ECN 306 Exam 2 questions with verified
solutions already passed
A nationally optimal tariff causes no production or consumption efficiency losses -
correct answer ✔✔False
A nation whose total imports are 50% of GDP decides to impose a 30% import
tariff on all imports. If the tariff causes a 45% reduction in import quantities, what
is the impact on national well-being as a percentage of GDP? - correct answer
✔✔3.38%
For both the small and large nations in international trade, national well-being is
always higher under free trade than under autarky. - correct answer ✔✔True
Generally, non-tariff barriers have what effects? - correct answer ✔✔Limit the
quantity of the imported good, increase the cost of accessing the home market,
create uncertainty regarding access to the home market
The U.S. is considering implementing a quota. What procedure for granting import
licenses would you recommend so that the U.S. suffers the smallest economic loss
from the quota? - correct answer ✔✔Announce that an auction will be held and
foreign suppliers will be required to bid competitively for the licenses
Let T represent the deadweight loss to the nation of a tariff, Q the cost to the
nation of a quota, and VER the cost to the nation of a voluntary export restraint.
, What correctly shows how these losses of national economic well-being are
related? - correct answer ✔✔T <= Q <= VER
Careful studies by economists indicate that trade restrictions: - correct answer
✔✔Are an expensive way to try and save jobs, cost consumers approximately
$169,000 per job saved, and largely alter the mix of jobs in an economy
What is the modern version of the mercantillism argument for protection? -
correct answer ✔✔The Preserves Domestic Employment Motive
According to the Special Interest Model, politicians supply protection: - correct
answer ✔✔Because they are concerned with getting re-elected (thus, they grant
protection in exchange for campaign contributions from the protected industry),
and whenever the benefits of protection are concentrated among a few (who will
be cognizant of the favor), while the costs are disbursed among the many
According to the text, tariff protection may be justified for start-ups or infant
industries in what situation? - correct answer ✔✔Whenever start-ups in poor
nations lack access to well-developed capital markets
What implications does the Specificity Rule have for public policy? - correct
answer ✔✔It asks that a domestic subsidy be used to support domestic
production rather than a tariff since there is no consumption inefficiency loss with
the subsidy
What argument for trade protection is possibly valid for developing countries? -
correct answer ✔✔The Revenue Motive argument
solutions already passed
A nationally optimal tariff causes no production or consumption efficiency losses -
correct answer ✔✔False
A nation whose total imports are 50% of GDP decides to impose a 30% import
tariff on all imports. If the tariff causes a 45% reduction in import quantities, what
is the impact on national well-being as a percentage of GDP? - correct answer
✔✔3.38%
For both the small and large nations in international trade, national well-being is
always higher under free trade than under autarky. - correct answer ✔✔True
Generally, non-tariff barriers have what effects? - correct answer ✔✔Limit the
quantity of the imported good, increase the cost of accessing the home market,
create uncertainty regarding access to the home market
The U.S. is considering implementing a quota. What procedure for granting import
licenses would you recommend so that the U.S. suffers the smallest economic loss
from the quota? - correct answer ✔✔Announce that an auction will be held and
foreign suppliers will be required to bid competitively for the licenses
Let T represent the deadweight loss to the nation of a tariff, Q the cost to the
nation of a quota, and VER the cost to the nation of a voluntary export restraint.
, What correctly shows how these losses of national economic well-being are
related? - correct answer ✔✔T <= Q <= VER
Careful studies by economists indicate that trade restrictions: - correct answer
✔✔Are an expensive way to try and save jobs, cost consumers approximately
$169,000 per job saved, and largely alter the mix of jobs in an economy
What is the modern version of the mercantillism argument for protection? -
correct answer ✔✔The Preserves Domestic Employment Motive
According to the Special Interest Model, politicians supply protection: - correct
answer ✔✔Because they are concerned with getting re-elected (thus, they grant
protection in exchange for campaign contributions from the protected industry),
and whenever the benefits of protection are concentrated among a few (who will
be cognizant of the favor), while the costs are disbursed among the many
According to the text, tariff protection may be justified for start-ups or infant
industries in what situation? - correct answer ✔✔Whenever start-ups in poor
nations lack access to well-developed capital markets
What implications does the Specificity Rule have for public policy? - correct
answer ✔✔It asks that a domestic subsidy be used to support domestic
production rather than a tariff since there is no consumption inefficiency loss with
the subsidy
What argument for trade protection is possibly valid for developing countries? -
correct answer ✔✔The Revenue Motive argument
