Question 1

It is widely recognized that the economic sanctions levied against Iraq in 1990 were a major factor causing Iraq to withdraw its military forces from Kuwait.

Accepted Answer

The answer of It is widely recognized that the economic...

Question 2

During the post World War II era,the United States has adopted explicit industrial policies similar to those of France and Japan.

Accepted Answer

The United States did not adopt explicit industrial policies similar to France and Japan during the post World War II era. The US relied largely on market-based policies and free enterprise to drive economic growth.

Question 3

According to the strategic-trade-policy hypothesis,government can alter the terms of competition to favor domestic companies,thus increasing their profits at the expense of their rivals.

Accepted Answer

The strategic-trade-policy hypothesis proposes that governments can use policies such as subsidies and tariffs to alter the terms of competition in a particular industry, giving domestic firms an advantage over their foreign competitors. This can potentially increase the profits of domestic firms, but also comes at the expense of other firms in the international market.

Question 4

As a way of helping U.S.business firms trade in the world market on a more equal terms with their organized foreign competitors,the U.S.government permits them to form export trade associations and export trading companies.

Accepted Answer

This statement is true. The U.S. government does allow American businesses to form export trade associations and export trading companies to help them compete more effectively in the global marketplace. These organizations can help smaller businesses to pool their resources and expertise, negotiate better deals with foreign partners, and access markets that might be difficult to reach otherwise.

Question 5

Assume that Russia has a comparative advantage in vodka.If the United States extends Russia the benefits of the normal-trade-relations (most favored nation)principle,U.S.consumer surplus decreases in the vodka market.

Accepted Answer

The extension of normal-trade-relations principle to Russia would mean that trade barriers between U.S. and Russia would be reduced or eliminated, leading to increased trade opportunities between the two countries. If Russia has a comparative advantage in vodka, it means that they can produce vodka at a lower opportunity cost than the U.S. If U.S. consumers are able to access lower-priced vodka from Russia due to increased trade, they would experience an increase in consumer surplus, not a decrease.

Question 6

Assume that the United States imports chemicals from Germany.Trade theory predicts that if the German government grants an export subsidy to its chemical firms,the overall welfare of the United States will increase.

Accepted Answer

An export subsidy from the German government to its chemical firms would lower the cost of chemicals for importers in the United States, potentially reducing prices for consumers and industries that use these chemicals, thereby increasing the overall welfare of the United States.

Question 7

The Commodity Credit Corporation makes available export credit financing for U.S.agricultural exports.

Accepted Answer

The Commodity Credit Corporation (CCC) is a federal government entity that provides various support programs for agriculture. One of the services it offers is export credit financing to help U.S. farmers and businesses sell food and agricultural commodities overseas. The CCC helps to promote American products in global markets by providing credit guarantees, insurance, and other forms of financial assistance to qualified exporters.

Question 8

The strategic-trade-policy hypothesis assumes that domestic firms operate under increasing cost conditions as well as in perfectly competitive markets.

Accepted Answer

The strategic trade policy hypothesis typically assumes that domestic firms operate under conditions of imperfect competition, such as oligopolies, rather than in perfectly competitive markets.

Question 9

The classical theory of comparative advantage assumes that firms operate in imperfectly competitive markets,while the theory of strategic trade policy assumes that firms operate in perfectly competitive markets.

Accepted Answer

The classical theory of comparative advantage assumes that firms operate in perfectly competitive markets, while the theory of strategic trade policy assumes that firms operate in imperfectly competitive markets.

Question 10

By reducing available supplies of a product,an export embargo leads to falling prices in the target nation and increasing target-nation consumer surplus.

Accepted Answer

By reducing available supplies, an export embargo leads to an increase in prices in the target nation as demand exceeds supply. This results in a decrease in target-nation consumer surplus.

Question 11

According to the strategic-trade-policy hypothesis,a subsidy granted to domestic exporters may lead to increased export profits which more than offset the cost of the subsidy to domestic taxpayers.

Accepted Answer

The strategic-trade-policy hypothesis states that subsidies granted to domestic exporters can provide a competitive advantage in global markets, leading to increased export profits that outweigh the cost of the subsidy to domestic taxpayers. Therefore, the statement is true.

Question 12

If the U.S.government pursued a "knowledge-based growth policy," it would subsidize particular firms to help them compete in the world economy.

Accepted Answer

A "knowledge-based growth policy" typically focuses on investing in education, research and development, and innovation across the economy rather than subsidizing specific firms. This approach aims to enhance the overall knowledge base and productivity of the economy.

Question 13

In the post World War II era,the Japanese government formed industrial policies to encourage the development of its steel,auto,shipbuilding,and machine tool industries.

Accepted Answer

This statement is true. Following World War II, the Japanese government implemented various industrial policies to promote the growth and development of key industries such as steel, auto, shipbuilding, and machine tools. These policies included government-led investment and technological support, as well as protectionist measures such as import tariffs and export subsidies. These policies helped to drive Japan's post-war economic miracle and establish it as a major industrial power.

Question 14

According to the strategic- trade- policy hypothesis,governmental subsidies granted to domestic producers can help them in capturing economic profits from foreign competitors.

Accepted Answer

The strategic-trade-policy hypothesis suggests that governmental subsidies granted to domestic producers can give them a competitive advantage over foreign competitors and help them in capturing economic profits. This is based on the idea that in certain industries, there are economies of scale and that with such subsidies, firms may be able to achieve economies of scale faster, reduce their per-unit costs, and ultimately outcompete their foreign rivals.

Question 15

Assume that the United States is the only supplier of grain to China and that it levies a partial export embargo against China.The embargo leads to increased U.S.welfare if the resulting improvement in the U.S.terms of trade with China more than offset the costs of the lower export volume to China.

Accepted Answer

If the U.S. can maintain its supply of grain to other countries and sell it at a higher price due to the partial embargo on China, then the improvement in the U.S. terms of trade with China can offset the costs of the lower export volume to China, leading to increased U.S. welfare.

Question 16

Major beneficiaries of export-credit subsidies,granted by the Export-Import Bank,have included U.S.producers of aircraft,telecommunications,and power-generating equipment.

Accepted Answer

The statement is true as per the information provided.

Question 17

Unlike Japan and the United States,France has refrained from forming explicit industrial policies to enhance the competitiveness of its national champions.

Accepted Answer

France has a history of implementing industrial policies to support its national champions, similar to Japan and the United States.

Question 18

The Export-Import Bank provides export-credit subsidies to U.S.producers of agricultural goods.

Accepted Answer

The statement is incorrect. The Export-Import Bank provides export-credit subsidies to a variety of U.S. industries, including aerospace, but not exclusively agricultural goods.

Question 19

Economic sanctions are most effective in pressuring the target country to modify its behavior when the sanctions are imposed by a small number of countries and when the target country had weak economic ties to the imposing countries before the sanctions were initiated.

Accepted Answer

Economic sanctions are generally more effective when they are imposed by a large number of countries, especially those with significant economic ties to the target country, as this increases the economic pressure and reduces the target's ability to find alternative trading partners or financial support.

Question 20

Industrial policies of the U.S.government have included subsidizing particular firms to promote national champions,nationalizing basic industries,and encouraging cartelization of industries.

Accepted Answer

The answer of Industrial policies of the U.S.government have included...

Quiz 6: Trade Regulations and Industrial Policies