Deck 9: Nontariff Distortions to Trade

Question 1

An example of a nontariff barrier (NTB) is:

A) a tax on imports.
B) a tax on exports.
C) a physical limit on imports.
D) a tax on trade in services only.
E) All of the above.

Answer 1

a physical limit on imports.

Question 2

Nontariff barriers (NTBs) include all of the following except:

A) quotas.
B) tariffs.
C) subsidies.
D) health standards.
E) VERs.

Answer 2

tariffs.

Question 3

Quotas:

A) are a form of protectionism.
B) restrict imports of a product to a certain quantitative level.
C) are banned under the WTO.
D) All of the above
E) None of the above

Answer 3

All of the above

Question 4

Once a country joins the WTO:

A) all quotas must by immediately be eliminated.
B) all quotas are allowed under the WTO.
C) quotas must be slowly eliminated over a given period of time.
D) all quotas are allowed since the WTO does not pay attention to this trade issue.
E) the organization ignores quotas.

Question 5

Quotas exist because:

A) not all countries are members of the WTO.
B) some countries that are members of the WTO are allowed to maintain quotas during a transition period.
C) many industrial countries implement quotas in defiance of WTO rules.
D) All of the above
E) None of the above

Question 6

Which of the following is not one of the reasons countries have quotas?

A) Non-WTO member
B) New WTO member
C) Protection of agricultural production
D) Membership in the UN
E) All of the above

Question 7

A VER is:

A) a tariff that is imposed by the exporting country.
B) a tariff that is imposed by an importing country.
C) a voluntary quota imposed by the importing country.
D) a voluntary quota imposed by the exporting country.
E) only used by developing countries.

Question 8

Which of the following is not an NTB?

A) A quota
B) A VER
C) A technical rule calculated to exclude imports
D) An MFN tariff
E) All of the above

Question 9

Nontariff barriers include all of the following except:

A) buy domestic requirements.
B) tariffs.
C) technical standards.
D) labor standards.
E) None of the above

Question 10

Nontariff barriers include all of the following except:

A) buy domestic requirements.
B) technical standards.
C) environmental standards.
D) the corporate income tax.
E) None of the above

Question 11

Which of the following statements is true?

A) A VER is essentially the same thing as a quota.
B) A VER and a quota have nothing in common.
C) Quotas are legal under WTO rules.
D) VERs enhance consumer welfare whereas quotas do not.
E) The WTO does not cover quotas.

Question 12

A VER is imposed by:

A) the domestic government.
B) the foreign government.
C) the domestic producers.
D) the domestic consumers.
E) the WTO.

Question 13

Which of the following countries has a quota on imports of sugar?

A) Germany
B) Mexico
C) The U.S.
D) The Dominican Republic
E) Mexico.

Question 14

The following figure illustrates the demand and supply curves for PCs in a small country.


-Which of the following is true for the above quota?

A) Consumers lose area a.
B) The government would receive area e if it auctions the quota.
C) Domestic firms gain areas 'b + d.
D) There is no loss to the country's overall welfare.
E) There is a gain in the country's welfare.

Question 15

The following figure illustrates the demand and supply curves for PCs in a small country.


-Suppose the government used a tariff to achieve the same level of protection as the quota illustrated above. Comparing the two outcomes (quota versus tariff) we can conclude:

A) consumers lose area a.
B) the government can collect the tariff or sell the quotas to receive area e.
C) domestic producers gain under both a tariff and a quota.
D) All of the above
E) None of the above

Question 16

The following figure illustrates the demand and supply curves for PCs in a small country.


-With no trade the amount of domestically produced PCs is:

A) Q₁.
B) Q₂.
C) Q₃.
D) Q₁ to Q₃.
E) zero.

Question 17

The following figure illustrates the demand and supply curves for PCs in a small country.


-With no trade the amount of domestically produced PCs is:

A) Q1.
B) Q2.
C) Q3.
D) Q1 to Q3.
E) zero.

Question 18

The following figure illustrates the demand and supply curves for PCs in a small country.


-With no trade the country's producer surplus is:

A) area a.
B) area b.
C) areas b + c.
D) areas b + c + g.
E) b + d

Question 19

The following figure illustrates the demand and supply curves for PCs in a small country.


-With no trade the country's consumer surplus is:

A) area a.
B) area a + b.
C) area b.
D) area a + b + c.
E) b + d.

Question 20

The following figure illustrates the demand and supply curves for PCs in a small country.


-With free trade the country imports:

A) Q1.
B) Q2.
C) Q3.
D) Q1 to Q5.
E) area c.

Question 21

The following figure illustrates the demand and supply curves for PCs in a small country.


-With free trade the country's producer's surplus is:

A) area a.
B) area b.
C) area c.
D) area d.
E) area g.

