Question 1

Which of the following is the most common political argument for government intervention in international trade?

Accepted Answer

Protection of domestic jobs and industries from unfair foreign competition is the most common political argument for government intervention in international trade. Governments often intervene to protect jobs and industries that are important to their country's economy and to prevent the loss of jobs due to international competition. This can be done through tariffs, quotas, subsidies, and other trade barriers.

Question 2

The country of Cadmia,which is a leading producer of bauxite,had to impose trade sanctions on Cerian soda cans in order to get the government of Ceria to enforce export restraints.This imposition by the Cadmian government was undertaken to protect domestic producers of soda cans.Which of the following government intervention is being used by Cadmia?

Accepted Answer

Retaliation - Cadmia is imposing trade sanctions on Cerian soda cans as a retaliatory action to force Ceria's government to enforce export restraints. This is a form of government intervention in international trade.

Question 3

A government should use subsidies to support promising firms that are active in newly emerging industries,according to

Accepted Answer

Strategic trade policy argues that government intervention can help promote the growth of promising firms in newly emerging industries in order to gain a competitive advantage in the global market. This can be done through subsidies, tax breaks, or other means of financial assistance.

Question 4

For years,the world had used the country of Votnam as a place to assemble goods because of the country's availability of cheap labor.To shift its manufacturing base from simple assembly to full-fledged manufacture of components and finished goods,Votnam introduced a policy that 35 percent of the value of a product must be produced locally.This is an example of a(n)

Accepted Answer

This is an example of a local content requirement, which mandates that a certain percentage of a product's value must be produced locally.

Question 5

Which of the following are bureaucratic rules designed to make it difficult for imports to enter a country?

Accepted Answer

Administrative trade policies are bureaucratic rules specifically designed to make it difficult for imports to enter a country. These policies may include quotas, licensing requirements, or customs barriers that increase the cost or time required to import goods. Voluntary export restraints and subsidies may also restrict imports, but they are not bureaucratic rules. Consumer regulations and public sector regulations are more general types of regulations that may affect imports, but they are not necessarily designed to restrict access to imported goods.

Question 6

Dumping takes place when foreign producers

Accepted Answer

Dumping refers to the practice of a foreign company selling its products in a foreign market at a lower price than the actual cost of production. This is usually done to eliminate competition in the foreign market and eventually raise prices to earn substantial profits. This practice is harmful to domestic producers who are unable to compete with the subsidized prices and can lead to the closure of domestic firms.

Question 7

Which of the following is a major reason why many economists remain critical of the infant industry argument?

Accepted Answer

The infant industry argument suggests protecting new industries until they become competitive. Critics argue it can lead to inefficiency as these industries may rely on protection rather than improving productivity and competitiveness.

Question 8

The Palladian government required that all imported products that came from Lovaskiya be checked by Palladian customs inspectors.The inspection was done at a container freight station that was both remote and poorly staffed.This delayed the Lovaskiyan consignment from reaching the consumers in Palladia.The inspection strategy adopted by the customs officers in Palladia is an example of a(n)

Accepted Answer

The inspection strategy adopted by the customs officers in Palladia is an example of an administrative trade policy, which is a government policy that directly influences the quantity of goods and services imported or exported through measures such as inspections, quotas, and licensing requirements. This policy is aimed at protecting local industries from competition and controlling the flow of goods into the country.

Question 9

Cadmia banned imports of Mattel toys with high levels of toxic lead,manufactured in Argonia.The underlying motive for such a move could be

Accepted Answer

The ban on imports of Mattel toys with high levels of toxic lead is primarily aimed at protecting consumers from unsafe products. High levels of toxic lead in toys can cause serious health issues for children, and the ban is aimed at preventing the import of such products that could harm consumers. The other options are not relevant to the situation described in the question.

Question 10

The principal function of the trade sanctions the U.S.has in place against Cuba is to

Accepted Answer

The principal function of the trade sanctions the U.S. has in place against Cuba is to impoverish Cuba and lead to the downfall of the communist government. The U.S. hopes that by restricting trade and causing economic hardship, the Cuban people will rise up against their government and embrace democratic reforms. This has been the aim of U.S. policy towards Cuba for decades.

