chapter 6

19. Which of the following is not an example of a non-tariff barrier? A) A tax composed of a fixed percentage and a fixed sum per unit of the commodity being traded B) Voluntary export restraints C) Quota D) Export subsidy

A) A tax composed of a fixed percentage and a fixed sum per unit of the commodity being traded

26. _______________ are often imposed on imports to offset export subsidies by foreign governments. A) Countervailing duties B) Anti-dumping duties C) Import subsidies D) None of the above

A) Countervailing duties

29. _________________ raised average import duties in the U.S. to the all-time high of 59%? A) The Smoot-Hawley Tariff Act of 1930 B) The U.S. Tariff Assignment Act of 1954 C) The Trade Agreements Act of 1934 D) The Sarbanes-Oxley Act

A) The Smoot-Hawley Tariff Act of 1930

22. In which form of dumping does a domestic monopolist consistently maximize total profits by selling the commodity at a lower price abroad than domestically? A) Pervasive B) Persistent C) Predatory D) Sporadic

B) Persistent

20. Suppose one country induces another to reduce exports of a particular commodity under threat of greater consequences. This would be known as: A) dumping B) a voluntary export restraint C) a quota D) an export subsidy

B) a voluntary export restraint

11. A specified quantitative limit on a good that will be allowed to enter the country over a given period of time is referred to as: A) a domestic subsidy B) an import quota C) an export subsidy D) an import tariff

B) an import quota

25. The purpose of the U.S. Export-Import Bank is to: A) use predatory tactics to prevent foreign companies from trying to export products to the U.S. B) give foreign buyers of U.S. exports low-interest loans to finance their purchases C) subsidize producers of commodities in the U.S. for the purpose of making them competitive in the international market D) All of the above

B) give foreign buyers of U.S. exports low-interest loans to finance their purchases

18. If Japan is accused of dumping televisions into the US market, it is believed that Japan is: A) selling televisions in the US for a price above production costs B) selling televisions in the US for a price below production costs C) producing televisions cheaper than the US can produce them D) producing televisions at a higher cost than the US produces them

B) selling televisions in the US for a price below production costs

32. Over the last four decades: A) Non-tariff barriers (NTB's)and tariffs have both increased in importance and use B) NTB's and tariffs have both decreased in importance and use C) NTB's have increased and tariffs have decreased in importance and use D) NTB's have decreased and tariffs have increased in importance and use

C) NTB's have increased and tariffs have decreased in importance and use

28. With which market structure is strategic trade policy typically concerned? A) Perfect competition B) Monopolistic competition C) Oligopoly D) Monopoly

C) Oligopoly

23. In which form of dumping is a commodity sold at a lower price abroad in order to drive foreign producers out of business, after which prices are raised to take advantage of the newly acquired monopoly power abroad? A) Pervasive B) Persistent C) Predatory D) Sporadic

C) Predatory

30. Under which act was the President first given authority to negotiate bilateral tariff reductions, and was the most-favored-nations principle further developed? A) The Smoot-Hawley Tariff Act of 1930 B) The U.S. Tariff Assignment Act of 1954 C) The Trade Agreements Act of 1934 D) The Sarbanes-Oxley Act

C) The Trade Agreements Act of 1934

35. The Uruguay Round provided that GATT would be replaced by the: A) Bureau of Economic Analysis B) The World Bank C) The World Trade Organization D) the US Export/Import Bank

C) The World Trade Organization

36. Which of the following is not one of the problems being addressed in the latest round of trade negotiations, the Doha Round? A) The persistence of high agricultural tariffs and subsidies B) The need to establish environmental and labor standards C) The inability of the world to divide itself into major trading blocs D) Trade disputes between the US and the EU regarding tax breaks to corporations on income earned from exports

C) The inability of the world to divide itself into major trading blocs

31. The World Trade Organization was established by the ___________________ of multilateral trade negotiations. A) Kennedy Round B) Tokyo Round C) Uruguay Round D) Doha Round

C) Uruguay Round

27. Strategic trade policy is concerned with protecting, and assisting in creating comparative advantage in,: A) agricultural commodities B) transportation related industries C) national growth-affecting industries D) unskilled labor-intensive industries

C) national growth-affecting industries

24. Which of the following is an example of an export subsidy? A) Tax relief to potential exporters B) Subsidized loans to potential exporters C) Low-interest loans to foreign buyers of the nation's exports D) All of the above

D) All of the above

21. Why do tariffs and quotas on imports yield greater losses of national welfare than domestic subsidies? A) Tariffs and quotas transfer consumer surplus from the private sector to the public sector, while subsidies do not. B) Tariffs and quotas result in higher tax rates for domestic consumers, while subsidies do not. C) Tariffs and quotas redistribute revenue from domestic producers to consumers, while subsidies do not. D) Tariffs and quotas push prices up, thus distorting consumer choices and resulting in a deadweight loss consumption effect, while subsidies do not.

D) Tariffs and quotas push prices up, thus distorting consumer choices and resulting in a deadweight loss consumption effect, while subsidies do not.

