ECO201- CHAPTER9

What is specific tax?

• import tax calculated based on the country of origin.

• import tax calculated as a percentage of the value of imported goods.

• similar to import quotas.

• import tax calculated as a fixed fee for each unit of imported goods.

• import tax stated in specific laws.

What is ad valorem tax?

• import tax calculated entirely based on the country of origin.

• import tax calculated as a percentage of the value of imported goods.

• import tax mentioned in advertisements in industry publications.

• import tax calculated as a fixed fee for each unit of imported goods.

• similar to import quotas.

Who would benefit from a lower tax on imported steel?

• foreign producers at the expense of domestic consumers.

• domestic steel producers.

• foreign steel consumers.

• domestic steel consumers.

• workers in the steel industry.

What is a problem encountered when implementing 'infant industry' taxes?

• Domestic consumers will buy foreign goods regardless of the tax.

• The tax may harm domestic sales of the industry.

• Taxes do not protect domestic producers.

• The industry may never 'mature'.

• Most industries need tax protection as they mature.

Which type of tax is a fixed percentage of the value of an imported product?

• specific tax

• ad valorem tax

• nominal tax

• effective protective tax

• infant industry tax

A tax of 20 cents for each unit of imported garlic is an example of a(n)

• specific tax.

• ad valorem tax.

• nominal tax.

• effective protective tax.

• a detrimental tax.

A 20 percent tax on each unit of imported garlic is an example of a(n)

• specific tax.

• ad valorem tax.

• nominal tax.

• effective protective tax.

• a detrimental tax.

What is a TRUE statement regarding the application of taxes on cheese in the United States?

• It increases the price of cheese globally.

• It decreases the price of domestic cheese.

• It leads to higher domestic demand for cheese.

• It will always lead to retaliation from abroad.

• It generates revenue for the government.

The tax applied in a 'large country' (homeland) reduces the world price of imported goods. What does this cause?

• No change in the foreign price of the goods it imports.

• Foreign consumers demand less of the goods that have been taxed.

• Domestic demand for imported goods decreases.

• Domestic demand for imported goods increases.

• Foreign suppliers produce fewer goods that have been taxed.

Among the many arguments in favor of tariffs, the argument that has received significant economic justification is

• A) the balance of payments argument.

• B) the infant industry argument.

• C) the fair play argument.

• D) the cheap foreign labor argument.

• E) the domestic living standards argument.