Chapter 8-IE
A country is more likely to have net welfare gains when it imposes a tariff on a foreign monopolist if: a.the tariff is small. b.the tariff is large. c.the tariff revenues are large. d.the deadweight losses are large.
A
A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. What is its profit-maximizing output level? a.5 b.6 c.7 d.8
A
A monopolist faces a demand curve given by P = 60 -2Q and has total costs given by TC = Q2. Its marginal revenue is MR = 60 - 4Q and its marginal cost is MC = 2Q. Compared with the no-trade equilibrium, consumer surplus ___________ when the monopolist engages in free trade. a.increases b.decreases c.remains the same d.first decreases, then increases
A
A monopolist faces a demand curve given by P = 60 -2Q and has total costs given by TC = Q2. Its marginal revenue is MR = 60 - 4Q and its marginal cost is MC = 2Q. Now suppose that the country in which this monopolist is located decides to engage in international trade. The world price of the product produced by the monopolist is $10. What is the firm's profit-maximizing output level? a.5 b.20 c.30 d.40
A
A monopoly firm operating with no trade will produce the profit-maximizing quantity where: a.the firm's MC = MR, where MR is declining and below price. b.MR begins to increase and MC begins to decrease. c.P = MC. d.the firm's MC = MR, where MR is declining and equal to price.
A
A monopoly firm will sell ________ output and charge a ________ price than a perfectly competitive firm. a.less; higher b.more; higher c.more; lower d.less; lower
A
A positive externality occurs whenever: a.an increase in the output of one firm lowers costs for other firms. b.a decrease in the output of one firm lowers costs for other firms. c.an increase in costs of one firm lowers costs for other firms. d.a decrease in one firm's hiring of labor lowers labor costs for other firms.
A
An analysis of the case of Harley-Davidson reveals that the deadweight loss of import protection ___________ the gain in future producer surplus. a.was slightly less than b.slightly exceeded c.vastly exceeded d.was roughly the same as
A
An antidumping duty equals the difference between: a.the price charged by the exporter in its home market and the price charged in the export market. b.the price charged by the exporter in the export market and the price charged in its home market. c.the price charged by the exporter in its home market and the price of an equivalent product in the export market. d.the price of an equivalent product in the export market and the price charged by the exporter in the export market.
A
An example of infant industry protection is the computer industry in Brazil from 1977 to 1988. It is widely concluded that the effort was: a.a failure. b.a complete success, because now Brazil manufactures nearly all computer CPUs. c.successful, although there were costs to pay in higher prices, making PCs unattainable for most Brazilian consumers. d.as measured on a cost-benefit basis, still unclear due to potential future gains.
A
Antidumping duties are a type of: a.tariff. b.quota. c.export. d.trade agreement.
A
Assuming a firm would not survive without protection, what should the government do if the present value of the profits and value added from operating an infant industry firm exceed the deadweight loss of imposing protection? a.It should impose the tariff—the gains exceed the losses. b.It should not impose the tariff—the losses exceed the gains. c.If it imposes the tariff, it may actually create more problems that cannot be foreseen—do not impose the tariff. d.The government should just ban all imports of that product until the "infant" is able to compete on its own.
A
Comparing a tariff levied on an import where the home firm is a monopoly to a situation where the home firms are competitive, we find: a.the exact same result—both firms charge world price + tariff and both firms produce Q where MC = MR = world price + tariff. b.that the monopoly firm will be able to charge a higher price and limit its quantity. c.that the competitive firm will not be able to survive the impact of the tariff. d.that quantity is not the issue; the monopoly firm will pay its workers less and earn higher profits.
A
Dumping occurs when a foreign monopolist charges ______ price in the domestic market than/as in a foreign market. a.a lower b.a higher c.the same d.an equivalent
A
For a home monopolist, a quota allows the firm to charge _______________ the tariff. a.a higher price than b.a lower price than c.the same price as d.Not enough information is provided to answer the question.
A
How do the deadweight losses of a tariff differ when the domestic industry is perfectly competitive from when it is a monopoly? a.They are the same. b.Deadweight losses are larger for a perfectly competitive industry than for a monopoly. c.Deadweight losses are larger for a monopoly than for a perfectly competitive industry. d.It is not possible to compare deadweight losses of a monopoly with those of a perfectly competitive industry.
A
In 2012, the United States imposed countervailing duties ranging from 24 to 36% (on imports of about solar panels from China. Which of the following do you predict will happen if the United States decides to eliminate these duties? a.The U.S. price of solar panels will fall. b.U.S. production of solar panels will rise. c.U.S. imports of Chinese solar panels will fall. d.The U.S. price of solar panels will rise.
A
In comparison to the case of a perfectly competitive home market, the welfare effects of a tariff under a home monopoly are _______, and the deadweight loss for the home monopoly is ________. a.the same; the same b.higher; lower c.lower; higher d.lower; lower
A
Suppose that Far North Canadian Lumber, Ltd., sells lumber in Canada at a price of $1,000 per 1,000 board feet and exports the same lumber to the United States at a price of $600 per 1,000 board feet. U.S. Lumber, Inc., produces and sells lumber for $700 per 1,000 board feet in the United States. Is Far North Canadian Lumber dumping lumber in the United States? a.Yes; its price in Canada is greater than its price in the United States. b.Yes; its price in Canada is greater than U.S. Lumber's price. c.No; its price in the United States is less than U.S. Lumber's price. d.No; it is maximizing its profits when it price discriminates between the United States and Canada.
