Question

True or False? Explain.

1.     T / F         The specificity rule says that tariffs are usually not the best way of curing distortions in a country’s economy.

2.     T / F         National defense and national pride arguments for protection are basically second‑best.

3.     T / F         If “learning by doing” means that more production now translates into lower costs later, the best policy is a protective tariff.

4.     T / F         “Learning by doing” is what study guides in international economics are for.

5.     T / F         Some “infant industries” never grow up.

Multiple Choice

1.         Imposing a tariff aimed at counteracting the undesirable effects of domestic distortions

A. always reduces net national welfare.

B. is the optimal policy response.

C. is ineffective in achieving its stated goal.

D. can be better than doing nothing.

2.         In which case is the national defense argument a valid one for tariff protection?

A. When the crucial goods are depletable mineral resources.

B. When stocks of the crucial goods can be cheaply stored.

C. When production subsidies or stockpiling are prohibitively expensive.

D. When a war with a neighboring country is feared.

3.         Which of these arguments in favor of a tariff is most likely to be valid for poor countries?

A. Protection of domestic labor against cheap foreign labor.

B. Correction of the balance of payments problem.

C. Increase in domestic employment.

D. A poorly developed system for collecting domestic taxes.

4.         In which of the following cases does economic analysis (using the “one‑dollar, one‑vote” metric) justify tariffs as superior to other policies?

A. The developing government case.

B. The infant industry case.

C. The dying industry case.

D. Low “country esteem.”

5.         Compared with a tariff, a subsidy for import‑competing producers

A. is of no concern to foreign exporters.

B. avoids the consumer surplus loss.

C. brings a larger net welfare loss because the consumers have to pay for it, rather than bringing in revenues as with a tariff.

D. is better than a tariff when the importing nation has some monopoly power.

Answer 1

1):-The specificity rule says that tariffs are usually not the best way of curing distortions in a country's economy.

True

tariff is defined as a government tax on imports or exports

2) :-National defense and national pride arguments for protection are basically second‑best.

True

3) :-If "learning by doing" means that more production now translates into lower costs later, the best policy is a protective tariff.

False

4):-"Learning by doing" is what study guides in international economics are for

True

5) :-Some "infant industries" never grow up.

True

1) :-Imposing a tariff aimed at counteracting the undesirable effects of domestic distortions

D. can be better than doing nothing.

2) :-In which case is the national defense argument a valid one for tariff protection?

When production subsidies or stockpiling are prohibitively expensive.

3) :-Which of these arguments in favor of a tariff is most likely to be valid for poor countries?

A poorly developed system for collecting domestic taxes

4) :-In which of the following cases does economic analysis (using the "one‑dollar, one‑vote" metric) justify tariffs as superior to other policies?

The developing government case.

5) :-Compared with a tariff, a subsidy for import‑competing producers

avoids the consumer surplus loss.

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