Ch4

Question 1

INternational trade theory

Answer 1

open markets based on comparative advantage and specialization result in the most efficient use of world resources

Question 2

political reality

Answer 2

free-trade policies are criticized vociferously in industries and workers who face import competition

Question 3

Tariffs

Answer 3

tax on a product imposed when it crosses a national boundary

Question 4

import tariff vs export tariff

Answer 4

levied on imports

levied on exports

Question 5

3 purposes of Tariffs

Answer 5

1. revenue tariff
2. protective tariff
3. prohibitive tariff

Question 6

revenue tariff

Answer 6

to generate tax revenue for the imposing government

Question 7

protective tariff

Answer 7

to reduce the amount of imports entering a country in order to insulate import-competing domestic producers from foreign competition

Question 8

prohibitive tariff

Answer 8

to essentially eliminate imports of a particular product or from a particular country by setting a tariff rate so high no one will realistically choose to import that product from a given foreign country

Question 9

3 types of tariffs

Answer 9

1. Specific tariff
2. Ad Valorem tariff
3. compound tariff

Question 10

specific tariff

Answer 10

assessed per unit of a product that is imported

Question 11

ad valorem tariff

Answer 11

assessed as a % of the valuation of the imported product

Question 12

compound tariff

Answer 12

comprised partially of a specific tariff and partially of an ad valorem tariff

Question 13

Customs Valuation

Answer 13

estimation of the value of an imported product

Question 14

consumer surplus

Answer 14

the difference between the highest price a consumer is willing to pay and the price the consumer actually pays

Question 15

Looking at slide 6, what are the 2 areas

Answer 15

blue: consumer surplus

Green: producer surplus