Question 1

The number of countries belonging to the World Trade Organization (WTO),as of 2011,is about:

Accepted Answer

As of 2011, the current number of WTO member countries is 153.

Question 2

What is one of the major shortcomings of using tariffs or quotas to "save American jobs"?

Accepted Answer

While tariffs or quotas may protect certain industries and jobs from foreign competition, they do not necessarily increase the overall number of jobs in the country. They may even shift jobs from industries that rely on imports to industries that produce domestically, leading to a reshuffling of the composition of domestic employment. However, the net effect on overall employment is limited.

Question 3

A major difficulty with the argument that trade barriers are necessary because foreign workers are paid low wages is that:

Accepted Answer

Wage rates and labor productivity are directly related because higher productivity can lead to higher wages, as workers are able to produce more value. This undermines the argument for trade barriers based on low foreign wages, as productivity differences can explain wage disparities.

Question 4

"The nation needs to prevent foreign nations from selling their excess goods in our nation at a price below cost so we can save American firms." This quotation would be most closely associated with which protectionist argument?

Accepted Answer

The quotation refers to the practice of dumping, which is when foreign countries sell goods in another country at a price lower than their cost of production. This can harm domestic firms and cause them to go out of business. Therefore, the argument presented here is for protection against dumping, which is a key aspect of protectionist trade policy.

Question 5

The long-run effect of tariffs is:

Accepted Answer

Tariffs provide protection to domestic industries, causing them to expand and eventually employ more workers. This results in a reallocation of domestic workers from export industries to protected domestic industries. However, in the long-run, tariffs may lead to higher prices for consumers, lower quality products, and retaliation from other countries which may harm overall economic growth. Additionally, overtime, domestic industries may become complacent due to lack of competition and innovation, further weakening their competitiveness in the international market.  So, options A and B are false. Option D is partly true, but it is not the long-run effect of tariffs.

Question 6

Which is not commonly offered as a reason to support protectionism and abandon free trade?

Accepted Answer

Promoting specialization and increasing worldwide production levels is one of the main arguments in favor of free trade. A, B, and C are often cited as reasons to support protectionism and abandon free trade.

Question 7

As it relates to international trade,dumping:

Accepted Answer

Dumping refers to the practice of selling goods in a foreign market at less than cost. This is often done to gain market share or eliminate competition in that market. Dumping is considered an unfair trade practice and is subject to regulation by international trade laws.

Question 8

The infant industry argument for tariffs is criticized:

Accepted Answer

All of the given reasons are valid criticisms of the infant industry argument for tariffs. It can be difficult to determine which industries actually deserve protection and which do not. Additionally, direct subsidies may be a more efficient means of supporting industries in their early stages. Finally, there is the risk that tariffs will remain in place even after the industry has matured, which can lead to inefficiencies and trade disputes.

Question 9

Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?

Accepted Answer

Higher tariffs can lead to retaliation from other nations, creating a trade war that can harm both domestic and global economies. Tariffs also increase the cost of goods, potentially hurting consumers and reducing their purchasing power. Additionally, other nations may respond by placing their own tariffs on U.S. goods, reducing exports and potentially costing American jobs. Strategic trade policy, such as negotiating fair trade agreements or supporting domestic industries in other ways, may be a better approach than simply relying on tariffs.

Question 10

Dumping is the sale of a product in a foreign market:

Accepted Answer

Dumping refers to the sale of a product in a foreign market at a price below its domestic price or cost of production. This is often done in order to gain market share in the foreign market, and can be considered unfair trade practice.

Question 11

The organization created to oversee the provisions of multilateral trade agreements,resolve disputes under the international trade rules,and meet periodically to consider further trade liberalization is called the:

Accepted Answer

The World Trade Organization (WTO) is the organization created to oversee the provisions of multilateral trade agreements, resolve disputes under the international trade rules and meet periodically to consider further trade liberalization. The IMF focuses on international monetary cooperation and exchange rate stability, the CMO is a term used specifically for the agricultural sector in the European Union, and the ITC is a US government agency that provides trade data and investigates unfair trade practices.

Question 12

Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?

