Econ Final Bonus Questions

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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 "prisoner's dilemma" can arise when: a.two large countries simultaneously and independently apply tariffs on imports from each other. b.two large countries simultaneously and independently eliminate tariffs on imports from each other. c.one large country eliminates tariffs on imports from another large country. d.one small country eliminates tariffs on imports from a large country.

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 customs union will increase the welfare of its members and the rest of the world if: a.trade creation is greater than trade diversion. b.trade creation is less than trade diversion. c.trade creation is positive. d.trade diversion is positive.

Surveys of consumers regarding labor standards reveal that they: a.treat potential losses and potential gains equally. b.weigh potential losses more than potential gains. c.weigh potential losses less than potential gains. d.do not experience losses in gains.

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

Which of the following is NOT a regional trade agreement currently (2014) being considered? a.the Trans-Pacific Partnership b.the Trans-Atlantic Trade and Investment Partnership c.the North American Free Trade Area d.the Europe-Japan Free Trade Area

Which of the following is a possible reason for a country to impose a tariff? a.A tariff discourages domestic production. b.A tariff reduces the benefits for domestic producers. c.A tariff is a source of revenue for the government. d.A tariff will encourage domestic consumers to buy foreign goods.

Which statements BEST describe the result of a small country imposing a quota on imported sugar? I. The domestic price of sugar will fall. II. Domestic sugar consumption will fall. III. Domestic sugar production will fall. a.I b.II c.I and II d.I and III

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

Why did the European Union put tariffs on banana imports from some countries and not from other countries? a.to encourage organic farming in the Caribbean b.to support former colonies in Africa c.to discourage European banana consumption d.to encourage European banana production

Why did the United States suspend its preferential trade treatment for Bangladesh in 2013? a.The United States wanted to collect more tariff revenue on all imports from Bangladesh. b.The United States wanted to punish Bangladesh for its poor labor practices. c.The United States wanted to collect more tariff revenue on imports other than garments from Bangladesh d.The United States wanted to force Bangladesh to join NAFTA.

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

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

The negative effects of trade diversion are reduced when: a.trade diversion is more than offset by trade creation. b.consumers in the importing nation have a change in their buying habits. c.there is a cost increase in nations outside the region. d.the free-trade agreement includes more members.

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.

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

The expiration of the Multifibre Agreement in 2005 caused welfare gains for the average U.S. household of approximately: a.$100. b.$100 annually. c.$1,000. d.$1,000 annually.

Suppose that Norway is a small country and currently produces 100,000 board feet of lumber at $600 per 1,000 board feet. Then it begins to trade at the world price of $500 per 1,000 board feet. As a result of trade,Norway's production falls to 50,000 board feet and its consumption increases to 200,000 board feet. How many board feet of lumber does Norway now import? a.250,000 board feet b.200,000 board feet c.150,000 board feet d.100,000 board feet

The United States recently levied tariffs on tires imported from what country? a.Japan b.Brazil c.Russia d.China

according to UIP, when domestic and foreign interest rates are equal, the exchange rare of the home currency is expected to a) fall b) remain contact c) rise d) not enough information is provided

b) remain constant

A prisoner's dilemma exists for global pollutants because: a.countries do not face the full cost of pollution that they generate. b.countries that regulate pollution gain more than countries that do not regulate pollution. c.countries that regulate pollution lose more than countries that do not regulate pollution. d.no country follows international agreements to limit pollution.

Antidumping duties are a type of: a.tariff. b.quota. c.export. d.trade agreement.

Which of the following regional trade agreements is a free-trade area? a.NAFTA b.the European Union c.Mercosur d.NATO

Which of the following represents the stage where economic integration is LEAST complete? a.free-trade area b.customs union c.common market d.economic union

Who captured the quota rents of the 1980s U.S.Japanese voluntary export agreement for automobiles? a.Japanese auto producers b.U.S. consumers of Japanese automobiles c.U.S. auto producers d.the U.S. government

if UIP holds, the interest rate is 4%, and the foreign currency is expected to appreciate by 3%, then the foreign interest rate is approximately a) 1% B) 3% C) 7% D) none of the above

A) 1%

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.

In the case of global pollution, the Nash equilibrium shows that if one nation does not regulate its pollution, other nations: a.will have to regulate even more strictly. b.will not regulate either because of international price competition. c.will regulate but will bring charges in the WTO against the other . d.will regulate, so they will not harm their own citizens.

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.

The escape clause in U.S. trade law: a.enables the United States to withdraw from NAFTA. b.permits the U.S. government to impose trade barriers if fairly traded imports are the cause of significant injury to a U.S. industry and its workers. c.permits the government to impose trade remedies against nations that unfairly subsidize their exports to the United States. d.enables immigrants to return to their home countries.

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.

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.

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.

Which of the following taxes is easiest to collect? a. income taxes b. wealth taxes c. tariffs d. value-added taxes

Why do the United States and the European Union governments apply tariffs to solar panel imports, even though solar panels generate positive consumption externalities? a.They believe that imported solar panels' negative consumption externalities outweigh their positive consumption externalities. b.They believe that domestic production of solar panels generates negative production externalities that outweigh the positive consumption externalities from imports. c.They believe that domestic production of solar panels generates positive production externalities that outweigh the positive consumption externalities of imports. d.They believe that imported solar panels negative production externalities outweigh their positive consumption externalities.

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.

With respect to environmental issues, the GATT: a.does not allow countries to adopt environmental laws that affect imports. b.allows countries to adopt environmental laws that affect domestic production but not imports. c.allows countries to adopt environmental laws that are applied uniformly against domestic producers and imports. d.allows countries to adopt more stringent laws affecting imports than domestic producers.

There is a side agreement to _______________ that calls for the enforcement of existing worker rights in _______________. a.the European Union; the European nations b.the World Trade Organization; the less developed nations c.NAFTA; the South American nations d.NAFTA; Mexico, Canada, and the United States

To be able to enforce the rules of a free-trade area, goods from outside the region imported into the lowest-tariff nation cannot be shipped ________ into another nation in the area. a.with no transportation costs b.without a labor certificate c.with no customs inspection d.duty free

Which of the following is NOT an important provision of GATT? a.the most favored nation clause b.the safeguard provision or escape clause c.antidumping tariffs d.approval of export subsidies

Which of the following is NOT part of the NAFTA? a.tariff elimination on trade between member nations b.an agreement on worker rights in each country c.an agreement on environmental conditions in each country d.elimination of restrictions on movement of labor between member countries

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.

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

Which of the following is associated with increased use of solar panels? a.negative production externalities b.positive production externalities c.negative consumption externalities d.positive consumption externalities

When calculating gross national income (GNI) in an open economy, we adjust gross national expenditure (GNE) by a) adding exports and subtracting imports b) adding net factor income from abroad (NFIA) and adding trade blance c) adding net factor income from abroad d) adding net factor income from abroad (NFIA) and adding net unilateral transfers (NUT)

b) adding net factor income from abraod (NFIA) and adding trade balance

the real exchange rate between two currencies tells us: a) changes in the exchange rate over time b) how many units of one currency can be purchased with one unit of the home currency C) how much in terms of goods and services the home currency will buy in the foreign nation compared to the home nation

how much in terms of goods and services the home currency will buy in the foreign nation compared to the home nation

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 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 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 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 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 small country in international trade faces: a.a perfectly elastic world supply curve. b.a perfectly inelastic world supply curve. c.a perfectly elastic world demand curve. d.a perfectly inelastic world demand curve.

According to the GATT, a tariff applied under the safeguard provision must: a.be temporary. b.be permanent. c.apply to all imports. d.be no higher than 10%.

Although it has had some criticism for ineffectiveness, in what way has the North American Agreement on Labor Cooperation had some positive benefits? a.It created an institutional forum for the discussion of labor issues in Canada, the United States, and Mexico b.It prohibited any one NAFTA member country from publicly revealing violations of labor laws in other NAFTA member countries. c.It reduced the emphasis on labor rights as a legitimate trade issue d.All of these answer choices are examples of the positive benefits.

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

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.

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.

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.

Automobiles imported from Canada or Mexico must have 60% North American content to be eligible for tariff elimination under NAFTA rules. This is an example of: a.a rules of origin requirement. b.an environmental standard. c.a health and safety requirement. d.a preferential trade agreement.

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.

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

GATT/WTO allows nations to impose tariffs in response to unfair trade practices such as: a.dumping. b.transportation costs. c.environmental degradation. d.import subsidies.

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.

If S = 1P represents a country's home supply curve and D = 100 - 1P represents its home demand curve, then the equation representing its import demand curve is: a.100 - 2P. b.50 - 1P. c.100 - 1P. d.50 - 2P.

If a customs union includes the lowest-cost world producer of a product, then member countries: a.will always be better off in trade with that product. b.will always be worse off in trade with that product. c.can be better off or worse off depending on the strengths of the trade diversion and trade creation effects for that product. d.will no longer export or import that product.

If a large country imposes a tariff: a.its economic welfare may increase. b.its economic welfare must always fall. c.its economic welfare will increase if its deadweight losses exceed gains from its terms-of-trade effect. d.the tariff will have the same impact as an identical tariff imposed by a small country.

If a large country imposes a tariff: a.the terms-of-trade effect may offset deadweight losses on its economy. b.the terms-of-trade effect can never offset deadweight losses on its economy. c.there will be no terms-of-trade effect. d.the country will always be worse off.

If rent-seeking occurs, then a country's welfare losses from quotas will: a.increase. b.decrease. c.not change. d.first increase, then decrease.

Implementing a regional free-trade agreement may have an effect in which, due to reduced tariffs, a nation in the agreement begins to import a product it had previously produced itself. This effect is called: a.trade creation. b.trade diversion. c.reciprocal trade agreements. d.the employment effect of FTAs.

In 2002 the United States relied on GATT's ________ to impose tariffs on imported steel. a.escape clause b.antidumping clause c.countervailing duty clause d.most favored nation clause

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.

