Economics Chapter 34-Timed Quiz

____________ means selling goods below their cost of production.

Dumping

The acronym GATT stands for:

General Agreement on Tariffs and Trade.

_____________ are numerical limitations on the quantity of products that can be imported.

Import quotas

________________________ is theoretically possible, even sensible: give an industry a short-term indirect subsidy through protection, and then reap the long-term economic benefits of having a vibrant healthy industry.

The infant industry argument

Why would foreign firms export a product at less than its cost of production-which presumably means making a loss?

This may be part of a long-term strategy in which foreign firms would sell at below the cost of production in the short-term for a time, and when they have driven out the domestic U.S. competition, they would then raise prices.

Politicians often argue for tariff increases in order to reduce the nation's dependence on imports. If tariffs are increased, the long-run effect is most likely to be:

a decrease in both American imports and exports.

A rule that every imported product must be opened by hand and inspected with a magnifying glass, by one of just three government inspectors available at any given time might be referred to as __________________.

a non-tariff barrier

Suppose the government of Taiwan subsidized its watch-making industry, enabling Taiwanese producers to undersell foreign watch producers. The law of comparative advantage indicates that watch-importing nations would best take advantage of the Taiwanese subsidization policy by:

accepting the subsidy of the Taiwanese government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry.

As international trade increases, it contributes to a shift in jobs away from industries where that economy does not have a(n) __________ advantage and toward industries where it has a(n) ___________ advantage.

comparative; comparative

Raising an existing tariff on grapes from Argentina will:

increase American consumption of domestically produced grapes.

"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of restricted products at the expense of domestic consumers." This statement:

is essentially correct.

Economists would say tariffs:

limit voluntary exchanges.

Low-wage U.S. workers suffer from protectionism in all the industries that they don't work in, because:

protectionism forces them to pay higher prices for basic necessities like clothing and food.

If Japan does not have a comparative advantage in producing rice, the consequences of adopting a Japanese policy reducing or eliminating imports of rice into the country would include:

the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall.

International trade is fundamentally a ________________________.

win-win situation