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Self-test Questions
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1

The import supply curve facing a nation is the horizontal sum of its trade partners' export supply curves.
A)TRUE
B)FALSE
2

A main principle of the GATT/WTO is that all trade barriers should be non-discriminatory, so preferential trade arrangements are illegal under the WTO.
A)TRUE
B)FALSE
3

Starting from a situation where a nation imposes an MFN tariff, a preferential liberalisation will lead the nation to buy less from the nation which received the preference.
A)TRUE
B)FALSE
4

Starting from a situation where a nation imposes an MFN tariff, a preferential liberalisation will harm the non-preferred supplier since it will export less and receive a lower price for these exports.
A)TRUE
B)FALSE
5

The welfare effects of preferential liberalisation are ambiguous since although the trade volume effect is positive, there are two contradictory border price effects, one which tends to improve welfare and the other which tends to worsen welfare.
A)TRUE
B)FALSE
6

The welfare effects of the preferential liberalisation of a frictional barrier is always welfare enhancing for the liberaliser even if it is preferential.
A)TRUE
B)FALSE
7

A preferential trade liberalisation leads to a rise in the border price of goods imported from the preferred supplier and a drop in the price of imports from the non-preferred supplier.
A)TRUE
B)FALSE
8

The level of imports from the non-preferred supplier of imports falls because domestic consumers see a relative rise in the price of these goods.
A)TRUE
B)FALSE
9

The import supply curve is:
A)usually downward sloped.
B)a reflection of how much it costs foreigners to supply the goods.
C)the horizontal difference between the domestic demand and supply curves.
D)the marginal value of consuming goods.
Consider a situation where Home initially imposes the same specific tariff T on imports from its two trade partners, Partner and RoW. Home then unilaterally removes T from Partner imports only. Use the diagram to answer questions 10-17; in particular refer to the numbers. <a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=gif::::/sites/dl/free/0077103947/117919/ch05q10eq01.GIF','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (22.0K)</a>

10

After the preferential trade arrangement (PTA) the new domestic price for home is .
11

After the preferential trade arrangement (PTA) the border price for imports from Partner is .
12

After the preferential trade arrangement (PTA) the level of imports from Partner is . (Use Q1, Q2, Q3 in describing the correct answer.)
13

After the preferential trade arrangement (PTA) the change in Home consumer surplus is . (Use the numbers to refer to specific areas.)
14

After the preferential trade arrangement (PTA) the change in Home producer surplus is . (Use the numbers to refer to specific areas.)
15

After the preferential trade arrangement (PTA) the change in Home tariff revenue is . (Use the numbers to refer to specific areas.)
16

After the preferential trade arrangement (PTA) the change in Home net welfare is . (Use the numbers to refer to specific areas.)
17

After the preferential trade arrangement (PTA) RoW definitely loses from the unilateral preferential liberalisation since its border price and its export volume .





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