A
Suppose that the U.S. imposes a countervailing duty of 10% on coated paper imported from China to offset alleged Chinese subsidies. Suppose further that the U.S. duty-free price of Chinese coated paper imports is $500 per 1,000 meter roll and that the price of an equivalent roll of U.S.made coated paper is $600 per 1,000 meter roll. What is the U.S. government's estimate of the dollar value of the Chinese subsidies? a.$50 per 1,000 meter roll b.$60 per 1,000 meter roll c.$50 to $60 per 1,000 meter roll d.$100 per 1,000 meter roll
A
Suppose that the discriminating monopolist faces antidumping actions in its foreign market. Why might it volunteer to raise its price by $10 in the foreign market in order to settle the action without imposition of an antidumping duty? a.It might avoid an even higher antidumping duty. b.It wants to avoid the trouble of defending itself in an antidumping action. c.It should charge a higher price to maximize its profits in the foreign market. d.Raising its price will be good public relations.
A
The GATT prohibits quotas. Why didn't the United States or other countries try to stop the voluntary export restraint on automobiles implemented by the Japanese during the early 1980s? a.At the time, the GATT did not prohibit quotas administered by the exporting country, that is, voluntary export restraints. b.Other countries did try to stop the voluntary export restraints but were unsuccessful in their efforts. c.The GATT only prohibited quotas after the WTO was established in 1995. d.The GATT only prohibits developing countries from using quotas.
A
The U.S. International Trade Commission rejects many antidumping and countervailing duty allegations because there is: a.insufficient evidence that a U.S. industry is materially injured as a result of dumping or export subsidization. b.insufficient evidence of dumping or export subsidization. c.insufficient evidence of dumping or export subsidization and insufficient evidence that a U.S. industry is materially injured as a result of dumping or export subsidization. d.no evidence of dumping or export subsidization, but there is evidence that a U.S. industry is materially injured.
A
The WTO opposes quotas. Why did the WTO not stop the U.S. Japanese quota during the 1980s? a.There was a loophole in the GATT (at the time) that did not restrict nations from "voluntarily" curtailing their own exports. b.Quotas are permitted under the GATT and WTO—as long as they are implemented for an approved reason. c.The political situation at the time was tense; the GATT did not want to take on the powerhouses of the United States and Japan over such a small issue. d.The WTO operates by consensus; all parties wanted the quotas.
A
The demand curve in its home market is P = 200 - Q; the demand curve in its foreign market is P = 160 - 2Q; and its marginal cost is a constant $20 per unit. What is the discriminating monopolist's profit in the foreign market? a.$90 b.$110 c.$70 d.$35
A
The demand curve in its home market is P = 200 - Q; the demand curve in its foreign market is P = 160 - 2Q; and its marginal cost is a constant $20 per unit. What is the discriminating monopolist's profit maximizing output in the domestic market? a.90 b.110 c.70 d.35
A
The tariff imposed to punish a foreign discriminating monopolist is called: a.antidumping duty. b.a subsidy. c.punitive damages. d.a fine.
A
Under the VER of the 1980s, Japan's automakers received: a.additional quota rents of about $2.2 billion. b.approximately 10% lower prices. c.censure by the WTO for failing to behave in a competitive manner. d.wage concessions from their U.S. employees to keep plants open in the United States.
A
Under the voluntary export restraints, the Japanese government allocated each Japanese auto producer a certain number of cars that they could export to the United States. As a result, Japanese auto producers exported: a.fewer and more luxurious cars to the United States. b.fewer and less luxurious cars to the United States. c.more luxurious cars to the United States. d.less luxurious cars to the United States.
A
When a firm sells products at lower prices to foreign purchasers, it is known as: a.international dumping. b.restraint of trade. c.price gouging. d.reciprocal dumping.
A
When a tariff is applied to a good exported by a foreign monopoly (with no home producer), the price net of the tariff received by the seller is _________. a.lower than under free trade b.higher than under free trade c.the same as under free trade d.so high that no sales are possible
A
When the home country is small, how will an increase in a tariff protecting a home monopolist affect the home country's demand curve? a.There will be an upward parallel shift in the demand curve. b.The demand curve will pivot upwards from its vertical intercept. c.There will be a downward parallel shift in the demand curve. d.The demand curve will pivot downwards from its vertical intercept.
A
When the monopoly firm is able to charge a higher price, the amount of ________ also increases, thus magnifying the importing nation's __________. a.quota rents; losses b.comparative advantage; gains from trade c.profits; welfare d.protection; employment gains
A
Which U.S. government agency determines the magnitude of antidumping duties? a.the U.S. International Trade Commission b.the Office of the Special Trade Representative c.the International Monetary Fund d.the Department of Commerce
A
Which of the following examples cited in the text was the MOST successful case of infant industry protection? a.the Chinese auto industry b.the Brazilian computer industry c.Harley-Davidson d.Daimler-Chrysler Corporation
A
Which of the following is a justification for infant industry protection? a.The firm's learning must shift its average cost curve down over time so that it becomes competitive at world prices. b.The firm's output must increase so that it moves down along its average cost curve over time and becomes competitive at world prices. c.The firm's total cost curve must shift leftward over time so that it becomes competitive at world prices. d.The firm's learning allows it to produce more output and take advantage of increasing returns to scale.
