Deck 7: The Political Economy of International Trade

Question 1

Quotas benefit consumers the most.

Answer 1

False

Question 2

Tariffs are generally pro-producer and anti-consumer.

Answer 2

True

Question 3

Tariffs are the most complex instrument of trade policy.

Answer 3

False

Question 4

A voluntary export restraint (VER)is a quota on trade imposed by the exporting country,typically at the request of the importing country's government.

Question 5

Under a tariff rate quota,a lower tariff rate is applied to imports within the quota than those over the quota.

Question 6

Dumping is variously defined as selling goods in a foreign market at below their costs of production,or as selling goods in a foreign market at below their "fair" market value.

Question 7

In most cases,tariffs are placed on imports to protect domestic producers from foreign competition by raising the price of imported goods.

Question 8

Tariffs are the oldest instrument of trade policy.

Question 9

The main gains from subsidies accrue to importers,whose international competitiveness is increased as a result of these subsidies.

Question 10

Administrative trade policies are bureaucratic rules that are designed to make it easy for imports to enter a country.

Question 11

Antidumping policies are designed to punish the firms that engage in dumping industrial waste into the environment.

Question 12

In recent decades,a fall in subsidies,quotas,and voluntary export restraints has been accompanied by a rise in tariff barriers.

Question 13

Ad valorem tariffs are levied as a proportion of the value of the imported good.

Question 14

Export tariffs are far more common than import tariffs.

Question 15

Specific tariffs are levied as a proportion of the value of the imported good.

Question 16

The Buy America Act specifies that government agencies must give preference to American products when putting contracts for equipment out for bid unless the foreign products have a significant advantage.

Question 17

Dumping is viewed as a method by which firms unload excess production in their domestic markets.

Question 18

Import tariffs increase the overall efficiency of the world economy.

Question 19

Subsidies are a trade policy instrument.

Question 20

Both import quotas and VERs benefit domestic producers by limiting import competition.

Question 21

The 1995 Uruguay agreement that established the WTO also contained an agreement to protect intellectual property.

Question 22

Pressures for greater protectionism increased around the world during the 1980s and early 1990s due to the strain caused by the persistent trade deficit in the world's largest economy,Japan.

Question 23

The ultimate objective of antidumping policies is to protect domestic producers from unfair foreign competition.

Question 24

Free trade as a government policy was first officially embraced by Germany in 1846,when the Bundestag repealed the Corn Laws.

Question 25

D'Amato Act allows Americans to sue foreign firms that use property in Cuba confiscated from them after the 1959 revolution.

Question 26

The threat of antidumping action enhances the ability of a firm to use aggressive pricing to gain market share in a country.

Question 27

In the Uruguay Round of the WTO,member countries sought to exempt trade in services from GATT rules.

Question 28

Antidumping actions seem to be concentrated in certain sectors of the economy such as basic metal industries (e.g.,aluminum and steel),chemicals,plastics,and machinery and electrical equipment.

Question 29

Government intervention can be self-defeating because it tends to protect the inefficient rather than help firms become efficient global competitors.

Question 30

The Smoot-Hawley Act aimed to liberalize trade by eliminating tariffs,subsidies,and import quotas.

Question 31

Paul Krugman argues that although strategic trade policy looks unappealing in theory,in practice it is most likely to be workable.

Question 32

_____ tariffs are levied as a fixed charge for each unit of a good imported.

A) Ground
B) Primary
C) Direct
D) Specific
E) Internal

Question 33

A political argument for government intervention in international trade is that it is necessary to protect certain industries because they are important for national security.

Question 34

_____ tariffs are levied as a proportion of the value of the imported good.

A) Ad valorem
B) Primary
C) Direct
D) Specific
E) External

Question 35

Which of the following is a trade policy instrument that the GATT and WTO have been most successful in limiting?

