- CFA Exams
- CFA Level I Exam
- Topic 2. Economics
- Learning Module 6. International Trade
- Subject 2. International Trade Restrictions and Agreements
CFA Practice Question
Which statement is FALSE?
A. The welfare loss suffered by the importing country is generally greater with a quota than with an import tariff.
B. A VER has the same impact on the importing country as an import quota.
C. The welfare loss caused by an export subsidy is greater for a small country than for a large country.
Explanation: A is true. The tax revenue that would be raised by the equivalent tariff is instead captured by foreign producers as quota rents. B is also true. In both cases, foreign producers capture all of the quota rents.
C is false. In the case of a large country, the world price declines as the large country increases exports. The decline in world prices implies that a part of the subsidy is transferred from the large country to a foreign country.
User Contributed Comments 3
| User | Comment |
|---|---|
| dbalakos | Guys anyone knows what a VER is? |
| agaller | it's in the LOS bruh |
| nmech1984 | What is LOS bruh? :P |