A
Why is it better to protect an infant industry with monopoly power with a tariff than a quota? a.A tariff causes domestic production to increase, whereas a quota causes production to decrease. b.A tariff causes domestic production to decrease, whereas a quota causes domestic production to increase. c.A tariff will raise the domestic price above the world price, whereas a quota will not. d.A quota will raise the domestic price above the world price, whereas a tariff will not.
A
Why might infant industry protection of the Chinese automobile industry be considered successful? a.Many foreign auto producers established operations in China behind the high infant industry tariff protection. b.The tariff rate on Chinese imports of automobiles fell from 260% in the early 1980s to about 25% today. c.Chinese demand for automobiles increased dramatically in the past 20 years. d.China has become the world's second largest consumer of autos.
A
With free trade, the demand curve facing a small-country monopolist: a.is horizontal at the world price. b.shifts upward by the amount of imports demanded. c.shifts downward by the amount of imports demanded. d.is horizontal at the firm's MC.
A
A foreign discriminating monopolist is engaging in: a.infant industry protection. b.dumping its product. c.giving preferential treatment to domestic consumers. d.charging higher prices to foreign consumers.
B
A knowledge spillover is: a.a negative externality. b.a positive externality. c.a constant externality. d.an externality.
B
A lesson from the Brazilian experiment was that: a.infant industry protection is almost never successful. b.there are many determinants other than market price that also factor into an industry's success—firms had supplier difficulties and were hampered by excessive regulation. c.government usually knows better than the market whether an industry has potential. d.when politicians get involved, rational decisions and good business practices are more difficult.
B
A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. If the firm's profitmaximizing output level is 5 and its profit maximizing price is $15, what are its monopoly profits at this price and quantity? a.$25 b.$50 c.$75 d.$100
B
A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. Now suppose that the country in which this monopolist is located decides to engage in international trade. The world price of the product produced by the monopolist is $12. The profit-maximizing output level is 6, and the profit-maximizing price equals $12. What are its monopoly profits at this price and quantity? a.$25 b.$36 c.$50 d.$75
B
A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. Now suppose that the country in which this monopolist is located decides to engage in international trade. The world price of the product produced by the monopolist is $12. What is the monopolist's profit-maximizing output level? a.5 b.6 c.7 d.8
B
A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. What is its profit-maximizing price? a.$20 b.$15 c.$10 d.$5
B
A monopolist faces a demand curve given by P = 60 -2Q and has total costs given by TC = Q2. Its marginal revenue is MR = 60 - 4Q and its marginal cost is MC = 2Q. Compared with the no-trade equilibrium, producer surplus ___________ when the monopolist engages in free trade. a.increases b.decreases c.remains the same d.first increases, then decreases
B
A monopolist faces a demand curve given by P = 60 -2Q and has total costs given by TC = Q2. Its marginal revenue is MR = 60 - 4Q and its marginal cost is MC = 2Q. In autarky, what is the firm's equilibrium output? a.5 b.10 c.15 d.20
B
A profit-maximizing monopolist will produce at the point where: a.total revenue = total costs. b.marginal revenue = marginal cost. c.average revenue = average cost. d.the difference between average revenue and average cost is maximized.
B
A recent antidumping case charged Canadian tomato producers with dumping tomatoes on the U.S. market. In order for the United States to impose antidumping duties, Canadian tomatoes must be sold at _______ than their fair value in the United States, and there must be injury to the ________ tomato industry. a.more; U.S. b.less; U.S. c.more; Canadian d.less; Canadian
B
According to the text, the annual cost to the United States from its anti-dumping policies is equivalent to a deadweight loss of _____ uniform tariff applied across all imports. a.a 1% b.a 6% c.a 10% d.a 15%
B
An internationally discriminating monopolist is one that: a.can charge different prices to each customer in its domestic market. b.can charge different prices in its domestic and foreign markets. c.faces a downward-sloping demand curve in its domestic market and a perfectly elastic demand curve in its foreign market. d.faces a perfectly elastic demand curve in its domestic market and a downward sloping demand curve in its foreign market.
B
As China's auto production capability has evolved, it is unclear whether protection was beneficial or harmful. Why? a.Accounting data must be translated from Chinese to English, and that is a difficult task. b.After 30 years of infant industry protection, the tariff on auto imports is still significant (a 25% tariff). c.China will probably never achieve exports, so whether any gains were made is unclear. d.Chinese consumers are exerting more market power, and they are opposed to any kind of import protection.
B
Brazilian subsidies on its exports of furniture to the United States. Which type of tariff will be applied on U.S. imports of Brazilian furniture? a.antidumping duties b.countervailing duties c.export duties d.safeguard duties levied under Section 421 of the amended U.S. Trade Act of 1974
B
China protected its fledgling auto industry through restrictive tariffs and quotas. What were their effects on the Chinese market? a.China was able to lower the prices of autos domestically produced and imported. b.China's auto prices from 1995 to 2001 substantially increased. c.China's auto industry really never got off the ground despite high protection. d.China made a decision to import autos from Japan and export autos to the United States.
