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CHAPTER 6
NONTARIFF TRADE BARRIERS

MULTIPLE-CHOICE QUESTIONS
1. The imposition of a tariff on imported steel for the home country results in:
a.
Improving terms of trade and rising volume of trade
b. Higher steel prices and falling steel consumption
c.
Lower profits for domestic steel companies
d.
Higher unemployment for domestic steel workers
2. Which of the following refers to a market-sharing pact negotiated by trading partners to moderate the
intensity of international competition?
a.
Orderly marketing agreement
b.
Local content requirements
c.
Import quota
d.
Trigger price mechanism
3. Suppose the United States and Japan enter into a voluntary export agreement in which Japan imposes an
export quota on its automakers. The largest share of the export quotas revenue effect would tend to be
captured by:
a.
The U.S. government
b.
Japanese automakers
c.
American auto consumers
d.
American autoworkers
4. Suppose the government grants a subsidy to domestic producers of an import-competing good. The subsidy
tends to result in deadweight losses for the domestic economy in the form of the:
a.
Consumption effect
b.
Redistribution effect
c.
Revenue effect
d.
Protective effect

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5. Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under
domestic subsidies. This is because, unlike domestic subsidies, import tariffs and quotas:
a.
Permit less efficient home production
b.
Distort choices for domestic consumers
c.
Result in higher tax rates for domestic residents
d.
Redistribute revenue from domestic producers to consumers
6. Suppose the government grants a subsidy to its export firms that permits them to charge lower prices on
goods sold abroad. The export revenue of these firms would rise if the foreign demand is:
a.
Elastic in response to the price reduction
b.
Inelastic in response to the price reduction
c.
Unit elastic in response to the price reduction
d.
None of the above
7. Because export subsidies tend to result in domestic exporters charging lower prices on their goods sold
overseas, the home countrys:
a.
Export revenues will decrease
b.
Export revenues will rise
c.
Terms of trade will worsen
d.
Terms of trade will improve
8. Which trade restriction stipulates the percentage of a products total value that must be produced
domestically in order for that product to be sold domestically?
a.
Import quota
b.
Orderly marketing agreement
c.
Local content requirement
d.
Government procurement policy
9. The imposition of a domestic content requirement by the United States would cause consumer surplus for
Americans to:
a.
Rise
b.
Fall
c.
Remain unchanged
d.
None of the above
10. Domestic content legislation applied to autos would tend to:
a.
Support wage levels of American autoworkers
b.
Lower auto prices for American autoworkers
c.
Encourage American automakers to locate production overseas
d.
Increase profits of American auto companies
11. Compared to an import quota, an equivalent tariff may provide a less certain amount of protection for home
producers since:
a.
A tariff has no deadweight loss in terms of production and consumption
b.
Foreign firms may absorb the tariff by offering exports at lower prices
c.
Tariffs are effective only if home demand is perfectly elastic
d.
Quotas do not result in increases in the price of the imported good

