Deck 7: Commercial Policy

Question 1

The WTO's Doha Development Agenda is only considering market access issues in agriculture,such as tariffs and quotas,because export subsidies and production subsidies are considered less harmful and have not been part of the GATT or WTO agenda.

Answer 1

False

Question 2

Which of the following is FALSE?

A)The analysis of agriculture,textiles,and clothing in the EU,the United States,and Japan supports the proposition that older sectors of the economy are most protected,particularly in cases where the nation has lost a substantial part of its comparative advantage.
B)Even when tariffs are relatively low,the cost per job saved tends to be high.
C)Commercial policy is grossly inefficient at achieving the objective of job preservation.
D)Trade barriers in high-income countries never cause unintended consequences in low-income countries because most of their trade is with other industrialized countries.

Answer 2

D

Question 3

Trade barriers are an expensive and grossly inefficient way to reach most of the goals for which they are used.

Answer 3

True

Question 4

Australia has one of the most heavily subsidized agricultural sectors as a percentage of domestic GDP.

Question 5

One reason why producers have an incentive to organize in favor of protection is because

A)producer gains are spread across so many firms that no one gets a large share of the benefits.
B)producer gains are relatively concentrated.
C)there is no real cost to the economy.
D)producer gains outweigh consumer losses.
E)it is a cheap way to keep their employees happy.

Question 6

In the global recession of 2007-2009,world trade declined because nations closed their markets to trading partners.

Question 7

How did the Uruguay Round of GATT impact agriculture?

Question 8

Infant industry protection requires

A)a positive technological externality.
B)a national security externality.
C)time limited protection.
D)Both A and B.
E)Both A and C.

Question 9

Since the end of World War II,

A)tariffs around the world fell substantially.
B)agricultural subsidies were significantly reduced.
C)most nations began to apply tariffs uniformly across all industries.
D)tariffs increased in low-income countries and fell a small percentage in high-income countries.

Question 10

Describe some of the gains from lowering trade barriers that may be difficult to measure.

Question 11

There are asymmetric incentives to support and to oppose protectionist trade policies,with the stronger incentives going to those that would seek protection.

Question 12

Tariffs are highest in which sector internationally?

A)Agriculture
B)Energy
C)Technology
D)Automobiles

Question 13

One reason why consumers are unlikely to be too upset about tariffs is because

A)most consumers benefit from protection.
B)tariffs are an inexpensive way to create jobs.
C)consumer losses are not real losses.
D)the costs are so spread out that no one pays a big share of the total.
E)the gains of producers are larger.

Question 14

High-income industrial nations such as the United States and Japan tend to have their highest tariffs in

A)newer,high-technology manufacturing industries.
B)capital-intensive,diversified manufacturing.
C)agriculture,clothing,and textiles
D)Both A and B.
E)None of the above.

Question 15

The system of trade rounds under GATT and the WTO has been successful at creating trade rules and reducing trade barriers.

Question 16

The pattern of protection in industrial countries is particularly harmful to the interests of

A)low-income developing countries.
B)high-income industrial countries.
C)Asian nations.
D)European nations.
E)None of the above.

Question 17

Agriculture,clothing,and textiles are singled out for treatment in the chapter because

A)they tend to be the most highly protected sectors of industrial economies.
B)they tend to be the least-protected sectors internationally.
C)the policies of high-income nations in these sectors may have harmful effects in low-income countries.
D)A and C are both correct.
E)B and C are both correct.

Question 18

Which of the following describes the asymmetry Moncur Olson observed in the incentives to support and oppose trade policy?

A)The benefits of those seeking protection outweigh the costs imposed by the protection.
B)The benefits of protection are spread out over a large number of firms and industries,but the costs are concentrated on consumers.
C)The benefits of policy are concentrated,and the costs are spread out over a large number of participants.
D)The costs of protection are concentrated on a few firms,and the benefits of protection are spread out over a large number of consumers.

Question 19

Which of the following is NOT a reason people tolerate tariffs and quotas?

A)Ignorance
B)Their personal jobs depend on tariffs and quotas.
C)Costs may be hidden and hard to quantify.
D)Costs of the policy are spread over a large number of people.
E)The marginal expenses to fight the protection outweigh the personal marginal costs of the protection.

Question 20

Some economists argue that free trade is beneficial regardless of the actions of a country's trading partners,including trading partners that heavily protect their home markets.

Question 21

Describe traditional knowledge and how it relates to current trade issues about intellectual property rights protection.

Question 22

A major difficulty with the infant industry argument for protection is that

A)government revenue will fall with a tariff.
B)it requires the nation to fall into the large country case for tariff protection.
C)effective rates of protection are usually greater than nominal rates.
D)the measurement of production externalities is hard and uncertain.
E)the productivity of infant industries is usually declining.

