ECON 1B - CH 9
Although international trade leads to substantial net benefits, not everyone gains from international trade. Which of the following groups is most likely to lose from trade? A. the workers and companies in the industries that compete with the imports B. businesses outside the import sectors C. businesses that use inputs and products that are being imported D. consumers
A
The World Trade Organization (WTO) A. generally aids in negotiating trade agreements that include not only goods but also services and intellectual property. B. replaced the General Agreement on Tariffs and Trade (GATT) in January 1995. C. is an international organization that oversees international trade agreements. D. all of the above.
D
Some people are opposed to globalization because they A. believe globalization destroys the distinctive cultures of many countries. B. want to erect trade barriers to protect domestic firms from foreign competition. C. believe globalization favors the interests of high-income countries at the expense of low-income countries. D. Only A and B above. E. All of the above.
E
Which of the following is not a main source of comparative advantage? A. Relative abundance of labor and capital. B. Climate and natural resources. C. Technology. D. External economies of scale. E. Internal economies of scale.
E
____________ are goods and services produced domestically but sold to other countries.
Exports
____________ are goods and services bought domestically but produced in other countries.
Imports
____________ are taxes imposed by a government on imports of a good into a country.
Tariffs
Globalization is the process of countries becoming more open to foreign (trade only/investment only/or trade and investment)
trade and investment
Protectionism is the use of (trade barriers/the WTO/or the Congress) to shield domestic firms from foreign competition.
trade barriers
1. Instagram is a smartphone app now owned by Facebook. According to an article that discusses the climate for software firms in the San Francisco Bay Area, the success of Instagram "is a tale about the culture of the Bay Area tech scene, driven by a tightly woven web of entrepreneurs and investors who nurture one another's projects with money, advice and introductions to the right people." Source: Somini Sengupta, Nicole Perlroth, and Jenna Wortham, "Behind Instagram's Success, Networking the Old Way," New York Times, April 13, 2012. Being located in the Bay Area gives start-up software firms an advantage because of A. external economies. B. climate and availability of natural resources. C. low state taxes. D. economies of scale. 2. The advantages the Bay Area has are A. not likely to persist over time because more software firms will locate there, enhancing the external economies. B. not likely to persist over time because fewer software firms will locate there, reducing the external economies. C. likely to persist over time because more software firms will locate there, enhancing the external economies. D. likely to persist over time because fewer software firms will locate there, enhancing the external economies.
1. A 2. C
Who benefits and who loses from protectionist policies? What are the main arguments people use to justify protectionism? (Select all that apply) 1. Winners A. Industries that use trade protected goods as inputs. B. Workers in trade protected industries. C. Workers in industries that use trade protected goods as inputs. D. Consumers. 2. Losers A. Trade protected industries. B. Workers in trade protected industries. C. Industries that use trade protected goods as inputs.
1. B 2. C
According to an editorial in the Washington Post: "Sugar protectionism is a burden on consumers and a job-killer." Source: "Sourball," Washington Post, March 22, 2010. 1. The United States practices "sugar protectionism" by A. imposing a quota on sugar imports. B. charging sugar exporters a flat license fee to be able to export sugar in the United States. C. banning sugar imports. D. encouraging sugar exporting countries to use voluntary export restraints. 2. In what way is sugar protectionism a burden on consumers? As far as the effect of "sugar protectionism" on U.S. consumers is concerned, A. it raises the prices of sugar and candy that consumers have to pay and leads to a loss of consumer surplus. B. it limits the quantity of sugar that a consumer is eligible to buy. C. it requires a consumer to pay a license fee to buy large quantities of sugar. D. it has no appreciable effect on sugar prices. 3. "Sugar protectionism" is viewed as a "job killer" because A. it leads to job losses in the sugar industry. B. it leads to job losses in the candy industry and various food manufacturing industries that use sugar. C. it adversely affects the stock market by raising the price of "sugar futures". D. any regulation such as a sugar quota leads to a recession and economy-wide job loss. 4. If sugar protectionism has the bad effects as stated in the editorial, which of the following is a likely reason why Congress and the president do not eliminate it? A. There is little political support for the elimination of the quota. B. Consumers are unaware of the existence of the quota. C. Sugar growers have a very strong lobby in Washington. D. All of the above.
1. C 2. A 3. B 4. D
Who gains and who loses when a country imposes a tariff or a quota on imports of a good? Suppose the United States imposes a tariff or quota on sugar imports. For each of the following, enter the letter G if it will gain from the tariff or quota or enter the letter L if it will lose from the tariff or quota. 1. Domestic sugar producers and their workers 2. Consumers 3. Industries that use sugar and their workers 4. The U.S. economy
1. G 2. L 3. L 4. L
How does the World Trade Organization (WTO) allow countries to determine whether dumping has occurred? The WTO allows countries to determine that dumping has occurred if A. a product is exported for a lower price than it sells for on the home market. B. a product is imported for a lower price than it sells for on the home market. C. firms are selling products for a price that exceeds the cost of production. D. some brands in the country sell for lower prices than other brands in the same country.
A
Protectionism is the use of trade barriers to shield domestic firms from foreign competition. Protectionism is usually justified on the basis of several arguments which include: A. protecting high wages, protecting mature industries, and protecting national security. B. saving jobs, protecting infant industries, and protecting national security. C. protecting high wages, protecting national security, and maintaining high prices for imports. D. protecting national security, promoting the wants of select industries, and saving jobs.
B
What is the name given to the sale of a product for a price below its cost of production? A. cut-throat pricing B. bargain pricing C. grim-trigger pricing D. dumping
D
You and your neighbor pick apples and cherries. If you can pick apples at a lower opportunity cost than your neighbor, which of the following statements is true? A. Your neighbor is better off specializing in picking cherries. B. You have a comparative advantage in picking apples. C. You can trade some of your apples for some of your neighbor's cherries, and both of you will end up with more of both fruit. D. All of the above.
D
Many economists discourage restrictions on trade, emphasizing the costs associated with tariffs and quotas. However, the U.S. government still receives pressure from some to erect trade barriers, and some trade barriers are still in place. Why would policymakers (such as those in Congress) understand the potential benefits from trade yet support trade restrictions? A. Foreign competition from free trade does not create new jobs. B. It is difficult to identify the number of jobs lost to foreign competition. C. Although trade restrictions have costs, their net benefits are always positive. D. The benefits of trade restrictions are reaped by all industries. E. The costs of trade restrictions per consumer are small.
E