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

In the 1980s,the United States negotiated a voluntary export agreement with Japan in which each Japanese auto producer voluntarily agreed to reduce the number of its automobiles exported to the United States. This voluntary export agreement caused each Japanese auto producer to: a.raise the prices of its automobile exports to the United States. b.lower the prices of its automobile exports to the United States. c.not change the prices of its automobile exports to the United States. d.increase the number of automobiles exported to the United States.

In which of the following forms of regional trading agreement are rules of origin required? a.a free-trade area b.a customs union c.a common market d.an economic union

International agreements to limit pollution can lead to: a.a Nash equilibrium where no countries face the full cost of pollution that they generate. b.a Nash equilibrium where countries that regulate pollution gain more than countries that do not regulate pollution. c.a Nash equilibrium where countries that regulate pollution lose more than countries that do not regulate pollution.d. a Nash equilibrium where no country regulates pollution.

Most favored nation status requires: a.a WTO member that reduces a tariff on imports from one WTO trading partner to apply the lower tariff to imports from all other WTO members. b.a WTO member that reduces a tariff on imports from one WTO trading partner to apply the lower tariff to imports from all other countries. c.a WTO member that increases a tariff on imports from one WTO trading partner to raise the tariff on imports from all other WTO members. d.a WTO member that increases a tariff on imports from one WTO trading partner to raise the tariff on imports from all other countries.

Of the following, which is NOT a regional trade agreement? a.the World Trade Organization b.the European Union c.the North American Free Trade Agreement d.the Central American Free Trade Agreement

One difference between the tariffs on steel imports levied in 2002 and the tariffs on Chinese tire imports levied in 2009 was that: a.U.S. steel producers supported the steel tariff, while U.S. tire producers did not support the tire tariff. b.U.S. tire producers supported the tire tariff, while U.S. steel producers did not support the steel tariff. c.U.S. steel workers supported the steel tariff, while U.S. tire workers did not support the tire tariff. d.U.S. tire workers supported the tire tariff, while U.S. steel workers producers did not support the steel tariff.

One way to fairly distribute quotas, while getting revenue for the government, is to: a.auction quotas in a public sale to the highest bidder. b.conduct a lottery for quotas for the lucky winner. c.allow Congress to apportion quotas among their constituents. d.restrict quotas on the basis of handicap, gender, and other protected status.

Producer surplus is: a.the difference between the price of a product and marginal cost of producing the product. b.the difference between the price of a product and what consumers were willing to pay for the product. c.the difference between the discounted price of a product and its retail price. d.the difference between the price of a product and its average cost of production.

Professor Daniel Trefler at the University of Toronto concluded that Canada ________ from free trade with the United States because _______________. a.gained; trade creation exceeded trade diversion with the United States b.lost; trade diversion exceeded trade creation with the United States c.first gained, then lost; trade diversion exceeded trade creation after NAFTA was fully implemented d.neither gained nor lost; trade creation equaled its trade diversion with the United States

Quota rents are: a.the difference between the domestic price and world price following imposition of a quota. b.the extra return to land that occurs following imposition of a quota. c.the difference between imports with no quota and imports with the quota. d.the extra payment to labor that occurs following imposition of a quota.

Section 421 of the amended Trade Act of 1974 allows tariffs to be applied against: a.rising imports from China that cause "market disruption" in a U.S. industry. b.any imports that cause market disruption in a U.S. industry. c.subsidized Chinese imports. d.any imports from Canada or Mexico that violate NAFTA provisions.

Suppose country X currently does not produce widgets. Instead, it imports widgets from country Z. Then country X establishes a preferential trading agreement with country Y. Following the formation of the PTA, it imports widgets from country Y. What has occurred? a.There is trade diversion and a welfare loss for country X. b.There is trade creation and a welfare loss for country Y. c.There is trade diversion and a welfare gain for country X. d.There is trade creation and a welfare gain for country Y.

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.

Suppose that a large country imposes optimal tariffs on imports from another large country. The second country then responds with optimal tariffs on imports from the first country. For these two countries, the Nash equilibrium results in ___________ for the first country and __________ for the second country. a.losses; losses b.gains; gains c.losses; gains d.gains; losses

Suppose that the United States is a large country. In fall 2009, the United States imposed tariffs on tires imported from China. The deadweight losses of these tariffs were larger than the terms-of-trade gains to the U.S. economy. Who was better off and who was worse off as a result of these tariffs? a. U.S. tire producers were better off and U.S. consumers, and Chinese tire producers were worse off. b. U.S. tire producers, U.S. consumers, and Chinese tire producers were all worse off. c. U.S. tire producers and Chinese tire producers were better off, and U.S. consumers were worse off. d. U.S. tire producers and U.S. consumers were better off, and Chinese tire producers were worse off.

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

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.

Suppose that the equations S = 2P and D = 6 - P represent a small country's home supply and home demand curves. Which of the following is the equilibrium price in autarky? a.$2 b.$4 c.$6 d.$8

Suppose that there is a negative externality associated with alcohol consumption in the United States (e.g., costs of publicly funded alcoholism treatment centers). What will happen to the social costs of this externality if the United States eliminates all tariffs on alcohol imports? a.The social coasts will increase. b.They will not change. c.They will decrease. d.The social costs will increase but be offset by the private losses associated with increased imports as the tariffs are eliminated.

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.

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.

The VER between the United States and Japan was shown to _______________ gas consumption, _______________ the use of energy, and _______________ gas mileage from automobiles. a.raise; raise; lower b.lower; lower; raise c.raise; lower; lower d.lower; raise; raise

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.

The tariff imposed to punish a foreign discriminating monopolist is called: a.antidumping duty. b.a subsidy. c.punitive damages. d.a fine.

The tuna-dolphin dispute was ruled by the WTO in favor of nations that _______________. The ruling said that trading partners _______________ bar imports based on _______________. a.exported tuna to the United States and Europe; could not; a production process such as the size of the nets used b.imported tuna; could; the production process c.cared about wildlife in the seas; could; concerns over the safety of dolphins d.produced seafood products; could not; the way the products were used, such as in pet food

Trade diversion may be such that the combined welfare of two nations in the agreement actually ____ because of ____, not completely offset by the _____. a.falls; loss of tariff revenue for the importing nation; gain in the exporting nation's producer surplus b.rises; gains from trade; loss of jobs in the importing industry c.rises; gain in tariff revenue; gain in jobs d.remains the same; loss of tariff revenue; gains from product variety

U.S. consumers were hurt by the 2002 steel tariff; U.S. producers who use steel were also hurt, but the biggest outcry came from: a.exporters of steel to the United States—Europe, Japan, and South Korea. b.the United Nations. c.the big labor unions. d.Ralph Nader, who is very opposed to restrictions on free trade.

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.

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.

Unlike the Kyoto Protocol, the Copenhagen Accord will: a.include India and China as participants. c.strongly curtail emissions. d.seek to reverse global warming. be noncontroversial.

Walmart has been pursuing improvements in its reputation in response to growing criticism on environmental, labor, and social issues in its foreign supplier factories. Among others, which requirement has Walmart imposed on its Chinese suppliers? a.They must demonstrate compliance with Chinese environmental laws. b.There must be a 100% improvement in energy efficiency at China's 200 largest suppliers. c.They must increase their wages to the equivalent of the U.S. minimum wage. d.It has imposed all of these on its Chinese suppliers.

We can measure producer and consumer surplus by looking at the supply and demand graphical representation. Producer surplus is: a.the area above the supply curve but below the equilibrium price. b.the area below the demand curve but greater than the equilibrium price. c.the area below the demand curve all the way down to the quantity axis. d.the combined triangular area below the demand curve and above the supply curve.

What happened to the price of U.S. clothing and U.S. clothing production as a result of the expiration of the Multifibre Agreement in 2005? a.The price of clothing in the United States fell, and U.S. clothing production fell. b.The price of clothing in the United States fell, and U.S. clothing production rose. c.The price of clothing in the United States rose, and U.S. clothing production fell. d.The price of clothing in the United States rose, and U.S. clothing production rose.

What happens when two countries apply tariffs against each other in an attempt to capture their terms-of-trade gain? a.Both countries lose because the terms-of-trade gain for one country is canceled by the tariff in the other country. b.Both countries gain because the terms-of-trade gain for one country is canceled by the tariff in the other country. c.Neither country gains nor loses because the terms-of-trade gain for one country is canceled by the tariff in the other country. d.The country initially applying the tariff gains because it captures the terms-of-trade gain; the other country neither gains nor loses.

What is a major cause of negative production externalities associated with the mining and processing of rare earth mineral? a.Processing of rare earth minerals generates radioactive wastes. b.Rare earth mining is often done in less-developed countries. c.Processing of rare earth minerals is very costly in countries that possess rare earth mineral deposits. d.Processing of rare earth minerals generates air pollutants.

What is the MOST recent set of negotiations at WTO called? a.the Doha round b.the Kyoto round c.the Geneva accord d.the Paris negotiation

Under NAFTA, labor disputes and issues will be dealt with by the: a.U.S. Department of Labor. b.North American Agreement on Labor Cooperation. c.National Labor Relations Board. d.U.S. Department of Justice.

What is the role of nongovernmental organizations in promoting labor standards? a.They have no enforcement power, but they can investigate and bring attention to and put pressure on firms, governments, and other groups to effect change. b.Because they are nongovernmental, they have no power. c.They can change laws for labor in many situations. d.Because they are part of the United Nations, they often report their findings and cause major policy changes.

What is the term used to describe when one country retaliates to a tariff on its exports with tariffs on its imports? a.a tariff war b.a tariff tiff c.a tariff conflict d.a tariff fight

What would happen to U.S. economic welfare if the U.S. eliminated tariffs on solar panel imports? a.U.S. economic welfare would increase because of the social gains from increased U.S. consumption of solar panels. b.U.S. economic welfare would decrease because the social gains from increased U.S. consumption of solar panels would be less than the social costs inflicted on U.S. solar panel producers. c.U.S. economic welfare would decrease because the social gains from increased U.S. production of solar panels would be less than the social costs associated with increased U.S. consumption of solar panels. d.U.S. economic welfare would increase because the social gains from increased U.S. production of solar panels would exceed the social costs associated with increased U.S. consumption of solar panels.

