Question 1

Every country imposes tariffs on at least some imports.

Accepted Answer

Almost all countries impose tariffs on at least some imports in order to protect domestic industries, generate revenue, or lower trade deficits.

Question 2

If an infant industry truly has a good chance to become competitive and produce profitably once it is well established,it is not at all clear that government should even offer protection to reduce short-run losses.

Accepted Answer

If an industry has a good chance of becoming competitive and profitable once established, then protection measures may not be necessary as the industry will eventually be able to compete on its own. In this case, it may not make sense for the government to offer temporary protections that reduce short-run losses.

Question 3

The United States has no comparative advantage in shipping,so a domestic shipping industry has no reason to exist.

Accepted Answer

While the United States may not have a comparative advantage in shipping, a domestic shipping industry can still exist due to factors such as protectionist measures, government subsidies, and the need for reliability in certain shipping services.

Question 4

Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.

Accepted Answer

When a government imposes protectionist measures like tariffs or quotas to shield domestic industries from foreign competition, it limits the availability of imported goods in the domestic market. As a result, the prices of these goods go up, and consumers may have to pay more to purchase them. On the other hand, domestic producers in the protected industry face less competition, which makes it easier for them to sell their goods at higher prices, resulting in higher profits. Thus, protection from foreign competition benefits domestic producers at the expense of domestic consumers, who have to pay more for goods and services.

Question 5

A monopoly exists when there is only one producer in an industry,and no close substitutes for the product exist.

Accepted Answer

A monopoly exists when there is only one producer in an industry and no close substitutes for the product exist.

Question 6

If the average costs of production decline with increases in output,then the larger a firm is,the lower its per unit costs will be.

Accepted Answer

This statement is based on the concept of economies of scale, which suggests that as a firm produces more output, it can spread its fixed costs over a larger quantity of goods, resulting in lower average costs of production. Therefore, a larger firm would likely have a lower per unit cost compared to a smaller firm, assuming they have the same production technology and input costs.

Question 7

The world output is higher if the countries follow restrictive trade policies rather than free trade.

Accepted Answer

The world output is generally higher if countries follow free trade policies rather than restrictive trade policies. Free trade promotes specialization, greater competition, and more efficient allocation of resources, leading to increased productivity, economic growth, and overall welfare. Restrictive trade policies, on the other hand, can lead to reduced trade, higher prices, and reduced economic growth.

Question 8

Domestic firms often claim that foreign firms have an unfair advantage because foreign workers are willing to work for very low wages.

Accepted Answer

This is a common argument made in debates about trade and globalization. Domestic firms may argue that they cannot compete with foreign firms because foreign workers are willing to work for lower wages, which reduces the cost of production for foreign firms. However, economists often point out that this is not necessarily an unfair advantage, as wages are determined by supply and demand in the labor market. In some cases, foreign workers may be willing to work for lower wages because they have fewer job opportunities or lower levels of education and training. Additionally, foreign firms may operate in countries with lower standards of living or weaker labor protections, which can also contribute to lower wages. Overall, the issue is complex and depends on various factors, including the specific industries and countries involved.

Question 9

Tariff accounts for 32% of the total government revenue in the U.K.and only 1.2% in India.

Accepted Answer

The statement is about tariff revenue in the UK and India, and there is no direct connection or information provided about cocoa demand and supply curves.

Question 10

Industries that are truly critical to the national defense should be protected from foreign competition if that is the only way to ensure their existence.

Accepted Answer

Protecting critical industries from foreign competition is necessary to ensure national security and maintain the ability to produce essential goods during times of crisis. However, this protection should be carefully balanced with the principles of free trade and competition.

Question 11

When barriers to trade are imposed,we should expect some groups to be harmed at the expense of other groups.

Accepted Answer

when barriers to trade are imposed, certain groups such as domestic producers may benefit by being shielded from competition, while other groups such as consumers may suffer from higher prices and limited choices.

Question 12

Tariffs are considered to be a popular tax in the first world countries,who justify them on the basis of the revenue they generate for government spending.

Accepted Answer

Tariffs are often controversial and not universally popular in first world countries; they are justified more on the grounds of protecting domestic industries rather than generating revenue for government spending.

Question 13

Since individual consumers do not know how much of the price they pay for a commodity is due to protection,consumers rarely lobby their political representatives to eliminate protection and reduce prices.

Accepted Answer

Consumers are often unaware of how much of the price they pay for a commodity is due to protection, and therefore do not typically advocate for the elimination of protection and reduction of prices to their political representatives.

Question 14

When production does not proceed on the basis of comparative advantage,resources are expended on their most efficient uses.

Accepted Answer

When production does not proceed on the basis of comparative advantage, resources are expended on less efficient uses.

Question 15

While it is possible to erect barriers to foreign competition and save domestic jobs,restricting international trade may impose large costs on an economy.

Accepted Answer

Erecting barriers to foreign competition can lead to retaliation from trade partners, leading to reduced exports for domestic producers and higher prices for consumers. It also limits access to new technologies and markets, hindering innovation and economic growth.

Question 16

Protection is rarely withdrawn from infant industries because such firms are necessary to ensure creation of domestic jobs.

Accepted Answer

The answer of Protection is rarely withdrawn from infant industries...

Question 17

Creating conditions for fair trade by limiting imports will make the domestic consumers better off,as they will be required to pay low prices for the products.

Accepted Answer

Limiting imports may make domestic producers and workers better off, but it will lead to higher prices for consumers due to reduced competition. Fair trade can be achieved through other means, such as promoting labor and environmental standards globally and encouraging consumers to purchase products that meet those standards.

Question 18

Protecting infant industries from foreign competition may make sense,but only until the industry matures.

Accepted Answer

Protecting infant industries from foreign competition helps them to establish and grow in the domestic market. However, once the industry matures and becomes sufficiently competitive, protectionism is no longer necessary and may even hinder further growth and innovation. It is important to gradually remove protectionist measures and allow for fair competition in the global market.

Question 19

When dealing with strategic trade policy,one practical problem for government is the likelihood of retaliation by the foreign government.

Accepted Answer

If a government implements strategic trade policy, such as imposing tariffs or quotas on foreign imports, there is a high chance that the affected foreign government may retaliate by imposing their own tariffs or trade barriers on the government's exports. This can lead to a trade war, which can have negative effects on both countries' economies. Therefore, the likelihood of retaliation is a practical problem that governments have to consider when implementing strategic trade policies.

Question 20

One danger associated with calls for fairness based on reciprocity is that,calls for fair trade may be invoked in cases where,foreign restrictions on U.S.imports do not actually exist.

Accepted Answer

Calls for fairness based on reciprocity may be misplaced if there are no actual foreign restrictions on U.S. imports.

Quiz 21: International Trade Restrictions