Question 1

The most recent round of multilateral trade negotiations is the:

Accepted Answer

The Doha Round is the most recent round of multilateral trade negotiations, launched in 2001 by the World Trade Organization (WTO). The Kennedy Round took place from 1964-1967, the Tokyo Round from 1973-1979, and the Geneva Round refers to ongoing negotiations at the WTO headquarters in Geneva.

Question 2

Countervailing duties may be imposed:

Accepted Answer

Countervailing duties are imposed by a country on a foreign product to offset the advantage given to the foreign manufacturer by subsidies provided by its government. This action is taken to protect domestic producers from foreign subsidized imports. Therefore, countervailing duties may be imposed in response to a foreign export subsidy.

Question 3

The average tariff rate today on dutiable imports in the United States is approximately:

Accepted Answer

The average tariff rate for the United States is approximately 5 percent of the value of imports, according to data from the World Trade Organization. While there are some products that have higher tariffs (such as agricultural products), the overall average has decreased over time as the U.S. has pursued more free trade agreements.

Question 4

The Uruguay Round of trade negotiations lowered:

Accepted Answer

The Uruguay Round of trade negotiations aimed to reduce and remove trade barriers, including both tariffs and nontariff barriers. The agreement ultimately lowered both types of barriers in order to promote free trade between participating countries. The negotiations did not specifically address trade sanctions against South Africa or the Soviet Union.

Question 5

Suppose the United States imposes trade sanctions (export quotas) on grain sold to the Russians.Assuming other nations do not increase grain exports to the Russians,all of the following would occur except:

Accepted Answer

If the United States imposes trade sanctions on grain sold to the Russians, it would lead to a decrease in export revenues for U.S. producers, and grain prices would rise in Russia due to the reduced supply. Consumer surplus for the Russians would decrease since they would have to pay higher prices for the same amount of grain. However, it is not necessarily true that grain prices would rise in the United States, as domestic supply would remain the same, and the export quota may not affect domestic prices.

Question 6

In 1990 the United States and its allies imposed trade embargoes on exports/imports to/from Iraq in response to its invasion of Kuwait.The embargoes would induce smaller losses in Iraq's consumer surplus the:

Accepted Answer

If Iraq was less dependent on foreign products initially, the impact of the embargo on consumer surplus would be smaller, as domestic alternatives could mitigate the loss.

Question 7

The World Trade Organization provides for all of the following except:

Accepted Answer

The World Trade Organization provides for the usage of the normal-trade-relation (most-favored-nation) clause, assistance in the settlement of trade disagreements, and multilateral tariff reductions. However, it does not provide for bilateral tariff reductions, as it focuses on promoting free and fair trade among all member countries.

Question 8

During the past four decades:

Accepted Answer

Many countries have reduced tariffs through free trade agreements and tariff negotiations, but non-tariff barriers such as product standards, regulations, and customs procedures have become increasingly important in international trade.

Question 9

In U.S.trade law,Section 301 cases involve accusations of:

Accepted Answer

Section 301 cases involve accusations of unfair trade practices by foreign nations, such as discriminatory practices, intellectual property violations, and trade barriers. The U.S. government evaluates these accusations and can impose retaliatory tariffs or other measures against the foreign nation.

Question 10

Industrial policy attempts to fulfill all of the following objectives except:

Accepted Answer

The other three objectives are commonly pursued through industrial policy measures. However, fostering industries which offer long-run comparative disadvantage (i.e. industries that are not competitive in the long-term) goes against the objective of promoting economic efficiency and could lead to long-term inefficiencies and distortions in the economy.

Question 11

Assume Boeing Inc.(of the United States) and Airbus Industrie (of Europe) rival for monopoly profits in the Canadian aircraft market.Suppose the two firms face identical cost and demand conditions,as seen in Figure 6.1.
Figure 6.1.Strategic Trade Policy: Boeing versus Airbus
 
-Referring to Figure 6.1,assume that Boeing is the first to enter the Canadian market.Without a governmental subsidy,the firm maximizes profits by selling ____ aircraft at a price of $____,and realizes profits totaling $____.

