Chapter 7 MC*****

_____ is a direct restriction on the quantity of some good that may be imported into a country. A. Import tariff B. Import quota C. Import subsidy D. Ad valorem tariff

B. Import quota

Until 1995, GATT rules applied to all of the following EXCEPT: A. manufactured goods. B. services. C. textiles. D. agricultural products.

B. services.

After the Uruguay Round of GATT extended global trading rules to cover trade in services, the first two industries targeted for reform by the WTO were: A. textiles and technology. B. telecommunications and financial services. C. automotives and aerospace. D. agriculture and consulting services.

B. telecommunications and financial services.

Import tariffs: A. reduce the price of foreign goods. B. create efficient utilization of resources. C. reduce the overall efficiency of the world economy. D. are unambiguously pro-consumer and anti-producer.

C. reduce the overall efficiency of the world economy.

By lowering production costs, _____ help domestic producers compete against foreign imports. A. subsidies B. duties C. quotas D. tariffs

A. subsidies

Which of the following statements concerning a voluntary export restraint is NOT true? A. It benefits domestic producers by limiting import competition. B. In most cases, it benefits consumers. C. It raises the domestic price of an imported good. D. It is a variant of the import quota.

B. In most cases, it benefits consumers.

Identify the INCORRECT statement about trade barriers. A. They raise the costs of exporting products to a country. B. They may put a firm at a competitive advantage to indigenous competitors. C. They may limit a firm's ability to serve a country from locations outside of that country. D. To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.

B. They may put a firm at a competitive advantage to indigenous competitors.

Tariff rate quotas are common in agriculture, where their goal is to: A. reduce the use of synthetic fertilizers. B. limit imports over quota. C. increase agricultural imports. D. increase foreign competition.

B. limit imports over quota.

In 1997, two South Korean manufacturers of semiconductors, LG Semicon and Hyundai Electronics, were accused of selling dynamic random access memory chips (DRAMs) in the U.S. market at below their costs of production. It was alleged that the firms were trying to unload their excess production in the United States. This is an example of: A. ad valorem tariff. B. subsidy. C. dumping. D. import quota.

C. dumping.

According to the strategic trade policy argument: A. government intervention is not required because firms can borrow money from the capital markets to finance the required investments. B. selling goods in a foreign market at below their "fair" market value is legally and ethically justified. C. government support can help domestic firms overcome the first-mover advantages enjoyed by foreign competitors. D. a government should use subsidies to support promising firms that are active in old, established industries.

C. government support can help domestic firms overcome the first-mover advantages enjoyed by foreign competitors.

According to the _____ argument, governments should temporarily support new industries until they have grown strong enough to meet international competition. A. retaliatory action B. human rights C. infant industry D. antidumping

C. infant industry

According to ____, some specific fraction of a good must be produced domestically. A. import quotas B. voluntary export restraints C. local content requirements D. antidumping duties

C. local content requirements

The "millennium round" ended in 1999 with: A. a successful record on agricultural products. B. a new agenda for the next round focusing on financial services. C. no agreement on the reduction of barriers to cross-border trade and investment. D. a decision to avoid FDI.

C. no agreement on the reduction of barriers to cross-border trade and investment.

Foreign producers typically agree to voluntary export restrictions because: A. their manufacturing capacity is limited. B. they can divert their exports to other countries and charge more for their products. C. they fear far more damaging punitive tariffs or import quotas might follow if they do not. D. they are required to by the World Trade Organization.

C. they fear far more damaging punitive tariffs or import quotas might follow if they do not.

The Japanese government was pressurized by the U.S. government to place limits on the number of vehicles exported to the United States by Japanese automobile producers in 1981. This is an example of: A. tariff rate quota. B. specific tariffs. C. voluntary export restraint. D. ad valorem tariff.

C. voluntary export restraint.

Specific tariffs are: A. levied as a proportion of the value of the imported good. B. government payment to domestic producers. C. in the form of manufacturing or production requirements of goods. D. levied as a fixed charge for each unit of a good imported.

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

According to the Buy America Act, if a company wishes to win a contract from a U.S. government agency to provide some equipment, it must ensure that at least 51 percent of the product by value is manufactured in the United States. This is an example of: A. antidumping duties. B. voluntary export restraints. C. import quotas. D. local content requirements.

D. local content requirements.

The WTO argues that removing tariff barriers and subsidies in the agricultural sector could: A. protect domestic agriculture in developed nations. B. lower the overall level of agricultural trade. C. restrict global economic growth. D. lower prices to consumers.

D. lower prices to consumers.

The U.S. government has used the threat of punitive trade sanctions to try to get the Chinese government to enforce its intellectual property laws. This is an example of government intervention based on: A. human rights protection. B. national security. C. consumer protection. D. retaliation.

D. retaliation.

A common hybrid of a quota and a tariff is known as a(n): A. import tariff quota. B. voluntary export restraint. C. ad valorem tariff. D. tariff rate quota.