When a large nation imposes a tariff on a smaller nation and causes its terms of trade to deteriorate, the tariff is sometimes referred to as: a.a beggar-thy-neighbor tariff. b.a hate-thy-neighbor tariff. c.a love-thy-neighbor tariff. d.an aid-thy-neighbor tariff.

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

When a tariff is imposed, there is always an additional loss. One loss occurs when consumers purchase fewer units of the good because prices have risen, so society loses the value of that consumption. This loss is the: a. consumption loss. b. efficiency transfer. b. production loss. d.X-factor .

When consumers are able to buy a product at a price lower than its marginal value to them, it is called: a.consumer surplus. b.consumer sovereignty. c.producer surplus. d.marginal utility.

When does an externality occur? a.when one person's production or consumption of a good affects another person b.when a producers long-run average costs fall c.when a consumer's marginal utility from consuming a good increases d.when international trade leads to improvement in a country's economic welfare

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.

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

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

Which is a better outcome for income and standard of living levels for large nations? a.no tariffs b.low tariffs c.high tariffs d,equal tariffs for all nations

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.

Which of the following was an important reason why the United States did NOT sign the Kyoto Protocol? a.It believed that exemptions for some of its major developing country trading partners (such as China and India) were unfair. b.It believed that Europe's targets were set ridiculously low. c.It believed that pollution does not cause global warming. d.It believed that targets for some of its major developing country trading partners (such as China and India) were too low.

Why didn't U.S. tire producers support the recently enacted tariff on imported Chinese tires? a. Many of them manufacture tires in China. b. They were already earning monopoly profits. c. Since the union supported the tariff, they naturally had to oppose it. d.They wanted the government to impose an import quota rather than an import tariff

Why do some say labor standards are "disguised protection"? a.These standards favor the nations that already have high labor standards and eliminate competition from nations who do not. b.Nations with low labor standards often disguise the fact. c.Raising labor standards is not the issue—it is disguised by the fact that shoddy materials are used in production. d.Often children who should be in school work anyway, and their participation is "disguised" as if an adult held the job.

Why does the United States both import and export ethanol? a.U.S. regulations require U.S. fuel companies to use both ethanol made from corn and ethanol made from other sources (such as sugar), which has led to a surplus of corn ethanol that is exported to Brazil in return for sugar ethanol. b.U.S. regulations require U.S. fuel companies to use only ethanol made from corn, which has led to a surplus of corn ethanol that is exported to Brazil. c.Brazilian regulations require its fuel companies to use both ethanol made from corn and ethanol made from sugar, which has led to a surplus of sugar ethanol that is exported, and a need for corn ethanol, which is imported from the United States. d.Brazilian regulations require its fuel companies to use only ethanol made from corn, which has led to a surplus of sugar ethanol that is exported, and a need for corn ethanol, which is imported from the United States.

Why is NAFTA a free-trade area requiring rules of origin rather than a customs union? a.A free-trade agreement allows politically sensitive tariffs of each nation to remain unchanged. b.A customs union also requires rules of origin. c.The overall level of U.S. tariffs was much higher than the overall level of tariffs in Mexico and Canada. d.The overall levels of tariffs in Canada, Mexico, and the United States are similar, making rules of origin irrelevant.

Rent-seeking activities are: a.landowners' efforts to receive higher returns for their land. b.bribery and lobbying activities to obtain quota licenses. c.foreign suppliers' efforts to reduce quotas. d.domestic consumers' efforts to reduce tariffs.

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.

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.

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.

Whenever income is less than expenditure for a period of time, a nation will experience: A) a deficit in its current account B) A surplus in its current account C) A fall in GDP D) None of the above

A) a defecit in its current account

A customs union is a trade agreement: a.in which member countries are free to set their separate tariffs on other countries. b.in which members agree to set similar tariffs on nonmembers. c.in which resources are free to move between member countries. d.in which member countries have common currency.

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.

A knowledge spillover is: a.a negative externality. b.a positive externality. c.a constant externality. d.an externality.

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.

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

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

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

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

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

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.

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

A regional trade agreement involves: a.Most, if not all, the nations in the world. b.several nations, usually trading partners, with a common agenda or geographically linked. c.nations that agree to trade only with nations in their region. d.a region of the world with not only trade issues but also political cohesiveness.

According to one research study focusing on Indonesia, actions by nongovernmental organizations are ___________ than importing countries' threats to raise tariffs. a.less effective in raising wages and limiting declines in employment b.more effective in raising wages and limiting declines in employment c.less effective in raising wages but more effective in limiting declines in employment d.more effective in raising wages but less effective in limiting declines in employment

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%

An example of how trade diversion results in a suboptimal situation is auto parts trade between Mexico and the United States. After NAFTA: a.Mexico decreased its sales of auto parts to the United States. b.the United States purchased more auto parts from Mexico due to the elimination of tariffs and reduced purchases from East Asia, which was the lowest-cost producer. c.the United States brought a complaint against Mexico for low quality auto parts. d.the United States purchased fewer auto parts from Mexico due to the elimination of tariffs and increased purchases from East Asia, which was the lowest-cost producer.

An example of the tragedy of the commons is: a.no worldwide fuel economy standard. b.overfishing in international waters. unsafe fishing practices that trap c.dolphins and sea turtles. d.illegal copyright infringement.

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%

An import quota is different from a voluntary export restraint because: a.the former is imposed by the exporting country and the latter by the home country. b.the former is imposed by the home country and the latter by the exporting country. c.the latter is specified by domestic importers. d.the former results in less gain for the country.

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.

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.

Because it is difficult to negotiate multilateral trade agreements, some economists argue that preferential trade agreements are always beneficial since they represent a movement toward freer trade, which is better than no movement at all. Is this argument always correct? a.Yes; any movement toward freer trade is better than no movement at all. b.No; some preferential trade agreements may have higher trade diversion costs than trade creation gains. c.Yes; all preferential trade agreements have higher trade creation gains than trade diversion losses. d.No; all preferential trade agreements have higher trade diversion losses than trade creation gains.

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.

Consumer surplus is: a.the difference between the price of a product and consumers' valuation of the last unit of the product purchased. b.the difference between the price of a product and what consumers were willing to pay for the product. c.the difference between the discounted price of a product and its retail price. d.the difference between the price paid by consumers and the price required of producers.

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.

During which round of negotiations did the WTO toughen its stance against domestic policies that limit trade? a.Bretton Woods b.Uruguay c.Doha d.The WTO never toughened its stance against domestic policies.

Europe had refused to import genetically modified food products. The WTO ruled that: a.if Europe was afraid of these products, it could put an import ban on them. b.Europe needed to base its ban on scientific evidence rather than because of fear about something unproven. c.Europe could declare a moratorium until an investigation could be undertaken. d.the products could be treated and then they would be safe.

Foreign supply curves facing a large country differ from those facing a small country. Large countries face _____________ foreign supply curves, and small countries face ______________ foreign supply curves. a.perfectly price elastic; upward-sloping b.upward-sloping; perfectly price elastic c.downward-sloping; perfectly price elastic d.upward-sloping; downward-sloping

GATT is the acronym (or abbreviation) for: a.the General Agreement on Taxes and Tariffs. b.the General Agreement on Tariffs and Trade. c.the General Agreement on Trade and Taxes. d.the General Agreement on Trade.

GATT maintained a provision that nations could enact temporary emergency tariffs or quotas if imports threatened the existence of domestic producers. The WTO has not struck that provision. Economists call this: a.the tariff bill. b.the escape clause. c.justifiable means. d.domestic job security provision.

How many units will a country import if S = 1P represents its home supply curve, D = 100 - 1P represents its home demand curve, and the world price is $25? a.25 b.50 c.75 d.100

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.

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.

If there is free trade in a small economy, the nation will be able to import unlimited quantities of the product at: a.the domestic price. b.the world price. c.the price measured in euros. d.the price determined after all tariffs are assessed.

Implementing a regional free-trade agreement may have an effect in which, due to reduced tariffs, a nation begins to import a product from another member country that it had previously imported from outside the new trade region. This effect is called: a.trade creation. b.trade diversion. c.reciprocal trade agreements. d.the employment effect of FTAs.

In 2009, the European Union agreed to grant tariff-free access to its former colonies and to reduce tariffs on imports by 35% over seven years on _________, which finally ended a 15-year feud between the European Union and the United States and Latin American producers. a.pineapples b.bananas c.avocados d.oranges

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

In a situation where there is no incentive to cut pollution because it will make domestic firms less competitive, it will improve world welfare if: a.nations impose tariffs on polluters. b.there is an international agreement so that every nation regulates global pollutants and no firms have competitive advantages because of lax pollution laws. c.there is a ban on production until we can scientifically solve our pollution problems. d.we allow the market to work in this case.

Indian exporters are concerned about trade diversion because _________ made an agreement with the ASEAN free-trade area. a.India b.China c.the United States d.Mexico

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.

It can be shown that the Nash equilibrium would indicate that without any agreements, the best outcome for each large nation would be to: a.not impose a tariff. b.impose a tariff. c.find other ways to reward their domestic firms. d.impose a consumption tax.

Many regional trade agreements include other provisions that are not part of the treaty, but they are add-ons that might be important to trade issues. These are called: a.addenda. b.side agreements. c.environmental pacts. d.worker rights documents.

One interpretation of producer surplus is that it equals: a.the profits of a firm. b.the return to the fixed factors of production in an industry. c.consumer surplus. d.the difference between the price of a product and its average cost of production.

Over-harvesting of fish in international waters an example of what economic concept? a.a production externality b.a consumption externality c.marginal social benefits exceeding marginal private benefits d.private marginal costs exceeding marginal social costs

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%

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.

