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92. By limiting the amount of foreign sourcing, local content laws are viewed as a means of jobs preservation for domestic workers. a. True b. False
a. True
94. Local content laws are consistent with the principle of import substitution, in which domestic production replaces the importation of goods from abroad. a. True b. False
a. True
95. To the extent that a local content requirement forces firms to locate production in a high-cost nation, product price rises and consumer surplus falls. a. True b. False
a. True
97. A subsidy granted to import-competing producers is intended to lead to increased domestic production and decreased imports for the home country. a. True b. False
a. True
98. A subsidy granted to an import-competing producer shifts its supply schedule outward to the right. a. True b. False
a. True
90. Export quotas, placed on Japanese auto shipments to the United States in the 1980s, led to rising prices of both Japanese autos and U.S.-produced autos purchased by the U.S. consumer. a. True b. False
a. True
39. Consider Figure 5.1. Suppose instead that the Mexican government provides a subsidy of $200 per ton to its steel producers, as indicated by the supply schedule SM (with subsidy). As a result of the subsidy, the welfare loss to Mexico due to inefficient domestic production equals: a. $200 b. $400 c. $600 d. $800
a. $200
40. Consider Figure 5.1. Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as indicated by the supply schedule SM (with subsidy). The overall deadweight welfare loss to Mexico equals: a. $200 b. $400 c. $600 d. $800
a. $200
57. Consider Figure 5.3. If the Swedish government auctions import licenses to the highest bidder in a competitive market, it could realize revenues of up to: a. $3.20 b. $4.00 c. $4.80 d. $5.60
a. $3.20
60. Consider Figure 5.4. The cost of the production subsidy to the Venezuelan government totals: a. $32 b. $40 c. $48 d. $54
a. $32
62. Consider Figure 5.4. The production subsidy results in an overall welfare loss for Venezuela totaling: a. $8 b. $12 c. $16 d. $20
a. $8
71. Consider Figure 5.6. In the global market for wine, the EU is willing to supply as much wine as the US demands at $8 per bottle. If the US imposes a quota of 15 bottles of wine , how much revenue will the US government collect? a. 0 b. $35 c. $70 d. $105
a. 0
43. Consider Figure 5.2. In the absence of international dumping, ABC Inc. maximizes profits by selling ____ calculators at a price of $____; the firm realizes profits totaling $____. a. 27, $5, $54 b. 27, $5, $36 c. 24, $4, $46 d. 24, $4, $28
a. 27, $5, $54
16. A producer successfully practicing international dumping would charge: a. A relatively higher price in the more inelastic market b. A relatively higher price in the more elastic market c. The same price in all markets, regardless of their elasticities d. Different prices in all markets, regardless of their elasticities
a. A relatively higher price in the more inelastic market
66. Concerning international dumping, many economists argue that "fair value" should be based on a. Average variable cost b. Average fixed cost c. Marginal cost d. Total cost
a. Average variable cost
26. Import quotas tend to lead to all of the following except: a. Domestic producers of the imported good being harmed b. Domestic consumers of the imported good being harmed c. Prices increasing in the importing country d. Prices falling in the exporting country
a. Domestic producers of the imported good being harmed
6. Suppose the government grants a subsidy to its export firms that permits them to charge lower prices on goods sold abroad. The export revenue of these firms would rise if the foreign demand is: a. Elastic in response to the price reduction b. Inelastic in response to the price reduction c. Unit elastic in response to the price reduction d. None of the above
a. Elastic in response to the price reduction
22. From the perspective of the American public as a whole, export subsidies levied by overseas governments on goods sold to the United States: a. Help more than they hurt b. Hurt more than they help c. Are equivalent to an import quota d. Are equivalent to an export quota
a. Help more than they hurt
27. To maintain that South Koreans are dumping their VCRs in the United States is to maintain that: a. Koreans are selling VCRs in the United States below their production cost b. Koreans are selling VCRs in the United States above their production cost c. The cost of manufacturing VCRs in Korea is lower in Korea than in the United States since wages are lower in Korea d. The cost of manufacturing VCRs in Korea is higher in Korea than in the United States since wages are higher in Korea
