Suppose, in the United States, each farmer is given a federal agricultural subsidy worth 30,000 . What will be the effect of such subsidy?
a. They discourage domestic agricultural production.
b. They allow U.S. farmers to sell their products for lower prices in foreign markets.
c. They give foreign producers an unfair cost advantage.
d. They increase the amount of agricultural imports into the United States.
e. The price of the primary products decline in the U.S. market.
Question 2Government expenditures as a percentage of GDP in the U.S. increased from 1950 to 1975 but decreased sharply during the recession that began in 2008.
a. True
b. False
Indicate whether the statement is true or false
Question 3Which of the following would be expected if the tariff on foreign-produced automobiles was increased?
a. The domestic price of automobiles would fall.
b. The supply of foreign automobiles to the domestic market would be reduced, causing auto prices to rise.
c. The number of unemployed workers in the domestic automobile industry would rise.
d. The demand for foreign-produced automobiles would increase, causing the price of automobiles to increase in other nations.
Question 4One of the negative impacts of export subsidy is that:
a. the price of the domestic good increases in the world market.
b. the domestic supply of the goods increases more than proportionately than increase in demand.
c. the domestic cost of production of the exportable increase.
d. it results in a general deflation and hence the domestic producers incur losses.
e. the domestic consumers are harmed as the subsidies are financed by taxing them.
Question 5What is the Coase Theorem? What are transaction costs?
Question 6Which of the following is not a result we would expect to result from a tariff on leather shoes?
a. The price of leather shoes in the U.S. would increase.
b. The amount of shoes imported into the U.S. would decline.
c. Fewer pairs of shoes would be sold in the U.S.
d. Domestic producers would sell fewer shoes at the higher prices.
Question 7Subsidies are payments made by the government of a country to:
a. foreign firms to encourage imports.
b. foreign firms to encourage domestic exports.
c. domestic firms to encourage exports.
d. domestic firms to encourage imports.
e. domestic firms to ensure domestic consumption of their goods.
Question 8How could transferable pollution rights lead to pollution being reduced at the lowest possible opportunity cost?
Question 9Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers. This statement:
a. is essentially correct.
b. contains two errors; trade restraints do not increase the domestic scarcity of product and neither do they harm domestic consumers.
c. contains one error; domestic producers gain at the expense of foreign producers rather than domestic consumers.
d. contains one error; the trade restraints do not increase the scarcity of foreign produced goods.
Question 10Which of the following can be considered as a cultural barrier to trade?
a. Prohibition on Zimbabwean aircrafts from flying over or landing in Canada.
b. Restriction on the export of luxury goods to the Democratic Peoples Republic of Korea from Canada.
c. An arms embargo imposed on China by the U.K. government
d. Japanese law requiring a new retail firm to receive permission from other retailers in the area in order to open a business.
e. Restriction on the export of strategic goods to Ghana imposed by the government of U.K.
Question 11Why do most economists favor emissions taxes and transferable pollution rights over compliance standards as pollution deterrents?
Question 12An import quota or tariff on French wine that raises the prices for wine will probably
a. hurt domestic wineries, which will lose business as a result of the higher prices.
b. hurt both domestic wine drinkers and domestic wine producers because of a reduction in competition.
c. hurt both domestic wine drinkers and domestic wineries but this will be more than offset by a reduction in driving fatalities.
d. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices.
Question 13If a developer plans to build a skyscraper in a major city overshadowing an historic church, could an efficient solution be reached if the church had the legal right to prevent the developer from building in that location? Why or why not?
Question 14The basic difference between a tariff and quota is that:
a. quota can be imposed both on imports and exports whereas a tariff can be imposed only on imports.
b. quota yields revenue to the government whereas tariff does not yield any revenue.
c. tariff reduces the import of the goods with greater certainty than quota as the amount of import restricted by quota depends on the price elasticity of demand for importable.
d. tariff is a quantitative restriction on imports whereas quota is an import duty.
e. a tariff raises the price of the product only in the domestic market whereas with a quota, both domestic and foreign producers receive a higher price.