Deck 13: Trade and the Environment

Question 1

As a result of the Uruguay Round, production of _____ goods increased in industrialized countries and polluting emissions in these countries _____ as a result.

A)capital and skill-intensive; decreased
B)capital and skill-intensive; increased
C)unskilled-labor-intensive; decreased
D)unskilled-labor-intensive; increased

Answer 1

B

Question 2

Identify the correct statement.

A)There is sufficient evidence to prove that free trade simply promotes production and consumption of products that tend to cause large amounts of pollution.
B)It is not easy to find cases where government policies that limit or distort trade result in environmental damage.
C)Freer trade in environmental services actually lower environmental quality especially in the developing countries.
D)Environmentalists often fear that free trade permits production to be shifted to countries that have lax environmental standards.

Answer 2

D

Question 3

Free trade may lead to less pollution because:

A)it results in increased production and consumption of goods and services.
B)competition among nations leads to stricter pollution standards.
C)higher income can lead to political pressure on governments to enact tougher environmental protection policies.
D)imported products are produced using cleaner production techniques than domestic products.

Answer 3

C

Question 4

Environmental harm declines with rising income per person when:

A)the consumption of environment-friendly goods decline with an increase in income.
B)with rise in income the increase in demand for better environment quality is larger than any adverse effects from rising production scale.
C)the government imposes restrictions on the import of environment friendly technologies from abroad.
D)the adverse effect of any increase in nominal GDP dominates any modest increase in demand for environmental quality.

Question 5

Free trade may lead to more pollution because:

A)with free trade the size of the economy increases resulting in higher production and consumption.
B)competition among nations invariably leads to less restrictive pollution standards.
C)the countries may not specialize in the production of the goods in which they have comparative advantage.
D)domestic products are produced using cleaner production techniques than imported products.

Question 6

Which of the following statements is true?

A)Evidence shows that measures to keep the environment clean represent a large percentage of the total costs of production for a firm in a country with strict environmental laws.
B)There are significant incentives for firms to relocate from countries with strict environmental laws to countries with lax environmental regulation.
C)Firms are unlikely to relocate their high-pollution production to countries with lax environmental laws because they fear that such moves will result in adverse effects on their reputations.
D)Imposition of a tax on the production of a particular high-pollution product typically has a greater impact on consumer surplus than on producer surplus.

Question 7

Which of the following is most likely to be allowed under WTO rules?

A)The United States decides to ban the consumption and production of cheese made from unpasteurized milk in order to guarantee that the food people eat is safe.
B)The United States decides to ban the importation of foreign made cigarettes in order to reduce lung cancer in the United States, without putting any restriction on the sale of local cigarettes.
C)Great Britain outlaws non-British cars in an effort to reduce emissions in England, Scotland, and Wales.
D)Japan bans the importation of American rice because it is thought that American rice may not be as nutritious as Japanese rice.

Question 8

For which of the following types of environmental pollution can we expect that the level of environmental harm would increase as per capita income increases?

A)Carbon dioxide emissions
B)Lead pollution in water
C)Carbon monoxide
D)Arsenic in water

Question 9

The relationship between environmental harm and national income per person for arsenic water pollution exhibits a(n):

A)downward sloping curve.
B)upward sloping curve.
C)U-shape curve.
D)inverted U-shaped curve.

Question 10

Which of the following would you expect to lead to improved environmental quality?

A)An export or production subsidy from the French government to French wheat producers
B)A voluntary export restraint on the part of Japanese auto producers
C)An export subsidy for producers of clean technology for producing paper
D)Freer trade that promotes production of manufactured goods in developing countries where environmental laws are lax

Question 11

The WTO ruled that the U.S. regulations on the fuel economy of cars sold by each manufacturer:

A)were permissible under Article XX.
B)was a permissible reaction to similar regulations imposed by the Japanese government on the automobiles imported from the United States.
C)violated the WTO rules because the imported automobiles were treated differently from domestic autos.
D)was not an issue under their purview.

