Mastering Trade Restrictions
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Questions and Answers

Which of the following is an example of a trade restriction?

  • Tariffs (correct)
  • Foreign competition
  • Comparative advantage
  • Domestic employment

    • Which of the following is NOT a reason for imposing trade restrictions?

  • Promoting domestic employment
  • Encouraging comparative advantage (correct)
  • Protecting established domestic industries
  • Protecting new industries until they mature

    • Which of the following is similar to a quota but is imposed by the exporting country?

  • Tariffs
  • Import quotas
  • Voluntary export restraints (correct)
  • Embargoes

    • What is the goal of an export subsidy?

    <p>Promote exports</p> Signup and view all the answers

    What are domestic content provisions?

    <p>Requirements for domestic origin in production</p> Signup and view all the answers

    What are capital restrictions?

    <p>Controls on foreigners' ability to own domestic assets</p> Signup and view all the answers

    Which of the following is NOT an example of a trade restriction?

    <p>Comparative advantage</p> Signup and view all the answers

    What is the purpose of protecting new industries from foreign competition until they mature?

    <p>To promote domestic employment</p> Signup and view all the answers

    What is the purpose of protecting strategic industries for national security reasons?

    <p>To protect national security</p> Signup and view all the answers

    What is the purpose of generating revenue from tariffs, especially for developing countries?

    <p>To generate government revenue</p> Signup and view all the answers

    Which of the following is true about an import quota compared to a tariff?

    <p>An import quota can result in a greater welfare loss than a tariff</p> Signup and view all the answers

    What is the main difference between an import quota and a voluntary export restraint (VER)?

    <p>An import quota is imposed by the importer, while a VER is imposed by the exporter</p> Signup and view all the answers

    What is the goal of an export subsidy?

    <p>To stimulate exports</p> Signup and view all the answers

    What are countervailing duties?

    <p>Duties levied by the importing country against subsidized exports</p> Signup and view all the answers

    In the case of an export subsidy, what is the effect on the domestic market price in the small country case?

    <p>The price increases by the amount of the subsidy</p> Signup and view all the answers

    What is the net welfare effect of an export subsidy in the large country case?

    <p>Negative</p> Signup and view all the answers

    What can changes in import policies potentially affect?

    <p>Firm profitability and growth</p> Signup and view all the answers

    What do agricultural subsidies in developed countries, such as the EU, often lead to in trade negotiations?

    <p>Trade barriers against agricultural imports</p> Signup and view all the answers

    What does a VER result in for the importing country?

    <p>Welfare loss</p> Signup and view all the answers

    How can changes in the government's trade policy potentially affect industry structure?

    <p>By reducing competition and increasing market concentration</p> Signup and view all the answers

    Which of the following is the primary objective of tariffs?

    <p>To protect domestic industries</p> Signup and view all the answers

    What is the economic impact of a tariff on imports in a small country?

    <p>It alters the terms of trade</p> Signup and view all the answers

    In the context of tariffs, what is a small country?

    <p>A country that is a price taker in the world market for a product</p> Signup and view all the answers

    What is the net welfare effect of a tariff in a large country?

    <p>A deadweight loss</p> Signup and view all the answers

    What does the term 'deadweight loss' refer to in the context of tariffs?

    <p>Inefficiencies in production</p> Signup and view all the answers

    What is the key difference between tariffs and quotas?

    <p>Tariffs generate revenue for the government, while quotas generate quota rents for foreign producers</p> Signup and view all the answers

    What are quota rents?

    <p>Profits earned by domestic producers due to a quota</p> Signup and view all the answers

    What is the equivalent tariff that will restrict imports to a given quota?

    <p>The sum of the world price and the per-unit tariff</p> Signup and view all the answers

    What does the imposition of a quota result in?

    <p>A reduction in imports</p> Signup and view all the answers

    What is the net welfare effect of a tariff in a large country?

    <p>A deadweight loss</p> Signup and view all the answers

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