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12. Empirical studies show that because voluntary export quotas are typically administered by exporting
countries, foreign exporters tend to:
a.
Raise their export prices, thus capturing much of the quotas revenue effect
b.
Lower their export prices, thus losing much of the quotas revenue effect
c.
Raise their export prices, thus selling more goods overseas
d.
Lower their export prices, thus selling fewer goods overseas
13. Concerning the restrictive impact of an import quota, assume there occurs an increase in the domestic
demand for the import product. As long as the quota falls short of what would be imported under free
market conditions, the economys adjustment to the increase in demand would take the form of:
a.
A decrease in domestic production of the import good
b.
An increase in the amount of the good being imported
c.
An increase in the domestic price of the import good
d.
A decrease in domestic consumption of the import good
14. Assume the U.S. has a competitive advantage in producing calculators, while the rest of the world has a
competitive advantage in steel. Suppose the U.S. and the rest of the world enter into an agreement to lower
import quotas below existing levels on calculators and steel. Which of the following would least likely
occur for the U.S.? Rising levels of:
a.
Consumer surplus for American buyers of steel
b.
Producer surplus for American steelmakers
c.
Production in the American calculator industry
d.
Producer surplus for American calculator producers
15. A firm that faces problems of falling sales and excess productive capacity might resort to international
dumping if it:
a.
Can charge higher prices in markets that are elastic to price changes
b.
Earns revenues on foreign sales that at least cover variable costs
c.
Can sell at that price where domestic and foreign demand elasticities equate
d.
Is able to force foreign prices below marginal production costs
16. A producer successfully practicing international dumping would charge:
a.
A relatively higher price in the more inelastic market
b.
A relatively higher price in the more elastic market
c.
The same price in all markets, regardless of their elasticities
d.
Different prices in all markets, regardless of their elasticities
17. The practice of Canadian firms dumping their products in Sweden poses a problem for economic
policymakers since dumping tends to:
a.
Favor Swedish consumers over Canadian consumers
b.
Favor Swedish producers over Canadian producers
c.
Become widespread as firms operate at full productive capacity
d.
Result in firms charging prices above the total costs of production

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18. The United Auto Workers union attempted to win the approval of legislation that would moderate the
practice of foreign sourcing on the part of American auto manufacturers. Which of the following best
represents this legislation?
a.
Voluntary export quotas
b.
Trigger price mechanism
c.
Tariff quotas
d.
Local content laws
19. A main factor behind the presidents decision to extend relief to steel firms in the form of trigger prices was
that:
a.
Dumping complaints can be time consuming and expensive to implement
b.
The Tokyo Round outlawed the granting of subsidies to steel firms
c.
Trigger prices involve zero deadweight welfare loss for the economy
d.
Orderly marketing agreements were too costly to administer
20. If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then:
a.
The quota results in efficiency reductions but the tariff does not
b.
The tariff results in efficiency reductions but the quota does not
c.
They have different impacts on how much is produced and consumed
d.
They have different impacts on how income is distributed
21. If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then:
a.
The quota results in efficiency reductions but the tariff does not
b.
The tariff results in efficiency reductions but the quota does not
c.
They have identical impacts on how much is produced and consumed
d.
They have identical impacts on how income is distributed
22. From the perspective of the American public as a whole, export subsidies levied by overseas governments
on goods sold to the United States:
a.
Help more than they hurt
b.
Hurt more than they help
c.
Are equivalent to an import quota
d.
Are equivalent to an export quota
23. Export subsidies levied by foreign governments on products in which the United States has a comparative
disadvantage:
a.
Lower the welfare of all Americans
b.
Lead to increases in U.S. consumer surplus
c.
Encourage U.S. production of competing goods
d.
Encourage U.S. workers to demand higher wages
24. If import licenses are auctioned off to domestic importers in a competitive market, their scarcity value
(revenue effect) accrues to:
a.
Foreign corporations
b.
Foreign workers
c.
Domestic corporations
d.
The domestic government

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25. A specification of a maximum amount of a foreign produced good that will be allowed to enter the country
over a given time period is referred to as:
a.
A domestic subsidy
b.
An export subsidy
c.
An import quota
d.
An export quota
26. Import quotas tend to lead to all of the following except:
a.
Domestic producers of the imported good being harmed
b.
Domestic consumers of the imported good being harmed
c.
Prices increasing in the importing country
d.
Prices falling in the exporting country
27. To maintain that South Koreans are dumping their VCRs in the United States is to maintain that:
a.
Koreans are selling VCRs in the United States below their production cost
b.
Koreans are selling VCRs in the United States above their production cost
c.
The cost of manufacturing VCRs in Korea is lower in Korea than in the United States since wages are
lower in Korea
d.
The cost of manufacturing VCRs in Korea is higher in Korea than in the United States since wages
are higher in Korea
28. If the home countrys government grants a subsidy on a domestically produced good, domestic producers
tend to:
a.
Capture the entire subsidy in the form of higher profits
b.
Increase their level of production
c.
Reduce wages paid to domestic workers
d.
Consider the subsidy as an increase in production cost
29. For years the U.S. government levied quotas on inexpensive oil imported from the Middle East. The quotas
led to cost increases for U.S. consumers totaling $3 billion for oil products. An apparent justification for
this policy was that:
a.
U.S. oil companies and workers deserved higher incomes
b.
U.S. oil was of superior quality and merited higher prices
c.
One should not be too dependent on foreign suppliers of crucial resources
d.
The U.S. government needed the quota revenue to balance its budget
30. In certain industries, Japanese employers do not lay off workers. Therefore, they sometimes have excess
supplies of goods that they cannot sell on the home market without lowering prices. To hold down losses,
they sell goods in overseas markets at prices well beneath those in Japan. This practice is best referred to
as:
a.
Orderly marketing
b.
Trigger pricing
c.
Domestic content pricing
d.
Dumping