Question 11

If Argonia exports vast quantities of cheap toys to Cadmia,selling them at below their costs of production,it would constitute

Accepted Answer

Selling products at below their costs of production to gain an unfair advantage and drive competitors out of the market is known as dumping. Therefore, if Argonia exports vast quantities of cheap toys to Cadmia, selling them at below their costs of production, it would constitute dumping.

Question 12

One of the main reasons why many economists remain critical of the infant industry argument is its reliance on the assumption that

Accepted Answer

The answer of One of the main reasons why many...

Question 13

Which of the following specifies that U.S.government agencies must give preference to U.S.products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage?

Accepted Answer

The Buy America Act specifies that U.S. government agencies must give preference to U.S. products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage. The Export Administration Act regulates the export of certain commercial items, while the Helms-Burton Act imposes economic sanctions on Cuba. The Hawley-Burton Act regulates the importation of goods produced with forced labor. The Volcker Rule limits the ability of banks to make speculative investments.

Question 14

Which of the following best indicates the motive for foreign firms to engage in dumping?

Accepted Answer

Dumping is the practice of selling goods in foreign markets at prices lower than those charged in the domestic market or lower than the cost of production. Foreign firms engage in dumping to unload excess production and maintain their market share. By doing so, they can weaken their competitors in foreign markets and improve their market position. Therefore, A is the correct choice as it reflects the primary motive for foreign firms to engage in dumping.

B, C, D, and E are incorrect options because reducing labor costs, providing a wider range of products, meeting export requirements, and obtaining subsidies are not necessarily the primary motives for foreign firms to engage in dumping. While they may be contributing factors for some firms, they are not the main reason for engaging in dumping practices.

Question 15

Many developing countries have a potential comparative advantage in manufacturing,but new manufacturing industries cannot initially compete with well-established industries in developed countries,according to

Accepted Answer

The statement describes the concept of the infant industry argument, which argues that new and emerging industries in developing countries need temporary protection through tariffs or subsidies in order to grow and become competitive with established industries in developed countries.

Question 16

Maroji,a developing country,has a potential comparative advantage in manufacturing electronic goods but is unable to compete with China,at least for the near future.Maroji's predicament is best explained by the

Accepted Answer

Maroji's predicament is best explained by the infant industry argument. This argument suggests that new industries in developing countries may need tariff protection and other government support to be able to compete with established industries in developed countries. In this case, Maroji's electronic goods industry is still developing and not yet able to compete with China, which is an established industry leader in the production of electronic goods. Therefore, Maroji would require government support to protect and nurture its infant industry until it becomes competitive.

Question 17

Animax Limited got an order to sell 50,000 central processing units (CPUs)to Palladia,but the Palladian government stipulated that 15 percent of the component parts of those CPUs must be produced in Palladia.This stipulation by the Palladian government would be example of a(n)

Accepted Answer

The stipulation by the Palladian government that 15 percent of the component parts of the CPUs must be produced in Palladia is an example of a local content requirement. This requirement mandates that a certain percentage of the product's value must be made locally, which is a form of protectionism.

Question 18

Which of the following is considered to be the ultimate objective of antidumping policies?

Accepted Answer

The ultimate objective of antidumping policies is to protect domestic producers from unfair foreign competition. Dumping occurs when foreign firms export goods at a price lower than their domestic market price, which may harm domestic producers' ability to compete in the market. Antidumping policies are aimed at preventing such practices and creating a level playing field for domestic producers. The other options are not the ultimate objective of antidumping policies but may also be considered as potential benefits.

Question 19

The Bureau of Natural Resources,a U.S.government agency,put out a contract for 45,000 document copiers.It stipulated in the contract letter that preference would be given to a bidder for whom at least 51 percent of the materials by value in the copier were produced in the U.S.This contract provision is covered by the

Accepted Answer

The Buy America Act requires that preference be given to domestically produced materials in federal government procurement contracts. This contract provision aligns with the requirements of the Buy America Act.

Question 20

Why is retaliation by government intervention a risky strategy?

Accepted Answer

When a country retaliates with government intervention, it could result in increased tariff barriers by the country that is being pressured. This could lead to a tit-for-tat escalation of trade barriers that could ultimately harm both countries' economies.

Quiz 7: Government Policy and International Trade