D. tariff rate quota.

A quota rent is: A. a quota on trade imposed by the exporting country. B. levied as a fixed charge for each unit of a good imported. C. levied as a proportion of the value of the imported good. D. the extra profit producers make when supply is artificially limited by an import quota.

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

What term refers to a situation in which a government does not attempt to restrict what its citizens can buy or sell to another country? A. Tariffs B. Import quotas C. Free trade D. Subsidies

C. Free trade

Which of the following observations about subsidies is true? A. Government subsidies must be paid for, typically by taxing individuals and corporations. B. Subsidies are used to reduce exports from a sector, often for political reasons. C. Whether subsidies generate national benefits that exceed their national costs is debatable. D. Subsidies help foreign producers gain a competitive advantage over domestic producers.

A. Government subsidies must be paid for, typically by taxing individuals and corporations.

Economic problems during the Great Depression were compounded in 1930 when the U.S. Congress passed the ____, aimed at avoiding rising unemployment by protecting domestic industries and diverting consumer demand away from foreign products. A. Smoot-Hawley Act B. Antidumping Act C. Helms-Burton Act D. D'Amato Act

A. Smoot-Hawley Act

_____ is a quota on trade imposed by the exporting country, typically at the request of the importing country's government. A. Voluntary export restraint B. Specific tariff quota C. Trade reconciliation D. Ad valorem tariff

A. Voluntary export restraint

According to the 1986 Uruguay Round, the _____ was to be created to implement the GATT agreement. A. World Trade Organization B. International Monetary Fund C. United Nations D. World Bank

A. World Trade Organization

Tariffs do not benefit: A. consumers. B. domestic producers. C. governments. D. domestic firms.

A. consumers.

The TRIPS regulations established at the 1995 Uruguay Round: A. established regulations on patents and copyrights. B. set a new level of agriculture subsidies. C. organized OECD countries to eliminate tariffs on textiles. D. established new tariff levels on technology.

A. established regulations on patents and copyrights.

Local content regulations: A. protect domestic producers by limiting foreign competition. B. lower the prices of imported components. C. tend to benefit consumers and not producers. D. encourage outsourcing of production units.

A. protect domestic producers by limiting foreign competition.

According to the _____ policy, subsidies can help a firm achieve a first-mover advantage in an emerging industry. A. strategic trade B. antidumping C. tariff quota D. free trade

A. strategic trade

The Netherlands exported tulip bulbs to almost every country in the world except Japan. This was because in Japan, customs inspectors insisted on checking every tulip bulb by cutting it vertically down the middle. This is an example of which of the following trade barriers? A. Export restraint B. Administrative trade policies C. Local content requirement D. Ad valorem

B. Administrative trade policies

Which of the following is NOT one of the main instruments of trade policy? A. Tariffs B. Credit portfolios C. Local content requirements D. Administrative policies

B. Credit portfolios

_____ is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value. A. Export restraint B. Dumping C. Local content requirement D. Ad valorem

B. Dumping

Which of the following acts allows Americans to sue foreign firms that use property in Cuba confiscated from them after the 1959 revolution? A. D'Amato Act B. Smoot-Hawley Act C. Helms-Burton Act D. Antidumping Act

C. Helms-Burton Act

Which of the following is a consequence of subsidies? A. Subsidies make domestic producers vulnerable to foreign competition. B. Subsidies lead to lowered production. C. Subsidies protect inefficient domestic producers. D. Subsidies produce revenue for the government.

C. Subsidies protect inefficient domestic producers.

Administrative trade policies are: A. requirements that some specific fraction of a good be produced domestically. B. quotas on trade imposed by the exporting country. C. bureaucratic rules designed to make it difficult for imports to enter a country. D. designed to punish foreign firms that engage in dumping.

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

TRIPS regulations oblige WTO members to do all of the following EXCEPT: A. grant and enforce patents lasting at least 20 years. B. grant and enforce copyrights lasting 50 years. C. comply with the rules within five years in the case of rich countries. D. comply with the rules within 10 years in the case of the poorest countries.

C. comply with the rules within five years in the case of rich countries.

_____ are the highest rate that can be charged, which is often, but not always, the rate that is charged. A. Ad valorem tariff rates B. Tariff rents C. Specific tariff rates D. Bound tariff rates

D. Bound tariff rates

Which of the following is a reason for the pressure for greater protectionism that occurred during the 1980s and early 1990s? A. The U.S. Congress erected an enormous wall of tariff barriers. B. Japanese economic failure strained the world trading system. C. The persistent trade surplus in the United States strained the world trading system. D. Many countries found ways to get around GATT regulations.

D. Many countries found ways to get around GATT regulations.

The Smoot-Hawley Act aimed at: A. diverting consumer demand toward foreign products. B. promoting unrestricted free trade. C. limiting global warming. D. avoiding rising unemployment.

D. avoiding rising unemployment.

The infant industry argument is criticized because it relies on an assumption that: A. new manufacturing industries in developing nations can initially compete with established industries in developed countries. B. selling goods in a foreign market at below their "fair" market value is legally and ethically justified. C. the domestic industry in a developing nation lacks the capacity to meet demand. D. firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market.

D. firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market.