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Review+questions+DV+Ch+4 - Review questions True/False...

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Review questions True/False Indicate whether the sentence or statement is true or false. ____ 1. Tariffs are taxes applied to imported goods and services. ____ 2. Tariffs do not affect consumers who purchase only domestically produced products. ____ 3. The government imposes a sales tax on retailers. The retailers then pay a lower price to product manufactur- ers. This is an example of a backward shifted tax. ____ 4. The government imposes a sales tax on retailers. The final price to consumers increases as a result of the tax, but the price does not rise by the full amount of the tax. This implies the tax is both forward and backward shifted. ____ 5. Applying a specific percentage tariff amount to each import is called a specific tariff. ____ 6. The text defines a small country as one where the consumption and production decisions of its residents do not affect the international price of a given good or service. ____ 7. Your firm imports high quality leather at an average cost of $200 a unit and produces and sells luxury leather items in the U.S. Your business would be affected more by an ad valorem tariff of 10% on leather imports rather than a specific tariff of $15 a unit. ____ 8. In a small country setting the imposition of a tariff results in 0% backward shifting to domestic producers and 100% forward shifting to domestic consumers. ____ 9. Losses of consumer and producer surplus that are shifted to the government due to the imposition of a trade barrier are called deadweight losses. ____ 10. A country imposes a tariff on imported beef. As a result, the domestic price of beef rises by 60% of the tariff. This country must be large enough that its production and consumption decisions affect the global price of goods and services. ____ 11. A large country imposes a tariff on imported machinery. Part of the resulting tax will be forward shifted to domestic consumers and part will be backward shifted to domestic producers.
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