Question 1

Fair trade is sometimes called ________.

Accepted Answer

Fair trade is often referred to as managed trade because it involves specific policies designed to manage or regulate trade in a way that ensures producers from developing countries are treated fairly.

Question 2

The government of Country X actively manages the national economy by providing subsidies to aerospace firms and automobile manufacturers. Country X most likely engages in ________.

Accepted Answer

Industrial policies involve government intervention in the economy to support specific industries, such as aerospace and automobile manufacturing, through measures like subsidies.

Question 3

Which country listed below followed industrial policy to achieve economic success?

Accepted Answer

Japan is well-known for its post-World War II industrial policy, which involved government intervention to promote specific industries and drive economic growth.

Question 4

What Japanese organization is entrusted with setting industrial policy?

Accepted Answer

The Ministry of International Trade and Industry (now known as the Ministry of Economy, Trade and Industry or METI) has historically been responsible for setting industrial policy in Japan.

Question 5

For which industry did Alexander Hamilton propose the infant industry argument?

Accepted Answer

Alexander Hamilton proposed the infant industry argument for the manufacturing sector, advocating for protective tariffs to shield emerging domestic industries from foreign competition.

Question 6

Free trade ________.

Accepted Answer

Free trade implies that there is minimal government intervention in private firms' importing and exporting decisions. It promotes open markets and the free flow of goods and services without tariffs or trade barriers. Options A, C, and D all involve some level of government intervention and are therefore not accurate descriptions of free trade.

Question 7

Which theory specifically addresses the needs of individual industries?

Accepted Answer

The answer of Which theory specifically addresses the needs of...

Question 8

The government of Country X is encouraging the growth of domestic manufacturing by implementing high barriers to imported goods. Country X is most likely following a strategy of ________.

Accepted Answer

Import substitution is a strategy aimed at reducing foreign dependency through the local production of goods that were previously imported. By implementing high barriers to imported goods, Country X is encouraging domestic manufacturing to replace these imports, aligning with the import substitution strategy.

Question 9

Free trade implies that government exerts minimal influence on the exporting and importing decisions of private firms and individuals.

Accepted Answer

Free trade is a policy to eliminate discrimination against imports and exports, allowing goods and services to move more freely across borders with minimal government interference, tariffs, or quotas, thus emphasizing minimal influence on the decisions of private firms and individuals regarding exporting and importing.

Question 10

________ implies that the national government exerts minimal influence on the exporting and importing decisions of private firms and individuals.

Accepted Answer

Free trade implies minimal government intervention in the trade decisions of individuals and firms, allowing them to import and export goods without significant restrictions or tariffs.

Question 11

The "level playing field" argument is primarily used to justify government policies that ________.

Accepted Answer

The "level playing field" argument is often used to justify government policies that restrict foreign competition, aiming to ensure that domestic industries are not disadvantaged by unfair practices from abroad, such as dumping or subsidies.

Question 12

The ________ holds that a country must be self-sufficient in critical raw materials, machinery, and technology or it will be vulnerable to foreign threats.

Accepted Answer

The national defense argument posits that a country needs to be self-sufficient in essential resources and technology to protect itself from potential foreign threats, emphasizing the importance of domestic production for national security.

Question 13

Which country has been particularly successful at nurturing domestic industries through government intervention?

Accepted Answer

The answer of Which country has been particularly successful at...

Question 14

The ________ proposes that tariffs be imposed on imported manufactured goods to give U.S. firms temporary protection from foreign competition until they can fully establish themselves.

Accepted Answer

The proposal described in the question is the infant industry argument. This argument suggests that tariffs be imposed on imported manufactured goods to provide temporary protection for domestic firms until they are developed enough to compete with foreign producers. The national defense argument advocates using tariffs to protect industries critical to the defense of a country, while industrial policy and strategic trade theory are broader economic policies that may include trade protectionism but are not specific to the use of tariffs.

Question 15

For five years, Harley-Davidson received tariff protection from Japanese imports to allow the motorcycle firm the opportunity to improve its operations and gain market share. This is an example of the ________.

Accepted Answer

The answer of For five years, Harley-Davidson received tariff protection...

Question 16

Which theory best applies to those industries capable of supporting only a few firms worldwide?

Accepted Answer

Strategic trade theory suggests that in industries where the global market can support only a few firms, governments can enhance their own country's position by supporting domestic firms. This is because such industries often have high barriers to entry and significant economies of scale, making it difficult for new entrants to compete.

Question 17

Managed trade suggests that the national government should actively intervene to ensure that domestic firms' exports receive an equitable share of foreign markets and that imports are controlled to minimize losses of domestic jobs and market share in specific industries

Accepted Answer

Managed trade involves government intervention in international trade to protect domestic industries and maintain a balance of trade, often through measures like export promotion and import restrictions to safeguard jobs and market share in specific sectors.

Question 18

________ suggests that a national government can make its country better off if it adopts trade policies that improve the competitiveness of its domestic firms in oligopolistic industries.

Accepted Answer

Strategic trade theory suggests that a national government can enhance its country's economic welfare through policies that help domestic firms gain competitive advantages in industries characterized by oligopolistic competition.

Question 19

Strategic trade theory applies best to which industry identified below?

Accepted Answer

Strategic trade theory is most applicable to industries with high fixed costs and significant economies of scale, such as commercial aircraft construction. This theory suggests that governments can enhance their national economic interests by providing support to such industries, helping them gain a competitive advantage in the global market.

Question 20

________ suggests that a country should encourage firms to compete in foreign markets by harnessing some advantage the country possesses.

Accepted Answer

Export promotion strategy suggests that a country should encourage firms to compete in foreign markets by leveraging the country's advantages.

Quiz 9: Formulation of National Trade Policies