Suppose that Norway is a small country and currently produces 100,000 board feet of lumber at $600 per 1,000 board feet. Then it begins to trade at the world price of $500 per 1,000 board feet. As a result of trade,Norway's production falls to 50,000 board feet and its consumption increases to 200,000 board feet. What is the Norway's total welfare gain once it begins to trade? a.$5,000 b.$7,500 c.$15,000 d.$17,500

Suppose that consumer demand is given by this equation: P = 10 - Q. What is the value of consumer surplus when P = 5? a.$5 b.$12.50 c.$25 d.$50

Suppose that the U.S. government imposes quotas rather than tariffs to replace the protection to U.S. producers after the expiration of the Multifibre Agreement. As U.S. demand for clothing increases over time, U.S. clothing consumers will find that: a.the price of clothing in the United States will fall. b.the price of clothing in the United States will rise. c.the price of clothing in the United States will not change. d.U.S. clothing production will fall.

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.

Suppose that the world price of steel is $500 per ton. Now suppose that the United States imposes a 20% tariff on imported steel (as it did in 2002). What is the U.S. domestic price of steel after the 20% tariff is imposed (rounded to the nearest dollar) if exporters bear two-thirds of the tariff? a.$433 b.$467 c.$533 d.$567

Surveys of consumers indicate that: a.they do not care at all about labor standards in other countries. b.many are willing to pay at least a small amount more for imports to ensure good labor standards in other countries. c.most are willing to pay a large amount more for imports to ensure good labor standards in other countries. d.they will not buy imports from any country with poor labor standards.

Surveys of consumers regarding labor standards indicate that they are willing to pay: a.a large amount for a large improvement in working conditions. b.a small amount for a large improvement in working conditions. c.nothing for a large improvement in working conditions. d.a small amount for a small decline in working conditions.

The United States applies a 25% tariff on imported pickup trucks (mainly from Japan). If the United States is considered to be a "large" country, then: a.the U.S. price of imported Japanese pickup trucks will increase by 25%. b.the U.S. price of imported Japanese pickup trucks will increase by less than 25%. c.the U.S. price of imported Japanese pickup trucks will increase by more than 25%. d.the U.S. price of imported Japanese pickup trucks will increase by 35%.

The WTO also ruled on the U.S. restriction of gasoline imports from Venezuela and Brazil in 1994 on environmental grounds. What was the outcome? a.The United States could ban those imports because they violated the U.S. Clean Air Act. b.They could not ban the imports because they had not given Venezuela and Brazil a grace period as they had given their own U.S. companies. c.The United States could not use "environmental protection" as an excuse for every trade dispute that came along. d.The United States could bring counter-charges against Venezuela and Brazil on the banana issue.

The customs union could lead to losses for the home country if: a.the other country in the customs union is the most efficient producer b.the other country in the customs unions is not the most efficient producer. c.there are other countries outside the customs union that are inefficient. d.all countries are efficient producers.

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

The fundamental cause of the tragedy of the commons is: a.international trade. b.lack of defined property rights. c.ignorance. d.tariffs.

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.

The politics behind tariff protection suggests that, other things equal, tariffs are more likely to be imposed when: a. the benefits to consumers and producers are concentrated on specific firms and states. b. the benefits to producers and their labor forces are concentrated on specific firms and states. c. the benefits to producers and their labor forces are spread nationwide. d. the losses to consumers are concentrated on specific firms and states.

The ruling in the shrimp-turtle case resulted in: a.the United States being able to ban shrimp caught with nets unsafe for sea turtles. b.the WTO upholding the environmental standard but ruling against the United States on technical grounds that it did not provide sufficient notice; after negotiation, however, the WTO reversed its decision. c.the WTO refusing to hear the case. d.a ruling that upheld the environmental standard.

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

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.

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.

There is some misunderstanding of the WTO's provisions for environmental protection in trade. The WTO actually: a.allows nations to bar all imports from nations that do not conform to their own standards. b.provides that nations may enforce any standards for particular products as long as the standards apply equally to domestic producers and importers. c.does not make any pretense of caring at all about the environment. d.is very inconsistent in its rulings.

To help its domestic producers, the United States unilaterally raised tariffs on ____ in early 2002, but after a ruling against the United States by the WTO, it was forced to rescind the tariff. a.autos b.steel c.oil d.dairy products

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.

To measure the impact of a tariff on the total welfare of society, we calculate the: a.rise in consumer surplus plus the rise in producer surplus. b.rise in producer surplus plus the increase in tariff revenue going to the government minus the loss of consumer surplus. c.rise in government revenues plus the rise in consumer surplus. d. total number of jobs saved by the tariff times the average wage.

Trade diversion is one reason that some economists: a.believe we should not even other to promote free trade. b.recommend we change our focus from regional trade agreements to the WTO, a multilateral trade agreement. c.recommend we reinstate some tariffs that were actually beneficial to all nations. d.think we should exclude low-wage nations from trade agreements.

U.S. firms can produce and sell electric fans for $25. The United States can also import electric fans from China at $40 each and from Canada at $45 each. Electric fans made in the United States, China, and Canada are identical. Currently, the United States imposes a 30% tariff on imported electric fans. For the United States, are there trade diversion losses, trade creation gains, or both as a result of the formation of NAFTA? a.There are only trade diversions losses b.There are only trade creation gains. c.There are neither trade creation gains nor trade diversion losses. d.There are both trade creation gains and trade diversion losses.

U.S. firms can produce and sell electric fans for $25. The United States can also import electric fans from China at $40 each and from Canada at $45 each. Electric fans made in the United States, China, and Canada are identical. Currently, the United States imposes a 30% tariff on imported electric fans. Now suppose that the United States forms a free-trade area (NAFTA) with Canada and Mexico. From which country will the United States import fans? a.China b.Canada c.It will import fans from neither China nor Canada. d.It will import fans from both China and Canada.

U.S. firms can produce and sell electric fans for $25. The United States can also import electric fans from China at $40 each and from Canada at $45 each. Electric fans made in the United States, China, and Canada are identical. Currently, the United States imposes a 30% tariff on imported electric fans. Suppose that the United States levied a 10% tariff on imported electric fans (rather than the 30% tariff described in the scenario). For the United States, would there be trade diversion losses, trade creation gains, or both as a result of the formation of NAFTA? a.There would be only trade diversions losses. b.There would be only trade creation gains. c.There would be neither trade creation gains nor trade diversion losses. d.There would be both trade creation gains and trade diversion losses.

U.S. tire production involves large social costs from air pollution. How will stronger U.S. environmental regulations requiring firms to reduce their air pollutants affect U.S. tire imports? a.Stronger U.S. environmental regulations will cause increases in U.S. tire imports. b.Stronger U.S. environmental regulations will cause decreases in U.S. tire imports. c.Stronger U.S. environmental regulations will neither cause increases nor decreases in U.S. tire imports d.Stronger U.S. environmental regulations will cause decreases in U.S. tire imports but not reduce tire producers' emissions of air pollutants.

WTO rulings with respect to environmental issues have: a.generally had very adverse effects on the environment. b.generally increased regard for environmental protection. c.caused substantial decreases in international trade. d.caused countries to adopt more stringent laws more affecting imports than domestic producers.

We can measure producer and consumer surplus by looking at the supply and demand graphical representation. Consumer surplus is: a.the area above the supply curve but below the equilibrium price. b.the area below the demand curve but greater than the equilibrium price. c.the area below the demand curve all the way down to the quantity axis. d.the combined triangular area below the demand curve and above the supply curve.

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.

What complex set of free-trade area regulations prohibits non member country imports to a high-tariff member country via a low-tariff member country? a.environmental certification b.rules of origin c.health and safety standards d.a codified trade agreement

What is a difference between a tariff imposed by a large country and a tariff imposed by a small country? a.A tariff imposed by a large country has no deadweight consumption and production losses. b.A tariff imposed by a large country has a terms-of-trade effect. c.A tariff imposed by a small country has a terms-of-trade effect. d.A tariff imposed by a large country has no deadweight consumption loss.

What is the effect of the high (15.3%) U.S. tariff on garments imported from Bangladesh on the Bangladesh economy? a.It has no effect on the Bangladesh economy, since U.S. consumers ultimately pay the tariff. b.It acts as a hidden tax of $4.61 on Bangladeshi citizens. c.It improves Bangladesh's terms of trade with the United States. d.It has a very small effect on the Bangladeshi economy, since only 10% of its exports to the United States are subject to the tariff.

What is the main difference between a customs union and a free trade area? a.There are no restrictions on the movement of labor and capital among customs union member countries, whereas labor and capital cannot move freely among free-trade member countries. b.Customs union member countries use identical tariffs, whereas free-trade area member countries have different tariff structures. c.There is free trade among customs union member countries but not among free-trade area member countries. d.Customs union member countries have adopted a common currency, whereas free-trade member countries use their separate national currencies.

What is the main difference between a quota and a voluntary export restraint? a.There are no differences between a quota and a voluntary export restraint. b.The importing country administers a quota, and the exporting country administers a voluntary export restraint. c.A quota affects a country's imports, while a voluntary export restraint affects its exports. d.A quota has deadweight losses, while a voluntary export restraint has no deadweight losses.

What is the major difference between a tariff and a quota that has equivalent effects upon domestic production? a.A quota does not lead to an increase in domestic prices, while a tariff does. b.The government collects tariff revenue with a tariff; other domestic groups (e.g., domestic producers, importers) may collect the equivalent of this tariff revenue with a quota. c.The government collects area c with a tariff; exporters collect area c with a quota, thus leading to further deadweight losses for the quota imposing country. d.The government collects area c with a tariff; importers collect area c with a quota, offsetting consumption deadweight losses and leading to lower deadweight losses for the quota-imposing country.

What organization emerged from the GATT, starting January 1, 1995, with expanded responsibilities and global interaction? a.the Doha round b.the World Trade Organization c.the United Nations d.the Institute for International Economics

What was the result of the Climate Summit held in December 2009? a.All countries signed binding agreements to reduce their greenhouse gases by 20% during the next 10 years. b.No country signed binding agreements to reduce their greenhouse gases. c.Only developed industrialized countries agreed to reduce their greenhouse gases by 20% during the next 10 years. d.Only China and India agreed to reduce their greenhouse gases by 20% during the next 10 years.

