Tariffs and quotas create a loss in social welfare because
A) producer surplus declines.
B) revenues from tariffs are misspent.
C) consumer surplus declines.
D) All of the above.
C
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Refer to the Article Summary. All else equal, a depreciation of the Chinese yuan relative to a currency such as the U.S. dollar should ________ Chinese exports and ________ imports to China
A) decrease; decrease B) decrease; increase C) increase; increase D) increase; decrease
Suppose the Swiss government subsidized its watch-making industry, enabling Swiss producers to undersell foreign watch producers. The law of comparative advantage indicates that watch-importing nations would best take advantage of the Swiss subsidization policy by a. setting a tariff high enough to just offset the subsidy granted to the Swiss watch-making industry
b. setting a declining quota on the import of Swiss watches such that the nation's domestic watch-making industry would continue to grow at the same rate as the rest of the economy. c. setting a tariff such that the prices of Swiss and domestic watches to the consumer are equal. d. gladly accepting the subsidy of the Swiss government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry.