IBUS Chapter 7

Which two groups are negatively impacted when an import tariff is enacted? (Check all that apply.)

Foreign producers, Consumers

What are two ways trade barriers hamper a firm's productive activities?

They raise the cost of exporting products. Quotas limit the ability to serve a country from outside locales.

Identify the true statement about trade barriers.

To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.

Suppose Australia exports lithium-ion batteries to almost every country in the world except Japan because Japan's customs inspectors insist on testing every battery to ensure it works. This would be an example of which trade barrier?

administrative trade policies

In the United States, the only firms allowed to import cheese are certain trading companies, each of which is allocated the right to import a maximum number of pounds of cheese each year. This is an example of

an import quota.

Economist Paul Krugman suggests that strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that

boosts national income at the expense of other countries.

Tariffs do not benefit

consumers

The purpose of the Smoot-Hawley Act, passed by the US Congress in 1930, was to

deter rising unemployment

The infant industry argument is criticized because it relies on an assumption that

firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market.

Many firms, of all national origins, increasingly depend on __________ for their competitive advantage.

globally dispersed production systems

According to the Buy America Act, if a company wishes to win a contract from a U.S. government agency to provide some equipment, it must ensure that at least 51 percent of the product by value is manufactured in the United States. This is an example of

local content requirements.

What are two ways a government uses intervention in trade as a foreign policy instrument?

pressure or punish "rogue states" grant preferential trading terms to countries it wants to build relations with

Based on the economic analysis of tariffs, it can be said that they are (select two)

pro producer, anti consumer

According to the __________ policy, subsidies can help a firm achieve a first-mover advantage in an emerging industry.

strategic trade

To help farmers who are struggling with their crops in harsh economic times, the U.S. government might provide cash grants, low-interest loans, or tax breaks. By lowering the farmers' production costs in a difficult economic environment, these ______ help the farmers compete against foreign imports and gain export markets.

subsidies

What are three main instruments of trade policy?

subsidies voluntary export restraints import quotas

Ad valorem tariffs are based on the

value