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.

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

When a large country imposes a tariff, the burden is often shared by: a.foreign consumers and domestic producers. b. domestic consumers and foreign producers. c. all producers and consumers in each nation equally. d. its government.

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

When products from a high-cost country within a customs union replace imports from a low-cost country that is not a member of the union, this is called: a.trade creation. b.trade diversion. c.trade deflection. d.trade development.

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%.

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.

Which of the following features is included in the NAFTA Agreement? I. a common tariff structure adopted by Canada, Mexico, and the United States II. elimination of tariffs on trade among Canada, Mexico, and the United States III. free mobility of labor and capital among Canada, Mexico, and the United States a.I b.II c.III d.I, II, and III

Which of the following is NOT an effect of an import quota imposed by a small nation? a.It raises producer prices. b.It generates revenue for the nation. c.It causes more production by domestic industries. d.It causes a reduction in imports of the product.

Which of the following is an example of a negative externality? a.The discovery of one firm is freely copied by other firms. b.A firm dumps its industrial wastes into a nearby river. c.The government subsidizes research and development expenditures. d.A consumer buys more units of a product than she can consume.

Which of the following is often used to describe regional trade agreements that discriminate, giving better tariff treatment to other nations in the agreement over outside nation? a.super-regionals b.preferential trade agreements c.exclusive trade arrangements d.equity trade agreements

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.

Which of the following is(are) the effect(s) of an international trade agreement that provides an incentive and reward for nations NOT to impose tariffs? I. an increase in world welfare and standard of living II. an opportunity for low-income nations to exploit the gains from trade. III. an opportunity for large countries to improve their terms of trade a.I b.I and II c.I and III d.I, II, and III

Which of the following statements about the European Union (EU) is CORRECT? a.EU member countries maintain separate tariff schedules. b.There is free trade among EU member countries. d.All EU member countries use a common currency (the euro). d.All EU member countries have eliminated tariffs on imports from non-EU member countries.

Which of the following statements is(are) rationales for the imposition of tariffs? I. Tariffs are a source of government revenue. II. Under certain conditions, tariffs can be used to manipulate world prices. III. Tariffs discourage domestic production. a.I b.II c.I and III d.I, II, and III

Which of the following was NOT an issue that the United States. had with the Kyoto Protocol? a.Major U.S. trading partners (such as China and India) are exempt from the provisions—not fair! b.Europe's targets were set ridiculously low. c.We don't really know if pollution causes global warming. d.There are less costly ways to deal with environmental problems.

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.

The difference between the spot contract and forward contract is that: A) the spot contract has a fixed price on the currency, and the forward contract has a flexible price B) the spot contract is a contract to be settled immediately, and the forward contract is a contract to be settled at a future agreed upon date. C) the spot contract is a derivative, and the forward contract is not a derivative. D) the spot contract has fixed price but the contract can be settled at a later date, the forward contract is a contract to be settled immediately.

B) the spot contract is a contract to be settled immediately, and the forward contract is a contract to be settled in the future agreed upon date.

When the expected dollar-euro exchange rates (E^e $/euro) rises, the foreign expected dollar return curve shifts A) downward B) upward C) not at all D) not enough information is provided

B) upward

"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.

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.

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.

A free-trade area is: a.a group of countries that agrees there will be "no rules" about trade—anything goes. b.a group of countries that agrees to eliminate customs fees and containerized shipping charges on goods traded among them. c.a group of countries that agrees to eliminate barriers to trade between themselves while keeping tariffs in place against the rest of the world. d.a group of countries that eliminates trade barriers among themselves and erects a common tariff against all other nations

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.

A large nation faces a(n) ____ foreign export supply curve, rather than a(n) ____ foreign export supply curve. a.flat; upward-sloping b.downward-sloping; upward-sloping c.upward-sloping; flat d.flat; downward-sloping

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

A study of consumers' attitudes toward labor standards for the products they buy revealed that consumers: a.just do not care. b.would completely change their buying patterns and want to be 100% sure that products they buy are made in foreign factories with good working conditions. c.would pay a slight premium to ensure good working conditions. d.are more concerned about the prices they pay than working conditions overseas.

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.

An international conference in Bretton Woods, New Hampshire, in 1944 resulted in the formation of: a.the European Union in 1945. b.the Kyoto Agreement in 1971. c.the General Agreement on Tariffs and Trade (GATT) in 1947. d.the International Red Cross in 1955.

Because a large nation can force the nation exporting the product to pay a substantial amount of the tariff, its _________ may improve after the tariff is imposed. a.consumption b.production c.terms of traded. income tax collection rate

Because of the relationship among ethanol production, sugar, and corn the authors of your text have concluded that: a.the corn subsidy is a big problem for ethanol exports. b.the sugar quota makes sugar so cheap in the United States that ethanol producers are using it instead of corn. c.due to the sugar quota and its high price, there is a huge demand for less environmentally friendly corn as a substitute in food products and for ethanol. d.ethanol should be imported rather than exported.

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.

Compared with a tariff, welfare losses will _______ when voluntary export restraints are used to reduce imports. a.decrease b.not change c.increase d.first increase, then decrease

Downgrading is: a.the slope of the import demand curve. b.the fall in tariffs. c.a decline in average quality when protection is eliminated. d.the result of deadweight loss.

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.

How does a tariff imposed by a large country differ from a tariff imposed by a small country? a.If a large nation imposes a tariff, that government gets more revenue. b.It may not have any effect at all in the large country, since its consumers have so many other choices. c.Because of its size, the large nation's tariff not only decreases the quantity demanded of the product but may also reduce the world price of the good. d.The large nation can just buy up foreign producers if the foreign producers don't like having a tariff imposed.

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.

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.

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.

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

If a quota license is awarded to a domestic firm without an auction, it may generate bribes or lobbying spending to earn this revenue. Economists call this a(n) ____ activity. a.efficient b.unnecessary c.wasteful rent-seeking d.profit-maximizing

If a regional trading agreement causes products from member countries to replace imports from nonmember countries, then the regional trading agreement will experience: a.economic gains. b.trade creation gains. c.trade diversion losses. d.trade perversion

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%

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.

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.

Import tariffs are ___________ on imports, and import quotas are ____________ on imports. a.subsidies; taxes b.limits; subsidies c.taxes; limits d.limits; taxes

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

In a large country case, an optimal tariff is one for which the terms-of-trade gain exceeds the: a.producer surplus. b.increased price of the product imported. c.deadweight loss. d.consumer surplus.

In a large country case, an optimal tariff would be: a.one that increases the producer surplus. b.one that raises the price of the product imported. c.one in which the terms-of-trade gain exceeds the deadweight loss. d.one that easily passes the legislative process.

In a prisoner's dilemma: a.all competing parties gain. b.one competitor gains at the expense of another. c.all competing parties lose. d.one competitor loses.

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.

In terms of efficiency, trade diversion is a _____ desirable outcome of a regional free-trade agreement, because trade is diverted from the ___________ producer to the __________ producer . a.more; high-cost; low-cost b.more; less deserving; more deserving c.less; low-cost; high-cost d.less; foreign; domestic

In the 1980s, the United States used _________ to restrict imports of Japanese automobiles. a.quotas b.tariffs c.voluntary export restraints d.antidumping duties

India is not a member of the China-ASEAN (Association of South East Asian Nations) free-trade area implemented on January 1, 2010. As a result, India fears that some of its: a.exports to China will be diverted to ASEAN countries. b.exports to the United States will be diverted to China. c.exports to China and to ASEAN countries will be diverted to trade among members of the China-ASEAN free-trade area. d.imports from ASEAN countries will be diverted to China.

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.

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

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.

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.

NGOs seem to do a better job than national policies because they: a.can enforce regulations. b.are better organized. c.target the worst offenders. d.target the worst offenders and are better organized.

One estimate of the deadweight losses of the 2002 U.S tariffs on imported steel is: a.$185 trillion. b.$185 billion. c.$185 million. d.$185,000.

Suppose a nation agrees to limit its own exports by imposing quotas on its own firms in order to keep revenue high, keep from breaking WTO rules, and pacify protectionist interests in the import nation. Which of the following terms describes this practice? a.lost profit opportunities b.reverse import restrictions c.voluntary export restraint agreement d.deadweight welfare loss

Suppose country X currently produces widgets. Then it establishes a preferential trading agreement with country Y. Following the formation of the PTA, country X no longer produces widgets and imports widgets from country Y. What has occurred? a.There is trade diversion and a welfare gain for both country X and country Y. b.There is trade diversion, a welfare gain for country Y, and a welfare loss for country X. c.There is trade creation and a welfare gain for both country X and country Y. d.There is trade creation, a welfare gain for country Y, and a welfare loss for country X.

Suppose initially there is no customs union and that the $100 tariff is imposed by the United States. Now, Mexico invests in productive technology and it shifts the Mexican supply curve to SMex. The United States now forms a customs union with Mexico. This will result in a price of _______ and imports of _______. a. $250; 500 b. $250; 400 c. $150; 600 d. $150; 500

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

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.

Suppose that production of steel in the United States involves negative externalities. Now suppose that U.S. tariffs on steel imports are eliminated and U.S. imports of steel increase. What effect does the elimination of these tariffs have on total social costs associated with steel production in the United States? a.Total social costs will increase. b.They will not change. c.They will decrease. d.They will increase but may be smaller than the private gains from increased steel imports.

Suppose that the U.S. government imposes a 20% tariff to protect U.S. clothing manufacturers adversely affected by the expiration of the Multifibre Agreement. Compared with a free-trade situation, the price of clothing will ______, and U.S. clothing production will ________. a. fall; fall b.fall; rise c.rise; rise d.rise; fall

Suppose that the U.S. government imposes a 20% tariff to protect U.S. clothing manufacturers adversely affected by the expiration of the Multifibre Agreement. Compared with a free-trade situation, what will happen to the price of clothing in the United States and to U.S. production of clothing? a.The price of clothing will fall, and U.S. clothing production will fall. b.The price of clothing will fall, and U.S. clothing production will rise. c.The price of clothing will rise, and U.S. clothing production will rise. d.The price of clothing will rise, and U.S. clothing production will fall.

