Question

2. “I am for fair trade. Clothing workers in Asia work for almost nothing and so the only way that we can have fair trade between these nations and the United States is by imposing tariffs on imports of clothing until the Asian companies pay their workers a decent wage. The tariffs will help us, because we’ll keep jobs in the United States, and they will help Asian workers because the companies will have to pay the workers a living wage.” These statements have a variety of errors. Discuss the mistakes.

3. The government imposes a tariff on imported rice. In a diagram, show the effect on the price and quantity imported.

Answer the following multiple choice questions.

4. Exports ____ consumer surplus in the domestic country and ____ producer surplus in the domestic country.
a. increase; increase
b. decrease; decrease
c. increase; decrease
d. decrease; increase

5. Suppose the country of Atlantica imposes a tariff on foreign-produced cars. As a result,
a. the tariff revenue collected by the government in the Atlantica increases.
b. the number of imported cars increases.
c. Atlantica’s total surplus does not change.
d. Atlantica’s total surplus increases.

6. A business which contends that it needs temporary protection so that it can grow large enough to compete with foreign producers is using an argument known as the
a. growth case for tariffs.
b. social advantages case for tariffs.
c. infant-industry case for tariffs.
d. price fluctuations case for tariffs.

7. A reason for trade protection that most economists support include
a. other countries have lax environmental standards.
b. a poor country cannot spend resources on “green” production techniques.
c. poor countries have low wages and advanced nations cannot compete because their wages are higher.
d. None of the above.

8. The gains from free trade accrue to a ____ number of people and the costs of free trade are imposed on a ____ number of people.
a. small; large
b. large; small
c. small; small
d. large; large

Answer 1

Ans-2)

There are a lot of errors in the given statement-------

* If you are in the favour of free trade, there must not be any import tariff

* As it is stated that asian workers work for almost nothing, US should hire these eorkers to produce cloth ans sell to thr consumers at cheaper rate

* Imposition of tariff in US on cloth from asian countries is not a solution to force companies in US to pay their workers a decent wage

* It is also stated that imposition of tariff will help asian workers to get living wage from companies.How is it possible for asian countries when Tariff is imposed in US country.

3) Impact of import tariff on rice-----

* Under free trade-------

Price of rice=$3

Quantity imported= 40-10= 30 tonnes

* After Imports Tariff------@$1 per ton

Price of rice=$4

Quantity imported refuced to 35-15=20 tonnes of rice

Ans-4) option d is correct

Decrease, increase

Reason--

It will be quite clear from graph below -

Initial CS= area ABE,PS= area OBE

After exports ----CS is shaded area( small triangle)

PS= larger area shaded

Ans5) oprion A is correct

The tariff Revenue collected by the govt in the Atlantica increases

Reason-- Allother options given are incorrect, but this is correct option as with imposition of Tariff ,the govt collects income on imports from foreign countries.

Ans---6) option C is correct

Infant industry case for tariffs

Reason--

Infant industry is in the favour of import tariffs because initially this business doesn't get economies of scale while the foreign older firms get this. So, in order to compete with them and to sell their product at their price ( which is higher than that of foreign sellers) ,they oppose free trade and need temporary protection.

Ans7) ---- option d is correct

None of the above

Reason-- All options are incorrect.

- green protection technique is a method of producing goods by conserving energy, with no use of artificial chemicals and at minimum cost, this option has no sense in the statement.

- If poor countries have low qages,advance countries have good technology, so there is no question that they cannot compete.

- the rest option also does not suit here.

Ans-8) option b is correct.

Large, small

Reason--

The gains from free trade accrue to large number of people like---- domestic buyers get cheaper goods, foreign producers increase sales Revenue .

The costs of free trade are imposed upon domestic sellers only as they are not able to sell Equilibrium Quantity of goods now.

Thanks.