Steven Kreft G202 Exam 2 – 2025/2026 Comprehensive
Exam Prep & Study Guide | 100% Pass Guarantee
When do you export? - correct answer- When the world price is above the domestic
price
- The domestic industry has the comparative advantage
- The domestic industry will export to the world
Why do exports enhance the welfare of the domestic country? - correct answerProducer
surplus increases more than consumer surplus decreases
When do you import? - correct answer- When the world price is below the domestic
price
- Foreign producers have the competitive advantage
- The domestic industry imports from the world
Why do imports enhance the welfare of the domestic country? - correct
answerConsumer surplus increases more than producer surplus decreases
What do you have to import? - correct answerThe difference between what we produce
and the consumption
What is the consumption rule? - correct answerDomestic consumers should consume
as long as value (Dus) is greater than or equal to production cost (Pw)
What is the production rule? - correct answerDomestic producers should produce as
long as their production costs (Sus) are less than or equal to the world's cost (Pw)
What is a tariff? - correct answer- A tax placed on imports
- Directly affects the domestic price charged on imports
What does a tariff result in? - correct answer- Higher domestic prices
- Under-consumption in the domestic market
- Over-production by domestic producers
- Less imports to the domestic market
What is under consumption? - correct answerThere are too few units consumer
domestically, causing society to miss out on a net benefit
- the right triangle on the graph
What is over production? - correct answerThere are too many units produced
domestically, causing society to incur a new cost
- The left triangle on the graph
,What is a quota? - correct answer- A maximum quantity placed on imports
- The quota indirectly affects the domestic price by creating a situation of excess
demand
What is the direct impact of a quota? - correct answerTo limit imports
What is the indirect impact of a quota? - correct answerTo raise the price through the
excess demand
Foreign gain equation - correct answer(Pq-Pw)*IMPq
What do quotas result in? - correct answer- Less imports to the domestic market
- Under-consumption in the domestic market
- Over-production by domestic producers
- Higher domestic prices
What is the difference between tariffs and quotas? - correct answerTariffs raise revenue
while quotas do not
- Quotas are combined with a licensing system, they can raise revenue through
licensing fees
Which, between tariffs and quotas, result in more inefficiency? - correct answerQuotas
Who gains from a quota if there is no licensing fee? - correct answerForeign Gain
who gains from a quota if the licensing fee is < the premium price - correct answergain
is split depending on how big the fee is compared to the premium
why does lobbying occur with quotas - correct answerif there is foreign gain, some part
of the overall gain will become lobbying inefficiency
Why do nations adopt trade restrictions? - correct answer- national defense
- retaliation against dumping
- infant industry agreement
- special interest influences
how do trade restrictions take away jobs - correct answer- imports and export are linked
through income creation
- import restrictions raise price on inputs
how do trade restrictions create jobs - correct answer- jobs increase in domestic
industry that has no trade restrictions
- but creates more workers in inefficient industry
Assume that sugar is initially traded freely in the US at the world price of $20 and at this
world price the US imports 5,000 units of sugar. Then assume that the US enacts a
, quota of 2,000 units of imported sugar that raises the domestic price of sugar to $45.
What is the most amount of revenue that the government can generate if it combines
this quota with a licensing fee?
a) $10,000 b) $45,000 c) $50,000 d) $90,000. - correct answerc) $50,000
For a given product, which of the following trade restrictions would likely result in the
leastoverall inefficiency?
a) A $20 tariff that resulted in 5,000 units of imports
b) A quota of 3,000 units that has a licensing fee set at the difference between the world
price and the domestic price after the quota takes effect.
c) A $30 tariff that resulted in 3,000 units of imports.
d) A quota of 5,000 units that does not have a licensing fee. - correct answera) A $20
tariff that resulted in 5,000 units of imports
If a country does not have a comparative advantage in producing a good and opens up
to free trade of the good, the welfare in the domestic market increases because
a) consumer surplus increases more than producer surplus decreases.
b) producer surplus increases more than consumer surplus decreases.
c) both consumer and producer surplus increase.
d) Welfare in the domestic market does not increase because of the lack of comparative
advantage. - correct answera) consumer surplus increases more than producer surplus
decreases.
For a given product that the US imports from the world market at a price of $40, which
of the following quotas enacted in the US market has the potential to cause the least
amount of lobbying inefficiency?a) A 1,000 unit quota with a license fee of $20 per unit
that increases the product's price in the US market to $80.
b) A 2,000 unit quota with a license fee of $5 per unit that increases the product's price
in the US market to $70
c) A 3,000 unit quota with a license fee of $20 per unit that increases the product's price
in the US market to $60.
d) A 4,000 unit quota with no license fee that increases the product's price in the US
market to $50. - correct answerc) A 3,000 unit quota with a license fee of $20 per unit
that increases the product's price in the US market to $60.