A) Local content requirements
B) Tariffs
C) Subsidies
D) Voluntary export restraints
E) Import quotas

Question 36

According to a provision of the Uruguay Round of GATT,agricultural subsidies were to be increased substantially.

Question 37

One of the reasons for the trend toward greater protectionism was that many countries found ways to get around GATT regulations.

Question 38

Tariff rates on agricultural products are generally much lower than tariff rates on manufactured products or services.

Question 39

The infant industry argument is the oldest economic argument for government intervention in international trade.

Question 40

The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade and this justification challenges the rationale for unrestricted free trade.

Question 41

_____ take many forms including cash grants,low-interest loans,tax breaks,and government equity participation in domestic firms.

A) Ad valorem tariffs
B) Subsidies
C) Quota rents
D) Specific tariffs
E) Local content requirements

Question 42

Which of the following statements is true about import quotas?

A) Import quotas benefit domestic producers by limiting import competition.
B) If a domestic industry lacks the capacity to meet demand, an import quota can raise the prices for domestically produced good but not the imported good.
C) Under an import quota, a lower tariff rate is applied to imports within the quota than those over the quota.
D) Import quotas benefit consumers by decreasing the domestic price of an imported good.
E) An import quota helps a foreign producer in gaining a competitive advantage in the markets of the country which imposes the quota.

Question 43

Which of the following groups would benefit the most from receiving subsidies?

A) Governments
B) International organizations such as the WTO
C) Domestic producers
D) Importers
E) Foreign competitors

Question 44

Which of the following statements with regard to subsidies is true?

A) The main gains from subsidies accrue to domestic producers, whose international competitiveness is increased as a result.
B) Pharmaceutical industry tends to be one of the largest beneficiaries of subsidies in most countries.
C) Subsidies always generate national benefits that exceed their national costs.
D) Subsidies comprise only of cash grants and low-interest loans.
E) Subsidies never help a firm achieve a first-mover advantage in an emerging industry.

Question 45

Which of the following terms refers to a government payment to a domestic producer?

A) Value-Based Benefit
B) Ad valorem tariff
C) Subsidy
D) Specific tariff
E) Quota

Question 46

Tariffs cause damage to _____ as they must pay more for certain imports.

A) investors
B) governments
C) consumers
D) domestic producers
E) administrators

Question 47

A(n)_____ is a quota on trade imposed by the exporting country,typically at the request of the importing country's government.

A) tariff rate quota
B) quota rent
C) voluntary export restraint (VER)
D) quota share
E) export embargo

Question 48

The extra profit that producers make when supply is artificially limited by an import quota is referred to as a:

A) net profit.
B) quota rent.
C) trade surplus.
D) profit margin.
E) quota share.

Question 49

By lowering production costs,_____ help domestic producers compete against foreign imports.

A) tariffs
B) custom duties
C) tariff rate quotas
D) subsidies
E) voluntary export restraints

Question 50

A tariff of 15-20% was levied by the government of Cadmia on the value of automobile accessories imported from a neighboring country.This increased the price of those imported car accessories for the consumers in Cadmia.Which of the following instruments of trade policy is being by the government of Cadmia?

A) Local content tariff
B) Ad valorem tariff
C) Subsidies
D) Quotas
E) Antidumping tariff

Question 51

Which of the following industries tends to be one of the largest beneficiaries of subsidies in most countries?

A) Banking industry
B) Aviation industry
C) Agriculture
D) Streel industry
E) Pharmaceutical industry

Question 52

Both import quotas and VERs benefit _____ by limiting import competition,but they result in higher prices,which hurt _____.

A) domestic producers; consumers
B) the governments; domestic producers
C) importers; foreign producers
D) foreign producers; the governments
E) consumers; foreign investros

Question 53

The country of Argonia imposes an ad valorem tariff of 10 percent on 1 million tons of rice imports,after which an out-of-quota tariff of 80 percent is applied.According to this information,which of the following trade policy instruments is being used by Argonia?

