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40) The main difference between a tariff and an "equivalent" voluntary export restriction (VER) is that A) a tariff allows the government of the importing country to appropriate the extra market value of the imported good, but with a VER the extra market value accrues to the good's producers. B) a tariff allows the extra market value of the good to accrue to the supplier, but a VER allows the extra market value to be appropriated by the government of the importing country. C) a tariff restricts free trade between two countries and a VER does not. D) a tariff keeps the price in the importing country higher than it would otherwise be; a VER does not. E) none of the above.

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Lelia Lubowitz
Lelia LubowitzLv2
7 Dec 2017
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Related questions

Under a binding price ceiling, what does the change in consumer surplus represent?
A) The gain in surplus for those buyers who can still purchase the product at the lower price.
B) The loss in surplus for those buyers who previously purchased some units of the good at the higher price, but these units are no longer produced at the lower price.
C) The loss in surplus for those buyers who would like the purchase the excess demand created by the price ceiling policy.
D) Both A and B are correct.
E) Both A and C are correct.

When the market price is held above the competitive level, the deadweight loss is composed of:

A) producer surplus losses associated with units that used to be traded on the market but are no longer exchanged.

B) consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.
C) producer and consumer surplus losses associated with units that used to be traded on the market but are no longer exchanged.
D) There is no deadweight loss if the government uses a price floor policy to increase the price.

Compared to a tariff, an import quota, which restricts imports to the same amount as the tariff, will leave the country as a whole
A) worse off than a comparable tariff.
B) not as bad off as a comparable tariff.

C) about the same as a comparable tariff.

D) Any of the above can be true.

What is the welfare impact of a subsidy policy?
A) Producer surplus increases, consumer surplus declines, and total welfare declines.
B) Producer and consumer surplus increase, and these gains are larger than the government cost.

C) Producer and consumer surplus increase, and these gains are smaller than the government cost.

D) Producer surplus increases, consumer surplus declines, and total welfare increases due to the subsidy program.

Why is there a deadweight loss associated with subsidy payments?
A) There is no deadweight loss from a subsidy.
B) Quantity supplied is less than the equilibrium amount, so consumers and producers lose surplus value on those units that are no longer produced.
C) Quantity supplied exceeds the equilibrium amount, and consumer willingness to pay for these additional units is smaller than the marginal cost of producing them.
D) The subsidy payment does not distort quantities in the market, but the government cost exceeds consumer willingness to pay for the quantity demanded.

Trade involves the transfer of goods or services from one person or entity to another, often in exchange for money. A network that allows trade is called a market. Trade exists due to the specialization and division of labor, in which most people concentrate on a small aspect of production, but use that output in trades for other products and needs. Trade exists between regions because different regions may have a comparative advantage in the production of some trade-able commodity including the production of natural resources scarce or limited elsewhere, or because different regions' size may encourage mass production.
Q1. What are the effects of the Saudi Arab trade and import policies on the economy?
Ā 
The student will demonstrate competencies for Economics on completion of the following project:
Ā 
1. Research the effects of the Saudi Arabian government's policies regarding international trade. Focus on the value of items traded, and the balance of trade. Consider:
Ā 
A) Name the countries that are trading with the Saudi Arab?
Ā 
B) How much is Saudi Arabia importing and exporting from/to certain countries?
Ā 
C) What does an imbalance of importing and exporting do to an economy?
Ā 
D) How is currency involved?
Ā 
E) How does the Saudi Arabian government make policies with regard to international trade (like tariffs, import/export taxes, etc.)?
Ā 
F) How do sanctions on some countries affect their trade with Saudi Arabia? (give examples)
Ā 
Ā 
Write a research essay (7-10 paragraphs) analyzing your information. Include detailed information, examples, and works cited.
Ā 
Important: Students are required to use critical reasoning skills to analyze and evaluate their positions.
Ā 

The difference between a free trade area and a customs union is, in brief, that the first is politically straightforward but an administrative headache, while the second is just the opposite.

Consider first the case of a customs union. Once such a union is established, tariff administration is relatively easy: Goods must pay tariffs when they cross the border of the union, but from then on can be shipped freely between countries. A cargo that is unloaded at Marseilles or Rotterdam must pay duties there, but will not face any additional charges if it then goes by truck to Munich.

To make this simple system work, however, the countries must agree on tariff rates: The duty must be the same whether the cargo is unloaded at Marseilles, Rotterdam, or for that matter Hamburg because otherwise, importers would choose the point of entry that minimized their fees. So a customs union requires that Germany, France, the Netherlands, and all the other countries agree to charge the same tariffs. This is not easily done: Countries are, in effect, ceding part of their sovereignty to a supranational entity, the European Union.

This has been possible in Europe for a variety of reasons, including the belief that economic unity would help cement the post-war political alliance between European democracies.

But elsewhere these conditions are lacking. The three nations that formed NAFTA would find it very difficult to cede control over tariffs to any supranational body; if nothing else, it would be hard to devise an arrangement that would give due weight to U.S. interests without effectively allowing the United States to dictate trade policy to Canada and Mexico. NAFTA, therefore, while it permits Mexican goods to enter the United States without tariffs and vice versa, does not require that Mexico and the United States adopt a common external tariff on goods they import from other countries.

This, however, raises a different problem. Under NAFTA, a shirt made by Mexican workers can be brought into the United States freely. But suppose that the United States wants to maintain high tariffs on shirts imported from other countries, while Mexico does not impose similar tariffs. What is to prevent someone from shipping a shirt from, say, Bangladesh to Mexico, then putting it on a truck bound for Chicago?

The answer is that even though the United States and Mexico may have free trade, goods shipped from Mexico to the United States must still pass through a customs inspection. And they can enter the United States without duty only if they have documents providing that they are in fact Mexican goods, not trans-shipped imports from third countries.

But what is a Mexican shirt? If a shirt comes from Bangladesh, but Mexicans sew on the buttons, does that make it Mexican? Probably not. But if everything except the button were made in Mexico, it probably should be considered Mexican. The point is that administering a free trade area that is not a customs union requires not only that the countries continue to check goods at the border, but that they specify an elaborate set of Ć¢Ā€Āœrules of originĆ¢Ā€Ā that determine whether a good is eligible to cross the border without paying a tariff.

As a result, free trade agreements like NAFTA impose a large burden of paperwork, which may be a significant obstacle to trade even when such trade is in principle free.

Question:

1. From this case, what is the main difference between a free-trade area and a customs union?

2. Why are rules of origin needed for a free-trade area? How might they be protectionist?

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