Question 1

Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries. This protectionism will cause the greatest harm to
A) Canadian manufacturers.
B) the Canadian government.
C) manufacturers who export to Canada.
D) Canadian consumers.

Accepted Answer

The answer of Suppose that American firms claim that protectionism...

Question 2

Figure 9-8  Suppose the U.S. government imposes a $0.50 per pound tariff on sugar imports. Figure 9-8 shows the demand and supply curves for sugar and the impact of this tariff.
-Use Figure 9-8 to answer questions a-i.
a. Following the imposition of the tariff, what is the price that domestic consumers must now pay and what is the quantity purchased?
b. Calculate the value of consumer surplus with the tariff in place.
c. What is the quantity supplied by domestic sugar producers with the tariff in place?
d. Calculate the value of producer surplus received by U.S. sugar producers with the tariff in place.
e. What is the quantity of sugar imported with the tariff in place?
f. What is the amount of tariff revenue collected by the government?
g. The tariff has reduced consumer surplus. Calculate the loss in consumer surplus due to the tariff.
h. What portion of the consumer surplus loss is redistributed to domestic producers? To the government?
i. Calculate the deadweight loss due to the tariff.

Accepted Answer

The answer of Figure 9-8  Suppose the U.S. government...

Question 3

In 1930, the U.S. government attempted to help domestic firms that were harmed by the Great Depression by
A) establishing the General Agreement on Tariffs and Trade (GATT).
B) passing the Smoot-Hawley Tariff.
C) establishing the World Trade Organization (WTO).
D) passing the North American Free Trade Agreement (NAFTA).

Accepted Answer

The Smoot-Hawley Tariff increased tariffs on over 20,000 imported goods, in an attempt to protect domestic firms from foreign competition during the Great Depression. However, this led to retaliatory measures from other countries and ultimately worsened the global economic situation.

Question 4

________ raised average tariff rates by over 50 percent in the United States in 1930.
A) The GATT
B) The WTO
C) NAFTA
D) The Smoot-Hawley Tariff

Accepted Answer

The Smoot-Hawley Tariff, passed in 1930, raised average tariff rates by over 50 percent in the United States and contributed to the worsening of the Great Depression. The GATT and WTO are international organizations focused on reducing trade barriers, while NAFTA is a trade agreement between the United States, Canada, and Mexico.

Question 5

Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries with a "Buy Canadian" provision. This policy, similar to the original "Buy American" provision in the 2009 U.S. stimulus bill, is likely to cause
A) exporting countries to retaliate by placing trade barriers on Canadian imports.
B) Canadian manufacturers to become more efficient.
C) Canadian companies to pay lower prices for protected products.
D) most countries to reduce their own trade barriers to be able to better compete with Canadian imports at home.

Accepted Answer

When a country implements protectionist measures such as a "Buy Canadian" provision, it can lead to retaliation from exporting countries, who may place trade barriers on Canadian imports in response. This can harm Canadian businesses that rely on exports and potentially escalate into a trade war.

Question 6

Disagreements about whether the U.S. government should regulate international trade
A) began during the Great Depression.
B) began after World War I when government officials no longer believed in isolationism.
C) date back to the beginning of the country.
D) did not occur until the end of the Mexican War in 1848.

Accepted Answer

Disagreements about whether the U.S. government should regulate international trade date back to the beginning of the country, as seen in debates between Federalists and Anti-Federalists over the ratification of the Constitution and the creation of a national government with the power to regulate trade.

Question 7

Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products. Why, then, do some people support protectionism?
A) The criticisms of economists are based on theory. In fact, protectionism increases consumer and producer surplus as well as employment.
B) Supporters of protectionism in high-income countries believe that wages will fall as a result of competition with firms from developing countries.
C) Supporters of protectionism believe free trade will cause their countries to lose their comparative advantage.
D) Supporters of protectionism believe that free trade will lead to inflation.

Accepted Answer

Some people support protectionism because they believe that wages will fall as a result of competition with firms from developing countries. This belief is particularly strong among supporters of protectionism in high-income countries. They argue that their domestic industries will not be able to compete with the lower wages in developing countries, leading to job losses and wage cuts for domestic workers. As such, they advocate protectionist policies to shield their domestic industries from foreign competition.

Question 8

Which of the following describes the infant industry argument for protectionism?
A) An industry must be protected in its early stages of development so that firms can compete with government-subsidized foreign competition.
B) Some strategic industries must be protected to ensure adequate supplies of resources needed for national defense in emergencies.
C) Domestic producers in high-wage countries must be protected from foreign producers in low-wage countries to produce a level playing field.
D) Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.

Accepted Answer

The answer of Which of the following describes the infant...

