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

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

Accepted Answer

The answer of Unlike Japan and the United States,France has...

Question 3

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 can help domestic producers in gaining competitive advantage and capturing economic profits from foreign competitors. Therefore, the statement is true.

Question 4

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 5

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

By levying a partial export embargo against China, the United States can increase its bargaining power and negotiate for better terms of trade with China. If the improvement in terms of trade leads to an overall increase in welfare for the United States that more than offsets the costs of lower export volume to China, then the embargo would be beneficial for the United States. However, it is worth noting that the impact on China's welfare is not considered in this statement.

Question 6

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 7

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

When the United States extends Russia the benefits of the normal-trade-relations (most-favored-nation) principle, it typically reduces tariffs or trade barriers on Russian vodka. Since Russia has a comparative advantage in vodka production, this means it can produce vodka more efficiently (at a lower cost) than the United States. As a result, the supply of vodka in the U.S. market would increase, leading to lower prices for consumers. Lower prices increase consumer surplus, as consumers can either buy the same amount of vodka for less money or more vodka for the same amount of money.

Question 8

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 statement is false. The classical theory of comparative advantage assumes that firms operate in perfectly competitive markets, while the theory of strategic trade policy recognizes the possibility of imperfect competition and strategic behavior by firms.

Question 9

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 10

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...

Question 11

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 12

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 has not adopted explicit industrial policies similar to those of France and Japan. Instead, the US has favored a more free market approach to industrial development.

Question 13

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

Accepted Answer

The Commodity Credit Corporation provides export credit financing to support the export of U.S. agricultural products.

Question 14

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 15

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 of a product through exporting embargo, the prices in the target nation will likely increase due to decreased supply. This may lead to a decrease in target-nation consumer surplus.

Question 16

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 17

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 is true. The Japanese government implemented various industrial policies such as the "Iron and Steel Industry Rationalization and Strengthening Act" in 1953 and the "Automobile Industry Law" in 1955 to provide support and incentives for the development of key industries. This led to the growth of companies like Toyota, Honda, and Mitsubishi and the establishment of Japan as a major player in the global economy.

Question 18

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 suggests that the government can use policies such as tariffs or subsidies to alter the terms of competition, giving domestic companies an advantage over foreign competitors. This can lead to increased profits for domestic companies, but it also involves taking profits away from the foreign firms who are now at a disadvantage.

Question 19

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

The statement is true. The U.S. government does permit firms to form export trade associations and export trading companies to compete more equally with foreign competitors in the world market.

Question 20

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

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. This is because the subsidy helps domestic exporters compete against foreign firms, leading to increased market share and higher profits.

Quiz 6: Trade Regulations and Industrial Policies