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10.2   National Welfare Arguments Against Free Trade 1) The optimum tariff

Question : 10.2   National Welfare Arguments Against Free Trade 1) The optimum tariff : 1407651

 

10.2   National Welfare Arguments Against Free Trade

1) The optimum tariff is

A) the best tariff a country can obtain via a WTO negotiated round of compromises.

B) the tariff, which maximizes the terms of trade gains.

C) the tariff, which maximizes the difference between terms of trade gains and terms of trade loses.

D) not practical for a small country due to the likelihood of retaliation.

E) not practical for a large country due to the likelihood of retaliation.

2) The optimum tariff is most likely to apply to

A) a small tariff imposed by a small country.

B) a small tariff imposed by a large country.

C) a large tariff imposed by a small country.

D) a large tariff imposed by a large country.

E) an ad valorem tariff on a small country.

3) The prohibitive tariff is a tariff that

A) is so high that it eliminates imports.

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

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

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

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

4) The existence of marginal social benefits which are not marginal benefits for the industry producing the import substitutes

A) is an argument supporting free trade and non-governmental involvement.

B) is an argument supporting the use of an optimum tariff.

C) is an argument supporting the use of market failures as a trade-policy strategy.

D) is an argument rejecting free trade and supporting governmental involvement.

E) is an argument rejecting the domestic market failure concept.

5) The domestic market failure argument is a particular case of the theory of

A) the optimum, or first-best.

B) the second best.

C) the third best.

D) the sufficing principle.

E) the efficiency case for free trade.

6) The difficulty of ascertaining the right second-best trade policy to follow

A) reinforces support for the third-best policy approach.

B) reinforces support for increasing research capabilities of government agencies.

C) reinforces support for abandoning trade policy as an option.

D) reinforces support for free-trade options.

E) reinforced support for the domestic market failure argument.

7) The reason protectionism remains strong in the United States is that

A) economists can produce any result they are hired to produce.

B) economists cannot persuade the general public that free trade is beneficial.

C) economists do not really understand how the real world works.

D) the losses associated with protectionism are diffuse, making lobbying by the public impractical.

E) economists cannot agree on trade policy recommendations.

8) The United States appears at times to have a totally schizophrenic attitude toward protectionism. The United States was the country that proposed the establishment of the World Trade Organization as early as the late 1940s, and was also the only industrialized country that refused to ratify this at that time. The United States has consistently argued on the side of multinational free trade in GATT Rounds, and yet maintains many protectionist laws such as those which reserve oil shipments from Alaska to U.S. flag carriers. How can you explain this apparent lack of national consistency on this issue?

9) Refer to above figure. Assume that Boeing is the first to enter the Hungarian market. Without a government subsidy what price would they demand, and what would be their total profits?

10) Refer to above figure. What is the consumer surplus enjoyed by Hungarian consumers of Boeing aircraft in the situation?

 

 

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