1. What is typically the main objective of protectionist trade policies?

A. to raise average real wages in the economy

B. to maximize world production

C. to shield local producers from foreign competition

D. to create the level playing field

E. to raise government revenues through tariffs

2.If a tariff is imposed by a country that is large enough to have market power in global markets, the domestic consumer will face a domestic price ________ than the world price for the product, and this world price will be ________ by the tariff.

A. higher; increased

B. lower; reduced

C. lower; unaffected

D. higher; reduced

E. lower; increased

3.A country can improve its own terms of trade by imposing a tariff if that country

A. produces and exports a large fraction of the world's supply of some commodity.

B. imports mostly primary products.

C. has a significant trade surplus.

D. has a high level of industrial diversification.

E. constitutes a large fraction of the world demand for some product that it imports.

4.The change in economic welfare of a large country associated with an increase in a tariff equals

A. efficiency loss - tax revenue gain.

B.efficiency loss + tax revenue gain + terms of trade gain.

C.efficiency loss + tax revenue gain.

D.efficiency gain - terms of trade loss.

E.efficiency loss - terms of trade gain.

5.The terms of trade are

A.exports plus imports divided by GDP.

B.the ratio of export prices to import prices.

C. the terms negotiated in a trade agreement.

D. the value of the real exchange rate.

E. taxes plus transaction costs paid on imports.

6.For most products, Canada is a small economy with no market power in the global market. If Canada imposed a tariff on imported goods from a low-wage foreign country, this would

A.improve Canada's terms of trade.

B.equalize the costs of production between the two countries.

C.reduce the price of the imported good in Canada.

D.increase wages in the low-wage foreign country.

E.increase the Canadian price of the imported good.

7.An import quota will ________ producer surplus, ________ consumer surplus, ________ government revenue, and ________ overall domestic national welfare.

A.increase; decrease; have no effect on; have an ambiguous effect on

B.increase; increase; decrease; have an ambiguous effect on

C,increase; decrease; increase; have an ambiguous effect on

D.increase; decrease; have no effect on; decrease

E.increase; decrease; decrease; decrease

8.Theprohibitive tariffis a tariff that

A.is so low that the government prohibits its use since it would lose an important revenue source.

B.is so high that it eliminates imports.

C.is so high that it causes undue harm to import competing sectors.

D.is so low that it causes domestic producers to leave the industry.

E. is so high that it causes undue harm to trade-partner economies.

9.The strongest political pressure for a trade policy that results in higher protectionism comes from

A.domestic consumers lobbying for import restrictions.

B.domestic consumers lobbying for export restrictions.

C.domestic workers lobbying for import restrictions.

D.domestic workers lobbying for free trade.

E.domestic workers lobbying for export restrictions.

10.An important difference between tariffs and quotas ( licenses given on first come first serve basis) is that tariffs

A.raise the price of the good.

B.stimulate international trade.

C.generate tax revenue for the government.

D.are paid by foreign producers.

E. help domestic producers.