A) Subsidy
B) Tariff rate quota
C) Voluntary export restraint
D) Tariff ceiling
E) Local content requirement

Question 54

Which of the following is most likely to be an objective of export tariffs?

A) Abiding by the rules enforced by the WTO
B) Curbing the competition offered by foreign firms to domestic firms
C) Reducing exports from a sector, often for political reasons
D) Maintaining a positive trade deficit
E) Increasing the flow of capital in international market

Question 55

Which of the following statements is true about voluntary export restraints (VERs)?

A) VERs benefit consumers by limiting import competition.
B) VER reduces the domestic price of an imported good.
C) When imports are limited to a low percentage of the market by a VER, the price is bid up for that limited foreign supply.
D) Foreign producers agree to VERs because they fear economic instability in the world economy.
E) VERs negatively affect domestic producers by increasing import competition.

Question 56

Which of the following is true about tariffs?

A) It reduces the price of foreign goods for domestic consumers.
B) Tariffs reduce the overall efficiency of the world economy.
C) The tariffs that are levied as a fixed charge for each unit of a good imported are known as ad valorem tariffs.
D) Tariffs are mainly pro-consumer and anti-producer.
E) Tariffs are always levied on imports.

Question 57

Under a(n)_____,a lower tariff rate is applied to imports within the quota than those over the quota.

A) tariff rate quota
B) voluntary import restraint
C) import duty
D) quota rent
E) import quota

Question 58

By lowering production costs,subsidies help domestic producers in:

A) gaining export markets.
B) meeting import quotas.
C) meeting voluntary export restraints.
D) meeting the local content requirement.
E) competing in the domestic market against local producers.

Question 59

A(n)_____ requires that some specific fraction of a good must be produced domestically.

A) international allocation requirement
B) local content requirement
C) specific quota requirement
D) ad valorem portion requirement
E) Domestic sales requirement

Question 60

Which of the following groups benefits the most from the imposition of tariffs?

A) Government and domestic producers
B) Consumers and trade associations
C) Exporters and importers
D) Foreign producers
E) International bodies such as WTO

Question 61

Which of the following indicates the two paths of arguments for government intervention in international trade?

A) Political and cultural
B) Economic and legal
C) Political and economic
D) Legal and social
E) Political and legal

Question 62

_____ are bureaucratic rules designed to make it difficult for imports to enter a country.

A) Voluntary export restraints
B) Consumer regulations
C) Subsidies
D) Administrative trade policies
E) Public sector regulations

Question 63

Animax Limited got an order to sell 50000 Central Processing Units (CPUs)to Palladia,but the Palladian government stipulated that 15 percent of the component parts of those CPUs must be produced in Palladia.This stipulation by the Palladian government would be example of a(n):

A) voluntary export restraint.
B) quota rent.
C) import quota.
D) local content requirement.
E) antidumping policy.

Question 64

Which of the following industries is most likely to come under the purview of national security?

A) Pharmaceutical industry
B) Action figures
C) Semiconductors
D) Gaming consoles
E) Electrical appliances

Question 65

Dumping involves foreign producers:

A) attempting hostile takeovers of domestic firms and usurping the available resources for production.
B) indiscriminately exploiting the natural resources of a foreign country to create a later demand that can be met only by imports.
C) eliminating competition by subsidizing prices in a foreign market with home market profits and eventually raising prices to earn substantial profits.
D) capturing the niche market rather than the masses.
E) exporting only a small restricted quantity of their products into an importing country.

Question 66

Which of the following is the most common political argument for government intervention in international trade?

A) Decreasing the prices of products in the domestic market
B) Promoting strategic trade policy
C) Protecting jobs and industries from unfair foreign competition
D) Improving efficiency of domestic labor
E) Protecting human rights

Question 67

Cadmia banned imports of Mattel toys with high levels of toxic lead,manufactured in Argonia.The underlying motive for such a move could be:

A) protecting domestic businesses from unfair pricing.
B) protesting the pricing of toys below their costs of production.
C) protecting consumers from unsafe products.
D) increasing the trade surplus of the U.S.
E) reducing dumping of cheap toys.