a. Koreans are selling VCRs in the United States below their production cost
12. Empirical studies show that because voluntary export quotas are typically administered by exporting countries, foreign exporters tend to: a. Raise their export prices, thus capturing much of the quota's revenue effect b. Lower their export prices, thus losing much of the quota's revenue effect c. Raise their export prices, thus selling more goods overseas d. Lower their export prices, thus selling fewer goods overseas
a. Raise their export prices, thus capturing much of the quota's revenue effect
10. Domestic content legislation applied to autos would tend to: a. Support wage levels of American autoworkers b. Lower auto prices for American autoworkers c. Encourage American automakers to locate production overseas d. Increase profits of American auto companies
a. Support wage levels of American autoworkers
100. A subsidy granted to import-competing producers reduces overall domestic welfare by the same amount as would a tariff or quota that restricts imports by the same amount. a. True b. False
a. True
73. An import quota is a physical restriction on the quantity of goods that may be imported during a specified time period. a. True b. False
a. True
75. A global import quota permits a specified number of goods to be imported each year, but does not specify where the product is shipped from and who is permitted to import. a. True b. False
a. True
77. Import quotas can yield revenue for the domestic government if it auctions import licenses to the highest bidder in a competitive market. a. True b. False
a. True
78. To the extent that domestic importing companies organize as a monopoly buyer, and foreign exporting companies behave as competitive sellers, the importing companies capture the revenue effect of a quota. a. True b. False
a. True
80. The sugar import quotas of the U.S. government have tended to increase the market price of sugar, thus reducing the costs to the government of maintaining sugar price supports for domestic growers. a. True b. False
a. True
84. An orderly marketing agreement is a market-sharing pact negotiated by trading nations, and its effect is to moderate the intensity of international competition. a. True b. False
a. True
85. An elimination of nontariff barriers on apples tends to increase apple imports, reduce profits of import-competing apple producers, and generate job losses for domestic apple workers. a. True b. False
a. True
86. The distribution of an import quota's revenue effect depends on the relative concentration of bargaining power between foreign exporters and domestic importers. a. True b. False
a. True
89. When increases in nonrestraint supply offset part of the cutback in shipments that occur under an export quota, the overall inefficiency loss for the importing country is less than that which would have occurred in the absence of nonrestrained exports. a. True b. False
a. True
63. A voluntary export agreement a. Typically applies only to the world's most important exporting nation(s) b. Typically applies only to the world's least important exporting nation (s) c. Is always more restrictive on trade than a tariff or import quota d. All of the above
a. Typically applies only to the world's most important exporting nation(s)
68. Consider Figure 5.6. In the global market for wine, the EU is willing to supply as much wine as the US demands at $8 per bottle. What will happen to the price of a bottle of wine in the US if a quota of 15 bottles of wine is imposed? a. increase to $15 b. increase to $10 c. stay the same at $8 d. decrease to $5
a. increase to $15
Which of the following refers to a market-sharing pact negotiated by trading partners to moderate the intensity of international competition? a. orderly marketing agreement b. local content requirements c. import quota d. trigger price mechanism
a. orderly marketing agreement
51. Consider Figure 5.3. After the quota is levied, the price of apples in Sweden will equal: a. $0.60 per pound b. $1.00 per pound c. $1.40 per pound d. $1.80 per pound
b. $1.00 per pound
53. Consider Figure 5.3. The quota leads to a deadweight welfare loss for Sweden of an amount equaling: a. $0.80 b. $1.60 c. $2.40 d. $3.20
b. $1.60
