Deck 10: International Trade Policy

Question 1

International trade maximizes world welfare as the gains from trade cause:

A) a more efficient allocation of world resources
B) a decrease in price of nontradeable goods
C) more democracy in foreign countries
D) a decrease in overall world production
E) no change in world production.

Answer 1

a more efficient allocation of world resources

Question 2

Which of the following is not a benefit of international trade?

A) a larger selection of products
B) increased production efficiencies
C) more efficient allocation of resources
D) a redistribution of income from scarce to abundant factors of production
E) higher quality products

Answer 2

a redistribution of income from scarce to abundant factors of production

Question 3

Regulation of business by government is designed to aid in all of the following areas except:

A) strengthening the operation of the economy.
B) modifying the operation of the economy.
C) enhancing the operation of the economy.
D) concentrating the operation of the economy.
E) None of the above

Answer 3

concentrating the operation of the economy.

Question 4

In economics the term policy usually means:

A) the action that is taken by each specific company during its term.
B) the duration of a specific action for which goods are traded internationally.
C) an action or actions taken by the government.
D) All of the above
E) None of the above

Question 5

The theory of public choice is based on the premise that:

A) politicians attempt to maximize their utility.
B) politicians attempt to maximize the country's utility.
C) politicians attempt to keep neutral on unpopular subjects.
D) politicians attempt to minimize their utility.
E) politicians do not affect policy.

Question 6

The branch of economics that applies economic analysis to voting behavior is known as:

A) public finance.
B) negative political science.
C) public choice.
D) economic analysis of DUP.
E) public utility economics.

Question 7

The branch of economics that deals with governmental decision-making is:

A) civics.
B) public finance.
C) public choice.
D) economic/politics.
E) positive economics.

Question 8

The study of politics within a country like the U.S. by economists is called:

A) public economy.
B) political economy.
C) political choice.
D) public choice.
E) positive economics.

Question 9

The activity of a group that seeks to gain from changes in government policy is known as:

A) public policy.
B) directly productive activities.
C) rentseeking.
D) broad focus tariff policy.
E) welfare minimization.

Question 10

The use of resources to convince a government to restrict trade in a particular product is called:

A) rentseeking.
B) rent takers.
C) monopolizing the market.
D) monopoly power.
E) None of the above

Question 11

The group that would most likely lobby to influence the international trade policy of a country is:

A) the industry group that has a comparative advantage.
B) foreign investors.
C) individual private citizens, as they benefit from trade through lower product prices.
D) the industry group that has a comparative disadvantage.
E) consumers.

Question 12

The fact that there are very different tariffs on different products is known as:

A) the structure of protection.
B) public choice.
C) positive choice.
D) rent seeking.
E) industrial organization.

Question 13

Which of the following would mostly likely not receive protection?

A) industries with a comparative disadvantage
B) industries that are regionally concentrated
C) industries that employ a large number of workers
D) industries that have a large number of firms
E) None of the above

Question 14

Which of the following increases the likelihood of protectionism for a particular industry?

A) The industry produces an intermediate product.
B) The industry consists of many small firms.
C) The industry is not unionized.
D) The industry is geographically dispersed.
E) All of the above

Question 15

Which of the following statements is false?

A) Large industries tend to get more protection than small ones.
B) Concentrated industries tend to get more protection than industries that have a large number of small firms.
C) Intermediate products tend to get less protection than final products.
D) Industries that are not very concentrated geographically tend to receive lower levels of protection than industries that are regionally concentrated.
E) All of the above

Question 16

Which of the following is more likely to be protected by trade barriers in the U.S.?

A) jump ropes
B) apple juice
C) wheat
D) steel
E) information technology

Question 17

Which of the following industries are more likely to be protected?

A) industries with few firms
B) industries that produce an intermediate product
C) industries with a comparative disadvantage
D) All of the above
E) None of the above

Question 18

The benefits of a very detailed tariff schedule include:

A) the uniformity of tariffs for all products.
B) an increased public awareness of price changes caused by changes in tariffs.
C) the ability of government to provide protection on a specific product.
D) the ability of government to provide a transparent level of protection for domestic producers.
E) the ease of administration of the tariff.

Question 19

Which of the following is the only country in the world with a uniform tariff?

