karoliukas

Which of the following groups in the country of Minidonia would least likely be helped by the imposition of tariffs on Minidonian imports of transportation equipment?

A) Automotive manufacturers.

B) Minidonia's government.

C) Trucking companies.

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Tariffs on transportation equipment benefit the government in the form of tariff revenue, and benefit domestic producers and industry workers in the form of higher prices for transportation equipment. The users of transportation equipment, such as trucking companies, suffer from higher costs due to the higher prices of transportation equipment.

karoliukas

The primary benefits derived from tariffs usually accrue to:

A) foreign producers of goods protected by tariffs.

B) domestic suppliers of goods protected by tariffs.

C) domestic producers of export goods.

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Tariffs raise domestic prices, benefiting domestic suppliers.

karoliukas

In what way does a tariff differ from a quota? A tariff is:

A) not significantly different from a quota; tariffs are imposed by world organizations, whereas quotas are imposed by individual countries.

B) a tax imposed by a foreign government, whereas a quota is a limit on the total amount of trade allowed.

C) a tax imposed on imports, whereas a quota is a limit on the number of units of a good that can be imported.

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The difference between a tariff and a quota is that a tariff is a tax imposed on imported goods, while a quota is an import quantity limitation. Also, a tariff will generate tax revenue, but a quota does not.

karoliukas

Who benefits least from tariffs?

A) Foreign consumers.

B) Domestic consumers.

C) Domestic producers.

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A tax imposed on imports is called a tariff, which benefits domestic producers and domestic governments. Domestic consumers lose through higher prices, less choice of products, and lower quality products.

karoliukas

Who benefits the most from a quota?

A) Foreign consumers.

B) Domestic producers.

C) Foreign producers.

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Quotas restrict the supply of imported goods, which increases the price domestically benefiting domestic producers. Some foreign producers also benefit from the higher prices created by the quota if they receive the revenue transfer (due to higher prices received for all goods sold under the import license). However, overall the foreign producers do not sell as much of their product and have lost revenues.

karoliukas

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.

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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.

karoliukas

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.

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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.

karoliukas

The anti-dumping argument in favor of trade restrictions is the argument that restrictions should be imposed to:

A) discourage foreign firms from engaging in price competition.

B) prevent foreign firms from dumping unwanted products in domestic markets.

C) prevent foreign firms from selling their product below cost.

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The anti-dumping argument is that restrictions should be used to prohibit foreign firms from increasing market share by selling products below cost.

karoliukas

An anti-dumping restriction on trade:

A) keeps some highly sensitive products in the country.

B) prohibits foreign firms from selling products below cost to gain market share.

C) protects infant industries.

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Firms dump their goods at a price lower than cost in order to drive out the competition. Once this is complete, they will be able to raise prices to much higher levels in order to gain abnormal profits. Of course, once prices are increased, new competitors may arise.

karoliukas

Which of the items below is NOT a valid reason why nations adopt trade restrictions? To:

A) prohibit foreign firms from increasing market share by selling products below cost.

B) protect industries that are highly sensitive to national security.

C) protect industries in which they have a comparative advantage.

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If a particular country enjoys a comparative advantage in a particular industry, no protection is needed.