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Answer Key to Sample - Econ 13/IS 13 Sample Questions for Midterm 1 How does an import quota differ from an equivalent tariff ANS Both the import

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Econ 13/IS 13 Sample Questions for Midterm 1. How does an import quota differ from an equivalent tariff? ANS: Both the import quota and the tariff raise the domestic price of the good, reduce the welfare of domestic consumers, increase the welfare of domestic producers, and cause deadweight losses. The only difference for the economy is that the tariff raises revenue for the government, while the import quota creates surplus for license holders. 2. What are the arguments in favor of trade restrictions, and what are the counterarguments? According to most economists, do any of these arguments really justify trade restrictions? Explain. ANS: Arguments in favor include the jobs argument, the national security argument, the infant industry argument, the unfair competition argument, and the protection-as-a-bargaining-chip argument. Most economists would dismiss the jobs argument, the infant industry argument, and the unfair competition argument on strictly economic grounds. The bargaining-chip argument carries high risks of economic
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This note was uploaded on 11/23/2010 for the course ECONOMICS Econ 13 taught by Professor Georgesarraf during the Spring '10 term at UC Irvine.

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Answer Key to Sample - Econ 13/IS 13 Sample Questions for Midterm 1 How does an import quota differ from an equivalent tariff ANS Both the import

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