Accepted Answer

According to the graph, without any government subsidy, the profit maximizing point for Boeing is at point E, where the quantity sold is 4 and the price is $12 million. At this point, the profits for Boeing are $16 million. Therefore, the answer is (A) 4, $12 million, $16 million.

Question 12

The Uruguay Round of trade negotiations was primarily concerned with:

Accepted Answer

The Uruguay Round of trade negotiations, which took place between 1986 and 1994, was primarily concerned with reducing nontariff trade barriers, such as quotas and subsidies, in order to create a more open and fair global trading system. While import and export tariffs were certainly part of the negotiations, they were not the primary focus. Likewise, economic sanctions were not a major issue during the Uruguay Round.

Question 13

Suppose the president lowers tariffs on radios as the result of negotiations under the trade agreements program.Radio producers in the United States can appeal under the:

Accepted Answer

The Escape clause allows U.S. producers to appeal if rising imports substantially injure their industry. In this case, if the president's decision to lower tariffs on radios leads to a surge in imports, which harms the U.S. radio industry, producers can use the Escape clause to take action. Option B is incorrect because it refers to rising unemployment, which is not the trigger for the Escape clause. Options C and D are also incorrect because they refer to the Infant Industry clause, which applies to new industries or industries that need protection to develop.

Question 14

Those who argue in favor of import protection generally give the impression that such restricted trade will:

Accepted Answer

The answer of Those who argue in favor of import...

Question 15

Export embargoes induce greater losses in consumer surplus for the target country:

Accepted Answer

When the target country's supply schedule is more inelastic, it cannot easily increase production to compensate for the loss of imports, leading to greater losses in consumer surplus.

Question 16

In 1980 the United States announced an embargo on grain exports to the Soviet Union in response to the Soviet armed invasion of Afghanistan.The embargo was mainly resisted by:

Accepted Answer

The embargo was mainly resisted by U.S. farmers and grain companies, as they lost a valuable market for their products. This led to a decrease in demand for their crops and lower prices, causing hardship for many American farmers. U.S. grain consumers and producers of bread were not significantly affected, as they could still obtain grain from other sources. The impact on foreign grain producers and consumers varied depending on their trade relationships with the U.S. and the Soviet Union.

Question 17

Assume Boeing Inc.(of the United States) and Airbus Industrie (of Europe) rival for monopoly profits in the Canadian aircraft market.Suppose the two firms face identical cost and demand conditions,as seen in Figure 6.1.
Figure 6.1.Strategic Trade Policy: Boeing versus Airbus
 
-Consider Figure 6.1.At the monopoly price as established by Boeing,Canadian consumers realize $____ of consumer surplus from the availability of aircraft.

Accepted Answer

At the monopoly price (Pm), consumer surplus is the area above price and below the demand curve. In Figure 6.1, consumer surplus is equal to $8 million.

Question 18

The strongest political pressure for a trade policy that results in higher protectionism comes from:

Accepted Answer

Domestic workers often lobby for import restrictions to protect their jobs from foreign competition, leading to higher protectionism.

Question 19

In U.S.trade law,which measure permits the levying of restrictions on fairly traded imports that harm or threaten to harm American manufacturers?

Accepted Answer

The Escape clause allows the U.S. to impose restrictions on fairly traded imports that cause or threaten serious injury to domestic industries.

Question 20

Which international organization stipulates procedures for the settlement of international trade disputes?

Accepted Answer

The World Trade Organization (WTO) stipulates procedures for the settlement of international trade disputes through its Dispute Settlement Understanding (DSU) mechanism. The DSU provides a structured process including consultations, panel proceedings, and appellate review for resolving trade disputes between member nations.

Quiz 6: Trade Regulations and Industrial Policies