B
Countervailing duties are used to offset any advantages that foreign exporters might gain over domestic producers because of foreign: a.tariffs. b.subsidies. c.infant industry protection. d.quotas.
B
Countervailing duties are: a.applied to dumped imports. b.applied to subsidized imports. c.another name for safeguard duties. d.not allowed under terms of the GATT.
B
If a country imposes a $10 tariff on a foreign monopolist, the price received by the monopolist, net of the tariff, will: a.fall by $10. b.fall by less than $10. c.fall by more than $10. d.fall by $0.
B
If the home nation allows free trade but imposes a tariff on a product currently produced by a home firm monopoly, what is the outcome? a.The home firm then will regain its monopoly control over the price. b.The home firm will be able to charge a higher price (world price + tariff), but it will become a price taker, just like a competitive firm. c.The home nation's firm will be able to limit quantity and charge a higher price. d.The monopoly firm will lower price, increase sales, and undercut the foreign competition.
B
In 2012, the United States imposed antidumping and countervailing duties totaling 24% and 36%, respectively, on imports of solar panels from two groups of Chinese solar panel exporters. Which of the following describes the process that led to these duties? I. The U.S. Department of Commerce determined that China was dumping and subsidizing solar panels in the U.S. market II. The U.S. International Trade Commission determined that Chinese solar panel imports caused material injury to U.S. solar panel producers. III. The World Trade Organization determined that China was dumping and subsidizing solar panels in the U.S. market a.I and II b.I and III c.II and III d.I, II, and III
B
International dumping occurs when: a.monopolistic firms charge the same price in domestic and foreign markets. b.monopolistic firms charge a higher price in the domestic market and a lower price in the foreign market. c.monopolistic firms charge a lower price in the domestic market and a higher price in the foreign market. d.domestic monopolistic firms relocate operations abroad.
B
Roughly ________ of the increased prices of Japanese automobiles during the 1980s was due to the voluntary export restraints. a.25% b.35% c.50% d.95%
B
Suppose that British Steel, Ltd., sells steel in Britain at $600 per ton and the same steel in the United States at $450 per ton. The price of equivalent steel produced in the United States is $550 per ton. How large an antidumping tariff (in percentage) will be applied on imports from British Steel if it is found that it dumped steel on the U.S. market? a.9.11% b.22.22% c.25% d.33.33%
B
Suppose that Far North Canadian Lumber, Ltd., sells lumber in Canada at a price of $1,000 per 1,000 board feet and exports the same lumber to the United States at a price of $600 per 1,000 board feet. U.S. Lumber, Inc., produces and sells lumber for $700 per 1,000 board feet in the United States. What other condition must be satisfied in order for the U.S. government to impose an antidumping duty on Canadian lumber imports? a.There must be material injury to a Canadian lumber producer. b.There must be material injury to a U.S. lumber producer. c.There must be material injury to both a U.S. and a Canadian lumber producer. d.All these conditions must be satisfied.
B
Suppose that the United States imposes an antidumping duty on imported steel. Which of the following is likely to occur? a.The U.S. terms of trade will improve, and U.S. steel imports will rise. b.The U.S. price of steel will rise, and U.S. steel consumption will fall. c.The foreign price of steel will rise, and foreign steel consumption will fall. d.U.S. steel companies will earn lower profits.
B
The Chinese protected its automobile industry through restrictive tariffs and quotas. Which of the following BEST describes this practice? a.antidumping duties b.infant industry protection c.voluntary export restraints d.price discrimination
B
The demand curve in its home market is P = 200 - Q; the demand curve in its foreign market is P = 160 - 2Q; and its marginal cost is a constant $20 per unit. What is the discriminating monopolist's price in the domestic market? a.$90 b.$110 c.$70 d.$35
B
The no-trade equilibrium in a monopolistic market occurs where: a.marginal revenue = price. b.marginal cost = marginal revenue. c.market demand = market supply. d.marginal cost = average revenue.
B
The small-country monopolist's free-trade equilibrium features a marginal revenue curve equal to __________ and coincident with _____________. a.marginal cost; the consumer's demand curve for the product b.the world price; the new competitive demand curve for the firm c.one; profits d.imports at each price; the supply curve
B
The small-country monopolist's free-trade equilibrium occurs: a.where MC = MR, where MR is declining and below price. b.at the "world" price, which becomes a perfectly elastic demand curve for the monopoly firm and the firm's marginal cost curve. c.where the home demand is completely satisfied by foreign importers. d.at minimum marginal cost.
B
The voluntary export restraint that the United States negotiated with Japan: a.violated provisions of the GATT that encouraged countries to avoid using quotas. b.exploited a loophole in the GATT because the quota was administered by the exporting country. c.did not allow U.S. auto producers to raise their prices. d.did not impose any deadweight losses on the United States.
B
To make a correct decision about limiting imports on behalf of an infant industry, the government should look at: a.political pressure from key constituents. b.a cost-benefit analysis measuring the present value of the likely benefits from lower production costs compared with the cost to society of higher prices in the present. c.the value of retaining U.S. jobs versus the small cost of higher priced units. d.the difficulty of keeping out imports from established trading partners and weighing the number of workers employed in the industry that could not easily get other jobs.
