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Reading 16: Trading with the World - LOS b ~ Q6-7

Q6. Suppose the world price of Mercury tennis shoes is $60, but they sell in the U.S. for $75 due to a $15 import tariff. Who will most likely be negatively affected by the tariff?

A)   U.S. Consumers.

B)   Producers.

C)   Foreign Consumers.

Q7. Prior to the beginning of summer, the government of Japan places a 150 percent tariff on imported chain saws. Assume for this example that this tariff has a significant impact on the supply of chain saws. The government’s action:

A)   will protect the jobs and high wages of Japanese chain saw industry workers.

B)   benefits the Japanese government and domestic producers.

C)   is more harmful than if the government had limited the amount of chain saws imported.

答案和详解如下:

Q6. Suppose the world price of Mercury tennis shoes is $60, but they sell in the U.S. for $75 due to a $15 import tariff. Who will most likely be negatively affected by the tariff?

A)   U.S. Consumers.

B)   Producers.

C)   Foreign Consumers.

Correct answer is A)

Tariffs benefit domestic producers of products because the level of imports will be reduced due to an effective increase in the price of the goods. Consumers in the country lose due to higher prices.

Q7. Prior to the beginning of summer, the government of Japan places a 150 percent tariff on imported chain saws. Assume for this example that this tariff has a significant impact on the supply of chain saws. The government’s action:

A)   will protect the jobs and high wages of Japanese chain saw industry workers.

B)   benefits the Japanese government and domestic producers.

C)   is more harmful than if the government had limited the amount of chain saws imported.

Correct answer is B)

The Japanese government’s action is an example of a tariff. A tariff is a tax imposed on imports and benefits the Japanese government because it collects the tariff. Domestic producers benefit because the reduction in the supply of imported goods means a higher domestic price.

The other choices are incorrect. A tariff is considered less harmful than a quota (an import quantity limitation) because under a quota, the domestic government does not receive any funds as it would under a tariff (the foreign producers receive the revenue transfer). In the long run, trade restrictions do not protect the net number of jobs in the country. The number of jobs protected by import restrictions will be offset by jobs lost in the import/export industry. Import/export firms will be unable to sell the overpriced domestic products abroad or import and sell the lower priced restricted foreign-made product.

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