ECN 306 Final Exam 2 Questions with
Complete Rationales 2026/2027 Updated.
Find changes in CS, PS, Government and TS as a result of quota - Answer CS = - (a + b + c + d)
PS = + a + c
TS = -(b + d)
Import Quota DWL = b + d
Export Quota = b + c + d
Quotas vs Tariffs - Answer Similarities:
- Equivalency
- Imports and price are same
- CS and PS same
- With exception of VER, DWL same
- if import licenses are auctioned, all welfare effects same
Find changes in CS, PS, Government Spending and TS as a result of production subsidy - Answer
Subsidy
CS = No Change
PS = + a
G = - (a + b)
If import licenses are auctioned off to domestic importers in a competitive market, their scarcity
value (revenue effect) accrues to - Answer the domestic government.
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 -
Answer protective effect.
If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then -
Answer they have different impacts on how income is distributed.
During periods of growing demand, a tariff more effectively restricts the volume of imports than
an equivalent import quota. - Answer False
Similar to import tariffs, quotas on imports result in - Answer higher prices for domestic
consumers.
,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 economy's adjustment to the increase in demand
would take the form of - Answer an increase in the domestic price of the import good.
From the perspective of the American public as a whole, export subsidies levied by overseas
governments on goods sold to the United States - Answer help more than they hurt.
Import quotas - Answer increase the price to the domestic consumer.
The imposition of a domestic content requirement by the United States would cause consumer
surplus for Americans to - Answer fall
Figure 5-2 illustrates the revenue and cost conditions of ABC Inc., which sells calculators in
Canada and France.Figure 5-2 International Dumping
Refer to Figure 5-2. In the absence of international dumping, ABC Inc. maximizes profits by
selling ____ calculators at a price of $____; the firm realizes profits totaling $____. - Answer A)
27, 5, 36
B) 24, 4, 46
C) 24, 4, 28
D) 27, 5, 54 (Correct)
Figure 5-3 illustrates the apple market for Sweden, assumed to be a small country that is unable
to affect the world price of $0.60. SSweden is the domestic supply and DSweden is the domestic
demand. SSweden+Quota is Sweden's supply schedule with an import quota.
Figure 5-3 Sweden's Apple Market
Figure 5-3 illustrates the apple market for Sweden, assumed to be a small country that is unable
to affect the world price of $0.60. SSweden is the domestic supply and DSweden is the domestic
demand. SSweden+Quota is Sweden's supply schedule with an import quota.
Refer to Figure 5-3. After the quota is levied, the price of apples in Sweden will equal - Answer
A) $0.60 per pound
B) $1.00 per pound (Correct)
C) $1.80 per pound
D) $1.40 per pound
, Figure 5-2 illustrates the revenue and cost conditions of ABC Inc., which sells calculators in
Canada and France.Figure 5-2 International Dumping
Refer to Figure 5-2. Compared with the total revenue and total profit that ABC Inc. realizes in
the absence of dumping, with dumping the firm attains a - Answer rise in revenue of $18 and
rise in profits of $18.
Figure 5-5 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.
Figure 5-5 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.
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.
Refer to Figure 5-5. 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. - Answer True
Figure 5-1 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.
Refer to Figure 5-1. Suppose 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 - Answer A) 3 tons
B) 4 tons (correct)
C) 1 ton
D) 2 tons
Figure 5-5 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.
Figure 5-5 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.
Complete Rationales 2026/2027 Updated.
Find changes in CS, PS, Government and TS as a result of quota - Answer CS = - (a + b + c + d)
PS = + a + c
TS = -(b + d)
Import Quota DWL = b + d
Export Quota = b + c + d
Quotas vs Tariffs - Answer Similarities:
- Equivalency
- Imports and price are same
- CS and PS same
- With exception of VER, DWL same
- if import licenses are auctioned, all welfare effects same
Find changes in CS, PS, Government Spending and TS as a result of production subsidy - Answer
Subsidy
CS = No Change
PS = + a
G = - (a + b)
If import licenses are auctioned off to domestic importers in a competitive market, their scarcity
value (revenue effect) accrues to - Answer the domestic government.
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 -
Answer protective effect.
If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then -
Answer they have different impacts on how income is distributed.
During periods of growing demand, a tariff more effectively restricts the volume of imports than
an equivalent import quota. - Answer False
Similar to import tariffs, quotas on imports result in - Answer higher prices for domestic
consumers.
,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 economy's adjustment to the increase in demand
would take the form of - Answer an increase in the domestic price of the import good.
From the perspective of the American public as a whole, export subsidies levied by overseas
governments on goods sold to the United States - Answer help more than they hurt.
Import quotas - Answer increase the price to the domestic consumer.
The imposition of a domestic content requirement by the United States would cause consumer
surplus for Americans to - Answer fall
Figure 5-2 illustrates the revenue and cost conditions of ABC Inc., which sells calculators in
Canada and France.Figure 5-2 International Dumping
Refer to Figure 5-2. In the absence of international dumping, ABC Inc. maximizes profits by
selling ____ calculators at a price of $____; the firm realizes profits totaling $____. - Answer A)
27, 5, 36
B) 24, 4, 46
C) 24, 4, 28
D) 27, 5, 54 (Correct)
Figure 5-3 illustrates the apple market for Sweden, assumed to be a small country that is unable
to affect the world price of $0.60. SSweden is the domestic supply and DSweden is the domestic
demand. SSweden+Quota is Sweden's supply schedule with an import quota.
Figure 5-3 Sweden's Apple Market
Figure 5-3 illustrates the apple market for Sweden, assumed to be a small country that is unable
to affect the world price of $0.60. SSweden is the domestic supply and DSweden is the domestic
demand. SSweden+Quota is Sweden's supply schedule with an import quota.
Refer to Figure 5-3. After the quota is levied, the price of apples in Sweden will equal - Answer
A) $0.60 per pound
B) $1.00 per pound (Correct)
C) $1.80 per pound
D) $1.40 per pound
, Figure 5-2 illustrates the revenue and cost conditions of ABC Inc., which sells calculators in
Canada and France.Figure 5-2 International Dumping
Refer to Figure 5-2. Compared with the total revenue and total profit that ABC Inc. realizes in
the absence of dumping, with dumping the firm attains a - Answer rise in revenue of $18 and
rise in profits of $18.
Figure 5-5 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.
Figure 5-5 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.
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.
Refer to Figure 5-5. 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. - Answer True
Figure 5-1 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.
Refer to Figure 5-1. Suppose 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 - Answer A) 3 tons
B) 4 tons (correct)
C) 1 ton
D) 2 tons
Figure 5-5 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.
Figure 5-5 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.