32. Consider Figure 5.1. With free trade, Mexico's consumer surplus and producer surplus respectively equal: a. $2000 and $1200 b. $3200 and $200 c. $3600 and $800 d. $4000 and $600
b. $3200 and $200
33. Referring to Figure 5.1, suppose the Mexican government imposes an import quota equal to 2 tons of steel. If Mexican steel importers behave as monopoly buyers and foreign exporters behave as competitive sellers, the overall welfare loss of the quota to Mexico equals: a. $200 b. $400 c. $600 d. $800
b. $400
35. Referring to Figure 5.1, suppose the Mexican government imposes an import quota equal to 2 tons of steel. If the Mexican government auctions import licenses to the highest foreign bidder, the overall welfare loss of the quota to Mexico equals: a. $200 b. $400 c. $600 d. $800
b. $400
42. Consider Figure 5.1. Suppose the rest of the world voluntarily agrees to reduce steel shipments to Mexico vis-a-vis an export quota equal to 2 tons. Assuming Mexican importers behave as monopoly buyers while foreign exporters behave as competitive sellers, the overall welfare loss of the quota to Mexico is: a. $200 b. $400 c. $600 d. $800
b. $400
45. Consider Figure 5.2. With international dumping, ABC Inc. sells ____ calculators to Canadian buyers at a price of $____ and ____ calculators to French buyers at a price of $____. a. 15, $4, 12, $7 b. 15, $7, 12, $4 c. 9, $5, 15, $6 d. 9, $6, 15, $5
b. 15, $7, 12, $4
50. Consider Figure 5.3. If SSweden+Quota represents the supply schedule after a quota is levied, Sweden's imports will equal: a. 6 apples b. 8 apples c. 10 apples d. 12 apples
b. 8 apples
5. Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic subsidies. This is because, unlike domestic subsidies, import tariffs and quotas: a. Permit less efficient home production b. Distort choices for domestic consumers c. Result in higher tax rates for domestic residents d. Redistribute revenue from domestic producers to consumers
b. Distort choices for domestic consumers
15. A firm that faces problems of falling sales and excess productive capacity might resort to international dumping if it: a. Can charge higher prices in markets that are elastic to price changes b. Earns revenues on foreign sales that at least cover variable costs c. Can sell at that price where domestic and foreign demand elasticities equate d. Is able to force foreign prices below marginal production costs
b. Earns revenues on foreign sales that at least cover variable costs
9. The imposition of a domestic content requirement by the United States would cause consumer surplus for Americans to: a. Rise b. Fall c. Remain unchanged d. None of the above
b. Fall
72. In the post-World War II era, Nontariff trade barriers have decreased in importance relative to tariff barriers. a. True b. False
b. False
74. Today most industrial countries protect their industries via global import quotas rather than selective import quotas. a. True b. False
b. False
76. Import tariffs and import quotas yield identical protection effects, consumption effects, redistribution effects, and revenue effects. a. True b. False
b. False
79. An import quota tends to reduce the overall welfare of the importing nation by an amount equal to the protective effect, consumption effect, and the portion of the revenue effect that is captured by the domestic government. a. True b. False
b. False
81. During periods of growing demand, a tariff more effectively restricts the volume of imports than an equivalent import quota. a. True b. False
b. False
82. With a quota placed on imported sugar, increased domestic demand leads to increased sugar imports but not to higher sugar prices. a. True b. False
b. False
83. With a tariff on auto imports, increased domestic demand leads to a fall in the number of autos imported and a rise in the number of autos produced domestically. a. True b. False
b. False
87. Voluntary export restraint agreements typically apply to all of the world's exporting nations rather than only the most important exporting nations. a. True b. False
b. False
88. For an export quota applied to manufactured goods, foreign exporters tend to capture only a negligible share of the quota's revenue effect. a. True b. False
b. False
91. During the 1980s, U.S. steel-using companies (Caterpillar) actively supported the U.S. government's negotiation of voluntary export agreements with foreign steel-exporting countries. a. True b. False
b. False
