Impact of Tariffs and Trade

This video tutorial explores international trade, focusing on how tariffs on imported goods affect consumers, producers, and market efficiency. It begins with a demand and supply diagram, explaining domestic and world supply curves, and the small country assumption. The tutorial discusses the impact of free trade on consumer and producer surplus, showing how free trade increases total surplus. It then introduces tariffs, explaining their effects on imports and market dynamics through graphical analysis. The tutorial concludes by summarizing the benefits of free trade and the inefficiencies introduced by tariffs.

What is the primary focus of the demand and supply diagram in a competitive market?

• To assess government revenue

• To determine the world price

• To calculate consumer surplus

• To find the equilibrium price and quantity

Why is Canada considered a small economy in the context of international trade?

• Because it has a large population

• Because its consumption and production decisions do not affect world prices

• Because it can influence world prices

• Because it has a high GDP

How does free trade affect the quantity of goods consumed in a domestic market?

• It stabilizes the quantity consumed

• It has no effect on the quantity consumed

• It increases the quantity consumed

• It decreases the quantity consumed

What happens to producer surplus when goods are imported at a lower world price?

• Producer surplus increases

• Producer surplus remains unchanged

• Producer surplus decreases

• Producer surplus doubles

What is a tariff?

• A discount on exported goods

• A tax on imported goods

• A fee for domestic consumers

• A subsidy for domestic producers

How does a tariff affect the price of imported goods?

• It decreases the price

• It keeps the price the same

• It increases the price

• It eliminates the price

What is the result of a tariff on the level of imports?

• Imports are unaffected

• Imports decrease

• Imports remain the same

• Imports increase

Which region represents tariff revenue in the graphical analysis?

• Region A

• Region C

• Region D

• Region B

What is a deadweight loss in the context of tariffs?

• A gain in consumer surplus

• A loss in government revenue

• An inefficiency caused by the tariff

• An increase in producer surplus

How does a tariff impact consumer surplus?

• Consumer surplus doubles

• Consumer surplus decreases

• Consumer surplus remains unchanged

• Consumer surplus increases