Question 68

A country Cadmia,which is a leading producer of bauxite,had to impose trade sanctions on Cerian soda cans in order to get the government of Ceria to enforce export restrains.This imposition by Cadmian government was undertaken to protect domestic producers of soda cans.Which of the following government intervention is being used by Cadmia?

A) Diversification
B) Deregulation
C) Retaliation
D) Liberalization
E) Monopolization

Question 69

Which of the following is considered to be the ultimate objective of antidumping policies?

A) Protecting consumers from high prices
B) Preventing domestic firms from unloading their excess production in domestic markets
C) Protecting domestic producers from unfair foreign competition
D) Protecting consumers from substandard and hazardous products
E) Preventing foreign products from entering domestic market

Question 70

Which of the following best indicates the motive for foreign firms to engage in dumping?

A) Unloading excess production in foreign markets
B) Cutting labor costs to reduce the costs of production
C) Providing a wider range of products for consumers in foreign markets
D) Meeting the voluntary export requirements imposed on it
E) Obtaining subsidies from the importing country

Question 71

The _____ in the United States specifies that 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

Question 72

Which of the following policies protect domestic producers from unfair foreign competition?

A) Accounting policies
B) Demand side policies
C) Arbitration policies
D) Antidumping policies
E) Supply side policies

Question 73

The two US agencies that deal with antidumping complaints are:

A) the Economic Offences Wing and the Conciliation Council.
B) the International Trade Commission and the Industry Council.
C) the Commerce Department and the International Trade Commission.
D) the Federal Trade Commission and the Economic Council.
E) the Industry Council and the Economic Offences Wing.

Question 74

_____ are specific duties representing a special tariff which is imposed for punishing foreign firms for engaging in dumping and these tend to be fairly substantial and stay in place for up to five years.

A) Excise duties
B) Civil duties
C) Stamp duties
D) Countervailing duties
E) Customs duties

Question 75

In the context of international trade,_____ is defined as selling goods in a foreign market at a price below their costs of production or as selling goods in a foreign market at below their "fair" market price.

A) monopolizing
B) dumping
C) offshoring
D) subsidizing
E) nearshoring

Question 76

If Argonia exports vast quantities of cheap toys to Cadmia,selling them at below their costs of production,it would constitute:

A) monopolism.
B) dumping.
C) offshoring.
D) nearshoring.
E) subsidizing.

Question 77

The Palladian government required that all imported products that came from Lovaskiya be checked by Palladian customs inspectors.The inspection was done at a container freight station that was both remote and poorly staffed.This delayed the Lovaskiyan consignment from reaching the consumers in Palladia.The inspection strategy adopted by the customs officers in Palladia is an example of a(n):

A) antidumping policy.
B) voluntary export restraint policy.
C) administrative trade policy.
D) monopolistic competition policy.
E) tariff rent policy.

Question 78

Local content regulations provide protection for a domestic producer of parts in much the same way a(n)_____ does,by limiting foreign competition.

A) greenfield investment
B) international content requirement
C) domestic sales requirement
D) import quota
E) subsidy

Question 79

Antidumping duties are often called _____ duties.

A) tariff rent
B) counterveiling
C) subsidy
D) quota rent
E) export restraint

Question 80

Why is retaliation by government intervention a risky strategy?

A) It encourages dumping by foreign companies.
B) A country that is being pressured may respond to the imposition of punitive tariffs by raising trade barriers of its own.
C) It may expose certain industries that are important for national security to foreign competition.
D) It allows firms to sell goods in foreign market at below their fair market value.
E) It makes it difficult for domestic firms are unable to make any investments by borrowing money from the domestic capital market.