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Figure 6.1 illustrates the steel market for Mexico, assumed to be a small country that is unable to affect the
world price. Suppose the world price of steel is given and constant at $200 per ton. Now suppose the Mexican
steel industry is able to obtain trade protection, as discussed in the questions below. Answer the next 12 questions
on the basis of this information.
Figure 6.1.Alternative NTBs Levied by a Small Country

31. Consider Figure 6.1. With free trade, the quantity of steel imported by Mexico equals:
a.
2 tons
b.
4 tons
c.
6 tons
d.
8 tons
32. Consider Figure 6.1. With free trade, Mexicos consumer surplus and producer surplus respectively equal:
a.
$2,000 and $1,200
b.
$3,200 and $200
c.
$3,600 and $800
d.
$4,000 and $600

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33. Referring to Figure 6.1, suppose the Mexican government imposes an import quota equal to 2 tons of steel.
If Mexican steel importers behave as monopoly buyers and foreign exporters behave as competitive sellers,
the overall welfare loss of the quota to Mexico equals:
a.
$200
b.
$400
c.
$600
d.
$800
34. Referring to Figure 6.1, again consider the steel import quota of Question #33. If foreign exporters behave
as monopoly sellers, and Mexican importers behave as competitive buyers, the overall welfare loss of the
quota to Mexico equals:
a.
$200
b.
$400
c.
$600
d.
$800
35. Referring to Figure 6.1, again consider the steel import quota of Question #33. If the Mexican government
auctions import licenses to the highest foreign bidder, the overall welfare loss of the quota to Mexico
equals:
a.
$200
b.
$400
c.
$600
d.
$800
36. Consider Figure 6.1. Suppose instead that the Mexican government provides a subsidy of $200 per ton to
its steel producers, as indicated by the supply schedule SM (with subsidy). The quantity of imports equals:
a.
1 ton
b.
2 tons
c.
3 tons
d.
4 tons
37. Consider Figure 6.1. Referring to Question #36, the total cost of the subsidy to the Mexican government
equals:
a.
$200
b.
$400
c.
$600
d.
$800
38. Consider Figure 6.1. As a result of the subsidy referred to in Question #36, Mexican steel producers gain
__________ of producer surplus.
a.
$200
b.
$400
c.
$600
d.
$800

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39. Consider Figure 6.1. As a result of the subsidy referred to in Question #36, the welfare loss to Mexico due
to inefficient domestic production equals:
a.
$200
b.
$400
c.
$600
d.
$800
40. Consider Figure 6.1. As the result of the subsidy referred to in Question #36, the overall deadweight
welfare loss to Mexico equals:
a.
$200
b.
$400
c.
$600
d.
$800
41. Consider Figure 6.1. Suppose instead that the rest of the world voluntarily agrees to reduce steel shipments
to Mexico vis--vis an export quota equal to 2 tons. Assuming Mexican importers behave as competitive
buyers while foreign exporters behave as monopoly sellers, the overall welfare loss of the quota to Mexico
is:
a.
$200
b.
$400
c.
$600
d.
$800
42. Consider Figure 6.1. Referring to the export quota of Question #41, suppose Mexican importers behave as
monopoly buyers while foreign exporters behave as competitive sellers. The overall welfare loss of the
quota to Mexico is:
a.
$200
b.
$400
c.
$600
d.
$800

