1. Automobiles and many other products are differentiated. As a result a. consum
ID: 1223597 • Letter: 1
Question
1. Automobiles and many other products are differentiated. As a result
a. consumers of automobiles have difficulty deciding what type of imported automobile to buy.
b. different countries may each have a comparative advantage in producing different types of automobiles
c. we see countries specializing completely in the production of automobiles
d. the quantity of imported automobiles is less than it could be.
2. Which of the following statements is true?
a. The U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.
b. Economic efficiency would be increased if the United States eliminated all of its trade restrictions, but only if all other countries eliminated their trade restrictions too.
c. Eliminating its tariffs and quotas unilaterally would not benefit the United States because this would remove the leverage it would have to persuade other countries to eliminate their trade restrictions
d. The U.S. economy would gain from the elmination of its tariffs but not from the elmination of its quotas.
Explanation / Answer
1. b. different countries may each have a comparative advantage in producing different types of automobiles
2. a. The U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.
Tariff is the tax on the imported goods while quota is the limit on the goods imported. When these restrictions are removed then economy will gain.
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