93. Local content laws stipulate the maximum percentage of a product's total value that must be produced domestically for that product to be sold domestically. a. True b. False
b. False
96. A subsidy granted to import-competing producers results in a welfare loss to the economy by an amount equal to the protective effect plus the consumption effect. a. True b. False
b. False
99. A subsidy granted to an import-competing producer imposes a deadweight loss on the domestic economy equal to the redistribution effect plus consumption effect. a. True b. False
b. False
The imposition of a tariff on imported steel for the home country results in: a. improving terms of trade and rising volume of trade b. higher steel prices and falling steel consumption c. lower profits for domestic steel companies d. higher unemployment for domestic steel workers
b. higher steel prices and falling steel consumption
11. Compared to an import quota, an equivalent tariff may provide a less certain amount of protection for home producers since: a. A tariff has no deadweight loss in terms of production and consumption b. Foreign firms may absorb the tariff by offering exports at lower prices c. Tariffs are effective only if home demand is perfectly elastic d. Quotas do not result in increases in the price of the imported good
b. Foreign firms may absorb the tariff by offering exports at lower prices
65. Subsidies to domestic firms may lead to a. An increase in prices b. Higher volume of exports c. Higher volume of imports d. Increase in welfare of the trading partner
b. Higher volume of exports
28. If the home country's government grants a subsidy on a domestically produced good, domestic producers tend to: a. Capture the entire subsidy in the form of higher profits b. Increase their level of production c. Reduce wages paid to domestic workers d. Consider the subsidy as an increase in production cost
b. Increase their level of production
23. Export subsidies levied by foreign governments on products in which the United States has a comparative disadvantage: a. Lower the welfare of all Americans b. Lead to increases in U.S. consumer surplus c. Encourage U.S. production of competing goods d. Encourage U.S. workers to demand higher wages
b. Lead to increases in U.S. consumer surplus
14. Assume the U.S. has a competitive advantage in producing calculators, while the rest of the world has a competitive advantage in steel. Suppose the U.S. and the rest of the world enter into an agreement to lower import quotas below existing levels on calculators and steel. Which of the following would least likely occur for the U.S.? Rising levels of: a. Consumer surplus for American buyers of steel b. Producer surplus for American steelmakers c. Production in the American calculator industry d. Producer surplus for American calculator producers
b. Producer surplus for American steelmakers
70. Consider Figure 5.6. In the global market for wine, the EU is willing to supply as much wine as the US demands at $8 per bottle. IF the US imposes a quota of 15 bottles of wine what will happen to consumer surplus? a. decreases by $210 b. decreases by $245 c. stays the same d. increases by $70
b. decreases by $245
suppose the US and Japan enter into a voluntary export agreement in which japan imposes an export quota on its automakers. The largest share of the export quota's "revenue effect" would tend to be captured by: a. the US govt b. japanese automakers c. american auto consumers d. american autoworkers
b. japanese automakers
17. Anti-dumping law has been called unfair for all of the following reasons EXCEPT: a. they do not reflect currency fluctuations b. they are based on average variable cost c. they are based on average total cost d. all of these are reasons to call these laws unfair
b. they are based on average variable cost
61. Consider Figure 5.4. The increase in Venezuelan producer surplus under the production subsidy totals: a. $16 b. $20 c. $24 d. $32
c. $24
49. Consider Figure 5.3. At the free-trade price of $0.60 per pound, Sweden's consumer surplus totals $____ and producer surplus totals $____. a. $10.80, $2.40 b. $14.60, $3.90 c. $24.20, $1.80 d. $32.40, $2.30
c. $24.20, $1.80
54. Consider Figure 5.3. The quota's revenue effect equals: a. $1.60 b. $2.40 c. $3.20 d. $4.00
c. $3.20
38. Consider Figure 5.1. Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as indicated by the supply schedule SM (with subsidy). As a result of the subsidy Mexican steel producers gain ____ of producer surplus. a. $200 b. $400 c. $600 d. $800
c. $600