Question 23

If a country faces action under Section 301 of the U.S.Trade Act of 1974,it means that the country has

A)exceeded average import growth by more than 301 percent.
B)exceeded average export growth by more than 301 percent.
C)tariffs that are above 301 percent.
D)been charged by the United States with systematically engaging in unfair trade practices.
E)been charged by the WTO with violating its trade obligations.

Question 24

Protection in the form of tariffs or quotas is a very inefficient tool for job creation and preservation.

Question 25

When comparing the U.S.and Mexican car assembly industries,the disadvantage of higher U.S.wages is offset by

A)Mexican trade barriers.
B)trade adjustment assistance in the United States.
C)higher productivity in the United States.
D)a lower opportunity cost in Mexico.
E)"Buy American" advertising campaigns in the United States.

Question 26

Choose one of the arguments countries generally use to justify protection for a particular industry.Describe the argument and any inherent problems with it.Is the argument primarily an economic or a noneconomic one?

Question 27

The biggest flaw in the logic of the labor argument is the failure to consider

A)the needs of developing countries.
B)the impact of tariffs on inflation.
C)the differences in national productivity levels.
D)the strategy of multinational businesses.
E)the impact on employment levels.

Question 28

The more difficult the goal,the more likely military force is going to be needed to back up economic sanctions.

Question 29

Dumping occurs when a firm

A)sells too much of a good in a foreign country.
B)sells in a foreign country at prices that are below fair value.
C)sells in its home market at prices that are below the average price charged by its competitors.
D)sells in a foreign market at prices that are below the prices charged by firms based in the foreign market.
E)charges more than a fair price.

Question 30

Economic sanctions

A)usually work to create policy change in the targeted country.
B)are more likely to work if the international community supports them.
C)are more likely to work if military force is not used.
D)never work to create policy change in the targeted country.
E)Both A and C.

Question 31

Television programming might be targeted for protection in a country using which of the following arguments?

A)Infant industry
B)National security
C)Need for retaliation
D)Labor argument
E)Cultural protection

Question 32

It seems likely that economic sanctions ultimately would have led to regime change in Iraq.

Question 33

Critique the infant industry or the labor argument for protection.

Question 34

Some economists suggest the optimal way for a nation to protect its access to a strategic mineral is with

A)an infant industry tariff.
B)a high rate of effective protection to keep local mines in business.
C)a quota on imports of the mineral.
D)a low nominal rate of protection.
E)a stockpile.

Question 35

Because low tariffs have a high ratio of benefits to costs,they are an especially efficient way for nations to achieve full employment and growth.

Question 36

Historically,one of the most common reasons for countries to impose tariffs was

A)to protect their national security.
B)to raise revenue for the government.
C)to eliminate unemployment.
D)to counter inflation.
E)None of the above.

Question 37

If a large percentage of economic activity in developing countries is unrecorded,then the countries are likely to rely on which of the following taxes to provide government revenue?

A)Sales taxes
B)Property taxes
C)Income taxes
D)Tariffs

Question 38

A countervailing duty is a tariff that is levied to counteract

A)the dumping of goods in the domestic market by foreign firms.
B)a sudden surge of imports which hurt a domestic industry.
C)subsidies given to foreign firms by their own governments.
D)the tariff on domestic goods that are enacted by foreign governments.
E)low prices for imported goods that are made in countries with low wages.

Question 39

"Cheap foreign wages" is a poor argument for protection because it fails to recognize the importance of productivity.Which of the following does NOT contribute to increasing productivity?

A)Education and training
B)Government subsidies
C)Infrastructure
D)Capital

Question 40

If a nation protects an industry because it believes that there are positive externalities in the production process,it is asserting that the free market will

A)produce less than is optimal from society's point of view.
B)produce more than is optimal from society's point of view.
C)produce the correct amount but charge too high a price.
D)produce the correct amount but charge too low a price.
E)None of the above.

Question 41

301-actions are more frequently used as a tool of trade policy,especially since the formation of the World Trade Organization.

Question 42

In the United States,which agency determines whether domestic firms have been harmed by subsidies and dumping or by a sudden surge in imports and whether protection is warranted?

Question 43

In the United States,which part of government investigates claims of subsidies or dumping?

Question 44

The most common form of tariff is a countervailing duty.

Question 45

Describe the four legal procedures available to U.S.firms to seek protection from foreign competition.What circumstances would warrant a request under each? How frequently is each used? What would be the result if the firm won?

Question 46

Under Special 301,what is the U.S.government required to do?