Question 1

GATT has not recognized the infant industry argument as a legitimate reason for protectionism.

Accepted Answer

The infant industry argument has had substantial appeal for the governments of developing nations during the past 50 years, and the GATT has recognized the infant industry argument as a legitimate reason for protectionism.

Question 2

Bureaucratic rules designed to make it difficult for imports to enter a country are local content requirements.

Accepted Answer

Local content requirements are regulations that require a certain percentage of a product to be made from local components, not rules that make it difficult for imports to enter a country.

Question 3

When governments intervene in international trade,they often do so by restricting domestic production and exports,while adopting policies that promote imports of goods and services into their nation.

Accepted Answer

When governments intervene in international trade, they adopt policies that promote exports of goods and services from their nation, and may restrict imports to protect domestic industries.

Question 4

Specific tariffs are levied as a proportion of the value of the imported good.

Accepted Answer

Specific tariffs are levied as a fixed amount per unit of the imported good, whereas ad valorem tariffs are levied as a proportion of the value of the imported good.

Question 5

Krugman has suggested that trade policy designed to retaliate against another country's trade policy would hurt the citizens of both countries.

Accepted Answer

Krugman believed that retaliatory trade policies would result in a decrease in trade between the two countries, leading to higher prices and reduced access to goods for consumers in both nations. He argued that the best approach would be to negotiate and seek a mutually beneficial solution rather than resorting to retaliation.

Question 6

Tariffs are unambiguously pro-consumer and anti-producer.

Accepted Answer

Tariffs are taxes on imported goods, which raise their price for consumers. This makes domestic goods relatively cheaper and therefore benefits domestic producers. However, the increased price for consumers hurts them, making tariffs pro-producer and anti-consumer.

Question 7

Many governments have long had regulations to protect consumers from unsafe products.

Accepted Answer

Many governments around the world have regulations in place to ensure that products sold to consumers are safe for use. These regulations cover a wide range of products, including food, drugs, cosmetics, toys, electronics, and more. The purpose of these regulations is to protect consumers from harm and to ensure that products are thoroughly tested and evaluated before they reach the market.

Question 8

The Buy America Act specifies that government agencies must give preference to American products when putting contracts for equipment out to bid unless the foreign products have a significant price disadvantage.

Accepted Answer

The answer of The Buy America Act specifies that government...

Question 9

Unlike other trade policies,local content regulations tend to benefit consumers and not producers.

Accepted Answer

Local content regulations require a certain percentage of goods or services to be produced domestically, which can increase production costs and lead to higher prices for consumers. Producers may benefit from the protectionist measures, but the overall economic impact is generally negative.

Question 10

A company that sells its product in a foreign market below the cost of production may be accused of dumping.

Accepted Answer

Dumping occurs when a company sells its products in a foreign market below the cost of production in order to gain an unfair advantage over local producers. This can be seen as anti-competitive behavior and can lead to trade disputes and potential legal action.

Question 11

Strategic trade policy suggests that a government should use subsidies to support promising firms that are active in newly emerging industries.

Accepted Answer

Strategic trade policy argues that government intervention can help firms in emerging industries gain an advantage over foreign competitors. This can be achieved through subsidies, government loans, and other forms of support that reduce the costs of production or boost research and development efforts. The aim is to build up a critical mass of firms in the industry, so that the country can become a major exporter and reap the benefits of first-mover advantages. Critics argue that this approach can lead to protectionism, inefficiency, and a misallocation of resources.

Question 12

The U.S.government has used the threat of punitive trade sanctions to try to get the Chinese government to enforce its intellectual property laws.

Accepted Answer

The U.S. government has indeed used the threat of punitive trade sanctions to pressure the Chinese government to better protect intellectual property rights.

Question 13

The infant industry argument is the latest argument for government intervention in trade.

Accepted Answer

The infant industry argument is by far the oldest economic argument for government intervention. Alexander Hamilton proposed it in 1792.

Question 14

The Helms-Burton Act of 1996 was aimed at foreign companies that were undermining U.S.trade sanctions against Libya and Iran.

Accepted Answer

The Helms-Burton Act of 1996 was actually aimed at foreign companies that were doing business in Cuba, which was under a U.S. trade embargo.

Question 15

Antidumping policies vary drastically from country to country.

Accepted Answer

Although antidumping policies vary somewhat from country to country, the majority are similar to those used in the United States.

Question 16

Under a tariff rate quota,a higher tariff rate is applied to imports within the quota than those over the quota.

Accepted Answer

Under a tariff rate quota, a lower tariff rate is applied to imports within the quota than those over the quota.

Question 17

Export tariffs are far less common than import tariffs.

Accepted Answer

This is true as most countries prioritize promoting exports rather than hindering them with tariffs. Additionally, imposing export tariffs can lead to retaliation from other countries and negatively impact the exporting country's economy.

Question 18

Antidumping polices are designed to punish firms that are engaged in dumping.

Accepted Answer

Antidumping policies are specifically aimed at punishing firms that engage in dumping, which is the practice of exporting goods at unfairly low prices. These policies are meant to protect domestic industries from being undercut by foreign competitors who are able to sell their goods at lower prices due to various factors such as subsidies, exchange rate manipulation, or lower labor and production costs. Antidumping measures can take the form of tariffs, quotas, or other restrictions on imports, and are often controversial due to their potential to ignite trade wars and disrupt global supply chains.

Question 19

By lowering production costs,subsidies help domestic producers compete against foreign imports and gain export markets.

Accepted Answer

Subsidies reduce the cost of production for domestic producers, making their products more competitive in the market. This enables them to gain export markets and compete against foreign imports.

Question 20

A common hybrid of a quota and a rent is known as a quota rent.

Accepted Answer

The answer of A common hybrid of a quota and...

Quiz 6: The Political Economy of International Trade