B
Were the results of the U.S. tariff increase on imported small Japanese truck imports consistent with the predictions of the model of a tariff applied to a good exported by a foreign monopoly? a.No; the imports of trucks declined from 1980 to 2000. b.Yes; the rise in market price was less than the tariff imposed, implying that Japanese producers lowered their prices to maintain market share. c.Yes; but trucks and SUVs became indistinguishable, and a number of conclusions can be drawn. d.No clear conclusions can be drawn.
B
What will a home monopolist prefer? a.high quotas b.low quotas c.low tariffs d.It would like all of these equally; that is, they are equivalent.
B
When a country imposes a tariff to protect a domestic monopolist from international competition, it will produce _______ output and charge _______ in a perfectly competitive domestic industry. a.more; a higher price than b.the same; the same price as c.less; a higher price than d.less; a lower price than
B
When a tariff is applied to a good exported by a foreign monopoly (with no home producer), the increase in the equilibrium price is ________ the tariff applied. a.more than b.less than c.the same as d.more than twice as much as
B
When the United States imposed a 25% tariff on imported pickup trucks, the price of Japanese pickup trucks in the United States: a.rose by 25%. b.rose by less than 25%. c.rose by more than 25%. d.fell by less than 25%.
B
When the small home nation imposes a tariff of $10, the domestic price: a.rises by more than $10. b.rises by $10. c.rises by less than $10. d.does not change.
B
Which of the following is one of the concerns over having U.S. auto producers in China? a.They will dump back onto U.S. markets. b.They will allow technology to leak to Chinese competitors. c.They cannot compete with the Japanese. d.They will allow the Chinese competitors to steal their business model.
B
Which type of tariff is used to offset subsidies on exports entering the United States? a.antidumping duties b.countervailing duties c.export duties d.safeguard duties levied under the escape clause
B
Will a home monopolist prefer a quota or a tariff to protect its output? a.The home monopolist will prefer a tariff, because a tariff allows it to earn higher profits than a quota. b.The home monopolist will prefer a quota, because a quota may allow it to earn higher profits than a tariff. c.It is immaterial to the home monopolist because it will earn the same higher profits with each form of protection. d.The home monopolist will prefer neither, because it earns higher profits in a free-trade situation.
B
"Infant industry protection" refers to: a.countries' use of protection (tariffs and quotas) to protect their domestic manufacturing activities. b.countries' use of protection to protect their export activities. c.countries' use of short-term protection to protect young industries while they mature. d.countries' use of short-term protection to protect their agricultural activities.
C
A country's net welfare will increase when it imposes a tariff on a foreign monopolist if its: a.terms-of-trade gain is greater than its increase in tariff revenues. b.terms-of-trade gain is less than its increase in tariff revenues. c.terms-of-trade gain is greater than its lost consumer surplus. d.increase in tariff revenues is greater than its lost consumer surplus.
C
A foreign firm that is selling below cost and is accused of dumping often: a.lowers its price further to increase the tariff imposed. b.moves its production to the importing nation to avoid the tariff completely. c.raises its export prices to reap the rents and avoid the antidumping tariff completely. d.calls for a ruling by the WTO.
C
A knowledge spillover occurs when firms: a.restrict trade of inputs with each other. b.have wasteful expenditure. c.mimic the successful innovations of other firms. d.keep secrets from other firms.
C
A monopolist faces a demand curve given by P = 20 - Q and has total costs given by TC = Q2. By using a bit of calculus, you should be able to determine that the firm's marginal revenue is MR = 20 - 2Q and its marginal cost is MC = 2Q. Now suppose that the country in which this monopolist is located decides to engage in international trade. The world price of the product produced by the monopolist is $12. What is its profitmaximizing price? a.$20 b.$15 c.$12 d.$10
C
Although tariff and quota protections for China auto imports were very costly to consumers, which of the following was a benefit? a.Auto prices, compared with other prices in the economy, actually fell. b.Auto consumption skyrocketed, but there were environmental effects. c.Firms that were involved in joint ventures were able to "learn" and to significantly lower their costs. d.China's government realized it had to keep its hands off entrepreneurial concerns.
C
Because the smallcountry monopolist loses the ability to control the market price, consumers enjoy more quantity, competitive prices, and: a.a bonus because the foreign goods are of higher quality. b.a loss because the monopoly loses profits. c.higher consumer surplus because the monopolist's producer surplus is reduced. d.a loss because now unions have less power than before.
C
Dumping goods is profitable whenever: a.the firm does not get caught. b.the firm can hire illegal workers to process the production. c.the foreign market price (after transportation costs) is higher than marginal cost but lower than the home price. d.the foreign firm eventually closes because it cannot compete.
C
How does the demand curve facing a home monopolist compare in a no-trade situation to a situation in which a quota protects the monopolist's output? a.They are identical. b.The quota-protected demand curve lies to the right of the no-trade demand curve. c.The quota-protected demand curve lies to the left of the no-trade demand curve. d.The no-trade demand curve is perfectly price elastic at the world price; the quota-protected demand curve has a negative slope.
C
If a country imposes a $10 tariff on a foreign monopolist, the domestic price will rise by: a.more than $10. b.$10. c.less than $10. d.$0.