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Figure 6.2 illustrates the revenue and cost conditions of ABC Inc., which sells calculators in Canada and France.
On the basis of this information, answer the next four questions.
Figure 6.2.International Dumping

43. Consider Figure 6.2. In the absence of international dumping, ABC Inc. maximizes profits by selling
_______ calculators at a price of $_______; the firm realizes profits totaling $_______.
a.
27, $5, $54
b.
27, $5, $36
c.
24, $4, $46
d.
24, $4, $28
44. Referring to Figure 6.2, consider the quantity of calculators sold in the previous question. Of this quantity,
ABC Inc. sells _______ calculators in Canada and realizes revenues totaling $_______; the firm sells
_______ calculators in France and realizes revenues totaling $_______.
a.
15, $35, 9, $45
b.
15, $45, 9, $35
c.
21, $105, 6, $30
d.
21, $30, 6, $105
45. Consider Figure 6.2. With international dumping, ABC Inc. sells _______ calculators to Canadian buyers at
a price of $_______ and _______ calculators to French buyers at a price of $_______.
a.
15, $4, 12, $7
b.
15, $7, 12, $4
c.
9, $5, 15, $6
d.
9, $6, 15, $5
46. Consider Figure 6.2. Compared with the total revenue and total profit that ABC Inc. realizes in the absence
of dumping, with dumping the firm attains a:
a.
Fall in revenue of $18; fall in profits of $15
b.
Fall in revenue of $18, fall in profits of $18
c.
Rise in revenue of $18, rise in profits of $15
d.
Rise in revenue of $18, rise in profits of $18

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Figure 6.3 illustrates the apple market for Sweden, assumed to be a small country that is unable to affect the
world price. SSweden is the domestic supply and DSweden is the domestic demand. SSweden+Quota is Swedens supply
schedule with an import quota. Answer the next 11 questions on the basis of this information.
Figure 6.3.Swedens Apple Market

47. Consider Figure 6.3. In the absence of trade, Swedens equilibrium price and quantity of apples would be:
a.
$0.60 and 22 pounds
b.
$0.60 and 14 pounds
c.
$1.00 and 18 pounds
d.
$1.40 and 14 pounds
48. Consider Figure 6.3. Suppose the rest of the world can supply apples to Sweden at a price of $0.60 per
pound. With free trade, Sweden produces _______ pounds of apples and imports _______ pounds of
apples.
a.
10, 8
b.
10, 18
c.
6, 22
d.
6, 16

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49. Consider Figure 6.3. At the free-trade price of $0.60 per pound, Swedens consumer surplus totals
$_______ and producer surplus totals $_______.
a.
$10.80, $2.40
b.
$14.60, $3.90
c.
$24.20, $1.80
d.
$32.40, $2.30
50. Consider Figure 6.3. If SSweden+Quota represents the supply schedule after a quota is levied, Swedens imports
will equal:
a.
6 apples
b.
8 apples
c.
10 apples
d.
12 apples
51. Consider Figure 6.3. After the quota is levied, the price of apples in Sweden will equal:
a.
$0.60 per pound
b.
$1.00 per pound
c.
$1.40 per pound
d.
$1.80 per pound
52. Consider Figure 6.3. As a result of the quota, Swedens consumer surplus:
a.
Increases by $6
b.
Increases by $8
c.
Decreases by $6
d.
Decreases by $8
53. Consider Figure 6.3. The quota leads to a deadweight welfare loss for Sweden of an amount equaling:
a.
$0.80
b.
$1.60
c.
$2.40
d.
$3.20
54. Consider Figure 6.3. The quotas revenue effect equals:
a.
$1.60
b.
$2.40
c.
$3.20
d.
$4.00
55. Consider Figure 6.3. Assume that Swedish import companies behave as competitive buyers while foreign
export companies behave as a monopoly seller. Compared to free trade, Swedens import quota results in
domestic welfare:
a.
Gains totaling $3.20
b.
Gains totaling $4.80
c.
Losses totaling $3.20
d.
Losses totaling $4.80