Question 22

The following figure illustrates the demand and supply curves for PCs in a small country.


-With a quota imposed on PCs, the country imports:

A) Q1.
B) Q2.
C) Q3.
D) zero to Q1.
E) Q2 to Q4.

Question 23

The following figure illustrates the demand and supply curves for PCs in a small country.


-The loss of consumer surplus due to the quota is:

A) area c.
B) area b.
C) area c + d.
D) area c + d + e.
E) area c + d + e + f.

Question 24

The following figure illustrates the demand and supply curves for PCs in a small country.


-When a quota is imposed in a domestic market:

A) domestic producers capture all of any future increase in demand.
B) foreign producers capture all of any future increase in demand.
C) the government captures all of any future increase in demand.
D) All of the above
E) None of the above

Question 25

For the government, a quota is worse than a tariff because part of the lost _____ surplus is not transferred to the government.

A) consumer
B) producer
C) dead-weight
D) tariff
E) exporter.

Question 26

Like tariffs, quotas result in:

A) additional government revenue.
B) an increase in consumer surplus.
C) a higher imported price.
D) more imports.
E) a lower imported price.

Question 27

When a quota is imposed, the losers include:

A) consumers and domestic producers.
B) consumers and foreign producers.
C) consumers and the domestic government.
D) consumers.
E) domestic producers.

Question 28

Suppose a quota on foreign-produced cars is enforced by the U.S. government. Which of the following groups is most like to oppose this action?

A) American automobile manufacturers
B) Consumers
C) American Steel Workers
D) United Auto Workers
E) the U.S. government

Question 29

When a quota is imposed:

A) foreign firms may gain by selling the imported product at a higher price.
B) foreign firms may lose by selling fewer imports.
C) domestic firms lose by selling fewer products.
D) both a and b
E) both b and c

Question 30

Like tariffs, quotas generally lead to:

A) an increased amount of consumer surplus.
B) a reduced amount of producer surplus.
C) higher prices and fewer imports.
D) increased government revenue.
E) increase the amount of trade.

Question 31

If a government auctions its quota:

A) domestic producers gain additional producer surplus.
B) consumers gain additional consumer surplus.
C) foreign firms pay an additional cost.
D) foreign firms gain additional revenue.
E) domestic producers lose additional producer surplus.

Question 32

To calculate a tariff equivalent for a quota one must:

A) take the difference between the world market price and the quota constrained domestic price and divide by the world market price.
B) take the difference between the world market price and the quota constrained domestic price and divide by the quota-constrained price.
C) take the difference between the tariff and domestic market cost divided by the domestic market costs.
D) take the sum of all quotas and divide by the number of units imported.
E) None of the above

Question 33

When demand increases for a good subject to a quota:

A) imports would stay the same but the price would rise.
B) the price would stay the same but imports would increase.
C) the supply curve shifts outward at the world price.
D) the price wouldn't change since imports ensure consumption.
E) All of the above

Question 34

If imports are constrained by a quota and demand increases then:

A) prices will rise.
B) prices will fall.
C) the quantity imported will increase.
D) the quantity imported will fall
E) neither price nor quantity will change.

Question 35

Which of the following statements is true?

A) If demand increases in the presence of a tariff, then prices will not increase because the amount of imports will increase.
B) Businesses always prefer tariff protection to quota protection.
C) Exporters never engage in FDI because of quota protection.
D) Quotas have no discernible effect on imports or domestic production.
E) Domestic consumers are unaffected by quotas.

Question 36

With a quota, as the domestic demand for a product rises:

A) losses for domestic firms increase.
B) losses for domestic consumers decrease.
C) losses for the domestic government decrease.
D) losses to society increase.
E) losses to society decrease.

Question 37

After a quota has been imposed in a market, suppose that the demand for the product increases, this would cause the quota price to _____ and the amount imported to _____ .

A) remain the same, remain the same
B) fall, fall
C) rise, rise
D) rise, remain the same
E) fall, remain the same

Question 38

Which of the following statements is false?

A) If demand increases in the presence of a tariff, then imports will increase.
B) If demand increases in the presence of a quota, then the price will rise.
C) The government always receives the same revenue with either a tariff or a quota.
D) If the government auctioned off quotas they would get the same revenue they would get if there were a tariff.
E) Quotas raise producer surplus.

Question 39

In moving from free trade to a quota, _____ is likely to occur.

A) an increase in the volume of trade
B) transshipping from the importing country to the exporting country
C) a quality upgrading of the traded good
D) an increase in imports
E) an increase in exports

Question 40

Which of the following describes the use of government policy to enhance exports in specific industries?

