ECON CH 21

The membership of the WTO includes about __________ nations. a/150 b/15 c/700 d/1500

a/150

Which of the following is the best example of a tariff? a/a tax placed on all small cars sold in the domestic market b/a $1000-per-car fee imposed on all small cars imported c/a limit imposed on the number of small cars that can be imported from a foreign country d/a subsidy from the American government to domestic manufacturers of small cars so they can compete more effectively with foreign producers of small cars

b/a $1000-per-car fee imposed on all small cars imported

___________ means selling goods below their cost of production. a/Non-tariff barriers b/Import quotas c/Dumping d/Protectionism

c/Dumping

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/an increase in both American imports and exports. b/an increase in American imports, and a decrease in American exports. c/a decrease in both American imports and exports. d/an decrease in American imports, and an increase in American exports.

c/a decrease in both American imports and exports.

There are nontariff barriers in the form of _______________ regulations, in which certain textiles are made in the United States, shipped to other countries, combined in making apparel with textiles made in those other countries—and then re-exported back to the United States at a lower tariff rate. a/import quota b/dumping c/export quota d/"rules of origin"

d/"rules of origin"

It is sometimes argued that nation should not depend too heavily on other countries for supplies of certain key products. This argument is commonly known as the _______________. a/Import Limitation Argument b/Anti-Dumping Argument c/Buy-American Argument d/National Interest Argument

d/National Interest Argument

___________ are numerical limitations on the quantity of products that can be imported. a/Nontariff barriers b/Taxes c/Tariffs d/import quotas

d/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. a/The infant industry argument b/Dumping c/Import quotas d/Protectionism

a/The infant industry argument

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/a non-tariff barrier b/an import quota c/a quota d/a government bureaucracy

a/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: a/accepting the subsidy of the Taiwanese government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry. b/setting a declining quota on the import of Taiwanese watches such that the nation's domestic watch-making industry would continue to grow at the same rate as the rest of the economy. c/setting a tariff high enough to just offset the subsidy granted to the Taiwanese watch-making industry. d/setting a tariff such that the prices of Taiwanese and domestic watches to the consumer are equal.

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

After the USA introduces a tariff in the market for gigastraps, the price of gigastraps in the USA will: a/increase. b/change in an indeterminate manner. c/decrease. d/remain the same.

a/increase.

Introducing a tariff on vitamin Z would: a/reduce exports of vitamin Z. b/increase American consumption of domestically produced vitamin Z. c/increase total American consumption of vitamin Z. d/decrease domestic production of vitamin Z.

b/increase American consumption of domestically produced vitamin Z.

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: a/Japan will be able to consume a combination of rice and other goods beyond their domestic production possibilities curve. b/the real incomes of Japanese rice consumers would rise, but the real incomes of Japanese rice producers would fall. c/the real incomes of Japanese rice producers would rise, but the real incomes of Japanese rice consumers would fall. d/the price of rice in Japan will fall.

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

International trade is fundamentally a ________________________. a/lose-lose situation b/war which is won by the strongest c/win-win situation d/win-lose situation

c/win-win situation

A tariff differs from a quota in that a tariff is: a/a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported. b/levied on imports, whereas a quota is imposed on exports. c/levied on exports, whereas a quota is imposed on imports. d/a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

d/a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

Raising an existing tariff on grapes from Argentina will: a/increase total American consumption of grapes. b/increase American imports of grapes from Argentina. c/increase domestic production of grapes. d/increase American consumption of domestically produced grapes.

d/increase American consumption of domestically produced

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. a/comparative; comparative b/comparative; competitive c/comparative; absolute d/absolute; absolute

a/comparative; comparative

An import quota does which of the following? a/increases the price of the domestic goods to consumers b/redistributes income away from domestic producers of those products toward domestic producers of exports c/both a) and c) d/decreases the price of the imported goods to consumers

a/increases the price of the domestic goods to consumers

Tariffs result in a decrease in consumer surplus because: a/the price of the protected good increases and quantity consumed decreases. b/the price of the protected good decreases and quantity consumed increases. c/the price and the quantity consumed of the protected good increases. d/the price and the quantity consumed of the protected good decreases.

a/the price of the protected good increases and quantity consumed decreases.

Why would foreign firms export a product at less than its cost of production—which presumably means making a loss? a/Many nations simply produce and sell inferior goods at prices that reflect this fact. b/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. c/Many nations participate in poor planning and as a result produce a surplus of product which they sell at a loss. d/Many nations simply wish to keep their workers employed, no matter what the cost.

b/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.

The infant industry argument for protectionism suggests that an industry must be protected in the early stages of its development so that: a/firms will be protected from subsidized foreign competition. b/domestic producers can attain the economies of scale to allow them to compete in world markets. c/there will be adequate supplies of crucial resources in case they are needed for national defense. d/it will not be subjected to a takeover from a foreign competitor.

b/domestic producers can attain the economies of scale to allow them to compete in world markets.

