Chapter 7

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

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

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

A

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

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

Many firms, of all national origins, increasingly depend on _____ for their competitive advantage. A. globally dispersed production systems B. specific tariffs C. infant industries D. subsidies

A

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

A

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

The _____ allows Americans to sue foreign firms that use property in Cuba confiscated from them after the 1959 revolution. A. Helms-Burton Act B. General Agreement on Tariffs and Trade C. Smoot-Hawley Act D. Buy American Act

A

The _____ raised tariff barriers in the hope of protecting jobs and diverting consumer demand away from foreign products. A. Smoot-Hawley Act B. Helms-Burton Act C. General Agreement on Tariffs and Trade D. Buy America Act

A

WTO rules allow countries to _____ foreign goods that are being sold cheaper than at home, or below their cost of production, even when domestic producers can show that they are being harmed. A. impose antidumping duties on B. subsidize C. lower the import quota on D. place countervailing duties on

A

Which of the following is a drawback of government intervention? A. It may invite retaliation and trigger a trade war. B. The policies may be captured by foreign investors and turned to their advantage. C. Despite being well-executed, the intervention is unlikely to work. D. The usually establish new tariff levels on technology—to the detriment of all in the industry.

A

Which of the following is one of the main instruments of trade policy? A. Tariffs B. Credit portfolios C. Opportunity costs D. Countervailing duties

A

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

Which of the following statements concerning a voluntary export restraint is true? A. It benefits domestic producers by limiting import competition. B. In most cases, it benefits consumers. C. It lowers the domestic price of an imported good. D. It is a variant of the ad valorem tariff.

A

____ 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

A key goal of the 1986 Uruguay Round was to: A. extend GATT to cover trade in commodities. B. extend GATT rules to cover trade in services. C. increase agricultural subsidies. D. loosen the GATT's monitoring and enforcement mechanisms.

B

A(n) _____ helps domestic producers to compete against foreign imports. A. ad valorem tariff B. specific tariff C. import quota D. subsidy

B

According to the infant industry argument, many developing countries have a potential _____ in manufacturing, but new manufacturing industries cannot initially compete with established industries in developed countries. A. absolute advantage B. comparative advantage C. opportunity cost D. competitive advantage

B

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

Business firms that lobby their governments to engage in protectionism have an opportunity to build a(n) _____ by constructing a globally dispersed production system. A. absolute advantage B. competitive advantage C. strategic trade advantage D. comparative advantage

B

If a domestic industry lacks the capacity to meet demand, an _____ can raise prices for both the domestically produced and the imported good. A. import tariff B. import quota C. import subsidy D. ad valorem tariff

B

In the United States, the only firms allowed to import cheese are certain trading companies, each of which is allocated the right to import a maximum number of pounds of cheese each year. This is an example of _____. A. a subsidy B. an import quota C. a local content requirement D. an ad valorem tariff

B

Paul Krugman suggests that strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that: A. provides enhanced protection for intellectual property of those firms. B. boosts national income at the expense of other countries. C. reduces domestic agricultural profits. D. depletes national income to the benefit of other countries.

B

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

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

The WTO's GATS has taken the lead to: A. provide enhanced protection for intellectual property. B. extend free trade agreements to services. C. reduce agricultural subsidies. D. enforce GATT rules.

B

The _____ specifies that government agencies must give preference to American products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage. A. General Agreement on Tariffs and Trade B. Buy America Act C. American Reinvestment Act D. Smoot-Hawley Act

B

Until 1995, GATT rules applied only to: A. services. B. industrial goods. C. textiles. D. agricultural products.

B

Which of the following observations about tariffs is true? A. Tariffs are generally anti-producer and pro-consumer. B. Export tariffs are used to raise revenue for the government. C. Export tariffs are far more common than import tariffs. D. Import tariffs increase the overall efficiency of the world economy.

B

____ 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

_____ in agriculture could jump-start economic growth among the world's poorer nations and alleviate global poverty. A. Quota rents B. Free trade C. Strategic trade policy D. Subsidies

B

_____ 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

A key issue in the "millennium round" of the WTO was to: A. increase barriers to cross-border trade in agricultural products. B. extend GATT to cover trade in commodities. C. further reduce barriers to cross-border trade and investment. D. extend GATT rules to cover trade in services.

