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Self-test Questions
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1When the only form of protection is a tariff, then the difference between the domestic and border price is exactly equal to the tariff.
A)TRUE
B)FALSE


2A 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


3Starting from a situation where a nation imposes an MFN tariff, a preferential liberalisation will lead the nation to buy a higher fraction of its imports from the nation which received the tariff preference and a lower fraction of its imports from the rest of the world.
A)TRUE
B)FALSE


4Starting 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


5Preferential liberalisation implies liberalisation on one hand, which tends to be welfare enhancing, and new discrimination on the other hand, which tends to be welfare worsening. The standard names for these two opposing effects are 'trade creation' and 'trade diversion'.
A)TRUE
B)FALSE


6The 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


7Formation of the EEC6's customs union resulted in a rise in the share of imports of the EEC6 from each other.
A)TRUE
B)FALSE


8The 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


9The 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/0077111192/117919/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>



10After the preferential trade arrangement (PTA) the new domestic price for home is .


11After the preferential trade arrangement (PTA) the border price for imports from Partner is .


12After the preferential trade arrangement (PTA) the level of imports from Partner is . (Use Q1, Q2, Q3 in describing the correct answer.)


13After the preferential trade arrangement (PTA) the change in Home consumer surplus is . (Use the numbers to refer to specific areas.)


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


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


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


17After the preferential trade arrangement (PTA) RoW definitely loses from the unilateral preferential liberalisation since its border price and its export volume .


18When a nation's imposes a tariff, the tariff is collected on:
A)only the additional goods imported
B)all goods, both domestically produced and imported
C)only imported goods.
D)9) When a nation's imposes a tariff, the tariff is collected on: foreign importers only, domestic importers are typically exempt.





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