Question 9

Which of the following statements is used to justify protectionism?
A) Free trade leads to higher prices for imported goods.
B) Free trade increases employment by protecting domestic firms.
C) A country should not rely on other countries for goods that are critical to its national defense.
D) Trade restrictions are not necessary to protect new firms since they can gain experience and become more productive without protection.

Accepted Answer

The statement that a country should not rely on other countries for goods that are critical to its national defense is often used to justify protectionism. Some argue that certain industries, such as weapons manufacturing or energy production, should be protected by trade barriers to ensure that a country has access to critical goods in times of conflict or crisis.

Question 10

The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. One reason for these anti-globalization protests is
A) foreign trade and investment are examples of zero-sum games.
B) protesters believe that globalization will result in a return to communism in developing countries.
C) protesters believe that free trade destroys the distinctive cultures of many countries.
D) protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment.

Accepted Answer

The statement that protesters believe that free trade destroys the distinctive cultures of many countries is the most accurate reason for the opposition to globalization. Many protesters argue that globalization results in a homogenization of culture, which can lead to the loss of cultural identity and traditional ways of life. This issue is particularly relevant for developing countries, which may not have the resources to compete with multinational corporations and may be forced to adopt Western values and cultural norms.

Question 11

Free trade ________ living standards by ________ economic efficiency.
A) raises; increasing
B) lowers; decreasing
C) raises; equalizing
D) lowers; eliminating

Accepted Answer

Free trade allows for countries to specialize in producing goods that they have a comparative advantage in. This increases economic efficiency, leading to lower prices for consumers and potentially higher profits for businesses. As a result, this can raise living standards through increased access to affordable goods and potentially more job opportunities.

Question 12

In 1995 ________, which was established in 1948, was replaced by ________.
A) the GATT; the WTO
B) the WTO; NAFTA
C) the Smoot-Hawley Tariff; the GATT
D) NAFTA; the Smoot-Hawley Tariff

Accepted Answer

In 1995, the General Agreement on Tariffs and Trade (GATT), which was established in 1948, was replaced by the World Trade Organization (WTO). NAFTA (North American Free Trade Agreement) and the Smoot-Hawley Tariff were not directly involved in this development.

Question 13

The process of countries becoming more open to foreign trade and investment is known as
A) autarky.
B) foreign exchange.
C) globalization.
D) protectionism.

Accepted Answer

The process described in the question is the definition of globalization. Option A, autarky, describes a country's policy of self-sufficiency and avoidance of trade with other nations. Option B, foreign exchange, refers to the currency conversion that takes place when countries engage in international trade. Option D, protectionism, is the opposite of globalization and involves countries trying to protect their domestic industries from foreign competition through tariffs and other barriers to trade.

Question 14

Protectionism
A) is the use of cheap labor to protect firms from paying high wages.
B) is the use of trade barriers to protect domestic firms from foreign competition.
C) refers to reductions in tariffs and other barriers that protect consumers from paying high prices.
D) refers to the use of copyright and trademark laws to protect inventors and artists from losing the rights to their creative efforts.

Accepted Answer

Protectionism refers to the use of trade barriers such as tariffs, quotas, and subsidies to protect domestic firms from foreign competition. The aim of protectionism is to create an advantage for domestic industries and jobs by reducing the competition they face from foreign firms. This can include protecting infant industries, maintaining national security, and preventing dumping of cheap foreign goods on domestic markets.

Question 15

Many people assume that if child workers in developing countries weren't working in factories, they would be in school. In fact, children in developing countries
A) split their time evenly between work and school.
B) usually have few good alternatives to work.
C) are only allowed to work if they have attended school up to age 15.
D) who work are relatively rare, as most do attend school full time.

Accepted Answer

Many children in developing countries work out of necessity to help support their families. Often, their families cannot afford to send them to school or there are no schools available. Therefore, these children have few good alternatives to working in factories or other industries.

Question 16

Figure 9-9  Bragabong currently both produces and imports almonds. The government of Bragabong decides to restrict international trade in almonds by imposing a quota that allows imports of only 10 million kilos each year. Figure 9-9 shows the estimated demand and supply curves for almonds in Bragabong and the results of imposing the quota.
-Use Figure 9-9 to answer questions a-j .
a. If there is no quota what is the domestic price of almonds and what is the quantity of almonds demanded by consumers?
b. If there is no quota how many kilos of almonds would domestic producers supply and what quantity would be imported?
c. If there is no quota what is the dollar value of consumer surplus?
d. If there is no quota what is the dollar value of producer surplus received by producers in Bragabong?
e. If there is no quota what is the revenue received by foreign producers who supply almonds to Bragabong?
f. With a quota in place what is the price that consumers of Bragabong must now pay and what is the quantity demanded?
g. With a quota in place what is the dollar value of consumer surplus? Are consumers better off?
h. With a quota in place what is the dollar value of producer surplus received by producers in Bragabong? Are domestic producers better off?
i. Calculate the revenue to foreign producers who are granted permission to sell in Bragabong after the imposition of the quota.
j. Calculate the deadweight loss as a result of the quota.