Suppose that the U.S. government required firms to pay a living wage to workers in their subsidiaries or contracting firms in developing countries. As a consequence of this requirement, wages would likely _______ to the living wage and employment would likely _________. a.rise; increase b.fall; increase c.rise; decrease d.fall; decrease

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.

Suppose that the United States allowed its domestic fuel producers to use ethanol made from any source (corn or sugar). What is likely to happen to U.S. production of corn ethanol and U.S. imports of sugar ethanol? a.U.S. production of corn ethanol would increase, and U.S. imports of sugar ethanol would decrease. b.U.S. production of corn ethanol would decrease, and U.S. imports of sugar ethanol would decrease. c.U.S. production of corn ethanol would decrease, and U.S. imports of sugar ethanol would increase. d.U.S. production of corn ethanol would increase, and U.S. imports of sugar ethanol would increase.

Suppose that the equations S = 2P and D = 6 - P represent a small country's home supply and home demand curves. If the world price is $1, which of the following is the increase in the country's surplus when it trades compared with autarky? a.$6.00 b.$4.50 c.$2.50 d.$0.50

Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 16 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. What is the purpose of this €60per-ton tariff? a.Its purpose is to protect Finnish steel consumers from foreign competition. b.Its purpose is to protect Finnish steel producers and consumers from the World Trade Organization. c.Its purpose is to protect Finnish steel producers from foreign competition. d.Its purpose is to cause Finland to comply with provisions of the General Agreement on Tariffs and Trade.

Suppose that the supply curve for widgets is described by this equation: P = 2Q. What is the value of producer surplus when P = 5? a.$5 b.$12.50 c.$25 d.$50

Suppose that the world price of resins is $100 per ton. Now suppose that the United States imposes a 10% tariff on imported resins. What is the U.S. domestic price of resins after the 10% tariff is imposed (rounded to the nearest dollar) if exporters bear half of the tariff? a.$90 b.$100 c.$105 d.$95

Suppose that there is a negative externality associated with alcohol consumption in the United States. What does this negative consumption externality imply about the relationship between the demand curve for alcohol and the social marginal benefit (SMB) curve for alcohol? a.The demand curve and the SMB curve for alcohol are identical. b.The demand curve lies below the SMB curve for alcohol. c.The demand curve lies above the SMB curve for alcohol. d.The demand curve intersects the SMB curve at the market equilibrium price.

Suppose that: (1) the United States has a comparative advantage in producing chemicals; (2) Costa Rica has a comparative advantage in producing sugar, and (3) the United States imposes a quota on its imports of Costa Rican sugar. Now suppose that the United States eliminates its import quotas on Costa Rican sugar. Which of the following is MOST likely to occur for the United States? a.Consumer surplus for American consumers of sugar products will fall. b.Producer surplus for American sugar producers will rise. c.Consumer surplus for American consumers of sugar products will rise. d.Tariff revenues for the U.S. government will rise.

The "most favored nation principle" means: a.that member countries can enter into exclusive favorable agreements with some countries. b.that member countries are barred from forming agreements outside their geographic vicinity. c.that member countries must apply the same low tariffs to all WTO member countries. d.that member countries must apply differential tariffs on imports from non-WTO countries.

The Home import demand curve is downward sloping because: a.as the government forces the price down, consumers buy more. b.foreign companies want to help domestic competitors. c.as the price falls below domestic equilibrium, the shortage in demand is filled by importing more quantity from abroad. d.consumers can control the price of the good.

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%

The WTO (under the GATT agreement) provides that nations may enter into regional trade agreements as long as they: a.limit such agreements to one. b.extend the provisions to all other nations in the WTO. c.do not jointly increase tariffs against outside countries. d.make sure they include smaller nations in their regions.

The World Trade Organization is called _______________ because it involves many, if not most, of the nations in the world. a.a bilateral trade organization b.a trilateral trade organization c.a multilateral trade agreement d.a quasi-political trade organization

The difference between the price consumers are willing to pay and the price that they actually pay is known as: a.price discrimination. b.government surplus. c.consumer surplus. d.producer surplus.

The phenomenon known as the tragedy of the commons occurs whenever: a.the private sector owns resources and manages them tragically. b.the government owns resources and manages them tragically. c.there is no ownership of resources, so they become depleted due to lack of management. d.two countries own the same resource and cannot agree on its management.

The purpose of the Labor Side Agreement under NAFTA is to: a.increase standards in Mexico only. b.increase standards throughout NAFTA. c.enforce existing standards throughout NAFTA. d.renegotiate standards.

The story about the mass slaughter of buffalo in the United States, which allowed the products to be exported during the 1870s, is an example of: a.the first-mover principle. b.the principle of comparative advantage. c.the tragedy of the commons. d.export subsidies.

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

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

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.

Under the WTO provision of Article XIX, countries can: a.never charge a tariff on an import. b.always charge a tariff on imports. c.temporarily charge a higher tariff on certain commodities. d.provide subsidies to all domestic producers of import competing products.

Using game theory as an analytical tool, if one large nation imposes tariffs, the total cost is small; however, when several trading partners do the same: a.the costs are even smaller. b.the costs balance out and there is no harm. c.the costs are the same but the potential gains are much smaller . d.then all nations gain.

What GATT provision did the United States use to justify levying tariffs on tire imports in fall 2009? a.antidumping duties b.export subsidization c.safeguard clause d.national security

What is the Kyoto Protocol? a.It is a treaty on abolishing child labor and forced labor camps. b.It is a guideline for using "force" when interrogating prisoners. c.It is based on the 1992 UN climate treaty that set specific air pollution reduction targets for each nation. d.It is a set of rules for shipping dangerous chemicals to avoid harm and to lower the risk of a terrorist attack.

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

When the United States imposed tariffs of 30% on many steel imports in March 2002, the estimated total cost to the United States over the period of March 2002 to December 2003 was: a.$1 million. b.$3.32 for each job saved—certainly worth it. c.$185 million. d.too small to measure.

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

Which of the following agreements signed in 1989 is the precursor to NAFTA? a.the U.S.Mexico Free Trade Agreement b.the Canada-Mexico Free Trade Agreement c.the Canada-U.S. Free Trade Agreement d.the Canada-Mexico-U.S. Free Trade Agreement

Which of the following describe why small nations impose tariffs, even though they reduce national welfare? I. Small, mostly poor, nations have no reliable means for collecting taxes to run their governments. II. Politicians like to build favor with industrial interests, especially during political campaigns. III. Raises for elected officials often hinge on whether enough tariff revenue is collected by the treasury department. a.I b.II c.I and II d.I, II, and III

Which of the following groups favored the suspension of preferential trade treatment for Bangladesh in 2013? a.the U.S. Congress b.the Bangladeshi garment industry c.U.S labor leaders d.U.S. consumers

Which of the following is an example of the tragedy of the commons? a.overproduction of Saudi Arabian crude oil b.overregulation of the U.S. steel industry c.over-harvesting of many species of fish d.U.S. farm subsidies

Which of the following is an exception to the most favored nation principle? a.trade in petroleum b.trade with Japan c.tariff concessions negotiated within a free-trade area or a customs union d.trade in services

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.

Which organization acts as a forum for countries to come to agreement on trade policies and resolve trade policy disputes? a.the International Trade Organization b.the United Nations c.the World Trade Organization d.the United Nations Conference on Trade and Development

Which principle of the GATT/WTO do regional trade agreements violate? a.the principle of first mover b.the targeting principle c.the most favored nation principle d.the principle of comparative advantage

Who bears the burden of the terms-of-trade effect when a large country imposes a tariff? a.foreign consumers b.foreign producers c.domestic producers d.domestic consumers

Who collects quota rents when the government gives quota licenses to domestic firms? a.domestic consumers b.foreign suppliers c.domestic producers d.the government

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.

A dining table costs $3,000 in New York and same table costs 5000 euros in Rome. If absolute PPP holds, $1 is equal to A) 1 euro B) 2 euros C) 5/3= 1.67 euros D) 3/5= 0.6 euros

C) 5/3= 1.67 euros

When the dollar depreciates against the euro, which of the following is unlikely to happen? A) German consumers will buy more U.S. products B) U.S consumers will find German goods to be more expensive C) German firms that export to the U.S. market will have a higher profit D) Americans will not travel to the euro areas as much for vacations

C) German firms that export to the U.S. market will have a higher profit

Which of the following situations would be inconsistent with the others? A) A deficit in the current account B) gross national expenditure being greater than gross national disposable income C) Net lending to the rest of the world D) A surplus in the financial account and capital account

C) net lending to the rest of the world

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.

A case study of NAFTA, with regard to the benefits for Canada from U.S. trade, found that: a.Canada was not able to increase its exports due to barriers still remaining. b.Canada had modest gains but was harmed by immigration into the United States from Mexico. c.Canada had more trade diversion than trade creation and so was harmed overall. d.Canada had more trade creation than trade diversion and so benefited overall.

A country that becomes a member of the World Trade Organization agrees to bind its tariffs. "Binding" means that the country agrees not to increase existing tariffs and that it will not introduce new tariffs. However, GATT allows three exceptions to binding. Which of the following is NOT an exception to binding? a.antidumping duties against dumped imports b.countervailing duties against subsidized imports c.safeguard or escape clause tariffs d.tariff reductions negotiated in free-trade areas

A customs union is: a.a group of countries that agrees there will be "no rules" about trade—anything goes. b.a group of countries that agrees to eliminate customs fees and containerized shipping charges on goods traded among them. c.a group of countries agreeing to eliminate barriers to trade between themselves but keeping tariffs in place against the rest of the world. d.a group of countries that eliminates trade barriers among themselves and erects a common tariff against all other nations.

A free-trade area is defined as: a.a trading agreement that allows for free flow of resources. b.a trading agreement that binds member countries to have a uniform tariff on other countries. c.a trading agreement that lets countries rely on subsidies on domestic production. d.a trading agreement in which a group of countries voluntarily agree to remove trade barriers between themselves.