A) Switzerland
B) Mexico
C) Nigeria
D) Chile
E) Bolivia

Question 20

The Constitution of the U.S. stipulates that the authority to regulate commerce and tariffs is given to:

A) the President.
B) Congress.
C) the individual States.
D) the U.S. Supreme Court.
E) the Senate.

Question 21

Which of the following statements is false?

A) The Tariff of Abominations of 1828 led to a large increase in the U.S. tariff.
B) Tariffs were increased in the 1860s to help the government pay for the Civil War.
C) Before the Civil War tariff policy was a source of friction between the Northern and Southern parts of the U.S.
D) The Smoot-Hawley Tariff of 1930 led to a large reduction in the U.S. tariff.
E) Tariffs were raised during the Great Depression.

Question 22

The Tariff of Abominations:

A) led to the Revolutionary War.
B) led to World War I.
C) led to a large increase in U.S. tariffs in 1828.
D) led to a large increase in U.S. tariffs in 1930.
E) led to a large decrease in tariffs.

Question 23

The Tariff of _____ was passed in _____ over the strong objections of the Southern states.

A) Waste, 1840
B) Abominations, 1828
C) Revenue, 1870
D) New York, 1990
E) New Orleans, 1812

Question 24

The now infamous legislation of 1930 that imposed a very high tariff structure on goods imported into the U.S. was the:

A) Reciprocal Trade Agreements Act.
B) Trade and Tariff Act.
C) Omnibus Trade and Competitiveness Act.
D) Smoot-Hawley Tariff.
E) Trade Adjustment Assistance

Question 25

The Smoot-Hawley Tariff of 1930:

A) restricted the President to negotiate tariff reductions.
B) increased tariffs to their highest levels of the twentieth century.
C) provided a stimulus to the U.S. economy.
D) began the process of the worldwide lowering of tariffs.
E) was a uniform tariff.

Question 26

Which of the following pieces of legislation is the foundation of modern U.S. international trade policy?

A) The Tariff Act of 1828
B) The Smoot-Hawley Tariff of 1930
C) The Reciprocal Trade Agreements Act of 1934
D) The Trade and Tariff Act of 1958
E) The Trade Adjustment Assistance Act.

Question 27

Which of the following pieces of legislation made MFN an integral part of U.S. international trade policy?

A) the Tariff of Abominations Act of 1834
B) the Smoot-Hawley Tariff of 1930
C) the Reciprocal Trade Agreements Act of 1934
D) the Dillon Act of 1958
E) the Trade Expansion Act of 1978.

Question 28

The act which was passed to mitigate the Smoot-Hawley Tariff and which is still the cornerstone of American trade policy is:

A) the GATT Act.
B) the Omnibus Trade and Competitiveness Act.
C) the Smoot-Hawley Tariff.
D) the Reciprocal Trade Agreements Act.
E) the Kennedy Round Act.

Question 29

Which of the following is not a key provision of the Reciprocal Trade Agreement Act?

A) The president is allowed to negotiate tariff reductions without Congressional involvement.
B) The tariff reductions are made on a most favored nation basis.
C) The U.S. would reduce tariffs for tariff reductions by other countries.
D) Congress can amend a negotiated trade agreement.
E) All of the above

Question 30

Which of the following transferred power for trade negotiations from Congress to the President?

A) Smoot-Hawley Act
B) the Trade Expansion Act of 1962
C) the Trade Expansion Act of 1974
D) the Smoot-Hawley Act of 1930.
E) the Reciprocal Trade Agreements Act of 1934

Question 31

Since World War II, tariffs in general have:

A) increased.
B) decreased.
C) remained constant.
D) disappeared.
E) been transferred to quotas.

Question 32

The current average U.S. tariff rate is:

A) 15%.
B) 24%.
C) 42%.
D) 4%.
E) zero.

Question 33

The concept whereby all trading parties that were contracting parties to GATT or new members of the WTO are treated the same with respect to tariffs is known as:

A) ITO.
B) CIF.
C) FOB.
D) MFN.
E) WTO.

Question 34

Which of the following is not a form of administered protection?

A) antidumping duties
B) countervailing duties
C) specific duties
D) escape clause actions
E) All of the above

Question 35

Which of the following is not a form of administered protection?

