21. Turkey is an importer of goose down pillows. The world price of these pillows is $50. Turkey imposes a $7 tariff on pillows. Turkey is a price taker in the pillow market. As a result of the tariff, who will gain? a. lurkish consumers of pillows will gain and producers will lose. b. Turkish consumers of pillows will lose and producers will gain. c. Turkish consumers of pillows will gain and producers will gain. d. lurkish consumers of pillows will lose and producers will lose Which of the following is an argument for restricting trade? a. Trade restrictions make all Canadians better off b. Trade restrictions increase economic efficiency c. Trade restrictions are necessary for economic growth. d. Trade restrictions are necessary to protect infant industries. 22. 23. Under what condition does a negative production externality occur? a. The equilibrium quantity of output is equal to the socially optimal quantity b. The equilibrium quantity of output is greater than the socially optimal quantity c. The cost to the consumer exceeds the cost to society d. The cost to the producer exceeds the cost to society 24. What is technology spillover? a. a negative externality b. a positive externality c. a subsidy producer surplus 25. What are the benefits of using corrective taxes? a They encourage consumers to avoid sales taxes by shopping online. b. They are frequently used to discourage imports They are rarely preferred to direct regulation. d. c. They give factory owners an economic incentive to reduce pollution. 26. Why are regulations preferred over corrective taxes in order to reduce pollution? a. They cause each factory to reduce pollution to the same maximum level. b. They are a less costly solution to society than a corrective tax. C. They cause pollution levels to drop below the regulated amount. d. Thev are a better solution for the environment than a corective tax. 27. Why are corrective taxes unlike most other taxes? a They distort incentives b. They move the allocation of resources away from the social optimum. They raise revenue for the government. d. c. They move the allocation of resources closer to the social optimum. What result could private contracts between parties with mutual interests lead to? a. They can only reduce the well-being of society b. They will always lead to market outcomes in which the public interest is sacrificed for 28. c. d. personal gain. They can solve some inefficiencies associated with positive externalities. They will always cause negative externalities to arise
21. With imposition of tariff, price of pillows goes up from $50 to $(50+7) = $57. This will increase the producers surplus (the area below price of pillows and above supply curve) and will decrease the consumer surplus(the area below demand curve and above the price of pillows).
Answer- option B
22. Trade restrictions i.e. import tariff, quota etc. Makes domestic consumers worse off and create deadweight loss to the society. However, it is necessary to protect domestic infant industries which are worse off because of free trade.
Answer- option D
23. Negative production externality occurs when market equilibrium quantity is greater than socially optimal quantity i.e. when social marginal cost is greater than private marginal cost.
Answer- option B
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