Import tariffs generally ________ the output of domestic producers of the affected products and also _________ the output of domestic exporters. a/decrease; decrease b/increase; decrease c/decrease; increase d/increase; increase

b/increase; decrease

Which of the following is the best example of a quota? a/a subsidy from the American government to domestic manufacturers of men's suits so they can compete more effectively with foreign producers of men's suits b/a tax placed on all small cars sold in the domestic market c/a limit imposed on the number of men's suits that can be imported from a foreign country a $100-per-car fee imposed on all small cars imported

c/a limit imposed on the number of men's suits that can be imported from a foreign country

A tariff differs from a quota in that a tariff is: a/levied on imports, whereas a quota is imposed on exports. b/levied on exports, whereas a quota is imposed on imports. c/a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported. d/a tax levied on exports, whereas a quota is a limit on the number of units of a good that can be exported.

c/a tax imposed on imports, whereas a quota is an absolute limit to the number of units of a good that can be imported.

During the second half of the twentieth century, trade barriers have in general: a/declined quite substantially in the U.S. economy but not in the global economy. b/increased quite sbstantially in the U.S. economy but not in the global economy. c/declined quite substantially both in the U.S. economy and in the global economy. d/increased quite substantially in the U.S. economy and in the global economy.

c/declined quite substantially both in the U.S. economy and in the global economy.

During the second half of the twentieth century, trade barriers have in general: a/increased quite sbstantially in the U.S. economy but not in the global economy. b/increased quite substantially in the U.S. economy and in the global economy. c/declined quite substantially both in the U.S. economy and in the global economy. d/declined quite substantially in the U.S. economy but not in the global economy.

c/declined quite substantially both in the U.S. economy and in the global economy.

Raising an existing tariff on grapes from Argentina will: a/increase domestic production of grapes. b/increase American imports of grapes from Argentina. c/increase total American consumption of grapes. d/increase American consumption of domestically produced grapes.

d/increase American consumption of domestically produced grapes

An import quota does which of the following? a/redistributes income away from domestic producers of those products toward domestic producers of exports b/increases the price of the domestic goods to consumers c/decreases the price of the imported goods to consumers d/both a) and c)

b/increases the price of the domestic goods to consumers

A new American import quota on imported steel would be likely to: a/increase the production of steel-using American firms. b/generate tax revenue to the government. c/increase American production of steel. d/reduce the cost of production to steel-using American firms.

c/increase American production of steel.

Why would foreign firms export a product at less than its cost of production—which presumably means making a loss? a/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. b/Many nations simply wish to keep their workers employed, no matter what the cost. c/Many nations simply produce and sell inferior goods at prices that reflect this fact. d/Many nations participate in poor planning and as a result produce a surplus of product which they sell at a loss.

a/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.

"Tariffs and other trade restrictions increase the domestic scarcity of products from abroad. Such policies benefit domestic producers of the restricted products at the expense of domestic consumers." This statement: a/contains one error; the trade restraints do not increase the scarcity of foreign-produced goods. b/is essentially correct. c/contains two errors; trade restraints do not increase the domestic scarcity of product and neither do they harm domestic consumers. d/contains one error; domestic producers gain at the expense of foreign producers rather than domestic consumers.

b/is essentially correct.

An import quota or tariff on French wine that raises the prices for wine will probably: a/hurt both domestic wine drinkers and domestic wineries, but this will be more than offset by a reduction in driving fatalities. b/hurt domestic wineries, which will lose business as a result of the higher prices. c/hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices. d/hurt both domestic wine drinkers and domestic wine producers because of a reduction in competition.

c/hurt domestic wine drinkers but help domestic wineries, which will gain from the higher prices.

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: a/setting a tariff such that the prices of Taiwanese and domestic watches to the consumer are equal. b/accepting the subsidy of the Taiwanese government, making the appropriate adjustment for the resources temporarily displaced from the domestic watch-making industry. c/setting a declining quota on the import of Taiwanese watches such that the nation's domestic watch-making industry would continue to grow at the same rate as the rest of the economy. d/setting a tariff high enough to just offset the subsidy granted to the Taiwanese watch-making industry.

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

Low-wage U.S. workers suffer from protectionism in all the industries that they don't work in, because: a/protectionism will encourage foreign workers to apply for American jobs. b/protectionism forces them to pay higher prices for basic necessities like clothing and food. c/protectionism will prevent them from applying for those jobs in other industries. d/protectionism provides a barrier to entry to the job markets that the low-wage earners want entry to.

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

The race to the bottom scenario of global environmental degradation is explained roughly like this: a/Companies seek the lowest market prices on products in order to gain market share, resulting in inferior goods and increased waste and pollution. b/Companies seek to influence environmental legislation standards are set to the lowest possible standards in the USA in order to maximize profits. c/Companies seek to reduce their costs of operations on plant and equipment design and this results in higher levels of pollution. d/Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits.

d/Profit-seeking multinational companies shift their production from countries with strong environmental standards to countries with weak standards, thus reducing their costs and increasing their profits.