A) antidumping duties
B) countervailing duties
C) the escape clause
D) offshore assembly
E) None of the above

Question 36

Dumping by a firm can be defined as:

A) a firm selling a product at a price below its cost of production in a foreign market.
B) a firm selling a product in a foreign market at a price lower than the price charged in its home market.
C) the discharge of waste products into the environment.
D) both a and b
E) both b and c

Question 37

Which of the following is not a type of dumping?

A) sporadic dumping
B) predatory dumping
C) complex dumping
D) persistent dumping
E) None of the above

Question 38

Which of the following does not cause lasting damage to the domestic industry?

A) sporadic dumping
B) persistent dumping
C) predatory dumping
D) All of the above
E) None of the above

Question 39

Which of the following is the term that refers to a situation where a country exports a good at a lower price than it sells for domestically?

A) voluntary export restraint
B) international commodity agreements
C) dumping
D) autarky
E) monopolistic competition

Question 40

Resolution of dumping cases in the U.S. involves investigations by:

A) the Justice Department and the International Trade Commission.
B) the Justice and Commerce Departments.
C) the Justice Department only.
D) the International Trade Administration and the International Trade Commission.
E) Congress.

Question 41

Antidumping duties:

A) are used to offset the effects of imports being sold at a price lower than that charged in the country of origin.
B) are illegal under U.S. trade law.
C) are administered by the Antitrust Division of the Justice Department.
D) All of the above
E) None of the above

Question 42

Which of the following statements is true?

A) U.S. antidumping law only prohibits predatory dumping.
B) U.S. antidumping law is completely consistent with WTO rules.
C) In an antidumping case, the ITA determines if the foreign product is being dumped in the U.S. market.
D) In an antidumping case, the ITC does not participate in the investigation.
E) Antidumping petitions are rarely filed.

Question 43

Countervailing duty cases involve:

A) foreign monopoly pricing.
B) foreign subsidies.
C) foreign tariffs on U.S. exports.
D) foreign VERs.
E) the use of quotas.

Question 44

Payment by government to a firm for each unit of output that it exports is known as a(n).

A) export subsidy
B) direct tax rebate
C) GATT/WTO
D) local content requirement
E) implicit subsidy.

Question 45

The application of countervailing duties against subsidized exports:

A) does not require evidence of international price discrimination.
B) is handled only by the International Trade Commission.
C) is handled only by the Department of Commerce.
D) only applies to developing countries.
E) is handled by the State Department.

Question 46

The escape clause:

A) can be used to restrict the import of fairly traded goods.
B) only applies to import competition from allegedly low-wage countries.
C) involves the total prohibition of goods imported from some countries.
D) is imposed hundreds of times a year on thousands of different types of imports.

Question 47

In the U.S. raising tariffs on a fairly traded imported product that causes harm to a domestic industry is what type of action?

A) anti-dumping
B) fair trade
C) escape clause
D) countervailing
E) quota

Question 48

Which of the following companies filed a famous escape clause case in the early 1980s?

A) General Motors
B) U.S. Steel
C) Harley-Davidson
D) Microsoft
E) Apple

Question 49

When the Allied powers met at a conference in 1944, what international organizations were developed?

A) the International Monetary Fund
B) the International Bank for Reconstruction and Development (World Bank)
C) the World Trade Organization
D) both a and b
E) None of the above

Question 50

GATT was:

A) part of the International Monetary Fund.
B) part of the World Bank.
C) part of the United Nations.
D) the interim committee designed to implement the International Trade Organization.
E) founded by the United Nations.

Question 51

From the late 1940s until the creation of the WTO, the treaty (organization) that was primarily responsible for conducting multilateral trade negotiations was the:

A) World Bank.
B) GATT.
C) ITO.
D) United Nations.
E) UNIDO.

Question 52

Which of the following statements is false?

A) GATT was a replacement for the failure of the U.S. to participate in the proposed ITO.
B) The ITO was a substitute for GATT.
C) GATT was a treaty and technically was not an organization.
D) Under GATT the explicit use of quotas to protect domestic industries was illegal in most cases.
E) The WTO replaced GATT.

Question 53

A principle problem associated with GATT was that:

A) it was not really a formal international organization.
B) the U.S. was not a member.
C) it had no enforcement mechanism.
D) it was part of the World Bank.
E) it had too few contracting parties.

