Use the following information to answer questions 21 thru 27.
A small country is considering imposing a $5 per bottle tariff on imported wine. Economists have estimated the following figures based on this tariff amount:
World price of wine (free trade): $20
Domestic production (free trade): 500,000
Domestic production (after tariff): 600,000
Domestic consumption (free trade): 750,000
Domestic consumption (after tariff): 650,000
21. With no tariff on imported wine, the countrys imports __________ bottles of wine, but after imposing the tariff the country will import __________ bottles of wine.
a. 100,000; 100,000
b. 250,000; 50,000
c. 150,000; 50,000
d. 750,000; 650,000
22. The imposition of the tariff on wine will cause domestic producer surplus to __________ by __________:
a. Rise; 100,000 bottles
b. Rise; $500,000
c. Fall; $2.5 million
d. Rise; $2.75 million
23. The imposition of the tariff on wine will cause domestic consumer surplus to __________ by __________:
a. Fall; 100,000 bottles
b. Fall; $250,000
c. Fall; $3.5 million
d. Rise; $3.5 million
24. The imposition of the tariff on wine will cause government tariff revenue to rise by how much?
a. $250,000
b. $1.25 million
c. $3.5 million
d. $500,000
25. The imposition of the tariff on wine will cause the countrys economic well-being to __________ by __________.
a. Fall; $0.5 million
b. Rise; $0.75 million
c. Fall; 100,000 bottles of wine
d. Fall; $0.75 million
26. What would be the production effect of the tariff on wine?
a. $250,000
b. $500,000
c. $2.5 million
d. $2.75 million
27. What would be the consumption effect of the tariff on wine?
a. $250,000
b. $500,000
c. $3.5 million
d. $2.75 million
28. Which of the following is a change in the ratio of international prices of a large country’s exports to the international price of the large country’s imports resulting from the imposition of a tariff in the country?
a. One-dollar, one-vote.
b. Production effect.
c. Consumption effect.
d. Terms-of-trade effect.
29. Which of the following refers to the percentage by which a nation’s trade barriers raise an industry’s value added per unit of output?
a. One-dollar, one-vote.
b. Optimal tariff.
c. Effective tariff.
d. Terms-of-trade effect.
30. Given the following information about domestic lamp production, what is the effective rate of protection afforded to the domestic lamp industry by a 20% tariff on lamps?
With free trade:
Unit value (price) of a lamp = $175.00
Unit cost of lamp inputs = $100.00
With 20% tariff on lamps:
Unit value (price) of a lamp = $210.00
Unit cost of lamp inputs = $100.00
a. 20%
b. 46?%
c. 110%
d. 102?%