Accepted Answer

While it is true that higher tariffs may protect some industries and jobs, it may also lead to higher prices for consumers and retaliation from other countries in the form of higher tariffs on U.S. exports. Studies have shown that imports may eliminate some jobs in certain sectors, but they also create new jobs in other sectors, making the net impact on employment uncertain. Therefore, higher tariffs may not necessarily be the best solution to save U.S. jobs.

Question 13

Which is a valid counterargument to the infant industry argument for protective tariffs?

Accepted Answer

The counterargument against the infant industry argument for protective tariffs is that it is difficult to determine which industries will become mature and have a comparative advantage in the long run. Thus, protective tariffs could end up protecting industries that do not have a long-term competitive advantage and therefore not be beneficial for the domestic economy in the long-run.

Question 14

The World Trade Organization:

Accepted Answer

The World Trade Organization (WTO) was established to resolve disputes arising under world trade rules. It is not the same as the International Monetary Fund (IMF) or NAFTA. Additionally, the WTO does not provide interest rate subsidies to foreign borrowers who buy exports on credit.

Question 15

Which is a valid counterargument to use tariffs to protect high wages from cheap foreign labor?

Accepted Answer

This is a valid counterargument because wage rates are largely determined by productivity, meaning that workers who are more productive will naturally earn higher wages regardless of cheap foreign labor. Therefore, protectionist policies through tariffs may not be necessary to maintain high wages.

Question 16

Dumping of goods abroad:

Accepted Answer

Dumping of goods abroad may be part of a firm's price discrimination strategy. This is done by offering different prices for the same product in different markets based on factors like competition and demand. It can allow firms to increase their market share in the destination market by undercutting the prices of local producers. Dumping is not a general case for permanent tariffs, as it can also be a result of other factors like excess supply. Dumping does not drive up prices of the dumped goods, as they are typically sold at lower prices than in the home market. Dumping is also not a strategy to rectify a nation's trade deficit.

Question 17

Which is a likely result of imposing tariffs to increase domestic employment?

Accepted Answer

An increase in the possibility of retaliatory tariffs.

Question 18

The statement that "tariffs are needed to protect American firms from foreign producers that sell excess goods in the American market at less than cost" would be most closely associated with which tariff argument?

Accepted Answer

This statement is associated with the argument for protection against dumping, which occurs when foreign producers sell goods in the American market at a price lower than their cost of production, which may drive domestic firms out of business. Tariffs can be used to counteract this behavior and protect domestic producers from unfair competition.

Question 19

As used in strategic trade policy,tariffs are a variation of the:

Accepted Answer

Tariffs are used in strategic trade policy to implement the infant-industry argument. This argument asserts that newly established industries need protection from foreign competition through tariffs until they mature and become competitive enough to compete in the global market.

Question 20

Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?

Accepted Answer

Higher tariffs can lead to retaliation from other countries, which may in turn hurt U.S. exports and industries that rely on international trade. This retaliation can lead to a costly and counterproductive trade war.

Quiz 13: International Trade and Exchange Rates

The number of countries belonging to the World Trade Organization (WTO) ,as of 2011,is about:

What is one of the major shortcomings of using tariffs or quotas to "save American jobs"?

A major difficulty with the argument that trade barriers are necessary because foreign workers are paid low wages is that:

"The nation needs to prevent foreign nations from selling their excess goods in our nation at a price below cost so we can save American firms." This quotation would be most closely associated with which protectionist argument?

The long-run effect of tariffs is:

Which is not commonly offered as a reason to support protectionism and abandon free trade?

As it relates to international trade,dumping:

The infant industry argument for tariffs is criticized:

Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?

Dumping is the sale of a product in a foreign market:

The organization created to oversee the provisions of multilateral trade agreements,resolve disputes under the international trade rules,and meet periodically to consider further trade liberalization is called the:

Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?

Which is a valid counterargument to the infant industry argument for protective tariffs?

The World Trade Organization:

Which is a valid counterargument to use tariffs to protect high wages from cheap foreign labor?

Dumping of goods abroad:

Which is a likely result of imposing tariffs to increase domestic employment?

The statement that "tariffs are needed to protect American firms from foreign producers that sell excess goods in the American market at less than cost" would be most closely associated with which tariff argument?

As used in strategic trade policy,tariffs are a variation of the:

Which is a valid counterargument to the call for higher tariffs to save U.S.jobs?