Question 1

The World Trade Organization provides for all of the following EXCEPT

Accepted Answer

The Global Market for Tin figure does not provide any information on the role of the World Trade Organization. However, the WTO is known for providing for multilateral tariff reductions, assistance in the settlement of trade disagreements, and the usage of the normal-trade-relation (most-favored-nation) clause. The only option that is not provided by the WTO is bilateral tariff reductions.

Question 2

Countervailing duties may be imposed

Accepted Answer

Countervailing duties are imposed in response to a foreign export subsidy, which is a financial assistance provided by the foreign government to its exporters, giving them an unfair advantage in the global market. Countervailing duties are meant to neutralize this advantage and protect the domestic industry from unfair competition.

Question 3

Assume Boeing Inc. (of the United States) and Airbus Industries (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.

Accepted Answer

The consumer surplus can be calculated by finding the area beneath the demand curve but above the price. In this case, the consumer surplus is roughly bounded by the demand curve and the price of $80 million. The area of this triangle is 0.5 x base x height = 0.5 x 200,000 x 40,000 = $4 billion. Therefore, Canadian consumers realize $8 million ($4 billion in Canadian dollars) of consumer surplus from the availability of aircraft.

Question 4

The Uruguay Round of trade negotiations lowered

Accepted Answer

The Uruguay Round of trade negotiations lowered both tariffs and nontariff trade barriers, leading to increased global trade in commodities such as tin.

Question 5

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

Accepted Answer

The organization that stipulates procedures for the settlement of international trade disputes is the World Trade Organization (WTO).

Question 6

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

Accepted Answer

The embargo was mainly resisted by U.S. farmers and grain companies, as they stood to lose a significant amount of business with the Soviet Union.

Question 7

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

Accepted Answer

When the target country's supply schedule is more inelastic, it cannot easily increase production to replace the embargoed goods, leading to greater losses in consumer surplus.

Question 8

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

Accepted Answer

The escape clause, also known as the safeguard clause, allows for the imposition of restrictions on imports that are fairly traded but still cause or threaten to cause serious injury to domestic industries. This measure is designed to provide temporary relief to domestic manufacturers facing such competitive pressures.

Question 9

Industrial policy attempts to fulfill all of the following objectives EXCEPT

Accepted Answer

Industrial policy is aimed at supporting industries that provide long-term comparative advantage. It is not intended to support industries that are not competitive in the long term, which is the opposite of the objective stated in option D. Therefore, option D is the correct answer. Options A, B, and C are all valid objectives of industrial policy.

Question 10

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

Accepted Answer

Domestic workers often lobby for import restrictions to protect their jobs from foreign competition, which can lead to higher protectionism.

Question 11

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

Accepted Answer

If Iraq is less dependent on foreign products, then the trade embargoes will have a smaller impact on its consumer surplus because it will be able to rely on its own domestic production or find alternative sources of imports.

Question 12

During the past four decades

Accepted Answer

NTBs have increased in importance as tariffs have generally decreased due to global trade agreements and negotiations aimed at reducing trade barriers. While tariffs have become less significant as a tool for protecting domestic industries, countries have increasingly turned to NTBs, such as quotas, embargoes, and technical standards, to regulate imports and exports.

Question 13

The Uruguay Round of trade negotiations was primarily concerned with

Accepted Answer

The Uruguay Round of trade negotiations was focused on reducing nontariff trade barriers, such as quotas, subsidies, and regulations that could limit or distort international trade.

Question 14

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

Accepted Answer

Section 301 cases involve accusations of unfair trade practices by foreign nations.

Question 15

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

Accepted Answer

The average tariff rate on dutiable imports in the United States is approximately 5 percent of the value of imports. This reflects the relatively low tariff barriers for most goods entering the U.S. market, especially in comparison to historical standards.

Question 16

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

Accepted Answer

The imposition of trade sanctions on grain sold to the Russians would lead to a decrease in the supply of grain available to the Russians, which would result in higher grain prices in Russia and a decrease in consumer surplus for the Russians. U.S. producers who rely on exports to Russia would experience a decrease in export revenues. However, it is unlikely that grain prices would rise in the United States, as the imposition of trade sanctions would only affect exports to Russia and not domestic production and consumption. Other nations may increase their grain exports to Russia to fill the gap left by the U.S. exports, but this is not specified in the question. Therefore, choice C is the correct answer.

Question 17

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

Accepted Answer

The answer of Those who argue in favor of import...

Question 18

Assume Boeing Inc. (of the United States) and Airbus Industries (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 $______________.

Accepted Answer

According to Figure 6.1, without any governmental subsidy, Boeing can sell 4 aircraft at a price of $12 million, which would result in total profits of $16 million for the firm.

Question 19

The most recent round of multilateral trade negotiations is the

Accepted Answer

The Doha Round, also known as the Doha Development Agenda, is the most recent round of multilateral trade negotiations under the World Trade Organization (WTO). It was launched in 2001 and has been ongoing with various setbacks and obstacles.

Question 20

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

Accepted Answer

The escape clause allows domestic producers to appeal for temporary relief from import competition if rising imports substantially injure the industry. Lower tariffs could increase import competition, and radio producers in the United States may feel threatened by this, so they could appeal under the escape clause.

Quiz 6: Trade Regulations and Industrial Policies