The effect of a tariff on a foreign monopolist is similar to a large nation imposing a tariff on a small nation. What is the implication for the welfare of the home nation?
a. Only very large tariffs bring any benefit to the home nation.
b. No tariffs are the best policy; all tariffs have a deadweight net loss.
c. Small tariffs can be beneficial, but only to a certain point.
d. The foreign producer may actually raise prices to make the tariff impossible to impose.
Answer: c. Small tariffs can be beneficial, but only to a certain point.
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Refer to the scenario above. Suppose besides consuming all the potatoes grown on his farm, Edwin buys 5 pounds of potatoes at $0.80 per pound. What is likely to happen in this case?
A) GDP will increase by $4. B) GDP will remain unchanged. C) GDP will decrease by $0.80. D) Trade surplus will increase by $4.
Suppose that an economy is currently producing at a point that lies inside of its production possibilities set. Which of the following would best explain this circumstance?
A) The prevailing level of technology prevents the economy from producing at a point closer to the frontier of the production possibilities set. B) The economy does not have enough resources to produce at a point closer to the frontier of the production possibilities set. C) The economy is experiencing a high level of unemployment. D) Any of the above statements could explain this situation. E) None of the above statements could explain this situation.
In the above figure, the equilibrium interest rate is ________ and the equilibrium quantity of money is ________ trillion
A) 4 percent; $1.2 B) 8 percent; $1.2 C) 4 percent; $0.6 D) 8 percent; $0.6 E) 0 percent; $1.2
During the past 1000 years, the income per person of the world has
a. increased each century, and it is now five times greater than the level of 1000 years ago. b. risen rapidly in Western Europe, North America, Japan, and Australia, but there has been little change in income per person in other parts of the world. c. increased by approximately tenfold during the past 200 years, but there was only a small increase during the 800 years prior to 1800. d. persistently increased, but the largest increases occurred during the 1200 to 1800 era.