Question 12

As a result of the Uruguay Round, production of _____ goods increased in Asian developing countries and polluting emissions in these countries _____ as a result.

A)capital and skill-intensive; decreased
B)capital and skill-intensive; increased
C)unskilled-labor-intensive; decreased
D)unskilled-labor-intensive; increased

Question 13

Article XX of the World Trade Organization allows trade restrictions:

A)to protect domestic jobs.
B)that are necessary to protect human, animal, or plant life or health.
C)to promote the use of solar energy in the developing countries.
D)in the form of tariffs imposed on capital-intensive commodities.

Question 14

For which of the following environmental pollutions would we expect that an inverted-U relationship would exist between environmental harm and per capita income?

A)Carbon dioxide emissions
B)Lead pollution in water
C)Sulfur dioxide in air
D)Airborne heavy particles

Question 15

Identify the correct statement.

A)The overall effects of the Uruguay Round on global pollution are actually small.
B)The actual effects of the Uruguay Round on pollution levels are uniform across all the countries.
C)Evidence shows that free trade is inherently anti-environment.
D)The composition effect of the Uruguay Round tends to increase production of environment friendly products in the United States.

Question 16

Which of the following would you expect to lead to worsening environmental quality?

A)An export or production subsidy from the French government to French steel manufacturers
B)Freer trade in capital equipment that incorporates environmentally friendly technologies
C)An export subsidy for producers of clean technology for producing paper
D)Freer trade that promotes production of manufactured goods in developing countries where environmental laws are strict

Question 17

Which of the following is likely to be the least important factor for firms in determining production location?

A)Comparative cost advantage
B)Environmental standards
C)Transportation costs
D)External economies of scale

Question 18

As the world moves toward freer trade, the composition of production shifts so that more environmentally "dirty" products are produced in _____ and more environmentally "clean" products are produced in _____.

A)industrialized countries; developing countries
B)developing countries; industrialized countries
C)both industrialized and developing countries; only industrialized countries
D)developing countries; neither industrialized nor developing countries

Question 19

The combined size and income effects of the Uruguay Round tend to:

A)decrease nitrogen dioxide emissions in European Union and Japan.
B)increase carbon monoxide emissions in developed countries.
C)increase pollution levels in developing countries.
D)decrease sulfur dioxide and carbon monoxide emissions in developing countries.

Question 20

Which of the following statements is true?

A)Shifts toward freer trade are responsible for the majority of the increase in carbon dioxide emissions.
B)Free trade is inherently unfair and anti-environment.
C)Relocation of firms to take advantage of lax environmental laws is small.
D)Production of commodities like textiles increases in the industrialized countries due to free trade.

Question 21

An example of the specificity rule in action is:

A)restricting imports in order to reduce environmental pollution.
B)taxing the consumption of a product whose production creates a great deal of pollution.
C)taxing the production of a product whose production creates a great deal of pollution.
D)imposing price floors on "clean" products as a way to increase the demand for these products.

Question 22

Which of the following was signed in 1987 and banned the exportation and importation of CFCs and halons?

A)The Uruguay Round
B)The CITES
C)The Montreal Protocol
D)The Kyoto Protocol

Question 23

If domestic production of a product causes pollution that imposes an external cost on the country, then:

A)exports of the product should be subsidized.
B)exports of the product offset the external costs.
C)exports of the product can make the country worse off.
D)exports are less than they would be otherwise.

Question 24

A good is said to be overproduced in an economy if:

A)the marginal cost of producing the good is less than its price.
B)the marginal benefit derived from the consumption of the good is more than the price.
C)the social marginal cost exceeds the social marginal benefit.
D)the production of the good generates a positive externality.

Question 25

Which of the following involved industrial countries agreeing to cut their emissions of greenhouse gases to about 5 percent below their 1990 levels by the years 2008-2012 while developing countries did not make any commitments?

