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7 figure home market i under free trade the home

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7. (Figure: Home Market I) Under free trade, the Home country will import: A) 26. B) 22. C) 16. D) 10. 8. (Figure: Home Market I) The government revenue due to the tariff is: A) $84. B) $14. C) $48. D) $8. 9. (Figure: Home Market I) What is the deadweight loss because of the tariff? A) $24 B) $12 C) $48 D) $44 Page 4
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10. When a tariff is imposed, there is always an additional loss. One part is from the fact that consumers purchase fewer units of the good because prices have risen, so society loses the value of that consumption. This loss is the: A) consumption loss. B) efficiency transfer. C) production loss. D) X-factor. 11. When a large country imposes a tariff, the burden is often shared by: A) foreign consumers and domestic producers. B) domestic consumers and foreign producers. C) all producers and consumers in each nation equally. D) its government. 12. If a large country imposes a tariff: A) The terms-of-trade effect may offset deadweight losses on its economy. B) The terms-of-trade effect can never offset deadweight losses on its economy. C) There will be no terms-of-trade effect. D) The country will always be worse off. Use the following to answer question 13: SCENARIO: FINNISH STEEL Suppose that the free-trade price of a ton of steel is €500 (note: is the symbol for the euro, a common currency used in 12 European countries, including Finland). Finland, a small country, imposes a €60-per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. 13. (Scenario: Finnish Steel) Suppose that Finland decides to use an import quota to achieve the same effects on domestic steel production as the tariff. How large a quota must it use? A) €60 B) 100,000 tons C) 200,000 tons D) 300,000 tons Page 5
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14. Suppose that: (1) the United States has a comparative advantage in producing chemicals; (2) Costa Rica has a comparative advantage in producing sugar; and (3) the United States imposes a quota on its imports of Costa Rican sugar. Now suppose that the United States eliminates its import quotas on Costa Rican sugar. Which of the following is most likely to occur for the United States? A) Consumer surplus for American consumers of sugar products will fall. B) Producer surplus for American sugar producers will rise. C) Consumer surplus for American consumers of sugar products will rise. D) Tariff revenues for the U.S. government will rise. 15. Quota rents are: A) the difference between the domestic price and world price following imposition of a quota. B) the extra return to land that occurs following imposition of a quota. C) the difference between imports with no quota and imports with the quota. D)
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7 Figure Home Market I Under free trade the Home country...

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