Accepted Answer

The answer of Figure 9-9  Bragabong currently both produces...

Question 17

Figure 9-7 
-Refer to Figure 9-7. Fenwick currently both produces and imports pistachios. The government of Fenwick decides to restrict international trade in pistachios by imposing a quota that allows imports of only 5 million pounds each year. Figure 9-7 shows the estimated demand and supply curves for pistachios in Fenwick and the results of imposing the quota. Answer questions a-j using the figure.
a. If there is no quota what is the domestic price of pistachios and what is the quantity of pistachios demanded by consumers?
b. If there is no quota how many pounds of pistachios would domestic producers supply and what quantity would be imported?
c. If there is no quota what is the dollar value of consumer surplus?
d. If there is no quota what is the dollar value of producer surplus received by producers in Fenwick?
e. If there is no quota what is the revenue received by foreign producers who supply pistachios to Fenwick?
f. With a quota in place what is the price that consumers of Fenwick must now pay and what is the quantity demanded?
g. With a quota in place what is the dollar value of consumer surplus? Are consumers better off?
h. With a quota in place what is the dollar value of producer surplus received by producers in Fenwick? Are domestic producers better off?
i. Calculate the revenue to foreign producers who are granted permission to sell in Fenwick after the imposition of the quota.
j. Calculate the deadweight loss as a result of the quota.

Accepted Answer

The answer of Figure 9-7 
-Refer to Figure 9-7. Fenwick...

Question 18

a. Distinguish between a tariff and a quota.
b. In what ways are tariffs and quotas similar?
c. In what ways are tariffs and quotas different?
d. Why might a foreign producer prefer a quota rather than a tariff?

Accepted Answer

The answer of a. Distinguish between a tariff and a...

Question 19

Figure 9-6 
-Refer to Figure 9-6. Suppose the U.S. government imposes a $0.25 per pound tariff on rice imports. Figure 9-6 shows the demand and supply curves for rice and the impact of this tariff. Use the figure to answer questions a-i.
a. Following the imposition of the tariff, what is the price that domestic consumers must now pay and what is the quantity purchased?
b. Calculate the value of consumer surplus with the tariff in place.
c. What is the quantity supplied by domestic rice growers with the tariff in place?
d. Calculate the value of producer surplus received by U.S. rice growers with the tariff in place.
e. What is the quantity of rice imported with the tariff in place?
f. What is the amount of tariff revenue collected by the government?
g. The tariff has reduced consumer surplus. Calculate the loss in consumer surplus due to the tariff.
h. What portion of the consumer surplus loss is redistributed to domestic producers? To the government?
i. Calculate the deadweight loss due to the tariff.

Accepted Answer

The answer of Figure 9-6 
-Refer to Figure 9-6. Suppose...

Question 20

Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?
A) Governments always make the level of protection for infant industries too high.
B) Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets.
C) Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue).
D) Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."

Accepted Answer

Protectionism may lead to complacency and decreased competitiveness in the protected industry. This can result in the infant industry never "growing up" and becoming fully competitive in international markets.

Quiz 9: Comparative Advantage and the Gains From International Trade

Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries. This protectionism will cause the greatest harm to

In 1930, the U.S. government attempted to help domestic firms that were harmed by the Great Depression by

________ raised average tariff rates by over 50 percent in the United States in 1930.

Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries with a "Buy Canadian" provision. This policy, similar to the original "Buy American" provision in the 2009 U.S. stimulus bill, is likely to cause

Disagreements about whether the U.S. government should regulate international trade

Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products. Why, then, do some people support protectionism?

Which of the following describes the infant industry argument for protectionism?

Which of the following statements is used to justify protectionism?

The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. One reason for these anti-globalization protests is

Free trade living standards by economic efficiency.

In 1995 , which was established in 1948, was replaced by .

The process of countries becoming more open to foreign trade and investment is known as

Protectionism

Many people assume that if child workers in developing countries weren't working in factories, they would be in school. In fact, children in developing countries

a. Distinguish between a tariff and a quota. b. In what ways are tariffs and quotas similar? c. In what ways are tariffs and quotas different? d. Why might a foreign producer prefer a quota rather than a tariff?

Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?