Economies
Practice the major concepts from the lesson.
1) Who are the winners when a nation places a tariff on foreign goods?
answer: Domestic producers and the Government
2) Who are the losers when a nation places a tariff on foreign goods?
answer: Foreign producers, Domestic Consumers
3) Who are the winners when a nation places a quota on foreign goods?
answer: Domestic producers
4) Who are the losers when a nation places a quota on foreign goods?
answer: Foreign producers, Domestic Consumers
5) Will producer surplus increase or decrease after a quota is put in place instead of allowing the free trade of goods?
answer: increase
6) Will consumer surplus increase or decrease after a quota is put in place instead of allowing the free trade of goods?
answer: decrease
7) Why might the government prefer a tariff over a quota?
answer: With the tariff it will receive additional revenue
8) Why might domestic consumers prefer a tariff over a quota?
answer: If the government receives revenues from foreign companies they might need less tax revenue from domestic consumers.
9) Place the following in the order, from most to least, that gives consumers the greatest consumer surplus: Quota or tariff, Closed Economy, Open Economy
answer: Open Economy, Quota or Tariff, Closed Economy
10) Place the following in the order, from most to least, that gives producers the greatest producer surplus: Quota or tariff, Closed Economy, Open Economy
answer: Closed Economy, Quota or Tariff, Open Economy