What are the banana growing regions? - correct answer- Latin America
- ACP: African, Caribbean, and the Pacific Rim
Who are the USA producing companies? - correct answerChiquita, Dole, Del Monte
Who is the Equador producing company? - correct answerNoboa
Who are the European Union producing companies? - correct answerGeest, Fyffes
Who are the major consumers of the banana market? - correct answer- EU
- North America
Exam Prep & Study Guide | 100% Pass Guarantee
When do you export? - correct answer- When the world price is above the domestic
price
- The domestic industry has the comparative advantage
- The domestic industry will export to the world
Why do exports enhance the welfare of the domestic country? - correct answerProducer
surplus increases more than consumer surplus decreases
When do you import? - correct answer- When the world price is below the domestic
price
- Foreign producers have the competitive advantage
- The domestic industry imports from the world
Why do imports enhance the welfare of the domestic country? - correct
answerConsumer surplus increases more than producer surplus decreases
What do you have to import? - correct answerThe difference between what we produce
and the consumption
What is the consumption rule? - correct answerDomestic consumers should consume
as long as value (Dus) is greater than or equal to production cost (Pw)
What is the production rule? - correct answerDomestic producers should produce as
long as their production costs (Sus) are less than or equal to the world's cost (Pw)
What is a tariff? - correct answer- A tax placed on imports
- Directly affects the domestic price charged on imports
What does a tariff result in? - correct answer- Higher domestic prices
- Under-consumption in the domestic market
- Over-production by domestic producers
- Less imports to the domestic market
What is under consumption? - correct answerThere are too few units consumer
domestically, causing society to miss out on a net benefit
- the right triangle on the graph
What is over production? - correct answerThere are too many units produced
domestically, causing society to incur a new cost
- The left triangle on the graph
,What is a quota? - correct answer- A maximum quantity placed on imports
- The quota indirectly affects the domestic price by creating a situation of excess
demand
What is the direct impact of a quota? - correct answerTo limit imports
What is the indirect impact of a quota? - correct answerTo raise the price through the
excess demand
Foreign gain equation - correct answer(Pq-Pw)*IMPq
What do quotas result in? - correct answer- Less imports to the domestic market
- Under-consumption in the domestic market
- Over-production by domestic producers
- Higher domestic prices
What is the difference between tariffs and quotas? - correct answerTariffs raise revenue
while quotas do not
- Quotas are combined with a licensing system, they can raise revenue through
licensing fees
Which, between tariffs and quotas, result in more inefficiency? - correct answerQuotas
Who gains from a quota if there is no licensing fee? - correct answerForeign Gain
who gains from a quota if the licensing fee is < the premium price - correct answergain
is split depending on how big the fee is compared to the premium
why does lobbying occur with quotas - correct answerif there is foreign gain, some part
of the overall gain will become lobbying inefficiency
Why do nations adopt trade restrictions? - correct answer- national defense
- retaliation against dumping
- infant industry agreement
- special interest influences
how do trade restrictions take away jobs - correct answer- imports and export are linked
through income creation
- import restrictions raise price on inputs
how do trade restrictions create jobs - correct answer- jobs increase in domestic
industry that has no trade restrictions
- but creates more workers in inefficient industry
Assume that sugar is initially traded freely in the US at the world price of $20 and at this
world price the US imports 5,000 units of sugar. Then assume that the US enacts a
, quota of 2,000 units of imported sugar that raises the domestic price of sugar to $45.
What is the most amount of revenue that the government can generate if it combines
this quota with a licensing fee?
a) $10,000 b) $45,000 c) $50,000 d) $90,000. - correct answerc) $50,000
For a given product, which of the following trade restrictions would likely result in the
leastoverall inefficiency?
a) A $20 tariff that resulted in 5,000 units of imports
b) A quota of 3,000 units that has a licensing fee set at the difference between the world
price and the domestic price after the quota takes effect.
c) A $30 tariff that resulted in 3,000 units of imports.
d) A quota of 5,000 units that does not have a licensing fee. - correct answera) A $20
tariff that resulted in 5,000 units of imports
If a country does not have a comparative advantage in producing a good and opens up
to free trade of the good, the welfare in the domestic market increases because
a) consumer surplus increases more than producer surplus decreases.
b) producer surplus increases more than consumer surplus decreases.
c) both consumer and producer surplus increase.
d) Welfare in the domestic market does not increase because of the lack of comparative
advantage. - correct answera) consumer surplus increases more than producer surplus
decreases.
For a given product that the US imports from the world market at a price of $40, which
of the following quotas enacted in the US market has the potential to cause the least
amount of lobbying inefficiency?a) A 1,000 unit quota with a license fee of $20 per unit
that increases the product's price in the US market to $80.
b) A 2,000 unit quota with a license fee of $5 per unit that increases the product's price
in the US market to $70
c) A 3,000 unit quota with a license fee of $20 per unit that increases the product's price
in the US market to $60.
d) A 4,000 unit quota with no license fee that increases the product's price in the US
market to $50. - correct answerc) A 3,000 unit quota with a license fee of $20 per unit
that increases the product's price in the US market to $60.
What are the banana growing regions? - correct answer- Latin America
- ACP: African, Caribbean, and the Pacific Rim
Who are the USA producing companies? - correct answerChiquita, Dole, Del Monte
Who is the Equador producing company? - correct answerNoboa
Who are the European Union producing companies? - correct answerGeest, Fyffes
Who are the major consumers of the banana market? - correct answer- EU
- North America
