global business chapter 7

________ was a multilateral agreement established in 1947 whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like. Asia-Pacific Economic Cooperation (APEC) North American Free Trade Agreement (NAFTA) General Agreement on Tariffs and Trade (GATT) Smoot-Hawley Act Trans Pacific Partnership (TPP)

General Agreement on Tariffs and Trade (GATT)

What is the result of the threat of antidumping action? It helps the firm raise capital in the primary market. It limits the ability of a firm to raise prices in response to high demand. It enhances the firm's ability to disperse its productive activities in an efficient manner. It limits the ability of a firm to use aggressive pricing to gain market share in a country. It enhances a firm's competitive advantage to indigenous competitors in that country.

It limits the ability of a firm to use aggressive pricing to gain market share in a country.

Arguments for international trade typically focus on political and _____ reasons. theoretical social economic ethical human rights

economic

High tariff barriers and subsidies in the agricultural industry ultimately lead to the lack of overproduction of products. an increased volume of agricultural trade. increased prices for consumers. stronger competition from foreign suppliers. lower overall prices for the end-user.

increased prices for consumers.

A major reason why many economists remain critical of the infant industry argument is because it makes the domestic industry inefficient. does not provide guaranteed employment for citizens. affects the standards of living and per capita income of the people. promotes foreign direct investment. leads to reduced prices in domestic markets.

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During the 1980s and 1990s, trade sanctions were put in place by Western governments against South Africa in response to the apartheid policies in place there. These trade sanctions were a response to voluntary export restraints. excess tariffs on imports. decreasing birth rates. human rights violations. environmental abuses.

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If Indonesia exports vast quantities of cheap textiles to Italy, selling them at below their costs of production, it would be an example of monopolism. dumping. offshoring. nearshoring. subsidizing.

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Mexico has raised the taxes on cheeses imported from the United States. These taxes are an example of a(n) subsidy referendum antidumping policy. local content requirement. tariff.

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One objective of export tariffs is to abide by the rules enforced by the WTO. curb the competition offered by foreign firms to domestic firms. reduce exports from a sector to ensure a sufficient supply. maintain a positive trade deficit. increase the flow of capital in the international market.

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One of the main reasons why many economists remain critical of the infant industry argument is its reliance on the assumption that protection of manufacturing from foreign competition is harmful. absolute advantage cannot sustain productivity of an industry. foreign firms too come under the definition of infant industry when they newly enter a foreign market. firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital markets. foreign competition will eventually cause domestic firms to improve the quality of their products.

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Paul Krugman believed that a country that attempts to use strategic trade policy to establish a domestic firm in a dominant position in a global industry, is most likely to dominate the industry. move away from protectionism. provoke retaliation. incur huge financial debts. upset the special-interest groups within the economy.

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Paul Krugman characterizes strategic trade policy as being similar to the infant industry argument. a boost to national income at the expense of other countries. the closest that countries can get to free trade. a way to reduce the possibility of retaliatory actions by other governments. a way to reduce administrative barriers to trade.

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President Trump has voiced his opposition to many free trade deals. Because of this, some say that he maintains a(n) _____ view on trade. comparative advantage expansionist absolute advantage open economy mercantilist

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Some countries have a policy that entirely restricts the export of coffee products. This is called a(n) antidumping policy. import quota. administrative trade policy. export ban. voluntary export restraint.

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Subsidies and quotas are examples of ________ barriers a county might impose. antidumping tariff nontariff content requirements export restraint

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The Smoot-Hawley Act had a damaging effect on the balance-of-payment of the United States. cash flow in the domestic economy of the United States. prices of natural resources in the United States. employment abroad.

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The ultimate purpose of GATT was to promote U.S. imports of electronics. diminish U.S. exports. subsidize agricultural workers. safeguard intellectual property rights. establish free trade.

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According to the _____, U.S. government agencies must give preference to U.S. products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage. a. Export Administration Act b.Helms-Burton Act c.Hawley-Burton Act d.Buy America Act e.Volcker Rule

..h

Why is retaliation by government intervention a risky strategy? It encourages dumping by foreign companies. It could result in increased tariff barriers by the country that is being pressured. It may expose certain industries that are important for national security to foreign competition. It allows firms to sell goods in the foreign market at below their fair market value. It makes it difficult for domestic firms to make any investments by borrowing money from the domestic capital market.

.It could result in increased tariff barriers by the country that is being pressured.

If a country is experiencing a surge of electronic imports from a trading partner, it might ask that country to set a limit on how much can be exported. This limit is known as a tariff rate quota. quota rent. voluntary export restraint (VER). quota share. export embargo.

.voluntary export restraint (VER).

