Chapter 7: Government Policy and International Trade

antidumping policies

designed to punish foreign firms that engage in dumping and thus protect domestic producers from unfair foreign competition

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

dynamic

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

export tariff

quota rent

extra profit producers make when supply is artificially limited by an import quota

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

giving recipients an unfair competitive advantage

A tariff is a tax levied on Blank______.

imports or exports

Specific Tariff

levied as a fixed charge for each unit of a good imported

ad valorem tariffs

levied as a proportion of the value of the imported good

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

subsidy

A government payment that supports a business or market. take many forms such as cash grants, low-interest loans, tax breaks, and government equity participation in domestic firms

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

Foreign producers Consumers

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

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

Government and domestic producers

dumping

Selling goods in another country below market prices

______ 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

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

Tariff rate quotas

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

Tariffs

import quota

a direct restriction on the quantity of a good that can be imported into a country

export ban

a policy that partially or entirely restricts the export of a good

import tariff

a tax levied by a nation on goods imported into the country

Sergei believes that a Japanese-based company is selling digital cameras well-below market costs in the United States and thereby gaining all of the business. He plans to report this to the Commerce Department who can examine the case based on US Blank______ policies.

antidumping

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

protect local jobs from foreign competition

Import quotas are based on the Blank______ 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 Blank______.

quota rent

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

specific

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

tariffs

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

they reduce the efficiency

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) Blank______.

voluntary export restraint

voluntary export restraint

A quota on trade imposed from the exporting country's side, instead of the importer's; usually imposed at the request of the importing country's government.

strategic trade policy

A trade policy wherein governments identify key industries that they wish to see grow and enact policies to support their development and success.

Why do exporting countries agree to impose voluntary export restraints?

To avoid future tariffs and import quotas on their products

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: Tariff rate quotas are common in agriculture, where the goal is to limit imports over quota.

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: This is true because studies show that government subsidies tend to protect the inefficient and promote excess production.

tariff rate quota

a lower tariff rate is applied to imports within the quota than those over the quota

local content requirement

a requirement that some specific fraction of a good be produced domestically

export tariff

a tax placed on the export of a good

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

Governments implement Blank______ trade policies that are designed to make it difficult for imports to enter a country.

administrative

What industry tends to benefit the most from subsidies in most countries?

agriculture

Infant industry argument

an industry should be protected until it can develop and be viable and competitive internationally

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

an unfair competitive advantage

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

anti-consumer pro-producer

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

ban

administrative trade policies

bureaucratic rules designed to make it difficult for imports to enter a country

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

export

A(n) Blank______ 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

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

increase by 50%

As noted in the text, in the past, the US government has tried to convince the Chinese government to enforce its Blank______ laws by threatening punitive trade sanctions.

intellectual Property

What are three main instruments of trade policy?

subsidies voluntary export restraints import quotas

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) Blank______.

subsidy

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) Blank______.

voluntary export restraint

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

True: A specific tariff is levied as a fixed charge for each unit of a good imported.