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56. Consider Figure 6.3. Assume that Swedish import companies behave as a monopoly buyer while foreign
export companies behave as competitive sellers. Compared to free trade, Swedens import quota results in
domestic welfare:
a.
Gains totaling $1.60
b.
Gains totaling $3.20
c.
Losses totaling $1.60
d.
Losses totaling $3.20
57. Consider Figure 6.3. If the Swedish government auctions import licenses to the highest bidder in a
competitive market, it could realize revenues of up to:
a.
$3.20
b.
$4.00
c.
$4.80
d.
$5.60
Figure 6.4 illustrates the calculator market for Venezuela, assumed to be a small country that is unable to affect
the world price. SVenezuela is the domestic supply schedule and DVenezuela is the domestic demand schedule. Answer
the next five questions on the basis of this information.
Figure 6.4.Venezuelan Calculator Market

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115

58. Consider Figure 6.4. Suppose the rest of the world supplies calculators to Venezuela at a price of $4 each.
With free trade, Venezuelan imports total:
a.
8 calculators
b.
16 calculators
c.
20 calculators
d.
24 calculators
59. Consider Figure 6.4. Assume the Venezuelan government grants its manufacturers a production subsidy of
$4 per calculator. After the subsidy is granted, Venezuelan imports total:
a.
8 calculators
b.
12 calculators
c.
16 calculators
d.
20 calculators
60. Consider Figure 6.4. The cost of the production subsidy to the Venezuelan government totals:
a.
$32
b.
$40
c.
$48
d.
$54
61. Consider Figure 6.4. The increase in Venezuelan producer surplus under the production subsidy totals:
a.
$16
b.
$20
c.
$24
d.
$32
62. Consider Figure 6.4. The production subsidy results in an overall welfare loss for Venezuela totaling:
a.
$8
b.
$12
c.
$16
d.
$20

TRUE-FALSE QUESTIONS
T

1. In the post-World War II era, nontariff trade barriers have decreased in importance relative to
tariff barriers.

2. An import quota is a physical restriction on the quantity of goods that may be imported during
a specified time period.

3. Today most industrial countries protect their industries via global import quotas rather than
selective import quotas.

4. A global import quota permits a specified number of goods to be imported each year, but does
not specify where the product is shipped from and who is permitted to import.

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5. Import tariffs and import quotas yield identical protection effects, consumption effects,
redistribution effects, and revenue effects.

6. Import quotas can yield revenue for the domestic government if it auctions import licenses to
the highest bidder in a competitive market.

7. To the extent that domestic importing companies organize as a monopoly buyer, and foreign
exporting companies behave as competitive sellers, the importing companies capture the
revenue effect of a quota.

8. An import quota tends to reduce the overall welfare of the importing nation by an amount equal
to the protective effect, consumption effect, and the portion of the revenue effect that is
captured by the domestic government.

9. The sugar import quotas of the U.S. government have tended to increase the market price of
sugar, thus reducing the costs to the government of maintaining sugar price supports for
domestic growers.

10. During periods of growing demand, a tariff more effectively restricts the volume of imports
than an equivalent import quota.

11. With a quota placed on imported sugar, increased domestic demand leads to increased sugar
imports but not to higher sugar prices.

12. With a tariff on auto imports, increased domestic demand leads to a fall in the number of autos
imported and a rise in the number of autos produced domestically.

13. An orderly marketing agreement is a market-sharing pact negotiated by trading nations, and its
effect is to moderate the intensity of international competition.

14. An elimination of nontariff barriers on apples tends to increase apple imports, reduce profits of
import-competing apple producers, and generate job losses for domestic apple workers.

