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Chapter 21 Test Bank
Multiple Choice Questions
1. A tariff differs from a quota in that a tariff is:
A. levied on imports, whereas a quota is imposed on exports.
B. levied on exports, whereas a quota is imposed on imports.
C. a tax levied on exports, whereas a quota is a limit on the number of units of a good that can
be exported.
D. a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a
good that can be imported.
Answer: D
Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Understand
2. Tariffs are taxes imposed on _________________.
A. imported products
B. exported products
C. hazardous goods
D. surplus goods
Answer: A
Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Understand
3. An import quota or tariff on French wine that raises the prices for wine will probably:
A. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher
prices.
B. hurt both domestic wine drinkers and domestic wineries, but this will be more than offset by a
reduction in driving fatalities.
C. hurt both domestic wine drinkers and domestic wine producers because of a reduction in
competition.
D. hurt domestic wineries, which will lose business as a result of the higher prices.
Answer: A
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Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Apply
4. Which of the following would be expected if the tariff on foreign-produced automobiles were
increased?
A. The domestic price of automobiles would fall.
B. The supply of foreign automobiles to the domestic market would be reduced, causing auto
prices to rise.
C. The number of unemployed workers in the domestic automobile industry would rise.
D. The demand for foreign-produced automobiles would increase, causing the price of
automobiles to increase in other nations.
Answer: B
Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Apply
5. _____________ are numerical limitations on the quantity of products that can be imported.
A. Tariffs
B. Import quotas
C. Taxes
D. Nontariff barriers
Answer: B
Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Remember
6. "Tariffs and other trade restrictions increase the domestic scarcity of products from abroad.
Such policies benefit domestic producers of the restricted products at the expense of domestic
consumers." This statement:
A. contains one error; the trade restraints do not increase the scarcity of foreign-produced
goods.
B. contains one error; domestic producers gain at the expense of foreign producers rather than
domestic consumers.
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C. contains two errors; trade restraints do not increase the domestic scarcity of product and
neither do they harm domestic consumers.
D. is essentially correct.
Answer: D
Reference:
Explanation:
Type: Multiple Choice Difficulty: Medium Category: Understand
7. Which of the following is the best example of a quota?
A. a tax placed on all small cars sold in the domestic market
B. a limit imposed on the number of men's suits that can be imported from a foreign country
C. a subsidy from the American government to domestic manufacturers of men's suits so they
can compete more effectively with foreign producers of men's suits
D. a $100-per-car fee imposed on all small cars imported
Answer: B
Reference:
Explanation:
Type: Multiple Choice Difficulty: Medium Category: Understand
8. A new American import quota on imported steel would be likely to:
A. increase the production of steel-using American firms.
B. increase American production of steel.
C. generate tax revenue to the government.
D. reduce the cost of production to steel-using American firms.
Answer: B
Reference:
Explanation:
Type: Multiple Choice Difficulty: Medium Category: Apply
9. The infant industry argument for protectionism suggests that an industry must be protected in
the early stages of its development so that:
A. firms will be protected from subsidized foreign competition.
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Chapter 21 Test Bank
Multiple Choice Questions
1. A tariff differs from a quota in that a tariff is:
A. levied on imports, whereas a quota is imposed on exports.
B. levied on exports, whereas a quota is imposed on imports.
C. a tax levied on exports, whereas a quota is a limit on the number of units of a good that can
be exported.
D. a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a
good that can be imported.
Answer: D
Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Understand
2. Tariffs are taxes imposed on _________________.
A. imported products
B. exported products
C. hazardous goods
D. surplus goods
Answer: A
Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Understand
3. An import quota or tariff on French wine that raises the prices for wine will probably:
A. hurt domestic wine drinkers but help domestic wineries, which will gain from the higher
prices.
B. hurt both domestic wine drinkers and domestic wineries, but this will be more than offset by a
reduction in driving fatalities.
C. hurt both domestic wine drinkers and domestic wine producers because of a reduction in
competition.
D. hurt domestic wineries, which will lose business as a result of the higher prices.
Answer: A
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Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Apply
4. Which of the following would be expected if the tariff on foreign-produced automobiles were
increased?
A. The domestic price of automobiles would fall.
B. The supply of foreign automobiles to the domestic market would be reduced, causing auto
prices to rise.
C. The number of unemployed workers in the domestic automobile industry would rise.
D. The demand for foreign-produced automobiles would increase, causing the price of
automobiles to increase in other nations.
Answer: B
Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Apply
5. _____________ are numerical limitations on the quantity of products that can be imported.
A. Tariffs
B. Import quotas
C. Taxes
D. Nontariff barriers
Answer: B
Reference:
Explanation:
Type: Multiple Choice Difficulty: Easy Category: Remember
6. "Tariffs and other trade restrictions increase the domestic scarcity of products from abroad.
Such policies benefit domestic producers of the restricted products at the expense of domestic
consumers." This statement:
A. contains one error; the trade restraints do not increase the scarcity of foreign-produced
goods.
B. contains one error; domestic producers gain at the expense of foreign producers rather than
domestic consumers.
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C. contains two errors; trade restraints do not increase the domestic scarcity of product and
neither do they harm domestic consumers.
D. is essentially correct.
Answer: D
Reference:
Explanation:
Type: Multiple Choice Difficulty: Medium Category: Understand
7. Which of the following is the best example of a quota?
A. a tax placed on all small cars sold in the domestic market
B. a limit imposed on the number of men's suits that can be imported from a foreign country
C. a subsidy from the American government to domestic manufacturers of men's suits so they
can compete more effectively with foreign producers of men's suits
D. a $100-per-car fee imposed on all small cars imported
Answer: B
Reference:
Explanation:
Type: Multiple Choice Difficulty: Medium Category: Understand
8. A new American import quota on imported steel would be likely to:
A. increase the production of steel-using American firms.
B. increase American production of steel.
C. generate tax revenue to the government.
D. reduce the cost of production to steel-using American firms.
Answer: B
Reference:
Explanation:
Type: Multiple Choice Difficulty: Medium Category: Apply
9. The infant industry argument for protectionism suggests that an industry must be protected in
the early stages of its development so that:
A. firms will be protected from subsidized foreign competition.
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