Q: A tariff creates deadweight loss. Which equation best represents deadweight loss ($$DWL) $$from a tariff?

$$DWL = \frac{1}{2} \times (Q_{after} - Q_{before}) \times (P_{tariff} - P_{world})$$

Question 1

Which concept explains why countries specialize in producing certain goods and trade them with other countries?

Accepted Answer

Comparative advantage

Question 2

A country is said to be in autarky when:

Accepted Answer

It does not engage in trade with other countries

Question 3

If the world price ($$P_{world}) is $$higher than the domestic price ($$P_{domestic}$$), what will happen?

Accepted Answer

The country will export the good

Question 4

Exports are defined as:

Accepted Answer

Goods produced domestically but sold overseas

Question 5

When a country exports a good, who benefits and who loses?

Accepted Answer

Producers benefit, consumers lose

Question 6

Why is a nation as a whole better off when it exports a good, even though some groups lose?

Accepted Answer

The gains to producers exceed the losses to consumers

Question 7

If the world price ($$P_{world}) is $$lower than the domestic price ($$P_{domestic}$$), what will happen?

Accepted Answer

The country will import the good

Question 8

Imports are defined as:

Accepted Answer

Goods produced overseas but sold domestically

Question 9

When a country imports a good, who benefits and who loses?

Accepted Answer

Consumers benefit, producers lose

Question 10

Which of the following is NOT a main source of comparative advantage?

Accepted Answer

Government regulation

Question 11

A tariff is a tax on _________.

Accepted Answer

Imports

Question 12

What is the effect of a tariff on consumer surplus and producer surplus?

Accepted Answer

Consumer surplus decreases, producer surplus increases

Question 13

A tariff creates deadweight loss. Which equation best represents deadweight loss ($$DWL) $$from a tariff?

Accepted Answer

$$DWL = \frac{1}{2} 	imes (Q_{after} - Q_{before}) 	imes (P_{tariff} - P_{world})$$

Question 14

Which of the following is a reason a government might impose a tariff?

Accepted Answer

To protect domestic producers from foreign competition

Question 15

An import quota differs from a tariff in that:

Accepted Answer

It sets a numerical limit on imports rather than taxing them

Question 16

A voluntary export restraint (VER) is:

Accepted Answer

An agreement between two countries to limit the amount traded

Question 17

Suppose the world price for oversized lollipops is $$2.50. $$Domestic demand is $$85,000$$ units and domestic supply is $$20,000$$ units. If the government sets an import quota of $$25,000$$ units, what is the maximum number of lollipops that can be imported?

Accepted Answer

$$25,000$$

Question 18

Which argument against international trade claims that domestic jobs are lost to foreign competition?

Accepted Answer

Jobs argument

Question 19

Which of the following is a benefit of international trade?

Accepted Answer

Lower costs through economies of scale

Question 20

If a country imposes a quota on imports, what happens to consumer surplus and producer surplus?

Accepted Answer

Consumer surplus decreases, producer surplus increases

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