Global Economy Midterm Multiple Choice Final version

What is a specific tariff?

• A tax based on the value of an imported good.

• A tax based on the quantity of an imported good.

• A subsidy given to domestic producers.

• A tax levied on exports.

What is an ad valorem tariff?

• A fixed charge per unit of imported goods.

• A tax based on the value of imported goods.

• A price ceiling imposed by governments.

• A quota on the number of imports.

What is the primary purpose of a tariff historically?

• To generate government revenue.

• To encourage imports.

• To increase the price of domestic goods.

• To promote competition among domestic industries.

How does a tariff typically affect domestic prices?

• Domestic prices rise by the full amount of the tariff.

• Domestic prices fall due to decreased competition.

• Domestic prices remain unaffected.

• Domestic prices rise, but by less than the tariff amount.

What is the effect of a tariff on consumer surplus?

• It increases consumer surplus.

• It has no effect on consumer surplus.

• It decreases consumer surplus.

• It only affects producer surplus.

Voluntary Export Restraints (VERs) are:

• Limits imposed by the importing country on the quantity of imports.

• Agreements where the exporting country limits the quantity of exports.

• Taxes on exports to foreign markets.

• Subsidies provided to exporters.

Import quotas:

• Increase government revenue.

• Limit the number of imports but do not generate government revenue.

• Lower prices for domestic consumers.

• Have no effect on domestic market prices.

How do tariffs affect government revenue?

• They decrease revenue.

• They have no impact on government revenue.

• They increase government revenue through taxes on imports.

• They increase government revenue by boosting exports.

In a large country, imposing a tariff can lead to:

• A terms of trade gain.

• A complete elimination of trade.

• Higher welfare for consumers.

• No change in welfare for the country.

Export subsidies result in:

• A decrease in the welfare of the exporting country.

• An improvement in the importing country’s welfare.

• A reduction of domestic production.

• Lower government spending on trade.