Question 1

Suppose the United States subsidizes domestic chicken production and then sells surpluses on the world market at a price below the cost of production.In foreign countries, the argument that would made to restrict chicken trade with the United States would be the

Accepted Answer

The situation described in the scenario is an example of dumping, which occurs when a product is sold in a foreign market at a price lower than the cost of production or at a price lower than the domestic price. The dumping argument is commonly used to justify restrictions on trade with countries that engage in this practice.

Question 2

International trade decreases the demand for workers in domestic industries that

Accepted Answer

International trade increases the demand for goods that a country is importing, which means that domestic industries that produce goods that are imported will experience an increase in demand. However, industries that produce goods that are exported will experience a decrease in demand as foreign producers will be supplying these goods to other countries.

Question 3

Which of the following parties benefits from an import quota but not from a tariff?

Accepted Answer

An import quota benefits the person or entity with the right to import the good because it grants them a specific advantage or monopoly over the importation of that good, often allowing them to charge higher prices. In contrast, a tariff generates revenue for the domestic government through taxes on imported goods, but does not grant exclusive rights to any importer.

Question 4

The infant-industry argument is used by those who assert they want to

Accepted Answer

The infant-industry argument proposes that new industries require protection from foreign competition until they are established and able to compete on their own. This argument is used to justify limiting imports to protect these new industries until they become more competitive. Therefore, the best choice is A.

Question 5

When a tariff is imposed on a good, domestic consumers of the good ________ and domestic producers of the good ________.

Accepted Answer

When a tariff is imposed on a good, the price of the imported good rises. Domestic consumers of the good will then buy less of the imported good, either because it has become relatively expensive or because domestic substitutes become relatively cheaper. Domestic producers of the good, on the other hand, will be protected from foreign competition and can charge higher prices. As a result, domestic consumers lose out, while domestic producers win.

Question 6

When protection is encouraged to protect a growing domestic industry; which of the following is being used?

Accepted Answer

The infant-industry argument is being used when protection is encouraged to protect a growing domestic industry. This argument suggests that a government should protect a newly established industry until it can develop and compete globally.

Question 7

Dumping is defined as the situation in which

Accepted Answer

Dumping refers to the situation where foreign producers sell their products at a price below the cost of production. This is done with an intention to gain a larger market share or to drive out competition. It is considered unfair trade practice and is subject to anti-dumping duties by the importing country. Therefore, option B is the correct choice.

Question 8

What is an effective counter against the argument that international trade should be restricted to protect domestic jobs?

Accepted Answer

Restricting international trade does not necessarily protect domestic jobs, but rather it limits competition and innovation. The more effective approach is to embrace free trade, which can lead to increased job opportunities and higher wages for workers in certain industries. This is because companies will have access to international markets, allowing them to expand and increase production, which in turn creates more jobs. Furthermore, competition can encourage companies to become more innovative and efficient, which can also lead to job growth.

Question 9

When politicians debated the North American Free Trade Agreement (NAFTA), some told stories of U.S.workers whose jobs would be moved to Mexico.Which of the following arguments in favor of protection was being used?

Accepted Answer

The story of U.S. workers losing jobs to Mexico is a classic example of the “save domestic jobs” protectionist argument. This argument implies that free trade agreements like NAFTA will lead to job losses and harm the interests of U.S. workers.

Question 10

Which of the following is NOT a major argument for restricting international trade?

Accepted Answer

The promotion of dumping argument is actually one of the main arguments FOR restricting international trade. Dumping occurs when a country exports goods at a lower price than it sells them domestically, often through government subsidies, and this can harm domestic producers in the importing country. The other arguments listed (national security, infant industry, prevention of dumping, saves U.S. jobs) are all commonly cited as reasons to restrict international trade.

Question 11

A flawed argument for protection from foreign trade is that
I∙tariffs save domestic jobs.
Ii∙tariffs protect the national culture.
Iii∙quotas bring about diversity and stability.

Accepted Answer

All three statements represent flawed arguments for protection from foreign trade. Tariffs might save some domestic jobs in the short term but can lead to inefficiencies and higher costs for consumers. Protecting national culture is not an economic argument and can lead to protectionism that harms overall economic welfare. Quotas might not necessarily bring about diversity and stability; instead, they can distort markets and lead to retaliation from other countries.

Question 12

If supporters of restrictions on imports argue that protection is needed to preserve a strategic industry, which of the following is being used?

Accepted Answer

The answer of If supporters of restrictions on imports argue...

Question 13

Which of the following is the national security argument against free trade?

Accepted Answer

The national security argument against free trade is that a country must protect industries that produce defense equipment and armaments. These industries are critical for a country's defense and cannot be left to foreign competition. Therefore, free trade may compromise a country's national security by allowing foreign companies to gain too much control over these industries.

Question 14

The infant-industry argument for protection is based on the idea of

Accepted Answer

The infant-industry argument suggests that protection is necessary for domestic industries during their early stages of development because they are not yet efficient enough to compete with established foreign industries. By protecting the industry, the domestic firm will be able to gain experience and expertise, and eventually become more efficient and competitive in the global market. This idea is based on the concept of learning-by-doing. Therefore, the correct answer is A) learning-by-doing.

Question 15

What is the infant-industry argument for protection from international trade?

Accepted Answer

The infant-industry argument suggests that domestic firms need to be protected until they gain a comparative advantage over foreign competitors due to their lack of experience and high initial costs. Once they have become established and more efficient, they can compete on a level playing field without protection.

Question 16

When a tariff supporter argues that foreign producers are selling their products for prices below the costs of production, which of the following is being used?

Accepted Answer

The argument being used is the dumping argument, which claims that foreign producers are selling their products below cost in order to undercut domestic competition and gain market share. Tariffs are seen as a way to level the playing field and prevent this unfair competition.

Question 17

What is the national security argument to support protection from international trade?

Accepted Answer

The national security argument for protection from international trade is that any firm necessary in wartime must be protected. In times of war, the nation's ability to produce essential goods and services becomes crucial to its survival. Therefore, protecting key industries from foreign competition is seen as necessary to maintain the nation's security.

Question 18

The argument that jobs are lost to free trade is

Accepted Answer

The argument that jobs are lost to free trade is partially correct as some jobs may be lost, but it is incorrect to say that no new jobs are created. It is important to recognize that free trade can lead to job displacement in certain industries, but it can also create new job opportunities in other industries. Therefore, while there may be short-term job losses, in the long run, free trade can lead to overall economic growth and job creation.

Question 19

What is the dumping argument for protection from international trade?

Accepted Answer

The dumping argument for protection from international trade is the idea that foreign producers may sell goods at prices lower than their production cost in the domestic market, with the aim of driving domestic firms bankrupt and creating a monopoly position in the future. In this case, protection from international trade is justified to prevent the harm caused by such unfair competition.

Question 20

Which of the following is an argument that is used for protection from free trade?
I∙the national security argument
Ii∙the infant-industry argument
Iii∙the dumping argument

Accepted Answer

All three arguments are commonly used to justify protection from free trade. The national security argument suggests that certain industries are vital for national defense and should be protected from foreign competition. The infant-industry argument holds that new industries need temporary protection until they become established and can compete internationally. The dumping argument is used when a country's producers sell goods abroad at a price lower than their domestic market or below their cost of production, harming domestic industries, which justifies protective measures.

Quiz 9: Global Markets in Action