A)The Uruguay Round
B)The CITES
C)The Montreal Protocol
D)The Kyoto Protocol

Question 26

The figure given below depicts the relationship between the social benefits and social costs associated with different levels of pollution. The two curves are Social Marginal Cost (SMC) and Social Marginal Benefit (SMB). The other terminologies are P = Price of the commodity, MC = Marginal Cost (private), and MB = Marginal Benefit (private). For pollution level 'a', _____, therefore the country should _____ pollution.

A)SMB > SMC; increase
B)SMC = SMC; decrease
C)SMB < SMC; increase
D)SMC < MC = P = MB; decrease

Question 27

A negative externality is said to exist if:

A)the private marginal cost exceeds the private marginal benefit.
B)the producer and the consumer surplus for a particular good are not equal.
C)a tax imposed on the production of a particular good results in a deadweight loss.
D)the social costs exceed the private costs.

Question 28

If the foreign use of Australian-mined coal is harming Australia, according to the specificity rule, the optimal policy for the Australian government to use is to _____.

A)tax coal imports
B)tax coal exports
C)tax foreign coal producers
D)subsidize coal exports

Question 29

When domestic production causes pollution that imposes an external cost on the country, the country may export the wrong products because:

A)the price of the product should be lower, which could lead to less production of the product.
B)the price of the product should be lower, which could lead to no exports of the product.
C)the price of the product should be higher, which could lead to more exports of the product.
D)the price of the product should be higher, which could lead to no exports of the product.

Question 30

Which of the following is an example of an international externality, in which production (or consumption) activities in one country impose external costs on other countries?

A)Transborder pollution
B)Persistent dumping
C)Free riding
D)Moral hazard

Question 31

Which of the following statements is true?

A)The WTO allows a country to impose a trade restriction on imports of a good because it was produced using methods that violate the importing country's environmental standards.
B)The WTO allows a country to impose an import restriction on a good for health reasons as long as the country also restricts the domestic production and consumption of the good.
C)The WTO is the final arbiter of whether goods pose a health or safety risk.
D)The WTO allows countries to pursue environmental protection using policies that may affect international trade and hence is unable to address the problem of disguised protectionism.

Question 32

In 1989 the United States passed a law against catching shrimp with nets that do not have turtle excluder devices. Four Asian countries filed a complaint with the WTO, and the WTO ruled that the U.S. policy violated WTO rules because:

A)protection of sea turtles was not a legitimate environmental purpose.
B)one nation could not impose moral values on other nations as per WTO rules.
C)sea turtles were not on the endangered species list.
D)the policy did not apply equally to all exporting nations and did not recognize alternative ways to protect sea turtles.

Question 33

If the use of fossil fuels is harming our nation, according to the specificity rule, the optimal policy to use to mitigate this harm is to:

A)subsidize research and development on alternate fuel sources.
B)levy taxes on the extraction of coal and petroleum.
C)tax the consumption of fossil fuels.
D)impose tariffs on the importation of fossil fuels.

Question 34

Non-smokers being exposed to involuntary or passive smoking is an example of:

A)transboundary pollution.
B)moral hazard.
C)a situation where social marginal benefit exceeds social marginal cost.
D)a negative externality.

Question 35

Which of the following statements about trade and domestic pollution is accurate?

A)Free trade is likely to cause producers to reduce their levels of pollution due to international competition.
B)It is possible for free trade to hurt a country if polluters are forced to internalize the external costs associated with their production.
C)In the presence of free trade, the costs of pollution can be transferred almost completely by the exporting country to the importing country.
D)If polluters are not forced to internalize the external costs associated with their production, free trade could result in the country exporting the wrong products.

Question 36

Which of the following establishes international cooperation to prevent international trade from endangering the survival of species?

A)The Uruguay Round
B)The CITES
C)The Montreal Protocol
D)The Kyoto Protocol

Question 37

The specificity rule states that:

A)The government should have a uniform policy in place to address the specific distortions in the economy.
B)it is more efficient to use a policy tool that is closer to the distortion that is caused by an externality.
C)property rights must be changed in order to correct for an externality.
D)a government tax is the best remedial measure for an externality.