Question 54

When using the most favored nation principle in international trade, this means that:

A) we prefer a foreign country's production to domestic production.
B) the lowest MFN negotiated tariff rate would apply to all WTO members countries.
C) the lowest negotiated tariff rate would apply to some countries.
D) the countries have come close to a free trade agreement.
E) we apply MFN only to friendly countries.

Question 55

The most favored nation principle of the WTO means that a tariff concession granted by one member country to another member country will:

A) be extended to all other countries without exception.
B) be extended to all other countries that are WTO members.
C) be extended to all WTO member countries that make a similar concession.
D) be extended to those WTO member countries that the country making the concession designates.
E) None of the above

Question 56

Which of the following was not a multilateral trade negotiation conducted under GATT?

A) the Tokyo Round
B) the Kennedy Round
C) the Uruguay Round
D) the NAFTA Round
E) None of the above

Question 57

Which of the following was not an MTN?

A) the Seattle Round
B) the Kennedy Round
C) the Tokyo Round
D) the Uruguay Round
E) the Doha Round

Question 58

The current round of multilateral trade negotiations is known as:

A) the Bush Round.
B) the Uruguay Round.
C) the Doha Round.
D) the Tokyo Round.
E) the Singapore Round.

Question 59

The WTO was established in which round of trade negotiations?

A) the Kennedy Round
B) the Uruguay Round
C) the NAFTA Round
D) the Tokyo Round
E) the Doha Round.

Question 60

The General Agreement of Trade in Services is:

A) an agreement among countries on the services that the WTO will offer.
B) a general agreement among countries that services will be regulated independently within each country.
C) an agreement among countries that trade in services should be regulated by agreed upon rules.
D) a general agreement among countries that eliminates the Multi-Fibre Agreement.
E) None of the above

Question 61

Both the WTO and GATT have worked to:

A) reduce the indebtedness of developing countries.
B) reduce large fluctuations in exchange rates.
C) reduce trade barriers among countries on a bilateral basis.
D) reduce trade barriers among countries on a multilateral basis.
E) None of the above

Question 62

Which organization has procedures for settling international trade disputes?

A) the World Bank
B) the International Monetary Fund
C) the World Court of Appeals
D) the World Trade Organization
E) the United Nations

Question 63

Which of the following countries is not currently a member of the WTO?

A) France
B) Canada
C) Germany
D) Cuba
E) Mexico

Question 64

Why do domestic firms and foreign countries find it difficult to interact with U.S. trade policy?

A) Congress has to approve everything, so it is a slow process.
B) The President has to decide what U.S. trade policy will be.
C) No one agency or person is responsible for U.S. trade policy.
D) The USTR conducts U.S. trade policy through constant and slow negotiations.
E) the U.S. has no discernible trade policy.

Question 65

Which of the following was the first major MTN?

A) Kennedy
B) Tokyo
C) Uruguay
D) Doha
E) Dayton

Question 66

Dumping can be:

A) predatory.
B) cost based.
C) price based.
D) all of the above
E) none of the above

Question 67

A country's international trade policy is specifically designed measures that do not affect trade relations with the rest of the world.

Question 68

The theory of public choice assumes that politicians seek to maximize the amount of campaign contributions they receive.

Question 69

Government can never improve economic welfare.

Question 70

Business can never benefit from government regulation since it distorts market efficiency.

Question 71

Individuals within a country who band together in an attempt to influence the government to pass laws are participating in a collective action.

Question 72

Individuals within a democracy have an incentive to band together and pass laws that are in their collective or society's best interest.

Question 73

In the 1970s the American automobile manufacturers banded together to petition the government not to lower tariffs on Japanese-made automobiles. This action was a form of rent-seeking.

Question 74

The amount of business regulation is determined by the business demand for regulation and the supply of regulation by the government.

Question 75

Rent-seeking behavior enhances the welfare of society at the expense of a small group.

Question 76

International trade decreases world welfare, as the gains from trade are a result of losses to particular factors of production.

Question 77

In the late eighteenth century the U.S. government imposed tariffs as a means of raising revenue for the national government.

Question 78

Today, many developing countries still use tariffs as a major source of government revenue.

Question 79

The structure of protection refers to the fact that tariffs vary from zero to very high levels depending on the product in question.

Question 80

Larger industries are more likely to receive protection than smaller industries.