C
If a foreign country imposes a voluntary export restraint, then the: a.consumer surplus will be lower than would be so if the home country imposes a tariff b.producer surplus will be lower than would be so if the home country imposes a tariff. c.area of government revenue will be taken by the foreign country. d.deadweight loss is smaller than would be so if the home country imposes a tariff.
C
If a monopoly suddenly became a perfectly competitive industry, equilibrium output would _________, and the equilibrium price would _________. a.increase; increase b.decrease; decrease c.increase; decrease d.decrease; increase
C
If the demand curve is downward sloping and linear (a straight line), a tariff imposed on a foreign monopoly seller will raise the domestic price by _______________ and lower the seller's net by _______________ of the tariff. a.one-fourth; three-fourths b.10%; 90% c.one-half; one-half d.100%; 0%
C
If we allow free trade in a small nation's industry where there is a domestic monopolist, the monopoly firm: a.gains even more power. b.earns higher profits. c.charges a lower price and produces more output. d.charges a higher price and produces less output.
C
If we allow free trade in a small nation's industry where there is a domestic monopolist, the monopoly firm: a.gains even more power. b.sees its profits rise. c.becomes a price taker, is not able to charge a higher price, and behaves like a competitive firm. d.is able to charge a higher price.
C
In 2006, the European Union imposed antidumping duties of 10% to 16.5% on products imported from China. What were those products? a.wooden pencils b.shirts c.shoes d.coated paper
C
In order to avoid congressional action in the United States, in the early 1980s the Japanese resorted to: a.infant industry protection. b.dumping of automobiles. c.voluntary export restraint (VER). d.price discrimination.
C
Infant industries are: a.manufacturing activities that make baby products. b.industries that cannot currently withstand foreign competition but are expected to grow and mature so that they can compete internationally. c.industries that can currently withstand foreign competition in the domestic market but are expected to mature into export industries. d.industries that cannot currently withstand foreign competition in either the domestic or the export market but are expected to mature into multinational firms.
C
It is better to protect an infant industry with _______ than ________. a.a voluntary export restraint; a quota b.a voluntary export restraint; a tariff c.a tariff; a quota d.a quota; a tariff
C
Measuring the impact of the protection on the U.S. economy and on Harley-Davidson: a.is very clear—it was a success. b.is very clear—it was a failure. c.is not as black and white as the numbers might show, but saving a profitable company at a low cost has some merit for the U.S. economy. d.should take into consideration that Harley-Davidson was a private firm with private stockholders. Most economists disagree with government efforts to save it from bankruptcy.
C
Monopolistic firms that practice international dumping: a.suffer losses on their sales in foreign markets. b.suffer losses on their sales in domestic markets. c.maximize their monopoly profits. d.are subject to antidumping taxes in their home countries.
C
Suppose that Far North Canadian Lumber, Ltd., sells lumber in Canada at a price of $1,000 per 1,000 board feet and exports the same lumber to the United States at a price of $600 per 1,000 board feet. U.S. Lumber, Inc., produces and sells lumber for $700 per 1,000 board feet in the United States. What might Far North Canadian Lumber, Ltd., do to avoid the antidumping duty? a.appeal to the U.S. International Trade Commission b.raise its price in the Canadian market c.raise its price in the U.S. market d.lower its price in the U.S. market
C
Suppose that a foreign monopolist supplies the entire domestic market (there is no domestic production). The home country then applies a 5% tariff on imports from the foreign monopolist. How will the tariff affect the price in the home market? a.It will increase by more than 5%. b.It will increase by 5%. c.It will increase by less than 5%. d.It will not change.
C
Suppose that the U.S. imposes a countervailing duty of 10% on coated paper imported from China to offset alleged Chinese subsidies. Suppose further that the U.S. duty-free price of Chinese coated paper imports is $500 per 1,000 meter roll and that the price of an equivalent roll of U.S.made coated paper is $600 per 1,000 meter roll. What is the likely response of Chinese coated paper exporters to the U.S. countervailing duty? a.They will not change their U.S. duty-free price of their exports and absorb all of the duties. b.They are likely to reduce their U.S. duty-free price of their exports by one-half. c.They are likely to reduce their U.S. duty-free price of their exports so that their U.S. prices, including the duties, are less than $600 per 1,000 meter roll. d.They are likely to reduce their U.S. duty-free price of their exports so that their U.S. prices, including the duties, are only slightly more than $600 per 1,000 meter roll.
C
The U.S. Customs Service reclassified imports of compact trucks (like the Toyota Tacoma) from "cab and chassis with some final assembly needed" to "complete or unfinished trucks." As a result of this reclassification, a tariff of _____ was applied, and U.S. prices of Japanese compact trucks rose by _____. a.25%; 25% b.25%; more than 25% c.25%; less than 25% d.4%; more than 4%
C
The effect of a tariff on a foreign monopolist is similar to a large nation imposing a tariff on a small nation. What is the implication for the welfare of the home nation? a.Only very large tariffs bring any benefit to the home nation. b.No tariffs are the best policy; all tariffs have a deadweight net loss. c.Small tariffs can be beneficial, but only to a certain point. d.The foreign producer may actually raise prices to make the tariff impossible to impose.
