7.03 Trade Barriers, Protectionism, and Free Trade

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Economies Practice

Practice the major concepts from the lesson.

1. Who are the winners when a nation places a tariff on foreign goods?
   1. Foreign producers, Domestic Consumers
   2. Domestic producers and the Government

   Answer: b. Domestic producers and the Government

2. Who are the losers when a nation places a tariff on foreign goods?
   1. Domestic producers and the Government
   2. Foreign producers, Domestic Consumers

   Answer: b. Foreign producers, Domestic Consumers

3. Who are the winners when a nation places a quota on foreign goods?
   1. Foreign producers, Domestic Consumers
   2. Domestic producers

   Answer: b. Domestic producers

4. Who are the losers when a nation places a quota on foreign goods?
   1. Domestic producers
   2. Foreign producers, Domestic Consumers

   Answer: b. 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?
   1. decrease
   2. increase

   Answer: b. increase

6. Will consumer surplus increase or decrease after a quota is put in place instead of allowing the free trade of goods?
   1. decrease
   2. increase

   Answer: a. decrease

7. Why might the government prefer a tariff over a quota?
   1. With the tariff they will receive less revenue
   2. With the tariff it will receive additional revenue

   Answer: b. With the tariff it will receive additional revenue

8. Why might domestic consumers prefer a tariff over a quota?
   1. If the government receives revenues from foreign companies they might need less tax revenue from domestic consumers.
   2. They wouldn't in any circumstance

   Answer: a. 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
   1. Open Economy, Quota or Tariff, Closed Economy
   2. Closed Economy, Quota or Tariff, Open Economy

   Answer: a. 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
    1. Closed Economy, Quota or Tariff, Open Economy
    2. Open Economy, Quota or Tariff, Closed Economy

    Answer: a. Closed Economy, Quota or Tariff, Open Economy

You've completed this review!