15. The distribution of an import quotas revenue effect depends on the relative concentration of
bargaining power between foreign exporters and domestic importers.

16. Voluntary export restraint agreements typically apply to all of the worlds exporting nations
rather than only the most important exporting nations.

17. For an export quota applied to manufactured goods, foreign exporters tend to capture only a
negligible share of the quotas revenue effect.

18. When increases in nonrestraint supply offset part of the cutback in shipments that occur under
an export quota, the overall inefficiency loss for the importing country is less than that which
would have occurred in the absence of nonrestrained exports.

19. Export quotas, placed on Japanese auto shipments to the United States in the 1980s, led to
rising prices of both Japanese autos and U.S.-produced autos purchased by the U.S. consumer.

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20. Under the Multifiber Arrangement, the United States can export only limited quantities of
textiles and apparel to Taiwan, Hong Kong, South Korea, and China.

21. During the 1980s, U.S. steel-using companies (Caterpillar) actively supported the U.S.
governments negotiation of voluntary export agreements with foreign steel-exporting
countries.

22. By limiting the amount of foreign sourcing, local content laws are viewed as a means of jobs
preservation for domestic workers.

23. Local content laws stipulate the maximum percentage of a products total value that must be
produced domestically for that product to be sold domestically.

24. Local content laws are consistent with the principle of import substitution, in which domestic
production replaces the importation of goods from abroad.

25. To the extent that a local content requirement forces firms to locate production in a high-cost
nation, product price rises and consumer surplus falls.

26. A subsidy granted to import-competing producers results in a welfare loss to the economy by
an amount equal to the protective effect plus the consumption effect.

27. A subsidy granted to import-competing producers is intended to lead to increased domestic

production and decreased imports for the home country.

28. A subsidy granted to an import-competing producer shifts its supply schedule outward to the
right.

29. A subsidy granted to an import-competing producer imposes a deadweight loss on the domestic
economy equal to the redistribution effect plus consumption effect.

30. A subsidy granted to import-competing producers reduces overall domestic welfare by the
same amount as would a tariff or quota that restricts imports by the same amount.

31. To the extent that subsidies granted to exporting firms reduce the foreign price of their goods,
the subsidizing countrys terms of trade worsen.

32. If the U.S. demand for Korean steel is price elastic, an export subsidy granted to Korean steel
firms will increase Koreas export revenue.

33. International dumping occurs when foreign buyers are charged higher prices than domestic
buyers for an identical product, after allowing for transportation costs and tariff duties.

34. Sporadic (distress) dumping would occur if domestic orange producers dispose of an excess
quantity of oranges, resulting from an abnormally large harvest, by selling them at lower prices
abroad than at home.

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35. Predatory dumping would occur if Toyota Inc. of Japan sells autos to U.S. consumers at lower
prices than to Japanese consumers in order to put Chrysler Inc. out of business.

36. A firm would increase profits from dumping if it charges a lower price at home, where demand
is inelastic, and a higher price abroad where demand is elastic.

37. The purpose of international dumping is to decrease a firms costs and increase its profits,
compared to what would be realized in the absence of dumping.

38. A firm granting lifetime employment to its workers has the incentive to engage in international
dumping during periods of business recession and excess production capacity.

39. A firm suffering idle plant capacity would minimize losses by selling its product abroad at a
lower price than at home, provided that the foreign price more than covers average variable
cost.

40. Under U.S. antidumping law, an antidumping duty can be levied when the U.S. Commerce
Department determines that a foreign product is being sold in the United States at less than fair
value and the U.S. International Trade Commission determines that the dumped product is
causing economic harm to domestic producers.

41. The margin of dumping equals the amount by which the foreign price is greater than the
domestic price, or the amount by which the foreign price exceeds the cost of production.

42. For most nations, the ratio of imports to total purchases in the public sector is much higher than
in the private sector.

