Question 1

Infant industries are given a government's protection to allow them time to develop comparative advantages and/or to survive in the global environment.

Accepted Answer

This is a correct statement about the purpose of government protection for infant industries.

Question 2

(Figure: Corn and Watches in the United States and Canada) Referring to the graphs, we see that _____ has the comparative advantage in producing corn and _____ has the comparative advantage in producing watches.

Accepted Answer

The answer of (Figure: Corn and Watches in the United...

Question 3

The United States may impose antidumping tariffs on foreign firms if the government can prove that legitimate price discrimination is not occurring.

Accepted Answer

The statement is true because antidumping tariffs are imposed when foreign firms sell products in the United States at a price below the cost of production or below the price in their home market, and this is considered unfair competition.

Question 4

In general, the fewer the trade restrictions among nations, the

Accepted Answer

Fewer trade restrictions allow for increased international commerce, which can lead to greater cooperation on environmental concerns and the adoption of more sustainable practices. Additionally, free trade can lead to economic growth and development, which can in turn lead to greater investment in environmental protection measures.

Question 5

The solution to dumping is

Accepted Answer

A retaliatory tariff is a common solution to dumping, as it raises the price of the dumped goods to protect domestic industries from unfair competition.

Question 6

Environmental protection typically improves when a country's economy grows.

Accepted Answer

Economic growth often provides the resources needed for investments in environmental protection and cleaner technologies, leading to improvements in environmental quality as a country becomes wealthier.

Question 7

It takes Melissa eight hours to produce a bushel of corn and two hours to wash and polish a car. It takes Greg six hours to produce a bushel of corn and one hour to wash and polish a car. If Melissa and Greg each work 48 hours in one week and produce only the good for which they have the comparative advantage, how much corn is produced and how many cars are washed in total?

Accepted Answer

The answer of It takes Melissa eight hours to produce...

Question 8

An industry that needs protection to become competitive is known as a(n) _____ industry.

Accepted Answer

An industry that needs protection to become competitive is known as an infant industry. This generally refers to industries that are newly established or developing and require support from the government, such as subsidies or trade barriers, to help them compete with more established industries in other countries.

Question 9

Dumping occurs when goods are sold at higher prices abroad than in their home markets.

Accepted Answer

Dumping occurs when goods are sold at lower prices abroad than in their home markets.

Question 10

Alexander Hamilton argued in the late 1700s for strong controls on imports to protect American industries from competition from more established English industries. This is an example of the _____ argument for trade restriction.

Accepted Answer

Hamilton's argument that the American industries were still in their infancy stage and needed protection from established English industries is an example of the infant industry argument for trade restriction. This argument suggests that temporary trade restrictions can help protect and allow young industries to grow and become competitive in the long run.

Question 11

International trade produces only "winners."

Accepted Answer

While international trade can provide benefits to countries and their respective industries, there can also be losers, such as domestic industries that are unable to compete with foreign imports and workers who may lose their jobs due to outsourcing or shifting global markets. Therefore, international trade does not produce only "winners."

Question 12

(Figure: Market for Watches in Countries A and B) Referring to the graphs, we see that after free trade, the price of watches in country A is _____ and the price of watches in country B is _____.

Accepted Answer

The answer of (Figure: Market for Watches in Countries A...

Question 13

(Table: Econoland and Macroland Annual Production Capacity in Tons) Based on the table, which statement correctly identifies opportunity costs?

Accepted Answer

The answer of (Table: Econoland and Macroland Annual Production Capacity...

Question 14

The effects of a tariff are

Accepted Answer

Tariffs are taxes on imported goods that generally lead to a reduced quantity supplied overall due to higher prices. Domestic producers, facing less competition from imports due to the tariff, are likely to increase their supply. The price of the good in the domestic market increases as a result of the tariff.

Question 15

As incomes rise in developing countries, environmental protection takes on added importance.

Accepted Answer

As incomes rise in developing countries, people tend to value their environment more and demand better environmental protections, leading to added importance placed on environmental protection.

Question 16

An ad valorem tax

Accepted Answer

An ad valorem tax is a tax that is implemented as a percentage of the value of the item being taxed. In the context of international trade, an ad valorem tax on imports would tax the import a certain percentage of its price as it crosses the border, while an ad valorem tax on exports would tax the export a certain percentage of its real value. Option B is incorrect because an ad valorem tax is based on the value of the item being taxed, not its real value. Option C is not accurate as an ad valorem tax does not distinguish between imports based on their contribution to national defense. Option D is also incorrect as a quota is not synonymous with a tax.

Question 17

Which statement is NOT an argument against free trade?

Accepted Answer

The statement "Consumers need to be protected against comparative advantage" is not an argument against free trade because comparative advantage is the basic principle on which free trade is based. It refers to the idea that countries should specialize in producing goods in which they have a comparative advantage (i.e., they can produce at a lower opportunity cost than other countries) and trade these goods with other countries. This leads to a more efficient allocation of resources and benefits both consumers and producers in the long run.

Question 18

(Table) Based on the table for Macrostan and Econostan, what would the total output of cheese and wool be across the two countries if each specializes completely in the production of the good for which it has the comparative advantage?

Accepted Answer

The answer of (Table) Based on the table for Macrostan...

Question 19

In the long run, the liberalization of trade has caused incomes to _____, leading to _____ environmental damage.

Accepted Answer

Liberalization of trade has increased economic growth and led to increased incomes, which has allowed for greater investment in environmental protection and improved technologies, resulting in less environmental damage.

Question 20

Which of these is a limitation of the infant industry argument?

Accepted Answer

The infant industry argument assumes that protection can be removed once the industry has matured and is able to compete on its own. However, it is often difficult to remove the protection and the industry may become reliant on it, leading to inefficiencies and a lack of competitiveness.

Quiz 15: International Trade