Deck 6: Trade Regulations and Industrial Policies

Question 1

For the United States,which organization makes loans to foreign buyers of U.S.manufactured goods?

A) Export-Import Bank
B) Domestic International Sales Corporation
C) Organization for Economic Cooperation and Development
D) Commodity Credit Corporation

Answer 1

A

Question 2

Under the original provisions of the Reciprocal Trade Agreements Act,the president of the United States was authorized to cut tariffs up to:

A) 10 percent
B) 50 percent
C) 75 percent
D) 100 percent

Answer 2

B

Question 3

The Export-Import Bank of the United States encourages American firms to sell overseas by providing direct loans and loan guarantees to foreign purchasers of American goods.To American firms,this represents a:

A) Specific subsidy
B) Ad valorem subsidy
C) Domestic subsidy
D) Export subsidy

Answer 3

D

Question 4

As a way of helping American firms trade in the world market,U.S.trade law provides antitrust exemptions for horizontal combinations of American firms engaged solely in export trade.Such firms are permitted to form:

A) Export trade associations
B) Domestic international sales corporations
C) Export-import banks
D) Commodity sales corporations

Question 5

Throughout the post-World War II era,the importance of tariffs as a trade barrier has:

A) Increased
B) Decreased
C) Remained the same
D) None of the above

Question 6

Adjustment assistance is sometimes used to assist:

A) In retraining workers displaced by imports
B) In retraining workers displaced by exports
C) Foreign firms injured by our quotas
D) Foreign firms injured by our tariffs

Question 7

Under U.S.commercial policy,the escape clause results in:

A) Temporary quotas granted to firms injured by import competition
B) Tariffs that offset export subsidies granted to foreign producers
C) Tax advantages extended to minority-owned exporting firms
D) Duties which offset commercial dumping on the part of foreign firms

Question 8

Countervailing duties are intended to neutralize any unfair advantage that foreign exporters might gain over domestic producers because of foreign:

A) Tariffs
B) Subsidies
C) Quotas
D) Buy-national policies

Question 9

A trade policy designed to alleviate some domestic economic problem by exporting it to foreign countries is known as a (an):

A) International dumping policy
B) Trade adjustment assistance policy
C) Most-favored-nation policy
D) Beggar-thy-neighbor policy

Question 10

The Uruguay Round of Multilateral Trade Negotiations accomplished all of the following except:

A) Placed primary emphasis on nontariff trade barriers
B) Is estimated to yield modest gains in world output and employment
C) Achieved cuts in tariffs but not in nontariff trade barriers
D) Abolished all barriers to trade in agricultural products

Question 11

The General Agreement on Tariffs and Trade and its successor,the World Trade Organization,have resulted in:

A) Termination of export subsidies applied to manufactured goods
B) Termination of import tariffs applied to manufactured goods
C) Encouragement of beggar-thy-neighbor policies
D) Reductions in trade barriers via multilateral negotiations

Question 12

Under U.S.commercial policy,which clause permits the modification of a trade liberalization agreement on a temporary basis if serious injury occurs to domestic producers as a result of the agreement?

A) Adjustment assistance clause
B) Escape clause
C) Most-favored-nation clause
D) Reciprocal-trade clause

Question 13

Trade theory suggests that the United States would gain from a subsidy provided by Japan to its calculator producers if the gains to American consumers of calculators more than offset the losses to American calculator producers.This occurs as long as the United States:

A) Is a net importer of calculators
B) Is a net exporter of calculators
C) Has an absolute advantage in calculator production
D) Has a comparative advantage in calculator production

Question 14

____ attempt to produce a fair and free-trading environment in which there exists a level playing field.

A) Trade-remedy laws
B) Industrial policies
C) Strategic trade policies
D) Economic sanctions

Question 15

The high point of U.S.protection culminated with the passage of the:

A) Smoot-Hawley Act of 1930
B) General Agreements on Tariffs and Trade in 1947
C) Trade Reduction Act of 1962
D) Adjustment Assistance Act of 1970

Question 16

The World Trade Organization was established by the ____ of multilateral trade negotiations:

A) Kennedy Round
B) Tokyo Round
C) Uruguay Round
D) Clinton Round

Question 17

The U.S."trade-remedy laws" could establish all of the following except:

A) Import tariffs to protect U.S. firms seriously injured by foreign competition
B) Countervailing duties which neutralize foreign export subsidies
C) Antidumping duties which protect U.S. firms from imports sold at less-than-fair-value
D) Economic sanctions levied against hostile nations

Question 18

Which policy reflects the notion that if society enjoys gains due to increased efficiency stemming from trade liberalization,some sort of compensation should be provided to those who are temporarily hurt by import competition?