59. Consider Figure 5.4. Assume the Venezuelan government grants its manufacturers a production subsidy of $4 per calculator. After the subsidy is granted, Venezuelan imports total: a. 8 calculators b. 12 calculators c. 16 calculators d. 20 calculators
c. 16 calculators
58. Consider Figure 5.4. Suppose the rest of the world supplies calculators to Venezuela at a price of $4 each. With free trade, Venezuelan imports total: a. 8 calculators b. 16 calculators c. 20 calculators d. 24 calculators
c. 20 calculators
44. Referring to Figure 5.2, consider if ABC Inc. sells 27 calculators at a price of $5 each, realizing profits totaling $54. Of this quantity, ABC Inc. sells ____ calculators in Canada and realizes revenues totaling $____; the firm sells ____ calculators in France and realizes revenues totaling $____. a. 15, $35, 9, $45 b. 15, $45, 9, $35 c. 21, $105, 6, $30 d. 21, $30, 6, $105
c. 21, $105, 6, $30
67. Consider Figure 5.6. In the global market for wine, the EU is willing to supply as much wine as the US demands at $8 per bottle. How much will the US produce and import in these circumstances? a. 5 bottles, 40 bottles b. 40 bottles, 0 bottles c. 5 bottles, 35 bottles d. 5 bottles, 0 bottles
c. 5 bottles, 35 bottles
31. Consider Figure 5.1. With free trade, the quantity of steel imported by Mexico equals: a. 2 tons b. 4 tons c. 6 tons d. 8 tons
c. 6 tons
25. A specification of a maximum amount of a foreign produced good that will be allowed to enter the country over a given time period is referred to as: a. A domestic subsidy b. An export subsidy c. An import quota d. An export quota
c. An import quota
13. Concerning the restrictive impact of an import quota, assume there occurs an increase in the domestic demand for the import product. As long as the quota falls short of what would be imported under free market conditions, the economy's adjustment to the increase in demand would take the form of: a. A decrease in domestic production of the import good b. An increase in the amount of the good being imported c. An increase in the domestic price of the import good d. A decrease in domestic consumption of the import good
c. An increase in the domestic price of the import good
64. When voluntary export limits are imposed on the world's chief exporter a. The exports of the non-restrained suppliers may be stimulated b. A trade diversion effect may occur c. Both a and b d. None of the above
c. Both a and b
8. Which trade restriction stipulates the percentage of a product's total value that must be produced domestically in order for that product to be sold domestically? a. Import quota b. Orderly marketing agreement c. Local content requirement d. Government procurement policy
c. Local content requirement
56. Consider Figure 5.3. Assume that Swedish import companies behave as a monopoly buyer while foreign export companies behave as competitive sellers. Compared to free trade, Sweden's import quota results in domestic welfare: a. Gains totaling $1.60 b. Gains totaling $3.20 c. Losses totaling $1.60 d. Losses totaling $3.20
c. Losses totaling $1.60
7. Because export subsidies tend to result in domestic exporters charging lower prices on their goods sold overseas, the home country's: a. Export revenues will decrease b. Export revenues will rise c. Terms of trade will worsen d. Terms of trade will improve
c. Terms of trade will worsen
21. If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then: a. The quota results in efficiency reductions but the tariff does not b. The tariff results in efficiency reductions but the quota does not c. They have identical impacts on how much is produced and consumed d. They have identical impacts on how income is distributed
c. They have identical impacts on how much is produced and consumed
29. Government subsidies may take the form of all of these EXCEPT: a. cash disbursements b. tax breaks c. bank credits d. insurance arrangements
c. bank credits
19. The U.S.-Japaneses agreement in 1981 to limit imports of small Japanese cars to the U.S. a. affected Japanese automakers uniformly b. resulted in losses to the Japanese auto industry c. cost the U.S.consumer an extra $660 or so per Japanese import purchased d. did not save any U.S. jobs
c. cost the U.S.consumer an extra $660 or so per Japanese import purchased
47. Consider Figure 5.3. In the absence of trade, Sweden's equilibrium price and quantity of apples would be: a. $0.60 and 22 pounds b. $0.60 and 14 pounds c. $1.00 and 18 pounds d. $1.40 and 14 pounds