33. The World Trade Organization provides for all of the following except: A) the use of the most-favored-nation clause B) assistance in the settlement of trade disputes C) multilateral tariff reductions D) bilateral tariff reductions

D) bilateral tariff reductions

GATT

General Agreement on Tariffs and Trade, was created in 1947, and devoted promotion of freer trade through multilateral trade negotiations

voluntary export restraints

NTB; a nation voluntarily reduces its exports to reduce the likelihood that importing nation will impose higher all-round trade restrictions.

Quota

a quantitative restriction on trade

difference between quota and tariff

a shift in demand or supply with a quota changes the price of imports, since quantity is fixed, but a similar shift with a tariff changes the quantity of imports, since price is fixed.

Salvatore's Outstanding Trade Problems

a. Rising protectionism during recent global and financial crises. b. Tariffs and subsidies on agricultural goods; and antidumping abuses. c. Three major trading blocs -- EU, NAFTA, and Asian bloc. d. Labor and environmental issues between some developed and developing nations.

34. The most-favored-nation principle refers to: a. extension to all trade partners of any reciprocal tariff reduction negotiated by the U.S. with any of its trade partners b. multilateral trade negotiation c. the General Agreement on Tariffs and Trade d. the International Trade Organization

a. extension to all trade partners of any reciprocal tariff reduction negotiated by the U.S. with any of its trade partners

15. When demand increases for a good subject to a quota: a. imports would stay the same but the price would rise. b. the price would stay the same but imports would increase. c. the supply curve shifts outward at the world price. d. the price wouldn't change since imports ensure consumption.

a. imports would stay the same but the price would rise.

17. The type of dumping which would justify antidumping measures by the country subject to the dumping is: a. predatory dumping b. sporadic dumping c. continuous dumping d. all of the above

a. predatory dumping

protectionism

benefits a few highly organized and vocal producers, and harms all consumers

10. Like tariffs, quotas generally lead to: a. an increased amount of consumer surplus. b. a reduced amount of producer surplus. c. higher prices and fewer imports. d. increased government revenue.

c. higher prices and fewer imports.

14. Like tariffs, quotas generally lead to: a. an increased amount of consumer surplus. b. a reduced amount of producer surplus. c. higher prices and fewer imports. d. increased government revenue.

c. higher prices and fewer imports.

13. Quotas are a greater threat to competition than tariffs because: a. quotas allow imports but only at a higher price. b. tariffs are voluntary but quotas are not. c. quotas preclude additional imports at any price. d. tariffs do not reduce imports and quotas do.

c. quotas preclude additional imports at any price.

12. An import quota: a. increases the domestic price of the imported commodity b. reduces domestic consumption c. increases domestic production d. all of the above

d. all of the above

16. Adjustment to any shift in the domestic demand or supply of an importable commodity occurs: a. in domestic price with an import quota b. in the quantity of imports with a tariff c. through the market mechanism with an import tariff but not with an import quota d. all of the above

d. all of the above

38. Which of the following is true with respect to the infant-industry argument for protection: a. it refers to temporary protection to establish a domestic industry b. to be valid, the return to the grown-up industry must be sufficiently high also to repay for the higher prices paid by domestic consumers of the commodity during the infancy period c. is inferior to an equivalent production subsidy to the infant industry d. all of the other answers

d. all of the other answers

37. A fallacious or questionable argument for protection is: a. trade restrictions are needed to protect domestic labor against cheap foreign labor, and to help reduce domestic unemployment. b. to eliminate a country's trade deficit problem c. the scientific tariff d. all of the other answers.

d. all of the other answers.

Smoot-Hawley Tariff Act

dramatically increased the depth and duration of the Great Depression.

Uruguay Round

eighth and most ambitious round of multilateral trade negotiations. One major provision was replacement of GATT with the WTO, the World Trade Organization

Trade Agreements Act of 1934

included the most-favored-nation principle, was an attempt to reverse the effects of the disasterous Smoot-Hawley Tariff Act

qualified arguments of protectionism

infant-industry argument, i.e., protect domestic industries in their "infant" years; national defense argument; strategic trade policies.

_________ barriers may be a response to _________

nontariff, dumping

Impact of a quota

same consumption and production effects as an import tariff

countervailing duties

sometimes imposed on imports to offset export subsidies by foreign governments

fallacious arguments of protectionism

tariffs protect domestic labor from cheap foreign labor; and scientific tariff (arguments which ignore concept of comparative advantage).

questionable arguments of protectionism

tariffs reduce domestic unemployment; and reduces a nation's trade deficit (these are "beggar-thy-neighbor" arguments).

WTO

the World Trade Organization, replaced GATT

persistent dumping

the continuous sale of commodity at a lower price

predatory dumping

the temporary sale of a commodity at a lower price to drive foreign producers out of business

dumping

where a nation sells its exports at below cost or at a lower price than the commodity is sold domestically two types: persistent and predatory

export subsidies

where governments make direct payments to their exporters to stimulate exports is a form of dumping