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

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

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

A tariff levied on a good produced in a small nation with an inelastic supply that maximizes the gain to a large nation is called a(n): a.retaliatory tariff. b.prime tariff. c.inelastic tariff. d.optimal tariff.

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.

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.

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%

China recently became a member of the World Trade Organization. For China, one of the benefits of WTO membership is: a.most favored nation treatment of its exports. b.the right to increase tariffs on all its imports. c.the right to subsidize all its exports. d.the right to impose antidumping duties on its imports.

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.

Did the United States ratify the Kyoto Protocol? Why or why not? a.Yes; but it has failed to meet targets for a number of years. b.No; the United States had promised to sign on January 1, 2008, but never did. c.Yes; and it has met its target each year. d.No; he United States believed the targets were impossible to meet without great harm to the industrial base.

Do the provisions of the GATT and WTO permit countries to apply their own environmental regulations against imports? a.No; environmental regulations applying to domestic production and imports need to be negotiated internationally under treaties such as the Kyoto Protocol. b.No; environmental regulations applying only to imports need to be negotiated internationally under treaties such as the Kyoto Agreement. c.Yes; and countries may require stricter environmental regulations for imports than for domestic production. d.Yes; as long as environmental regulations apply uniformly to domestic production and imports.

How did the WTO react to the U.S. imposition of steel tariffs in 2002? a.It said that even though the tariffs were high, it was okay because of the escape clause. b.It suspended the United States temporarily, stripping it of all its rights in the organization. c.It made the United States promise to repeal the tariff as soon as possible. d.It allowed other nations to impose tariffs on U.S. exports to retaliate.

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

If we assume perfect competition in the product markets, producer surplus is: a.maximized. b.minimized. c.equal to the firm's monopoly profits. d.equal to the return to the fixed factors of production.

In general, a tariff reduces the national welfare of the small importing nation because: a.there is a fall in producer surplus. b.there is a rise in consumer surplus. c.the gain in consumer surplus is smaller than the loss in producer surplus. d.the gain in producer surplus is smaller than the loss in consumer surplus.

In the case of global pollution, a nation that pollutes gets benefit from production but: a.has to pay for it in terms of dirty air and water. b.never receives any negative consequences. c.cannot control the amount of pollution by private firms. d.will not suffer the full costs of its own pollution and so has little incentive to control it.

In the large country case, when a tariff is imposed, the country: a.sees a terms-of-trade gain. b.is able to reduce world price of the imported good. c.is going to experience an increase in consumer surplus. d.sees a terms-of-trade gain and is able to reduce world price of the imported good.

In which type of trade agreement does the WTO allow exclusions to the most favored nation principle? a.multilateral trade agreements b.free-trade areas c.customs unions d.free-trade areas and customs unions

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

Most economists are opposed to the "living wage" concept in foreign labor agreements because: a.it is barely enough for survival. b.most workers in low-income nations already earn more. c.workers should never earn more than the managers. d.it is well above the market wage, and many workers in poor nations would lose the opportunity to be employed.

Normally the WTO does not allow discriminatory treatment in trade of member nations, but it makes an exception for nations: a.that have a large trade surplus. b.using environmentally harmful production techniques. c.that cannot control drugs and other illegal activities. d.engaging in regional free-trade agreements.

One feature of the GATT and now the WTO is that all member nations get the same treatment from their trading partners in terms of trade rules and restrictions. This provision is called: a.beggar thy neighbor. b.the good neighbor policy. c.rotating obligations. d.most favored nation status.

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

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.

Suppose that the United States is a large country and it wishes to impose optimal tariffs on its imports of avocados, bananas, and cherries. The export supply elasticities of avocados, bananas, and cherries are 1, 2, and 3, respectively. Which of the following ranks the products on the basis of their optimal tariffs from lowest to highest tariff? a.cherries, bananas, avocados b.avocados, cherries, bananas c.bananas, avocados, cherries d.avocados, bananas, cherries

Suppose that there is a negative externality associated with alcohol consumption in the United States. Will the United States be better or worse off if it eliminates all tariffs on alcohol imports? a.The United States will always be better off when tariffs on imported alcohol are eliminated. b.The United States will always be worse off when tariffs on imported alcohol are eliminated. c.The United States will be no better or worse off when tariffs on imported alcohol are eliminated. d.The United States will be better off only if the private gains from trade exceed the increased social costs of alcohol consumption when tariffs on imported alcohol are eliminated.

The United States applies a 25% tariff on imported pickup trucks. If the United States is considered to be a large country, then the U.S. price of an imported Toyota pickup with a CIF price (price landed at the U.S. border) of $20,000 will be: a.$25,000. b.$15,000. c.between $15,000 and $25,000. d.between $20,000 and $25,000.

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.

The WTO is considered _________, whereas NAFTA and the European Union are __________. a.a free trade area; cartels b.a cartel; multilateral agreements c.a free trade area; multilateral agreements d.a multilateral agreement; regional trade agreements

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

The safeguard provision or escape clause allows a country to: a.import products below cost from foreign countries. b.export products by selling below cost to foreign countries. c.avoid tariffs in foreign countries temporarily. d.temporarily increase tariffs on certain imported goods.

The tragedy of the commons refers to: a.the plight of the common people, who are doomed to low paying jobs and discrimination. b.the fact that public resources are becoming scarce. c.the idea that what we have in common is often not why we trade. d.the idea that when everyone has free access to a resource, it will be overused and depleted.

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.

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.

U.S. tire producers did not support the recently enacted tariff on imports of Chinese tires because U.S. producers that also produce tires in China would have experienced a decline in their ___________ earned in ___________. a.consumer surplus; the United States b.producer surplus; the United States c.consumer surplus; China d.producer surplus; China

Under the GATT framework, nations negotiated for up to six years, resulting in new trade agreements. These are known as: a. conferee sessions. b. plenary meetings. c. sesquisessions. d. rounds.

We can measure producer and consumer gains by looking at the supply and demand graphical representation. Total welfare in the economy would be: a.the area above the supply curve but below the equilibrium price. b.the area below the demand curve but greater than the equilibrium price. c.the area below the demand curve all the way down to the quantity axis. d.the combined triangular area below the demand curve and above the supply curve.

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.

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.

What is the "most favored nation" principle of the WTO? a.Trading partners may choose a favorite nation to trade with. b.Any nation can refuse to trade with another that is not its most favored nation. c.The WTO has the right to choose the nation that has performed best within the WTO guidelines as its most favored nation. d.Every nation must grant the same rights and treatment to other nations in the WTO as its "most favored nation."

What type of spillovers do the United States and the European Union governments believe are associated with their domestic solar panel production? a.consumption spillovers b.heating spillovers c.electricity spillovers d.knowledge spillovers

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.

When a large nation imposes a tariff, which of the following is NOT a cost incurred? a.deadweight efficiency loss b.reduced consumer surplus c.deterioration of terms of trade for the trading partners d.falling government revenues for the nation imposing the tariff

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

Where was the Climate Summit held in December 2009? a.Brussels b.New York c.Seattle d.Copenhagen

Which country saw the largest increase in its textile and clothing exports to the United States after the Multifibre Arrangement was abolished? a.Japan b.India c.Mexico d.China

Which of the following is NOT a reason why the United States did NOT sign the Kyoto Protocol? a.We still do not understand all the consequences of policy actions that affect global warming. b.Meeting the Kyoto targets would negatively affect the U.S. economy. c.Kyoto failed to include the developing countries, especially China and India. d.There was not enough cash incentive being provided to the United States to sign the protocol.

Which of the following is NOT an effect of an import tariff? a.It increases producer surplus by raising the market price and allowing more production. b.It raises government revenue. c.It reduces consumer surplus by raising the market price. d.It improves efficiency in the economy overall because it saves high paying jobs.

Which of the following is included in "labor standards"? I. minimum wages II. safety standards III. child labor regulations a.I b.I and II c.II and III d.I, II, and III

Which of the following statements characterizes NAFTA's economic arrangements among its member countries (Canada, Mexico, and the United States)? a.There are no restrictions on the movement of labor from one country to another. b.There are no restrictions on the movement of capital from one country to another. c.All three countries have adopted the same identical tariff system. d.There is free trade among the three member countries.

Which of the following statements explains why trading partners are often concerned about each other's labor standards? I. From a humanitarian perspective, people do not want to buy products if workers are in oppressive conditions. II. Unions realize that low standards for labor will be less costly, and those products will compete more effectively with products produced at home. III, Some nations do not enforce their own lax labor standards, but have also signed on to trade agreements. a.I b.II c.II and III d.I, II, and III

Which of the following statements is(are) FALSE? I. Trade creation is always bad for countries. II. Trade diversion is always good for countries. III. Regional trade agreements never cause welfare losses. a.I b.II c.III d.I, II, and III

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.

Who collects quota rents when the government auctions quota licenses? a.domestic consumers b.foreign suppliers c.domestic producers d.the government

Why are economists sometimes skeptical about international labor standards? a.They are difficult to enforce. b.They create more competition for U.S. workers. c.GATT does not allow labor standards. d.They may be used as a rationale to protect domestic activities that can no longer compete with imports.

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.

Why does the United States maintain high sugar quotas? a.to fight the obesity problem in America b.to punish sugar production in Communist nations c.to support sugar producers in low-income countries d.to avoid payouts to domestic sugar producers

Exchange rates are important because A) They affect the affordability of imports B) they make exports either more or less expensive for foreign buyers C) They affect the value of foreign assets and their returns D) all of the above

D) all of the above

From uncovered interest parity, we know that when the domestic currency is expected to depreciate, the domestic interest rate should be A) greater than the foreign interest rate B) greater than the foreign return C) less than the foreign interest rate D) less than the foriegn return

A) greater than foreign interest rate

If S = 1P represents a country's home supply curve and D = 100 - 1P represents its home demand curve, then the equilibrium price and quantity in autarky are: a.$100 and 0 units b.$50 and 50 units. c.$0 and 100 units d.All the answer choices are incorrect.