d. $1.40 and 14 pounds
34. Referring to Figure 5.1, suppose the Mexican government imposes an import quota equal to 2 tons of steel. If foreign exporters behave as monopoly sellers, and Mexican importers behave as competitive buyers, the overall welfare loss of the quota to Mexico equals: a. $200 b. $400 c. $600 d. $800
d. $800
37. Consider Figure 5.1. Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as indicated by the supply schedule SM (with subsidy). The total cost of the subsidy to the Mexican government equals: a. $200 b. $400 c. $600 d. $800
d. $800
41. Consider Figure 5.1. Suppose the rest of the world voluntarily agrees to reduce steel shipments to Mexico vis-a-vis an export quota equal to 2 tons. Assuming Mexican importers behave as competitive buyers while foreign exporters behave as monopoly sellers, the overall welfare loss of the quota to Mexico is: a. $200 b. $400 c. $600 d. $800
d. $800
69. Consider Figure 5.6. In the global market for wine, the EU is willing to supply as much wine as the US demands at $8 per bottle. IF the US imposes a quota of 15 bottles of wine, how much wine will US consumers demand, how much wine will US producers produce and how much wine will be imported? a. 30 bottles, 20 bottles, 10 bottles b. 40 bottles, 25 bottles, 15 bottles c. 30 bottles, 30 bottles, 0 bottles d. 30 bottles, 15 bottles, 15 bottles
d. 30 bottles, 15 bottles, 15 bottles
36. Consider Figure 5.1. Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as indicated by the supply schedule SM (with subsidy). The quantity of imports equals: a. 1 ton b. 2 tons c. 3 tons d. 4 tons
d. 4 tons
48. Consider Figure 5.3. Suppose the rest of the world can supply apples to Sweden at a price of $0.60 per pound. With free trade, Sweden produces ____ pounds of apples and imports ____ pounds of apples. a. 10, 8 b. 10, 18 c. 6, 22 d. 6, 16
d. 6, 16
52. Consider Figure 5.3. As a result of the quota, Sweden's consumer surplus: a. Increases by $6 b. Increases by $8 c. Decreases by $6 d. Decreases by $8
d. Decreases by $8
30. In certain industries, Japanese employers do not lay off workers. Therefore, they sometimes have excess supplies of goods that they cannot sell on the home market without lowering prices. To hold down losses, they sell goods in overseas markets at prices well beneath those in Japan. This practice is best referred to as: a. Orderly marketing b. Trigger pricing c. Domestic content pricing d. Dumping
d. Dumping
18. The United Auto Workers union attempted to win the approval of legislation that would moderate the practice of foreign sourcing on the part of American auto manufacturers. Which of the following best represents this legislation? a. Voluntary export quotas b. Trigger price mechanism c. Tariff quotas d. Local content laws
d. Local content laws
55. Consider Figure 5.3. Assume that Swedish import companies behave as competitive buyers while foreign export companies behave as a monopoly seller. Compared to free trade, Sweden's import quota results in domestic welfare: a. Gains totaling $3.20 b. Gains totaling $4.80 c. Losses totaling $3.20 d. Losses totaling $4.80
d. Losses totaling $4.80
46. Consider Figure 5.2. Compared with the total revenue and total profit that ABC Inc. realizes in the absence of dumping, with dumping the firm attains a: a. Fall in revenue of $18; fall in profits of $15 b. Fall in revenue of $18, fall in profits of $18 c. Rise in revenue of $18, rise in profits of $15 d. Rise in revenue of $18, rise in profits of $18
d. Rise in revenue of $18, rise in profits of $18
24. If import licenses are auctioned off to domestic importers in a competitive market, their scarcity value (revenue effect) accrues to: a. Foreign corporations b. Foreign workers c. Domestic corporations d. The domestic government
d. The domestic government
20. If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then: a. The quota results in efficiency reductions but the tariff does not b. The tariff results in efficiency reductions but the quota does not c. They have different impacts on how much is produced and consumed d. They have different impacts on how income is distributed
d. They have different impacts on how income is distributed
suppose the govt grants a subsidy to domestic producers of an import-competing good. The subsidy tends to result in deadweight losses for the domestic economy in the form of the: a. consumption effect b. redistribution effect c. revenue effect d. protective effect
d. protective effect