C

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

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

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

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

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

Governments use _____ to boost exports and restrict imports. A. subsidies B. local content requirements C. administrative trade policies D. formal instruments of trade policy

C

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

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

Inadequate protections for intellectual property: A. increase the incentive for innovation. B. led to the Smooth-Hawley Act. C. reduce the incentive for innovation. D. are one of the issues addressed by the local content requirement.

C

Strategic trade policy suggests that a government should use _____ to support promising firms that are active in newly emerging industries. A. tariff rate quotas B. quota rents C. subsidies D. ad valorem tariffs

C

Strategic trade policy suggests that in industries where the existence of substantial scale economies implies that the world will profitably support only a few firms, countries may predominate in the export of certain products simply because they had firms that were able to: A. influence the assignment of tariffs. B. receive government subsidies. C. capture first-mover advantages. D. capitalize on late-mover advantages.

C

Tariff rates on agricultural products are generally: A. much lower than tariff rates on manufactured products or services. B. much lower than import fees on electronics. C. much higher than tariff rates on manufactured products or services. D. much higher than import fees on electronics.

C

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

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

Underlying most of the trade theories discussed is the notion that: A. different countries have particular advantages in different productive activities. B. firms that establish a first-mover advantage with regard to the production of a particular new product will dominate global trade in that product. C. it usually makes sense for a firm to consolidate its productive activities in one country. D. despite a pivotal role in international trade, businesses are typically unable to influence government trade policy. `

C

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

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

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

Which of the following is a trade barrier that affects a firm's strategy? A. Tariffs lower the cost of exporting. B. Quotas may enhance a firm's ability to serve a country from outside of that country. C. To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise. D. The threat of antidumping actions promotes the firm's ability to use aggressive pricing to gain market share in a country.

C

_____ a requirement that some specific fraction of a good be produced domestically. A. Administrative trade policies are B. The Buy American Act is C. A local content requirement is D. Bureaucratic rules are

C

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

A company that sells its product in a foreign market below the cost of production may be accused of _____. A. pandering B. profiteering C. carnivorous behavior D. dumping

D

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

A(n) _____ helps domestic producers to compete against foreign imports. A. ad valorem tariff B. specific tariff C. import quota D. subsidy

D

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

Antidumping duties are often called: A. special circumstance duties. B. positive duties. C. retroactive duties. D. countervailing duties.

D

Identify the true statement about trade barriers. A. They lower the costs of exporting products to a country. B. They may put a firm at a competitive advantage to indigenous competitors. C. They may help a firm 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.

D

Krugman has suggested that trade policy designed to retaliate against another country's trade policy would: A. benefit the multination firms of both countries. B. benefit the citizens of both countries. C. hurt the multinational firms of both countries. D. hurt the citizens of both countries.

D

One issue at the forefront of the current agenda of the WTO is the: A. decrease in antidumping policies. B. low level of protectionism in agriculture. C. strong protection for intellectual property rights in many nations. D. increase in tariff rates on nonagricultural goods and services in many nations.

D

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

TRIPS regulations oblige WTO members to do which of the following? A. grant and enforce patents lasting at least 100 years. B. grant and enforce copyrights lasting 100 years. C. comply with the rules within five years in the case of the rich countries. D. comply with the rules within 10 years in the case of the poorest countries.

D

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

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

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

The extra profit that producers make when supply is artificially limited by an import quota is referred to as a(n) _____. A. tariff rate quota B. import quota C. subsidy D. quota rent

D

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

The threat of _____ limits the ability of a firm to use aggressive pricing to gain market share in a country. A. specific tariffs B. import quotas C. countervailing duties D. antidumping action

D

Which of the following is a political reason for governments to intervene in markets? A. To help citizens obtain jobs in foreign markets B. To aid their country's businesses in foreign markets C. To subsidize multinational companies D. To protect jobs and industries

D

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

_____ 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