B9

Question 1

What are tariffs

Answer 1

Taxes levied at imports

Question 2

What are specific tariffs?

Answer 2

a fixed charge for each unit of goods imported

Question 3

What are ad valorem tariffs

Answer 3

Taxes that are levied as a fraction of the value of the imported good’

Question 4

What are tariffs used for

Answer 4

To protedct domestic industry and for government revenue

Question 5

Can tariffs be beneficial?

Answer 5

Yes, to protect infant industries they have been useful to many especially in europe

Question 6

Are tariffs used often nowadays

Answer 6

No, non-tariff barriers are favored like import quotas (limit on quantity imported) and export restraints (foreign country limiting exports at domestic request)

Question 7

How do you calculate world equalibrium price

Answer 7

home + forign demand = home + forign supply

Question 8

What are the effects of tariffs on trade

Answer 8

it raises the price of imports and thus trade decreases, as they decrease world demand they usually also make things cheaper in the foreign exporter

Question 9

Is the effect of a tariff in large countries on prices usually the same size as the tariff

Answer 9

No becouse part of it is reflected in a decline the exporters export prices, I guess it means that the exporter have fewer other costs associated with the trade and can thus trade with lower prices as there are lower marginal costs. This only applies to large countries that can effect world demand

Question 10

Is the effect of tariffs in small countries on prices usually the same size as the tariff

Answer 10

Yes becouse small countries do not effect world demand

Question 11

The rate of effective protection is always the size of the tariff in small countries

Answer 11

No, depending on, what it is placed on it can very much effect different industries to different degrees

Question 12

what is the rate of effective protedction

Answer 12

a percentage rate of increased income for domestic firms as a result of tariffs

Question 13

What is consumer surplus

Answer 13

The difference between the price consumers pay and are willing to pay

Question 14

Who gains and looses from a tarrif

Answer 14

domestic producers gain as well as the government at the expense of consumer surplus. In agregate term the economy is worth off especially if the country is small and tarrifs do not imporove the terms of trade by lowering global prices through its reduced demand

Question 15

Are there aditional risks associated with tariffs outside the loss in cosumer surplus

Answer 15

Yes, that the exporter will levy tarrifs of their own and start a trade war

Question 16

Are export subsidies dumb

Answer 16

Yes, they lead to efficiency loss and reduces the terms of trade, the only thing they do is improve the consumer surplus in forign markets

Question 17

Does import quotas always rais the price of the imported good

Answer 17

Yes, restricting supply will do that

Question 18

Are quotas worse or better than tariffs

Answer 18

In quotas the government gains no revenue but rather quota rents are gained by the producer that can sell their goods at a markup, these producers may be foreign which would be a massive downgrade in terms of trade compared to teriffs

Question 19

What is a VER

Answer 19

A valulentary export restraint by an exporting country, in economic terms they are exactly like a quota but forigners always get the quota rents

Question 20

What are local content requirements

Answer 20

Requirenments for a specific fraction of final goods to be produced domestically, does not produce quota rents and so is not as risky for terms of trade

Question 21

Name some trade policy instruments outside tariffs, quotas, VERs and local content requirements

Answer 21

export credit subsidies (subsidizing the loans of exporters), national procurement (government production) and red tape barriers (international passive aggressiveness)

Question 22

The result of a tariff can be broken down in two parts, what are they called

Answer 22

An efficiency loss (how the equalibrium is distorted) and a terms of trade gain (how a tariff might bring down global prices wich for a small country is zero)

Question 23

Do tariffs increase monopoly power

Answer 23

yes, weaker competition will do that

Question 24

Do quotas restrict monopolistic power more than tariffs

Answer 24

No, becouse monopolies cannot increase their prices over the cost of export plus the tariff in the case of one but in the case of a quota they can set the price where they want as long as there is still demand.