1.Whether a tax is shifted forward or backward depends on the price elasticities
ID: 1192021 • Letter: 1
Question
1.Whether a tax is shifted forward or backward depends on the price elasticities of demand and supply.
True or False
2.The effect of a tax is the same thing as the incidence of the tax.
True or False
3.If the cost of collecting a tax is low relative to the revenue generated, the tax is said to be economical.
True or Flase
4.If trade between the United States and Canada were totally free of restrictions, the incomes of most Canadian workers would decrease.
True or Fa;se
5.The most-favored-nation clause was created in the
a.Trade Expansion Act of 1962
b.Marshall Plan
c.Reciprocal Trade Agreements Act of 1934
d.Canadian-American Trade Act
6.CAFTA is an organization comprised of six South American countries.
True or False
7.The principle of comparative advantage is associated with
a.restricting consumer choices
b.greater production at higher prices
c.specialization and exchange
d.comparing the efficiency of alternative tariffs
8.In dollar value, the United States is the largest importer in the world
True or False
9.The only factor determining whether a country can develop a comparative advantage in production is the degree to which it has a highly skilled labor force.
True or False
10.The Byrd Amendment seeks to penalize foreign exporters who dump products into the United States.
True or False
Explanation / Answer
(1) True.
If demand is more (less) elastic than supply, higher tax burden can be passed on to the buyers (sellers).
(2) False.
Tax incidence means how much of a tax imposed would be borne by buyers and how much, by sellers.
(3) True
A lower tax collection cost with respect to tax revenue collected will be efficient.
(4) False
Free trade promotes equality, efficiency and higher income for both exporters and importers. It does not reduce income of an exporter or importer.
(5) (b)
The Trade Marshall Plan created the MFN clause.
(6) True
The CAFTA in its original form was between: US, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua
(7) (c)
As per the comparative advantage principle, a country should specialize in and trade in the goods which it can produce at lower opportunity cost, that is, goods in which it has comparative advantage.
(8) True.
US is the largest importer (in $).
(9) False.
As per the comparative advantage principle, a country has comparative advantage in the goods which it can produce at lower opportunity cost. It does not depend on endowment of skilled labor force.
(10) True.
Objective of Byrd amendment is to penalize foreign firms who dump their goods into US.
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