A) Countervailing duties
B) Trade adjustment assistance
C) Domestic subsidies
D) Most-favored-nation standard

Question 19

The principle of normal trade relations (most-favored-nation)treatment was established with the passage of the:

A) Fordney-McCumber Act of 1922
B) Smoot-Hawley Act of 1930
C) Reciprocal Trade Agreements Act of 1934
D) Trade Act of 1974

Question 20

The Smoot-Hawley Tariff Act of 1930 has generally been associated with:

A) Falling tariffs
B) Increases in the volume of trade
C) Intensifying the worldwide depression
D) Efforts to liberalize nontariff trade barriers

Question 21

During the past four decades:

A) Nontariff barriers (NTBs) and tariffs have increased in importance
B) NTBs and tariffs have decreased in importance
C) NTBs have increased and tariffs have decreased in importance
D) NTBs have decreased and tariffs have increased in importance

Question 22

The most recent round of multilateral trade negotiations is the:

A) Kennedy Round
B) Tokyo Round
C) Doha Round
D) Geneva Round

Question 23

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

A) Improving the infrastructure for an industry
B) Easing transitions for workers in declining industries
C) Supporting troubled industries if the difficulty is temporary
D) Fostering industries which offer long-run comparative disadvantage

Question 24

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

A) Antidumping duty
B) Countervailing duty
C) National security clause
D) Escape clause

Question 25

In 1986 the United States enacted the Comprehensive Anti-Apartheid Act which provided for all of the following except the termination of:

A) New U.S. loans to the South African government
B) New U.S. investment in South Africa
C) U.S. imports of South African gold coins
D) U.S. imports of all South African goods

Question 26

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

A) 5 percent of the value of imports
B) 15 percent of the value of imports
C) 20 percent of the value of imports
D) 25 percent of the value of imports

Question 27

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

A) The lesser its initial dependence on foreign produced goods
B) The more elastic the target country's demand schedule
C) The greater the available output from alternative suppliers
D) The more inelastic the target country's supply schedule

Question 28

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:

A) Lesser its initial dependence on foreign products
B) Less elastic Iraq's demand schedule
C) Lesser the available output from alternative suppliers
D) More inelastic Iraq's supply schedule

Question 29

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

A) World Trade Organization
B) World Bank
C) International Monetary Fund
D) Organization of Economic Development

Question 30

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

A) Decrease the level of national security
B) Provide benefits to some particular industry
C) Provide benefits to the entire nation
D) Not yield welfare losses for the nation

Question 31

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

A) Domestic workers lobbying for import restrictions
B) Domestic workers lobbying for export restrictions
C) Domestic consumers lobbying for export restrictions
D) Domestic consumers lobbying for import restrictions

Question 32

The Uruguay Round of trade negotiations was primarily concerned with:

A) Import tariffs
B) Export tariffs
C) Economic sanctions
D) Nontariff trade barriers

Question 33

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:

A) Escape clause if rising imports substantially injure the U.S. radio industry
B) Escape clause if rising unemployment occurs even though imports remain unchanged
C) Infant industry clause if rising imports cause unemployment to rise among U.S. radio workers
D) Infant industry clause if rising imports result in losses for U.S. radio companies

Question 34

The Uruguay Round of trade negotiations lowered:

A) Trade sanctions levied against South Africa
B) Trade sanctions levied against the Soviet Union
C) Tariffs, but not nontariff trade barriers
D) Tariffs as well as nontariff trade barriers

Question 35

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:

A) Grain prices would rise in Russia
B) Consumer surplus would decrease for the Russians
C) Grain prices would rise in the United States
D) Export revenues would decrease for U.S. producers

Question 36

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

A) The usage of the normal-trade-relation (most-favored-nation) clause
B) Assistance in the settlement of trade disagreements
C) Multilateral tariff reductions
D) Bilateral tariff reductions

Question 37

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

A) International dumping by U.S. companies
B) Full-cost pricing by U.S. companies
C) Unfair trade practices by foreign nations
D) Trade embargoes by foreign nations

Question 38

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:

A) U.S. grain consumers and producers of bread
B) U.S. farmers and grain companies
C) Grain producers in foreign countries
D) Grain consumers in foreign countries

Question 39

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 $____.

A) 4, $12 million, $16 million
B) 4, $16 million, $12 million
C) 8, $12 million, $16 million
D) 8, $16 million, $12 million

Question 40

Countervailing duties may be imposed:

A) In response to a foreign export subsidy
B) In response to a foreign antidumping tariff
C) To promote exports of domestic companies
D) To promote imports of domestic consumers

Question 41

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.