C
The no-trade equilibrium in a perfectly competitive market occurs where: a.marginal revenue = price. b.marginal cost = total revenue. c.market quantity demanded = market quantity supplied. d.average revenue = price.
C
There are several conditions that justify limiting imports to ensure the survival of the "infant industry," and to justify government protection. Which of the following is(are) a justification? I. Knowledge spillovers should be likely. II. Protected firms should have a good chance of moving down along their average cost curves over time to become competitive at world prices. III. Protected firms should have a good chance to reduce future costs and cause their average cost curves to shift downwards. a.I b.II c.I and III d.I, II, and III
C
U.S. and Japanese automakers __________ during the automobile VER of the 1980s. a.both suffered losses b.were locked in a contentious trade war c.both enjoyed higher prices and higher profits d.both felt that the other side had more gains
C
Under the VER of the 1980s, U.S. automakers: a.continued their downward slide. b.could not recover because they were also faced with other issues, such as labor unrest, increased oil and steel prices, and higher taxes. c.were able to raise prices and improve quality to get even higher prices. d.were able, with the quota, to ignore world market conditions.
C
What will happen to domestic monopolists' prices and outputs when a small country engages in international trade? a.Prices will rise and outputs will fall. b.Prices will rise and outputs will rise. c.Prices will fall and outputs will rise. d.Prices will fall and outputs will fall
C
What will happen to profits and domestic prices when a quota is used to protect a domestic monopolist from international competition? a.Profits will fall; domestic prices will fall. b.Profits will fall; domestic prices will rise. c.Profits will rise; domestic prices will rise. d.Profits will rise; domestic prices will fall.
C
When a domestic monopolist becomes subject to international competition, it faces: a.a perfectly inelastic demand curve. b.a unitary elastic demand curve. c.a perfectly elastic demand curve. d.no demand curve.
C
Which criterion must be met to identify if an imported product is being dumped on the home country? I. The foreign firm sells the product at a lower price in the home market. II. The foreign firm sells the product below average cost in the home market. III. The foreign firm raises the price in the home country. a.I b.II c.I or II d.I, II, and III
C
Which of the following unfair trade remedies is used LEAST often? a.antidumping duties b.countervailing duties c.safeguard or escape clause duties d.antidumping and countervailing duties.
C
Why do monopolistic firms practice international dumping? a.They face the same demand conditions in their domestic and foreign markets. b.They face more elastic demand conditions in their domestic market than in their foreign markets. c.They face more elastic demand conditions in their foreign market than in their domestic market. d.They are able to take advantage of increasing costs.
C
With a home monopolist, the imposition of a tariff results in: a.a higher deadweight loss than a quota. b.a higher price for consumers than a quota. c.a lower deadweight loss than a quota. d.the same welfare effects as a quota.
C
A case study of Japanese auto imports during the 1980s focuses on an agreement between Japan and the United States to undertake: a.a coordinated effort to improve gas mileage. b.a study of wage concessions by Japanese carmakers in the United States. c.a review of unionization and employee benefits in both nations. d.a voluntary export restraint.
D
A monopolist faces a demand curve given by P = 60 -2Q and has total costs given by TC = Q2. Its marginal revenue is MR = 60 - 4Q and its marginal cost is MC = 2Q. Now suppose that the country in which this monopolist is located decides to engage in international trade. The world price of the product produced by the monopolist is $10. Calculate the value of the firm's profits. a.$400 b.$1,200 c.-$1,600 d.$25
D
A monopolist faces a demand curve given by P = 60 -2Q and has total costs given by TC = Q2. Its marginal revenue is MR = 60 - 4Q and its marginal cost is MC = 2Q. What price does the monopolist charge with no trade? a.$5 b.$10 c.$15 d.$20
D
A monopolist's price is "less than fair value" when it sells in export markets at prices ________ prices in its domestic markets or at prices _________ its average costs of production. a.above; above b.above; below c.below; above d.below; below
D
All of following are examples of infant industry protection cited in the text EXCEPT: a.the Chinese auto industry. b.the Brazilian computer industry. c.Harley-Davidson. d.Daimler-Chrysler Corporation.
D
An internationally discriminating monopolist will maximize its profits if it sets quantity where: a.MC = P in the home market and MC = MR in the foreign market. b.MC = MR in the home market and MC = P in the foreign market. c.MC = P in both the home and foreign markets. d.MC = MR in both the home and foreign markets.
D
At one time, most compact trucks (like the Toyota Tacoma) were imported under the classification "cab and chassis with some final assembly needed." These were classified as ___________ with a tariff of ______. a.complete or unfinished trucks; 4% b.complete or unfinished trucks; 25% c.parts of trucks; 25% d.parts of trucks; 4%
D
Comparing the monopoly firm with a perfectly competitive firm reveals that: a.the competitive firm sells less quantity. b.the monopoly firm charges a lower price. c.the competitive firm's price is above MC. d.None of these is revealed when the two firm are compared.
