Question 1

The determination of which industries deserve infant industry protection is often done ________.

Accepted Answer

The determination of which industries deserve infant industry protection is often done on a political basis, as governments may choose to protect industries that have political significance or influence.

Question 2

________ suggest(s) that special interest groups will often dominate the general interest on any given issue because these groups are willing to work for the passage of laws.

Accepted Answer

Public choice analysis suggests that special interest groups will often dominate the general interest on any given issue because these groups are more motivated and willing to work for the passage of laws that benefit them, often at the expense of the general public. This theory applies economic principles to political processes, explaining how self-interest and incentives shape political decisions.

Question 3

What arguments are used to justify government intervention in foreign trade? What tools are used to restrict trade?

Accepted Answer

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Question 4

What is the infant industry argument? How did Japan use the infant industry argument to rebuild its economic strength following World War II? What tools did it use?

Accepted Answer

The answer of What is the infant industry argument? How...

Question 5

Exports generate domestic jobs.

Accepted Answer

Exports increase demand for domestic goods and services, leading to higher production levels, which in turn create more jobs within the exporting country.

Question 6

A country's adoption of strategic trade policies to cover a broad group of industries can actually reduce the country's overall international competitiveness because favoring certain industries inevitably hurts others.

Accepted Answer

Strategic trade policies that favor certain industries often lead to resource misallocation, where resources are diverted from more efficient sectors to the favored ones, potentially reducing overall economic efficiency and international competitiveness.

Question 7

According to the national defense argument, government protection of specific industries may be necessary to ensure a country's self-sufficiency in critical raw materials, machinery, and technology.

Accepted Answer

The national defense argument posits that government intervention in protecting certain industries is crucial for maintaining a country's self-sufficiency in essential areas such as critical raw materials, machinery, and technology, to ensure national security and preparedness.

Question 8

________, once heavily dependent on cocoa, began an industrialization program to protect itself from fluctuations in cocoa prices.

Accepted Answer

Ghana, historically reliant on cocoa as a major export, initiated an industrialization strategy to diversify its economy and reduce vulnerability to the volatile global cocoa market prices.

Question 9

According to strategic trade theory, a national government can make its country better off if it implements trade policies that improve the competitiveness of its firms in oligopolistic industries.

Accepted Answer

Strategic trade theory suggests that governments can enhance their country's economic welfare by enacting policies that help domestic firms gain a competitive advantage in industries characterized by oligopolies, particularly when these industries have significant economies of scale and global competition.

Question 10

What is the primary difference between fair trade and free trade? Which do you think is more appropriate for the United States? Why?

Accepted Answer

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Question 11

What is a primary disadvantage of industrial policy?

Accepted Answer

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Question 12

The infant industry argument has been adopted in countries worldwide.

Accepted Answer

The infant industry argument, which suggests that new industries in developing countries need protection from international competition until they become mature and competitive, has been adopted by many countries around the world as a rationale for implementing protective tariffs and other trade barriers.

Question 13

Protection for infant industries can only be given during the first five years of the industry's life.

Accepted Answer

Protection for infant industries can be given for varying durations depending on the country's policies and the specific needs of the industry; there is no universal rule limiting protection to the first five years.

Question 14

Industrial policy assists a country's firms in capturing large shares of important, growing global markets

Accepted Answer

Industrial policy involves government actions aimed at improving the competitiveness and capabilities of domestic industries and firms, often with the goal of enabling them to capture larger shares of significant and expanding global markets.

Question 15

Classical theories of trade assume that firms operate in perfectly competitive markets.

Accepted Answer

Classical trade theories, such as Adam Smith's theory of absolute advantage and David Ricardo's theory of comparative advantage, assume that markets are perfectly competitive, meaning that there are many buyers and sellers, each with a negligible impact on market prices.

Question 16

Which type of trade policy did Adam Smith support?

Accepted Answer

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Question 17

What is the national defense argument for protectionism?

Accepted Answer

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Question 18

The United States is an ardent supporter of industrial policy.

Accepted Answer

The United States has traditionally favored a free-market approach over a strong industrial policy, emphasizing minimal government intervention in the economy.

Question 19

The South Korean government patterned its economic development strategies after the Japanese model.

Accepted Answer

South Korea's economic development strategies were indeed influenced by the Japanese model, particularly in terms of focusing on export-oriented industrialization, government-business cooperation, and the development of specific industries to enhance economic growth.

Question 20

Discuss the two principal issues surrounding the debate on appropriate trade policy. What role does domestic politics frequently play in such debates?

Accepted Answer

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Quiz 9: Formulation of National Trade Policies