A) $4 million
B) $8 million
C) $12 million
D) $16 million

Question 42

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Figure 6.2. Effects of an Export Subsidy

Consider Figure 6.2.As a result of the South Korean subsidy,Mexicans find their consumer surplus:

A) Rising by $160
B) Rising by $220
C) Falling by $160
D) Falling by $220

Question 43

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.For Europe as a whole (Airbus and European taxpayers),the subsidy leads to a (an)increase/decrease in net revenues of $____.

A) Increase of $12 million
B) Increase of $16 million
C) Decrease of $12 million
D) Decrease of $16 million

Question 44

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.Suppose the European government provides Airbus a subsidy of $4 million on each aircraft manufactured,and that the subsidy convinces Boeing to exit the Canadian market.As the monopoly seller,Airbus maximizes profit by selling ____ aircraft at a price of $____,and realizes profits totaling $____.

A) 6, $10 million, $36 million
B) 6, $12 million, $24 million
C) 12, $10 million, $36 million
D) 12, $12 million, $24 million

Question 45

Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the United States.
Figure 6.3 Iraqi Computer Market and Economic Sanctions

Consider Figure 6.3.In response to Iraq's armed invasion of neighboring countries,suppose the United States imposes a partial embargo that limits exports to Iraq to 10 computers.The export quota leads to an increase/decrease in the price of computers equal to $____,and an increase/decrease in consumer surplus equal to $____.

A) Increase, $2000, decrease, $40,000
B) Increase, $4000, decrease, $60,000
C) Decrease, $2000, increase, $40,000
D) Decrease, $4000, increase, $60,000

Question 46

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,the Airbus subsidy leads to a (an)increase/decrease in Canadian consumer surplus of $____,as compared to the consumer surplus that existed in the absence of a subsidy.

A) Increase of $8 million
B) Increase of $10 million
C) Decrease of $8 million
D) Decrease of $10 million

Question 47

In 1995 the General Agreement on Tariffs and Trade was replaced by the ____.

A) Agency for International Development
B) Organization for Economic Cooperation and Development
C) United Nations Center for Trade and Development
D) World Trade Organization

Question 48

Economic sanctions are most effective in causing the target nation to modify its behavior when the:

A) Target nation had negligible economic relationships with the imposing nation prior to the sanctions
B) People of the target nation have weak cultural ties to the people of the imposing nation
C) Sanctions are levied by a large number of nations
D) Target government is supported by the majority of its people

Question 49

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Figure 6.2. Effects of an Export Subsidy

Consider Figure 6.2.To help its firms further penetrate export markets,suppose the South Korean government provides them a production subsidy of $20 per calculator.With the subsidy,South Korean firms charge a price of $____ and export ____ calculators to Mexico.

A) $40, 8
B) $40, 10
C) $20, 8
D) $20, 10

Question 50

Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the United States.
Figure 6.3 Iraqi Computer Market and Economic Sanctions

Consider Figure 6.3.Of the quota-induced change in Iraqi consumer surplus,the amount of the change in Iraq's consumer surplus that is transferred to other sectors of Iraq's economy is captured by the United States as:

A) Tax revenue
B) Export revenue
C) Producer surplus
D) Consumer surplus

Question 51

The implicit industrial policies of the U.S.government have included:

A) Formulating industry-specific economic policies designed to promote national champions
B) Nationalizing basic industries such as steel and autos
C) Encouraging cartelization of aircraft and aluminum manufacturers
D) Improving the setting for industry such as communications and infrastructure

Question 52

Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the United States.
Figure 6.3 Iraqi Computer Market and Economic Sanctions

Consider Figure 6.3.With free trade,Iraq purchases ____ computers at a price of $____,and realizes $____ of consumer surplus from the availability of computers.

A) 30, $3,000, $25,000
B) 30, $3,000, $35,000
C) 30, $3,000, $45,000
D) 30, $3,000, $55,000

Question 53

Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the United States.
Figure 6.3 Iraqi Computer Market and Economic Sanctions

Consider Figure 6.3.For the United States,the export quota results in a (an):

A) Improvement in its terms of trade with Iraq
B) Increase in its export revenue
C) Increase in domestic computer prices
D) Decrease in domestic consumer surplus

Question 54

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Figure 6.2. Effects of an Export Subsidy

Consider Figure 6.2.For Mexico's producers and consumers as a whole,the South Korean subsidy leads to a:

A) $120 welfare gain
B) $320 welfare gain
C) $120 welfare loss
D) $320 welfare loss

Question 55

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,the total cost of the Airbus subsidy to the European taxpayer equals:

A) $16 million
B) $20 million
C) $24 million
D) $28 million

Question 56

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Figure 6.2. Effects of an Export Subsidy

Consider Figure 6.2.The South Korean subsidy helps/hurts Mexican manufacturers,since their producer surplus rises/falls by $____.