Suppose that Norway is a small country and currently produces 100,000board feet of lumber at $600 per 1,000 board feet. Then it begins to trade at the world price of $500 per 1,000 board feet. As a result of trade,Norway's production falls to 50,000 board feet and its consumption increases to 200,000 board feet. What is Norway's total gain in consumer surplus once it begins to trade? a.$10,000 b.$15,000 c.$100,000 d.$150,000

A customs union is different from a free-trade area, in that: a.the latter allows for free movement of factors, whereas the former does not. b.the latter allows for uniform tariffs, whereas the former does not. c.the latter removes trade barriers between member countries, whereas the former adopts identical tariffs with the rest of the world. d.the former removes trade barriers between member countries, whereas the latter adopts identical tariffs with the rest of the world.

When the absolute PPP holds, the real exchange rate is always equal to A) 1 B) the nominal exchange rate C) relative prices across contries D) 1/nominal exchange rate

a) 1

Whenever the balance on the current account (CA) is negative, it indicates that: a) the trade deficit b) total spending (GNE) in the economy is greater than income (GNDI) and is financed by barrowing from abroad c) domestic investment is less than national savings d) income (GNDI) is greater than total spending (GNE) in the economy and the country is a net lender to the rest of the world

b) total spending (GNE) in the economy is greater than income (GNDI) and is financed by barrowing from abroad

Suppose $1=10.5 pesos in new York and $1=9.6 pesos in mexico city. If you had $10,000 using arbitrage, your profits would be a) $(10,000*10.5/9.6)-$10,000= $937.50

$937.50

Foreign exchange swaps involve: A) selling one currency on the spot market and at the same time purchasing a forward B) trading goods rather than money to improve efficiency C) delaying payment of a spot contract until the currency is actually delivered D) none of the above

A) selling one currency on the spot market and at the same time purchasing it forward

Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 16 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. Suppose that the €60-per-ton tariff caused Finnish production of steel to increase by 100,000 tons and Finnish consumption of steel to fall by 100,000 tons. What is the value of Finland's welfare loss due to the tariff? a.200,000 tons b.€6 million c.€12 million d.€15 million

Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 16 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. Who will gain and who will lose as a result Finland's €60-per-ton tariff on imported steel? a.Both Finnish steel producers and steel consumers will be worse off with the tariff than without it. b.Finnish steel producers will be better off, and Finnish steel consumers will be worse off with the tariff than without it. c.Finnish steel producers will be worse off, and Finnish steel consumers will be better off with the tariff than without it. d.Both Finnish steel producers and steel consumers will be better off with the tariff than without it.

The General Agreement on Tariffs and Trade focused on: a.raising tariffs on agricultural products. b.lowering trade restrictions between countries. c.promoting full employment worldwide. d.increasing trade restrictions between countries.

WTO is the acronym for: a.the World Traffic Organization. b.the World Trade Organization. c.the World Tariff Organization. d.the World Tax Organization.

What is an "export subsidy"? a.a payment by one government to another for exports b.a payment (or other benefit) to domestic firms by their government to help them sell exports more cheaply c.the rule that says all exports must be taxed before they leave the port d.a provision that exporters must get their payments indirectly through a third party

When a tariff is imposed, there is always an additional loss. One loss occurs when production moves from more efficient foreign producers to less efficient domestic producers. This loss is the: a.consumption loss. b.efficiency transfer. c.production loss. d.X-factor .

When firms are able to sell units of a good at a price higher than the marginal cost of production, they are getting: a.consumer surplus. b.higher efficiency. c.producer surplus. d.marginal utility.

The situation in which the difference in interest rates between two currencies is equal to the expected change in the spot rate over the same time period is known as: A) covered interest arbitrage B) covered interest parity C) uncovered interest parity D) uncovered interest arbitrage

C) uncovered interest parity

Suppose that the equations S = 2P and D = 6 - P represent a small country's home supply and home demand curves. If the government imposed a 50% tariff on imports, how much revenue would it collect as a result of the tariff? (Note: It is possible to consume partial units of this product, such as 2.5 units.) a.$1.50 b.$2.75 c.$0.50 d.$0.75

Suppose that the free-trade price of a ton of steel is €500. (Note: € is the symbol for the euro, a common currency used in 16 European countries, including Finland.) Finland, a small country, imposes a €60 per-ton specific tariff on imported steel. With the tariff, Finland produces 300,000 tons of steel and consumes 600,000 tons of steel. What is likely to happen to Finnish production of steel and the price of steel sold in Finland after the €60-per-ton tariff is imposed? a.Finnish steel production will fall, and the Finnish price of steel will fall. b.Finnish steel production will rise, and the Finnish price of steel will fall. c.Finnish steel production will fall, and the Finnish price of steel will rise. d.Finnish steel production will rise, and the Finnish price of steel will rise.

An agreement that gives one party the right to buy or sell from or to another part a specified quantity of currency at a specified price would be include in which of the following. A) an option B) a spot contract C) a forward contract D) a swap

a) an option

If the home currency has a real depreciation, what is the situation? A) it takes more home goods to purchase the same quantity of foreign goods B) it take fewer home goods to purchase the same quantity of foreign goods C) the nominal exchange rate must have risen D) the nominal exchange rate must have fallen

a) it takes more home goods to purchase the same quantity of foreign goods

Arbitrage occurs when an entity purchases a good in the lower priced market and sells it at the same time in the highed priced market. The existance of trade costs would ___ opportunites of abitrage a) lower b) not affect c) increase d) completly eliminate

a) lower

A deficit in the financial account means: a) the nation has imported more assets than it exported b) the nation has exported more assets than it imported c) the nation has invested more than it saved d) the nation has produced more than it consumed

a) the nation has imported more assets than it exported

Arbitrage may not achieve purchasing power parity due to a) trade costs B) dealer markups that vary between nations C) taxes on income D) high interest rates

a) trade costs

In equilibrium, all traded goods sell at the same price internationally because of a) government intervention B) arbitrage C) the fact that the underlying value is the same everywhere D) none of the above

arbitrage

Net national savings (S=y-c-g) is realted to the balance on the CA in the following way (the current account identity): a) national savngs (S)= the balance on the current account (CA) + gross domest product (gdp)- gross national expenditure (GNE) b) national savings (S)= domestic investment (I)+ the balance on the current account (CA) c) National savings (S)= domestic investment (I)- the balance on the current account (CA) d) net national savings (s)+ the balance on the current account (CA)+ domestic investment (I)= gross domestic product

b) national savings (S)= domestic investment (I)+ the balance on the current account (CA)

Using the UIP equation, what would happen to the spot rate for euros if the interest rate on U.S dollars deposits rises ceteris paribus? A) the spot rate for euros would rise B) the spot rate for euros would fall c) the spot rate for euros would be unchanged d) all of the above could happen

b) the spot rate for euros would fall (dollar appreciation)

Using the UIP equation, equilibrium in the short run occurs when a) arbitrage is possible b) the spot rate is such that foreign and domestic investment returns are equalized c) the spot rate and forward rate are equalized d) foreign interest rates and domestic interest rates are equalized

b) the spot rate is such that foreign and domestic investment returns are equalized

Suppose that the UIP holds. If the U.S. interest rate is 9% and the eurozone interest rate is 5%, then in the short run we would expect: a) the dollar to appreciate approximately by 4% b) the dollar to depreciate approximately by 4% c) the dollar to appreciate by 14% d) insufficient information is provided

b)the dollar to depreciate approximately by 4%

Using an approximation to the UIP eqaution to determine the spot exchange rate, assume that the expected spot rate (after 1 year) for euros (in terms of dollars)= $1.50, the current interest rate on euro deposits is 2% and the current interest rate on dollar deposits is 6%. What current spot for euros would satisfy the equation? a) $1.5*(1+2%)= $1.53 b) $1.5*(1-2%)= $1.47 c) $(1.5/(1+4%)= $1.442 d) $(1.5/(1-4%)= $1.563

c) $(1.5/(1+4%))= $1.442

with the relative PPP, a rise in a nations inflation rate is always associated with an increase in the _____ if its currency A) rate of appreciation B) rate of forward premium C) rate of deprecation D) rate of forward discount

c) rate of depreciation

Evidence on the existence of relative PPP shows that: A) the evidence for relative PPP is scanty and theory is large discredited B) the evidence for relative PPP is hit or miss, and so one should exercise cations in using relative PP to predict changes in exchange rates C) relative PPP is an approximate guide to predicting the relationship between changes in inflation and exchange rates over long periods such as decades d) relative ppp holds nearly perfectly in the short and long run, are used with great accuracy to make predictions

c) relative PPP is an approximate guide to predicting the relationship between changes in inflation and exchange rates over long periods such as decades

The average of the bilateral rate changes for a nation, weighted by the importance of the trading partner, is know as A) the real exchange rate B) the nominal exchange rate C) the effective exchange rate D) the direct exchange rate

c) the effective exchange rate

What is the "most favored nation) principle of the wto? a) it means that trading partners may choose a favorite nation to trade with b) it means that any nation can refuse to trade with another that is not its most favored nation c) it means that the WTO has the right to choose the nation that has performed best within the WTO guidelines as its most favored nation d) it means that every nation must grant the same rights and treatment to other nations in the WTO as its most favored nation

d) it means that every nation must grant the same right and treatment to other nations in the WTO as its most favored nation

Which of the following factors is not part of the current account (CA) of a country? a) exports and imports b) income payments and receipts c) unilateral transfers d) purchase of foreign stocks

d) purchase of foreign stocks

In equilibrium, if both covered interest parity and uncovered interest parity hold, the expected future spot rate is equal to A) the current spot rate B) the expected forward rate C) the future spot rate D) the current forward rate

d) the current forward rate

In equilibrium, all traded foods sell at the same price internationally. If the same goods are expressed in their home prices, then the ratio of prices is equal to A) 1 B) the exchange rate between the two currencies C) the real exchange rate between the two currencies D) none of the above

the exchange rate between the two currencies

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