Question 38

Which of the following was NOT a reason why the signing and enforcement of the Montreal Protocol was relatively easy?

A)The scientific evidence about the threat that CFCs posed to the ozone was clear.
B)The production of substitutes for the CFCs appeared to be technologically unfeasible.
C)Production of CFCs was concentrated primarily in a few large publicity-conscious firms in the EU and the U.S.
D)The U.S.and the EU were most likely to be affected by ozone depletion because they are closer to the poles than other countries, and they were also the largest producers.

Question 39

In a market, distortions do not exist if:

A)the social marginal benefit is greater than the social marginal cost.
B)the social marginal benefit is equal to the social marginal cost.
C)the social marginal benefit is less than the social marginal cost.
D)the private marginal benefit is greater than the social marginal benefit.

Question 40

Which of the following exists when one person's activity results in direct costs or benefits to someone who is not part of the marketplace decision to undertake the activity?

A)Externality
B)Specificity rule
C)Property rights
D)Marginal cost

Question 41

Increases in global temperatures are likely to result in larger economic losses for the countries in Eastern Europe than for the countries in Asia and Africa that are close to the equator.

Question 42

A rise in income unambiguously leads to less pollution.

Question 43

Suggest a remedial measure for each of the following externalities if: (1) the whole world had only one government and (2) a particular nation is harmed and is acting alone. The individual situations are as follows:
a.Pollution from domestic consumption
b.Pollution from foreign consumption
c.Pollution from world consumption

Question 44

NAFTA established processes that have substantially reduced transborder pollution along the Mexico-U.S. border.

Question 45

Changing property rights as a way to correct externalities is always preferred to the use of government taxes and subsidies.

Question 46

Research supports the claim that there are significant compliance costs associated with environmentally friendly production in countries with strong environmental laws, so that there are significant incentives for firms to produce in countries with lax environmental laws.

Question 47

What elements does a solution to excessive global warming include? Explain each of these briefly.

Question 48

An increase in per capita incomes can be expected to have little effect on reducing emissions that lead to global warming.

Question 49

Why will the Kyoto Protocol have a small impact on overall global greenhouse-gas emissions? Cite examples from countries that struggle to meet their targets.

Question 50

"A country can be left worse off as a result of free trade and/or exporting the wrong products if there are no policies that force market decision-makers to internalize the costs associated with the production of certain goods and services." Do you agree or disagree with the statement? Illustrate your answer with the help of relevant diagrams.

Question 51

Externalities are direct benefits or costs accruing to individuals or groups of individuals who were not participants in the activity.

Question 52

Do you think the GATT and WTO rulings on the U.S. efforts to reduce the number of dolphin and sea turtle mortalities were justified? In your answer be sure to explain the rulings and reasons behind these rulings. How might the United States have changed its policies so that it did not violate WTO rules?

Question 53

If the production of a good creates a negative externality, exports can be damaging to a nation.

Question 54

Suppose the U.S. government is about to ban the importation of Nicaraguan steel. The reason cited is that the production of steel contributes to substantial environmental pollution. At the same time, the U.S. government offers subsidies to domestic steel producers. Under such a situation WTO rules permit the U.S. government to implement the ban on the import of Nicaraguan steel

Question 55

World Trade Organization rules allow a government to take actions to control environmental damage caused by its own firms' production.

Question 56

When the Japanese imposed a VER on automobile exports in the 1980s, the environmental conditions in the U.S. improved.

Question 57

Give a brief account of each of the following international agreements with respect to the environment. What externalities do they cover? Have each of these agreements been successful?
a.CITES
b.Montreal Protocol
c.Kyoto Protocol

Question 58

A ban on exportation of ivory by itself restricts legal supply, raises the world price, and encourages illegal trade.

Question 59

Which countries are most and least likely to be harmed by adverse climate changes? What progress that has been made to find a comprehensive way to address global warming?

Question 60

The Montreal Protocol bans international trade in endangered species.