A) Helps, rises, $60
B) Helps, rises, $100
C) Hurts, falls, $60
D) Hurts, falls, $100

Question 57

Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the United States.
Figure 6.3 Iraqi Computer Market and Economic Sanctions

Consider Figure 6.3.Of the quota-induced change in Iraqi consumer surplus,$____ is not transferred to other sectors of Iraq's economy and represents deadweight loss.

A) $5000
B) $10,000
C) $15,000
D) $20,000

Question 58

In 1995 the ____ was established to administer the new global trade rules agreed in the Uruguay Round of multilateral trade negotiations.

A) World Trade Organization
B) Organization for Economic Cooperation and Development
C) General Agreement on Tariffs and Trade
D) United Nations

Question 59

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Figure 6.2. Effects of an Export Subsidy

Consider Figure 6.2.With free trade,Mexican consumers purchase ____ calculators,Mexican firms produce ____ calculators,and ____ calculators are imported.

A) 10, 4, 6
B) 10, 6, 4
C) 10, 8, 2
D) 10, 2, 8

Question 60

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Figure 6.2. Effects of an Export Subsidy

Consider Figure 6.2.With free trade,Mexicans attain $____ of consumer surplus from the availability of calculators,while Mexican producer surplus equals $____.

A) $400, $200
B) $200, $400
C) $500, $180
D) $500, $240

Question 61

The Uruguay Round of trade negotiations resulted in the General Agreement on Tariffs and Trade being succeeded by the World Trade Organization.

Question 62

With the passage of the Smoot-Hawley Act in 1930,U.S.average tariffs were raised to over 50 percent on protected imports.

Question 63

According to the normal-trade-relations (most-favored-nation)principle,if the United States extends MFN treatment to China and then grants a low tariff on imports of shirts from South Korea,the United States is obligated to provide the identical low-tariff on imports of shirts from China.

Question 64

The most important determinants of sanctions include

A) Cultural factors including nationalistic attitudes
B) Strength of political opposition in the targeting nation
C) The number of nations imposing sanctions
D) All of the above

Question 65

The only members of the General Agreement on Tariffs and Trade and its successor,the World Trade Organization,are developing countries rather than developed countries.

Question 66

Although the Uruguay Round of multilateral trade negotiations succeeded in reducing nontariff trade barriers,it could not achieve reductions in tariff trade barriers.

Question 67

Trade adjustment assistance policies

A) Can resolve all workers' challenges to free trade
B) Attempt to share gains from free trade with disadvantaged workers
C) Have never been used to sustain a losing business concern
D) Are financed by state and local tax revenues

Question 68

According to the fast-track provision of U.S.trade law,once the President has completed trade negotiations,their outcome is subject to a vote (without amendment)in Congress within 90 legislative days of submission.

Question 69

According to the Reciprocal Trade Agreements Act of 1934,the President could lower tariffs by up to 10 percent of the existing level without congressional approval.

Question 70

Under the normal-trade-relations (most-favored-nation)principle,two nations agree to apply tariffs to each other at rates as low as those applied to any other nation.

Question 71

The fast-track provision of U.S.trade law has the affect of speeding up the timetable during which the President negotiates trade agreements with foreign governments.

Question 72

According to the General Agreement on Tariffs and Trade and its successor,the World Trade Organization,only bilateral trade negotiations can take place between a country and its trading partners.

Question 73

The United States

A) Has been a heavy user of antidumping laws to protect domestic producers
B) Has rarely used antidumping laws to protect domestic producers
C) Has targeted antidumping action against China, Japan, Canada, Italy, and Germany
D) Both a and c

Question 74

Proponents of the Smoot-Hawley Act of 1930 viewed it as a means of combating domestic unemployment.

Question 75

It is generally agreed that the Smoot-Hawley Act of 1930 led to improvements in U.S.exports and an overall increase in U.S.output and employment.

Question 76

Industrial policies

A) Require formal explicit efforts by governments
B) May be implicit
C) Have never been used by the U.S. government
D) Both a and b

Question 77

U.S.tariffs on imports from countries issued normal-trade-relations (most-favored-nation)status are often three or four times as high as those on comparable imports from nations not receiving that status.

Question 78

The high point of U.S.protectionism occurred with the passage of the Kennedy Act in the 1960s.

Question 79

Members of the General Agreement on Tariffs and Trade and its successor,the World trade through Trade Organization,agree to the principle of nondiscrimination in trade and the reduction of trade barriers by multilateral negotiations.

Question 80

The main focus of the Uruguay Round of multilateral trade negotiations was on tariff barriers rather than nontariff trade barriers.