D
If a perfectly competitive industry suddenly became a monopolist, equilibrium output would _________, and the equilibrium price would _________. a.increase; increase b.decrease; decrease c.increase; decrease d.decrease; increase
D
It is generally easier for a firm to get _______________ than _______________; therefore, many more of the former are in place than the latter. a.import quotas; tariffs b.safeguard tariffs; antidumping duties c.subsidies; tariffs d.antidumping and countervailing duties; safeguard tariffs
D
Some nations try to nurture and encourage new firms with lots of promise, so they protect them from foreign competition. This is called the _________ argument for trade protection. a.home nation unemployment b.level playing field c.efficiency d.infant industry
D
Suppose that Far North Canadian Lumber, Ltd., sells lumber in Canada at a price of $1,000 per 1,000 board feet and exports the same lumber to the United States at a price of $600 per 1,000 board feet. U.S. Lumber, Inc., produces and sells lumber for $700 per 1,000 board feet in the United States. How large an antidumping duty will the United States apply to lumber imports from Far North Canadian Lumber, Ltd.? a.$100 b.$200 c.$300 d.$400
D
Suppose that a foreign monopolist supplies the entire domestic market (there is no domestic production). The home country then applies a $10 tariff on imports from the foreign monopolist. The home country will be better off if: a.the terms-of-trade gain is less than the deadweight loss from the tariff. b.the price change is more than the deadweight loss of the tariff. c.the deadweight loss is more than the price change from the tariff. d.the terms-of-trade gain is more than the deadweight loss from the tariff.
D
The WTO has encouraged nations to replace their import quotas with tariffs. Why? a.Quotas are more difficult to administer for the customs people. b.Quotas are more discriminatory. c.Quotas hurt domestic firms more than tariffs. d.Quotas result in larger losses than tariffs with equivalent protection on domestic monopolists.
D
The case of ________ has been referred to in the press and business publications as an example of right-minded import protection in the United States. a.U.S. steel b.Dole bananas c.the Chrysler corporation d.Harley-Davidson motorcycles
D
The demand curve in its home market is P = 200 - Q; the demand curve in its foreign market is P = 160 - 2Q; and its marginal cost is a constant $20 per unit. What is the discriminating monopolist's profit maximizing output in the foreign market? a.90 b.110 c.70 d.35
D
To justify infant industry protection: a firm must move down its average cost curve to produce more output. b.a firm's average cost curve must shift upward over time. c.a firm's total cost curve must shift leftward over time. d.a firm's average cost curve must shift downward over time.
D
To maximize profits, the discriminating monopolist sells abroad rather than selling additional units at home because: a.the home market is just too competitive. b.there would be more incentive for entry from other firms. c.the market price at home would rise and the firm would lose customers. d.it would lower total profits if it lowered its home price in order to sell the additional units.
D
What are the likely effects of a U.S. antidumping duty on imported steel? a.The U.S. terms of trade will improve and U.S. steel imports will rise. b.The U.S. terms of trade will worsen and U.S. steel imports will rise. c.The foreign price of steel will rise and the United States will avoid deadweight losses. d.The U.S. price of steel will rise and the United States will suffer deadweight losses.
D
What is meant by a "discriminating monopolist"? a.The firm discriminates on the basis of hiring workers. b.The firm violates all antitrust laws. c.The firm evades taxes. d.The firm sells its product at different prices in different markets.
D
When a domestic monopolist in a small country becomes subject to international competition, it behaves as: a.a monopolist. b.a duopolist. c.an imperfect competitor. d.a perfect competitor.
D
When there is a foreign monopoly exporting to the home nation, under free trade it will sell a quantity where the home ______ is just equal to the foreign ______. a.MC; MR b.supply; demand c.demand; supply d.MR; MC
D
Which of the following groups were losers after the European Union's imposition of an antidumping duty on shoes imported from China? a.European consumers and European shoe manufacturers b.Chinese consumers and Chinese shoe manufacturers c.Chinese consumers and European shoe manufacturers d.European consumers and Chinese shoe manufacturers
D
Which of the following is a criterion for determining whether a foreign nation is dumping? a.The good is not produced at home. b.The good is selling below the price in the exporting nation. c.The good is priced below average total cost. d.The good is selling below the price in the exporting nation or is priced below average total cost.
D
Which of the following is a reason why antidumping actions are used more frequently than safeguard actions? I. It is easier to meet the criterion that imports have caused "material injury" to a domestic industry than the criterion that imports were a "substantial cause of serious injury." II. The President does not need to approve antidumping duties. III. The President has to approve duties imposed under safeguard actions. a.I b.II c.III d.I, II, and III
D
Which one of the following was NOT a reason why Brazil's infant industry protection of its personal computer industry was a failure? a.Imported silicon chips were expensive to obtain. b.Local regulations limited the entry of new firms in the industry. c.Domestically produced parts required by the Brazilian PC industry were expensive. d.The Brazilian government continued to purchase imported PCs.
D
Why did the U.S. price of imports of compact trucks (like the Toyota Tacoma) not increase by 25% when the U.S. Customs Service reclassified them as "complete or unfinished trucks" with a tariff of 25%? a.U.S. truck dealers that retailed imported compact trucks lowered their retail prices and absorbed part of the tariff. b.U.S. consumers negotiated lower retail prices from U.S. truck dealers selling imported compact trucks. c.The U.S. government decided not to collect the 25% tariff on imported Japanese compact trucks and instead made them subject to voluntary export restraints. d.Japanese truck manufacturers lowered their prices on trucks sold in the U.S. market and absorbed part of the tariff.
D