Chapter 10 ECON 202

Which of the following is an example of a regulatory trade restriction?

A requirement that all imported electronics must be individually inspected (See the definition of regulatory trade restrictions in the textbook. Some are imposed for legitimate reasons; others are designed simply to make importing more difficult.)

The existence of learning by doing and economies of scale sometimes lead people to make which type of argument in favor of trade restrictions?

An infant industry argument. (The infant industry argument says that with initial protection, an industry will be able to become competitive.)

If a country has a deficit, it is definitely:

Buying more than it is producing. (If a country has a trade deficit, it is importing (buying) more than it is exporting (producing). The other options pertain to some of the various ways a deficit may be financed. The word definitely in the question makes these options incorrect.)

If a nation is a debtor nation, it:

Has run trade deficits in the past. (A debtor nation could possibly be running a current trade surplus if it ran enough deficits in the past.)

Compared to the past, the United States is now:

Importing more high-tech goods and services from India and China and other East Asian countries. (The U.S. is importing more and more high-tech goods from India and China and other East Asian countries. The U.S. is outsourcing more to these newly emerging industrialized countries and is facing more competition from these nations.)

Trade restrictions tend to:

Increase prices to consumers. (Reduce competition and therefore increase prices to consumers. Therefore, consumers are hurt. The economic costs of trade restrictions (in the form of higher prices consumers must pay) far outweigh their benefits (which go to the protected domestic industries in the form of higher profits from more production)

Tariffs and quotas are different in that:

Quotas raise revenue for the government, but tariffs benefit import companies. (A tariff is a tax on imports, but a quota is a quantity limit.)

Of the countries listed below, _______ has the lowest amount of imports and exports as a share of total output.

The United States. (For the U.S., exports are about 13% of output and imports are about 16%. Africa is not a country.)

Most economies believe that:

The harm done by trade restrictions outweighs the benefits. (Even though there will be increased pressure for outsourcing and holding down U.S. wages, most economists believe that the U.S. will still be better off in the long run if it allows free trade.)

Tariffs and quotas are alike in that both cases:

The price of imports rises and the quantity of imports fall. (Figure 10-4 shows the effect of quotas and tariffs.)