How did the Smoot-Hawley Act affect employment? It created more jobs domestically and abroad. It decreased the overall wage rate. It boosted job rates around the world. It did not have any effect on employment. It had a damaging effect on employment abroad.

It had a damaging effect on employment abroad.

AllMetal Corp., based in Houston, believes the ideal way for the United States to respond when foreign competitors are already being supported by government subsidies is not to retaliate but to establish rules that help minimize trade-distorting subsidies. Which theorist does AllMetal's management agree with? Krugman Hofstede Hamilton Heckscher Ohlin Ricardo

Krugman Krugman may be right about the danger of a strategic trade policy leading to a trade war. The problem, however, is how to respond when one's competitors are already being supported by government subsidies. According to Krugman, the answer is probably not to engage in retaliatory action but to help establish rules of the game that minimize the use of trade-distorting subsidies.

One focus of strategic trade policy is to help domestic companies gain more competition to lower prices. less competition to raise prices. monopoly status. a first-mover advantage. exclusive intellectual property rights.

a first-mover advantage.

Following the global financial downturn in 2008-2009, some developed nations subsidized automobile makers to help them survive the economic climate. One negative consequence of this action was that a. the companies had an unfair competitive advantage in the global industry. b. most of these companies implemented export quotas that drove up prices. c.more companies attempted to enter the industry and sales flattened. d. it wasn't possible for these companies to meet local content requirements. e.agricultural producers lost all subsidies they were promised.

a. the companies had an unfair competitive advantage in the global industry. In response to a severe sales slump following the global financial crisis, between mid-2008 and mid-2009, some developed nations gave $45 billion in subsidies to their automobile makers. While the purpose of the subsidies was to help them survive a very difficult economic climate, one of the consequences was to give subsidized companies an unfair competitive advantage in the global auto industry.

Foreign producers agree to ________ imposed by an exporting country because they fear more damaging punitive tariffs or import quotas might follow if they do not. a.voluntary export restraints b.tariff rate quotas c.quota rents d.export bans e.dumping

a.voluntary export restraints

How do voluntary export restraints affect the prices of goods? a. VERs do not affect the price of goods for consumers. b. VERs always reduce the domestic price of an imported good. c. VERs always raise the domestic price of an imported good. d. Typically, VERs will lower the price of goods while the quota is in place. e. VERs will always raise the export price of domestic goods. Incorrect

c. VERs always raise the domestic price of an imported good. VERs always raise the domestic price of an imported good. When imports are limited to a low percentage of the market by a quota or VER, the price is bid up for that limited foreign supply.

In order to encourage the agricultural industry, the French government provided low-interest loans for the purchase of seeds and fertilizers. The government also gave cash grants and made tax reductions. Which instrument of trade policy is being used by the French government? a. tariffs b. voluntary export restraints c. subsidies d. local content requirements e. import quotas

c. subsidies

The group that benefits the most from receiving subsidies is government international organizations such as the WTO. domestic producers. importers foreign competitors.

domestic producers.

The WTO rules say that a country can impose antidumping duties on violators of intellectual property laws. farmers who receive subsidies for more than two years. foreign governments that replicate products made by a foreign producer. foreign goods being sold cheaper than at home. nations that don't cooperate with trade agreements.

foreign goods being sold cheaper than at home.

Italy has a direct restriction on the amount of metal products that may be imported into the country. Which instrument of trade policy does this reflect? voluntary import restraint tariff rate quota export ban import quota quota rent

import quota

The ________ argument was proposed by Alexander Hamilton in 1792 and is by far the oldest economic argument for government intervention. infant industry strategic trade policy consumer protection national security retaliation

infant industry

Subsidies and quotas are examples of ________ barriers a county might impose. antidumping tariff nontariff content requirements export restraint

nontariff

In some years, the U.S. government has paid wheat farmers an additional 50 cents on every bushel of wheat they sell. This money is an example of a(n) local content tariff. ad valorem tariff. subsidy import quota. antidumping duty.

subsidy

For many years, there have been limits set on the amount of sugar that foreign producers can sell in the U.S. market. This is mandated by a net profit. tariff rate quota system. trade surplus. subsidy agreement. quota share.

tariff rate quota system.

One of the reasons why protectionist pressures arose around the world during the 1980s was the different ways many countries found to get around GATT regulations. the opening up of national markets to cheap products from China. the fall of the Soviet Union. the persistent trade lead taken by the United States. the Japanese failure in industries such as automobiles and semiconductors that strained the world trading system.

the different ways many countries found to get around GATT regulations.

According to Krugman, _____ is the best indicator of the dangers of a strategic trade policy. a decrease in subsidies a decrease in protectionism the occurrence of a trade war huge financial debts for the countries involved the occurrence of a global recession

the occurrence of a trade war