A) VER
B) AVE
C) Strategic trade policy
D) NTB
E) quota policy

Question 41

The U.S. policy that requires the government to buy from a domestic supplier unless the domestic supplier's price is more than 6% higher than the foreign price is called:

A) the Buy American Act of 1933.
B) the Discriminatory Policy Act of 1988.
C) the Protection of Domestic Industries Act of 1994.
D) the Foreign Policy Act of 2001.
E) None of the above

Question 42

The Buy American Act of 1933 gives American suppliers a _____ percent margin of preference over foreign suppliers and a _____ percent margin of preference for military or defense related goods.

A) 6; 10
B) 5; 20
C) 6; 50
D) 10; 20
E) 20; 20

Question 43

Using various government policies to increase exports is frequently called:

A) labor standards.
B) environmental policy.
C) MITI.
D) strategic trade policy.
E) manufacturing policy.

Question 44

Which of the following is a source of government regulation related to international trade?

A) Administrative regulations
B) Technical regulations
C) Industrial policy
D) All of the above
E) None of the above

Question 45

The impact of transportation costs on international trade causes:

A) import prices to rise
B) export prices to rise.
C) imports to increase.
D) import prices to fall.
E) no change in import prices.

Question 46

The impact of transportation costs on international trade causes:

A) imports to increase
B) imports to decrease
C) export price to increase
D) import prices to decrease.
E) imports to cease.

Question 47

The gravity equation relates the volume of trade to:

A) distance.
B) the GDP of the importing country.
C) the GDP of the exporting country.
D) All of the above.
E) None of the above

Question 48

Which of the following predicts the volume of trade?

A) absolute advantage
B) comparative advantage
C) factor proportions
D) the gravity equation
E) all of the above

Question 49

NTBs could be associated with:

A) quotas.
B) VERs.
C) the MFA (Multi Fibre Agreement)
D) all of the above
E) none of the above

Question 50

Transportation costs:

A) raises the price of imported goods.
B) lowers the volume of imports.
C) are CIF - FAS.
D) all of the above .
E) none of the above.

Question 51

Both labor and environmental standards are applied to:

A) carpets.
B) lumber.
C) U.S. free-trade agreements.
D) all of the above
E) none of the above

Question 52

A quota restricts the imports of a product to a certain quantitative level.

Question 53

Between 10 and 20% of the tariffs lines of the EU, Japan, and the U.S. are affected by nontariff barriers to trade.

Question 54

Tariffs over the last two decades have increased as foreign competition has increased.

Question 55

The U.S. currently has no quotas on imported products.

Question 56

Quotas are not a legal method of restricting imports under GATT and the WTO.

Question 57

The net loss to a country as a result of a quota is smaller than the net loss of an equivalent tariff.

Question 58

A quota or a VER is usually applied so that a specific number of units can be imported without regard to the price of the product.

Question 59

A country that is a member of the WTO by definition does not use quotas as a form of protection.

Question 60

Some countries, such as the U.S., maintain quotas in defiance of WTO rules.

Question 61

The Multifibre Arrangement (MFA) is a fair system and minimizes welfare losses by allocating quotas based on traditional market shares.

Question 62

The EU and the U.S. severely limit the exports of apparel from developed countries through the use of quotas.

Question 63

The practical difference between a quota and a VER is the name.

Question 64

When a country voluntary agrees to limit its exports to another country, it is called a voluntary export restraint.

Question 65

Quotas redistribute consumer surplus to domestic and foreign firms.

Question 66

Like tariffs, quotas tend to increase the government's tax revenue.

Question 67

A quota is a form of commercial policy.

Question 68

Quotas tend to increase producers surplus.

Question 69

Converting a quota into a tariff is easily accomplished by calculating what the ad valorem equivalent tariff (AVE) needs to be to achieve the same level of protection.

Question 70

If the demand for a product increases, then a quota will lead to an increase in the price of the product because the amount imported cannot increase.

Question 71

A quota will sometimes encourage exporters to lower the quality of their product in order to export less.

Question 72

A quota will encourage exporters to increase the quality of the goods that they are exporting.

Question 73

A quota will encourage exporters to increase the quality of the goods that they are exporting in order to reduce the revenue they receive from exports.

Question 74

As tariffs have declined, national differences in the regulation of business have less of a chance to alter the pattern of world production and trade.

Question 75

Trade restrictions can occur when a country imposes additional technical requirements that are written in a manner so that foreign firms cannot comply.

Question 76

Business regulations within a country do not impact international trade flows when there is a free-trade agreement between the two countries.

Question 77

Since governments buy just like private consumers and businesses, government procurement has no noticeable impact of world trade.

Question 78

Government procurement practices normally create a level playing field for foreign and domestic firms.

Question 79

Most countries have some form of policy to favor domestic producers in the area of government procurement.

Question 80

The WTO has been very successful in negotiations concerning government procurement.