43. According to the U.S. Buy American Act, federal government agencies cannot purchase
materials and products from U.S. suppliers if their prices are higher than those of foreign
competitors.

44. For the United States, the Buy American Act has tended to increase consumer surplus for U.S.
buyers of protected merchandise.

45. An effective Buy American law would tend to increase U.S. producer surplus at the expense of
U.S. consumer surplus.

46. An effective Buy American law results in deadweight welfare losses for the United States in the
form of the protective effect and consumption effect.

47. Although the Tokyo Round of international trade negotiations reduced the Buy-American
restrictions of the U.S. government, many state governments have maintained restrictive BuyAmerican policies.

48. According to the cost-based definition of dumping, dumping begins to occur when a firm sells
a product at a price that is less than average variable cost.

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49. If the Japanese demand for computers is elastic and the Canadian demand for computers is
inelastic, a profit-maximizing firm would charge a higher price to Canadian buyers than to
Japanese buyers.

50. If the Australian government imposes a domestic content requirement of 75 percent on autos, at
least 25 percent of an autos value must be produced in a foreign country if that auto is to be
sold in Australia.

51. During the 1980s, the U.S. government imposed sugar import quotas in an attempt to reduce its
costs of maintaining price supports for U.S. sugar growers.

Figure 6.5 illustrates the television market for Mexico, assumed to be a small country that is unable to affect the
world price. SMexico is the domestic supply schedule and DMexico is the domestic demand schedule. Suppose that
Japan can supply televisions to Mexico at a price of $100 per set. Answer the next nine questions on the basis of
this information.
Figure 6.5.Mexicos Television Market

52. Consider Figure 6.5. With free trade, Mexicans produce 4 TVs, consume 24 TVs, and import
20 TVs.

53. Consider Figure 6.5. With free trade, Mexican producer surplus equals $2,450 and Mexican
consumer surplus equals $200.

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54. Consider Figure 6.5. Suppose that the governments of Mexico and Japan negotiate a voluntary
export agreement in which Japanese TV exports to Mexico are limited to 8 units. Under the
quota, the price of TVs in Mexico equals $250 while Mexicans produce 10 TVs and purchase
18 TVs.

55. Consider Figure 6.5. Compared to free trade, the Japanese export quota leads to an increase in
Mexican consumer surplus of $3,150.

56. Consider Figure 6.5. Compared to free trade, the Japanese export quota leads to an increase in
Mexican producer surplus of $1,050.

57. Consider Figure 6.5. The deadweight welfare loss to Mexico, as a result of the Japanese export
quota, totals $1,200.

58. Consider Figure 6.5. The Japanese export quotas revenue effect totals $1,200.

59. Consider Figure 6.5. The government of Mexico collects 50 percent of the export quotas
revenue effect, or $600, in the form of tax revenue.

60. Consider Figure 6.5. Assuming that the revenue effect of the export quota accrues to Japanese
firms, the overall welfare loss to Mexico equals $2,100 as a result of the quota.

121

Chapter 6:Nontariff Trade Barriers

ANSWERS
Answers to Multiple-Choice Questions
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.

b
a
b
d
b
a
c
c
b
a
b
a
c

14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.

b
b
a
a
d
a
d
c
a
b
d
c
a

27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.

a
b
c
d
c
b
b
d
b
d
d
c
a

40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
52.

a
d
b
a
c
b
d
d
d
c
b
b
d

53.
54.
55.
56.
57.
58.
59.
60.
61.
62.

b
c
d
c
a
c
c
a
c
a

25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.

T
F
T
T
F
F
T
T
F
T
T
F

37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.

F
T
T
T
F
F
F
F
T
T
T
F

49.
50.
51.
52.
53.
54.
55.
56.
57.
58.
59.
60.

T
F
T
T
F
T
F
T
F
T
F
T

Answers to True-False Questions

1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.

F
T
F
T
F
T
T
F
T
F
F
F

13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.

T
T
T
F
F
T
T
F
F
T
F
T