.
B. remain unchanged.
C. decline.

06. An import tariff in a small country will cause producer surplus to:
A. increase.
B. remain unchanged.
C. decline.

07. When a large country imposes an import tariff, the world price of the good will:
A. remain unchanged.
B. increase.
C. decrease.

08. A primary reason for governments to impose tariffs on imports is:
A. to increase consumer surplus.
B. to reduce a trade surplus.
C. to raise revenue.

09. In the case of a large country, the imposition of an import tariff is likely to cause the domestic price to:
A. rise by more than the tariff.
B. rise by the amount of the tariff.
C. rise by less than the tariff.

10. A large-country government imposes a tariff on an imported good and its domestic price rises. The attendant welfare effects will include:
A. an increase in consumer surplus.
B. an increase in producer surplus.
C. a decline in tariff revenue.

11. The net effect of an import tariff on a country’s welfare is:
A. a certain increase if the country is small.
B. a possible increase if the country is small.
C. a possible increase if the country is large.

12. The effects of imposing an import quota include:
A. an increase in consumer surplus.
B. an increase in producer surplus.
C. an increase in government revenue.

13. When a small country imposes an import quota, the domestic price of the good will:
A. increase.
B. stay unchanged.
C. decrease.

14. Consider two alternative trade policies that reduce imports by the same amount: the imposition of an import quota and the imposition of an import tariff. The effect in the two cases is that the government will:
A. earn more revenue with the quota than with the tariff.
B. earn the same amount of revenue with each.
C. earn zero revenue with the quota.

15. A small country that imposes a tariff will:
A. always have a deadweight loss.
B. sometimes incur a deadweight loss.
C. never have any deadweight loss.

16. The imposition of an import tariff by a large country will cause its terms of trade to:
A. increase.
B. remain unchanged.
C. decrease.

17. The optimal tariff, i.e. the tariff that maximizes an importing country’s welfare, is:
A. zero for a large country, but positive for a small country.
B. positive for both large and small countries.
C. positive for a large country, but zero for a small country.

18. The U.S. policy of imposing quotas on sugar imports has the effect of: A. raising the domestic price of sugar for consumers.
B. lowering the domestic price for sugar consumers.
C. lowering the domestic price for sugar producers. 

19. The General Agreement on Tariffs and Trade (GATT) was an international legal convention adopted after World War II to promote increased trade among countries. Since 1995, the new name for the GATT is:
A. The United Nations Conference on Trade and Development (UNCTAD).
B. The World Trade Organization (WTO).
C. Countries of the World, Unite! (CWU).

20. The U.S. Trade Act of 1974 describes conditions under which tariffs can be applied in the United States, and it mirrors the provisions of the GATT and WTO. Two sections of the Trade Act of 1974 deal with the use of “safeguard” tariffs, but only one (Section 421) applies to a single country—viz.:
A. China.
B. Mexico.
C. Russia.