ch 7

Based on the theories of Ricardo and Smith, the consequences of free trade include ______ economic gains in terms of economic growth and wealth creation.

dynamic

How do import tariffs affect the overall efficiency of the world economy?

They reduce the efficiency.

True or false: If Italy places a fixed charge of $5 for every unit of rice imported, that $5 is an example of a specific tariff.

True

Based on the economic analysis of tariffs, it can be said that they are (select two)

anti-consumer pro-producer

Which two groups are positively impacted when an import tariff is enacted? (Check all that apply.)

Government Domestic producers

Quota rent provides producers with ______.

extra profit

Company ABC in Scotland exports a pound of cheese to the US for $100. Based on the value of the cheese, the US places a 20% tax on it. What type of tariff is this?

Ad valorem

Which two groups are negatively impacted when an import tariff is enacted? (Check all that apply.)

Consumers Foreign producers

______ permit a specific quantity of imported goods to enter the country under a reduced rate while those exceeding the quantity are charged at a higher rate.

Tariff rate quotas

Why do exporting countries agree to impose voluntary export restraints?

To avoid future tariffs and import quotas on their products

Why would a country enact an export tariff?

To discriminate against exports in order to guarantee a sufficient supply of a good within the country To reduce exports from an industry sector, often for political reasons

True or false: To limit imports over quota, tariff rate quotas would be used for agricultural products to limit the amount entering a country.

True

Sometimes governments pay subsidies to help companies survive challenging economic climates. In effect, these companies receive ______.

an unfair competitive advantage

During the 1970s, Congress did not allow US industries to export crude oil production. This action is an example of an export ______.

ban

In the past, China enacted a(n) ______ on grain to make sure there was a sufficient supply within the nation.

export tariff

When the government does not use quotas, taxes or other means to restrict what its citizens can buy from or sell to another country, it is called _____ trade.

free

A consequence of subsidies paid to companies during difficult economic times is ______.

giving recipients an unfair competitive advantage

Goods that are taxed as they ship out of a country have a(n) ______ tariff.

export

A(n) ______ is a type of trade restriction that sets a physical limit on the quantity of a product that can be imported into the country in a set period of time.

import quota

What are three main instruments of trade policy?

import quotas voluntary export restraints subsidies

A tariff is a tax levied on ______.

imports or exports

According to a study cited in the text, if advanced countries stopped providing subsidies to farmers, global trade in agricultural products would ______.

increase by 50%

Which country is pointed to as the master of administrative trade policies?

japan

Evan works in a country in which the government has stated that 45% of all goods must be produced domestically. What type of requirement does this country have in place?

local content requirement

In order to win a contract from Mexico, QVB Autos Manufacturing must make 65% of the component parts for their automobiles in Mexico. This is an example of a ______.

local content requirement

Developed countries have imposed local content requirements in order to ______.

protect local jobs from foreign competition

Import quotas are based on the ______ of a good.

quantity

When supply of a product is artificially limited by an import quota, a producer receives extra profit that is known as ______.

quota rent

A tax on imports that is levied as a fixed charge per unit of an imported good is called a(n) ______ tariff.

specific

When the US government "bailed out" the automobile industry starting in 2009 by loaning money to keep General Motors and other automakers in business, it was an example of a(n) ______.

subsidy

Which instrument of trade policy has been in use the longest?

tariffs

Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are ______.

tarifs

Subsidies are a form of payment that is provided by ______.

the government

True or false: After analyzing current practices, it can be said that subsidies are not that successful at increasing the international competitiveness of domestic producers.

true

A self-imposed trade restriction on the quantity of a good that the exporting country is allowed to export to another country is called a(n) ______.

voluntary export restraint

Brazil was concerned about a surge of vehicles coming in from Mexico and considered protectionist measures. When Mexico responded by limiting the shipments of vehicles to Brazil it was using a(n) ______.

voluntary export restraint

Japan imposed a quota on auto exports into the US as a result of pressure from the American government. This action is an example of a(n) ______.

voluntary export restraint

Ad valorem tariffs are based on the ______ of a product.

value

______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.

Free