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Krugman TB ch08
Krugman TB ch08
Krugman TB ch08
1 BasicTariffAnalysis
1) pecifictariffsare S A) mporttaxesstatedinspecificlegalstatutes. i B) mporttaxescalculatedasafixedchargeforeachunitofimportedgoods. i C) mporttaxescalculatedasafractionofthevalueoftheimportedgoods. i D) hesameasimportquotas. t E) oneoftheabove. N Answer: B
QuestionStatus: reviousEdition P
20) tisarguedthatatariffmayhelppromoteemploymentinasingleindustry,butisnotlikelytohelp I employmentingeneral.Discuss. Answer: Ageneraltariffonallimportsisequivalenttoadepreciationinthevalueofthecountryscurrency.It wouldraisethepricesofallimports,andhaveaconsiderableincomeeffect.Thisincomeeffectwill haveanegativeeffectontotalconsumptionoftheimport-competingsector(aswellastheexportables andnon-tradables).Inaddition,underconditionsofaflexibleexchangerateregime(assumingthe Marshal-LernerConditionshold)itwilllowerthesupplyofthecountryscurrencyintheforeign exchangemarket,andhencecauseanappreciationofthecurrency.Thiswillharmthecountrys exports,andnegativelyaffectthissectorsemployment.
QuestionStatus: reviousEdition P
8.2 CostsandBenefitsofaTariff
1) fagoodisimportedinto(large)countryHfromcountryF,thentheimpositionofatariffincountryH I A) aisesthepriceofthegoodinbothcountries(theLawofOnePrice). r B) aisesthepriceincountryHandcannotaffectitspriceincountryF. r C) owersthepriceofthegoodinbothcountries. l D) owersthepriceofthegoodinHandcouldraiseitinF. l E) aisesthepriceofthegoodinHandlowersitinF. r Answer: E
QuestionStatus: reviousEdition P
16) policyoftariffreductioninthecomputerindustryis A A) ntheinterestoftheUnitedStatesasawholeandintheinterestofcomputerproducingregionsofthe i country. B) ntheinterestofUnitedStatesasawholebutnotintheinterestofcomputerproducingregionsofthe i country. C) otintheinterestoftheUnitedStatesasawholebutintheinterestsofcomputerproducingregionsof n thecountry. D) otintheinterestoftheUnitedStatesasawholeandnotintheinterestsofcomputerconsumers. n E) oneoftheabove. N Answer: B
QuestionStatus: reviousEdition P
21) heMetzlerParadoxisaspecialcaseoftheoptimumtariffconcept.Discussthisassertion.Wouldtheoptimum T tarifftendtobeahighoneoralowoneinthecasewherethisparadoxexists?Whatconditionswouldbe neededintheinternationalmarketsforacountrysexportsforthisparadoxtoexist?Whydoyousuppose empiricalsupportfortheexistenceofthisparadoxhasnotbeenforthcomingtodate? Answer: TheMetzlerParadoxdescribesanunlikelysituationinwhichtheimpositionofatariffnotonly improvesacountryswelfare,butalsoimprovesthatofitsdomesticconsumers.Ifthisparadoxwere presentthenthemagnitudeoftheoptimumtariffwouldtendtobelarge,sincethewelfaredecreasing decreaseinimportsisnotpresentinthiscase(theimportsactuallyincrease,asworldpricesdrastically drop).TheMetzlerParadoxcouldoccuronlyiftheforeignoffercurvesareinelastic.Itisnotlikelytobe observedbecausetradeelasticitiestendtoberelativelylarge.Also,wereittoexist,itsactivationbya largecountrywouldtendtoevokeforeignretaliation.
QuestionStatus: reviousEdition P
23) heeffectiverateofprotectionisaweightedaverageofnominaltariffsandtariffsonimportedinputs.Ithas T beennotedthatinmostindustrializedcountries,thenominaltariffsonrawmaterialsorintermediate componentsorproductsarelowerthanonfinal-stageproductsmeantforfinalmarkets.Whywould countriesdesigntheirtariffstructuresinthismanner?Whotendstobehelped,andwhoisharmedbythis cascadingtariffstructure? Answer: Thecascadingtariffstructureisprobablytheresultofsystematiclobbyingonthepartofmanufacturing interestsandlobbiestolowercostsofproduction(intermsofimportedinputs).Theendresultisin facttocreateeffectiveratesofprotectionfordownstream,orfinalmanufacturingprocessesthatare oftenmuchhigherthannominaltariffsontheseproducts.Animportantgroup,whichishurtbythis areexportersofrawmaterialsandcomponentsindevelopingcountries.
QuestionStatus: reviousEdition P
24) hetwodeadweighttrianglesaretheConsumptiondistortionandProductiondistortionlosses.Itiseasyto T understandwhytheConsumptiondistortionconstitutesalossforsociety.Afterallitraisesthepricesofgoods toconsumers,andevencausessomeconsumerstodropoutofthemarketaltogether.Itseemsparadoxical thattheProductiondistortionisconsideredanequivalentburdenonsociety.Afterall,inthiscase,profits increase,andadditionalproduction(withitsassociatedemployment)comesonline.Thiswouldseemtobe anoffsetratherthananadditiontotheburdenorlossbornebysociety.ExplainwhytheProductiondistortion isindeedalosstosociety,andwhatiswrongwiththelogicthatleadstotheapparentparadox. Answer: TheProductionDistortionrepresentsaninefficientshiftofsocietysresourcestoproduceagood,which itcouldnotsellprofitablyatworldprices.Since(withfullemploymentassumed)theseresourceswere formerlyusedtoproduceexportgoods,whichcouldcompeteprofitably,thenetresultisalossinreal incometothecountry.
QuestionStatus: reviousEdition P
8.3 OtherInstrumentsofTradePolicy
1) nimportantdifferencebetweentariffsandquotasisthattariffs A A) aisethepriceofthegood. r B) eneratetaxrevenueforthegovernment. g C) timulateinternationaltrade. s D) elpdomesticproducers. h E) oneoftheabove. N Answer: B
QuestionStatus: reviousEdition P
8.4 TheEffectsofTradePolicy:ASummary
1) herearenoquestionsforthissection. T Answer: TRUE
QuestionStatus: ew N
8.5 Appendix1toChapter8:TariffAnalysisinGeneralEquilibrium
1) herearenoquestionsforthissection. T Answer: TRUE
QuestionStatus: ew N
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8.6 Appendix2toChapter8:TariffsandImportQuotasinthePresenceofMonopoly
1) herearenoquestionsforthissection. T Answer: TRUE QuestionStatus: ew N
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