Exam 2 Quiz 7

Developed countries have lost comparative advantage in a) labor-intensive industries. b) agricultural industries. c) high-tech industries. d) capital-intensive industries.

a

If a nation protects an industry because it believes that there are positive externalities in the production process, it is asserting that the free market will a) produce the correct amount but charge too low a price. b) produce more than is optimal from society's point of view. c) produce less than is optimal from society's point of view. d) produce the correct amount but charge too high a price

c

One reason why consumers are unlikely to be too upset about tariffs is because a) most consumers benefit from protection. b) consumer losses are not real losses. c) the costs are so spread out that no one pays a big share of the total. d) tariffs are an inexpensive way to create jobs.

c

Predatory dumping occurs when a) foreign firms sell at a price that covers the cost of their variable inputs. b) foreign firms sell below cost because the product is perishable. c) foreign firms sell below cost with the intent to drive firms out of the domestic market. d) foreign firms sell at a price that is below the price of domestic firms.

c

Agriculture, clothing, and textiles are singled out for treatment in chapter seven because a) they are more important to job creation than other sectors. b) they tend to be the most-protected sectors internationally. c) the policies of high-income nations in these sectors may have beneficial effects in low-income countries. d) they tend to be the most highly protected sectors of industrial economies. e) they are not labor intensive.

d

During the 1990s, deadweight losses per job saved through tariffs and quotas in the apparel industry a) were less than the value of the jobs saved. b) increased net national welfare. c) were small enough to ignore. d) were greater than the wages earned in apparel jobs.

d

Economic sanctions a) are more likely to work if military force is not used. b) never work to create policy change in the targeted country. c) usually work to create policy change in the targeted country. d) are more likely to work if the international community supports them.

d

Of the common justifications for protectionism, the one that perhaps might be defended on economic grounds would be... a. The Cultural Protection argument b. The Labor argument c. The National Security argument d. The Infant Industry argument e. The Revenue argument

d

Which of the following is a TRUE statement? a) Australia has one of the most heavily subsidized agricultural sectors as a percentage of domestic GDP. b) In the global recession of 2007-2009, world trade declined because nations closed their markets to trading partners. c) Further trade opening is beneficial even if the monetary value of the gains is not high. d) Some economists argue that free trade is beneficial regardless of the actions of a country's trading partners, including trading partners that heavily protect their home markets.

d

Which of the following is a TRUE statement? a) U.S. sugar quotas cost each person in the U.S. thousands of dollars per year due to higher prices. b) Developed countries have gained comparative advantage in textile industries. c) Trade barriers are an inexpensive and efficient way to reach most of the goals for which they are used. d) There are asymmetric incentives to support and to oppose protectionist trade policies, with the stronger incentives going to those that would seek protection.

d

Sixty years after the signing of GATT and following eight completed round of trade negotiations, a) there has been no real change in trade barrier. trade barriers have been eliminated. b) trade barriers have actually increased. c) trade barriers are no longer an issue. d) trade barriers have been e) successfully reduced.

e

Which of the following is an example escape clause relief? a) A tariff is granted because foreign firms are selling below cost. b) None of these answers are correct c) A tariff is granted to an industry because foreign firms are subsidized by their governments. d) A tariff is granted to an industry because another nation persistently uses unfair trade practices. e) A temporary tariff is granted to allow for adjustment of the domestic industry.

e

Which of the following is a TRUE statement? a. Developed countries have gained comparative advantage in labor-intensive industries. b. Developed countries have gained comparative advantage in apparel industries. c. Large and efficient agricultural producers like Argentina and Australia protect that sector heavily. d. Tariffs are higher in agriculture than any other sector in most countries.

I answered A but its incorrect

Which of the following is a TRUE statement? a. It seems likely that economic sanctions ultimately would have led to regime change in Iraq. b) Protection in the form of tariffs or quotas is a very efficient tool for job creation and preservation. c) The more difficult the goal, the more likely military force is going to be needed to back up economic sanctions. d) Because low tariffs have a high ratio of benefits to costs, they are an especially efficient way for nations to achieve full employment and growth.

I answered B and was wrong

The biggest flaw in the logic of the labor argument is the failure to consider a. the differences in national productivity levels. b. the impact on unemployment. c. the needs of developing countries. d. the impact of tariffs on inflation. e. the impact on employment levels.

I answered C and that was wrong

A major difficulty with the infant industry argument for protection is that a. it requires the nation to fall into the large country case for tariff protection. b. the measurement of production externalities is difficult and uncertain. c. effective rates of protection are usually greater than nominal rates. d. government revenue will fall with a tariff.

b

Some economists suggest the optimal way for a nation to protect its access to a strategic mineral is with a) a quota on imports of the mineral. b) a stockpile. c) a high rate of effective protection to keep local mines in business. d) increase mineral exploration. e) an infant industry tariff.

b

Which of the following is NOT a reason people tolerate tariffs and quotas? a) The marginal expenses to fight the protection outweigh the personal marginal costs of the protection. b) Their jobs depend on tariffs and quotas. c) Costs of the policy are spread over a large number of people. d) Costs may be hidden and hard to quantify.

b

Which of the following is NOT a true statement about economic sanctions? a. None of these answers are correct b. Economic sanctions are usually effective in achieving policy goals. c. Economic sanctions are aimed at broad policy objectives, such as the end of apartheid. d. Economic sanctions may not be sufficient to achieve policy goals without military force or other measures. e. Economic sanctions can seriously harm the economy of a country on which they are imposed.

b

Which of the following is a TRUE statement? a) In the global recession of 2007-2009, world trade declined because nations closed their markets to trading partners. b) Some economists argue that free trade is beneficial regardless of the actions of a country's trading partners, including trading partners that heavily protect their home markets. c) Australia has one of the most heavily subsidized agricultural sectors as a percentage of domestic GDP. d) Further trade opening is beneficial even if the monetary value of the gains is not high.

b

Which of the following is an example of an antidumping duty? a) A tariff is granted to an industry because foreign firms are subsidized by their governments. b) A tariff is granted because foreign firms are selling below cost. c) A temporary tariff is granted to allow for adjustment of the domestic industry. d) A tariff is granted to an industry because another nation persistently uses unfair trade practices. e) None of these answers are correct

b

"Cheap foreign wages" is a poor argument for protection because it fails to recognize the importance of productivity. Which of the following does NOT contribute to increasing productivity? a) Education b) Training c) Government subsidies d) Infrastructure e) Capital

c

After World War II... a. tariffs increased in low-income countries and fell a small percentage in high-income countries. b. agricultural subsidies were significantly reduced. c. tariffs around the world fell substantially. d. tariffs around the world began to rise to pay off war expenses. e. most nations began to apply tariffs uniformly across all industries.

c

Economists believe that there are many nonmonetary gains from further trade opening. Which of the following is NOT one of those potential gains? a. Economies of scale from increased production decreases costs. b. Diversification of production lowers risks. c. Governments will be less reliant on tariff revenue. d. Intensified competition lowers prices.

c