Monash University

BFW 2104

CHAPTER 8 Economic Growth and International Trade

Multiple Choice

1)Which of the following statements is incorrect?

1. 1. An ad valorem tariff is expressed as a percentage of the value of the traded commodity
   2. a specific tariff is expressed as a fixed sum of the value of the traded commodity.
   3. export tariffs are prohibited by the U.S. Constitution
   4. The U.S. uses exclusively the specific tariff

2. A small nation is one:
   1. which does not affect world price by its trading
   2. which faces an infinitely elastic world supply curve for its import commodity
   3. whose consumers will pay a price that exceeds the world price by the amount of the tariff
   4. all of the above

3. If a small nation increases the tariff on its import commodity, its:
   1. consumption of the commodity increases
   2. production of the commodity decreases
   3. imports of the commodity increase
   4. none of the above

4. The increase in producer surplus when a small nation imposes a tariff is measured by the area:
   1. to the left of the supply curve between the commodity price with and without the tariff
   2. under the supply curve between the quantity produced with and without the tariff
   3. under the demand curve between the commodity price with and without the tariff
   4. none of the above.

5. If a small nation increases the tariff on its import commodity:
   1. the rent of domestic producers of the commodity increases
   2. the protection cost of the tariff decreases
   3. the deadweight loss decreases
   4. all of the above

6. Which of the following statements is incorrect with respect to the rate of effective protection?
   1. for given values of ai and ti, g is larger the greater is t
   2. for a given value of t and ti, g is larger the greater is ai
   3. g exceeds, is equal to or is smaller than t, as ti is smaller than, is equal to or is larger than t
   4. when aiti exceeds t, the rate of effective protection is positive

7. With ai=50%, ti=0, and t=20%, g is:

a. 40%

b. 20%

c. 80%

d. 0

8. The imposition of an import tariff by a small nation:
   1. increases the relative price of the import commodity for domestic producers and consumers

1. 2. reduces the relative price of the import commodity for domestic producers and consumers
   3. increases the relative price of the import commodity for the nation as a whole
   4. any of the above is possible

9. The imposition of an import tariff by a small nation:
   1. increases the nation's welfare
   2. reduces the nation's welfare
   3. leaves the nation's welfare unchanged
   4. any of the above is possible

10. According to the Stolper-Samuelson theorem, the imposition of a tariff by a nation:

1. increases the real return of the nation's abundant factor
2. increases the real return of the nation's scarce factor
3. reduces the real return of the nation's scarce factor
4. any of the above is possible

11. The imposition of an import tariff by a nation results in:

1. an increase in relative price of the nation's import commodity
2. an increase in the nation's production of its importable commodity
3. reduces the real return of the nation's abundant factor
4. all of the above

12. The imposition of an import tariff by a nation can be represented by a rotation of the:

1. nation's offer curve away from the axis measuring the commodity of its comparative advantage
2. the nation's offer curve toward the axis measuring the commodity of its comparative advantage
3. the other nation's offer curve toward the axis measuring the commodity of its comparative advantage
4. the other nation's offer curve away from the axis measuring the commodity of its comparative advantage

13. The imposition of an import tariff by a large nation:

1. increases the nation's terms of trade
2. reduces the volume of trade
3. may increase or reduce the nation's welfare
4. all of the above

14. The imposition of an optimum tariff by a large nation:

1. improves its terms of trade
2. reduces the volume of trade
3. increases the nation's welfare
4. all of the above

15. The optimum tariff for a small nation is: a. 100%

b. 50%