Question 1

A voluntary restraint agreement:

Accepted Answer

A)  is prohibited under the GATT treaty and has become less common recently. 
B)  does not, unlike a quota, affect the quantity of imports. 
C)  does not, unlike a tariff, affect the price of imports. 
D)  raises the price of imports in the same way as a quota. 
A)  is prohibited under the GATT treaty and has become less common recently. 
B)  does not, unlike a quota, affect the quantity of imports. 
C)  does not, unlike a tariff, affect the price of imports. 
D)  raises the price of imports in the same way as a quota. D

Question 2

Analysts have suggested that the cost of bras is related to trade restrictions on textile imports. What does the price of bras have to do with tariffs and quotas?

Accepted Answer

A)  Trade restrictions protect consumers by keeping the price of bras low. 
B)  Trade restrictions in the form of tariffs keep prices of bras high, but replacing them with quotas will result in lower prices. 
C)  Trade restrictions keep the prices of bras high, and ending them will result in lower prices. 
D)  Trade restrictions do not influence the price of bras; the price is determined by domestic technology and the overall inflation rate. 
A)  Trade restrictions protect consumers by keeping the price of bras low. 
B)  Trade restrictions in the form of tariffs keep prices of bras high, but replacing them with quotas will result in lower prices. 
C)  Trade restrictions keep the prices of bras high, and ending them will result in lower prices. 
D)  Trade restrictions do not influence the price of bras; the price is determined by domestic technology and the overall inflation rate. C

Question 3

Many call centers that provide telephone customer services for U.S. companies have been established in India, but few or none have been established in China. Why?

Accepted Answer

A)  China is at a more advanced stage of economic development than India. 
B)  China lacks the political infrastructure to support call centers. 
C)  Chinese labor lacks the specific language skills needed to make call centers profitable in China. 
D)  Indian labor costs are lower than Chinese labor costs. 
A)  China is at a more advanced stage of economic development than India. 
B)  China lacks the political infrastructure to support call centers. 
C)  Chinese labor lacks the specific language skills needed to make call centers profitable in China. 
D)  Indian labor costs are lower than Chinese labor costs. C

Question 4

The infant industry argument for protection is rejected by most economists because:

Accepted Answer

A)  they oppose any government intervention. 
B)  historical experience supports it. 
C)  many infant industries become reliant on protection and do not mature. 
D)  protection usually is provided only temporarily. 
A)  they oppose any government intervention. 
B)  historical experience supports it. 
C)  many infant industries become reliant on protection and do not mature. 
D)  protection usually is provided only temporarily.

Question 5

Trade adjustment assistance is:

Accepted Answer

A)  difficult to implement because the adjustment costs of international trade are generally greater than the gains from trade. 
B)  difficult to implement because claims of injury are easy to make and may be politically difficult to reject. 
C)  easy to implement because the adjustment costs of international trade are typically less than the gains from trade. 
D)  easy to implement because it is easy to identify the few industries genuinely injured by international trade. 
A)  difficult to implement because the adjustment costs of international trade are generally greater than the gains from trade. 
B)  difficult to implement because claims of injury are easy to make and may be politically difficult to reject. 
C)  easy to implement because the adjustment costs of international trade are typically less than the gains from trade. 
D)  easy to implement because it is easy to identify the few industries genuinely injured by international trade.

Question 6

A tariff designed to eliminate foreign competition completely will be expected to raise:

Accepted Answer

A)  either a large or a small amount of revenue depending on the magnitude of the tariff imposed. 
B)  a relatively large amount of tax revenue. 
C)  an amount of revenue equal to the amount of the tariff multiplied by the volume of exports. 
D)  a relatively small amount of tax revenue. 
A)  either a large or a small amount of revenue depending on the magnitude of the tariff imposed. 
B)  a relatively large amount of tax revenue. 
C)  an amount of revenue equal to the amount of the tariff multiplied by the volume of exports. 
D)  a relatively small amount of tax revenue.

Question 7

Which of the following groups might be expected to support high United States Department of Agriculture standards for imported citrus fruit?

Accepted Answer

A)  Orange and grapefruit producers in other nations 
B)  Citrus fruit consumers in New England, where citrus cannot be grown easily 
C)  Orange growers in Florida 
D)  Shipping companies that import agricultural goods from other countries 
A)  Orange and grapefruit producers in other nations 
B)  Citrus fruit consumers in New England, where citrus cannot be grown easily 
C)  Orange growers in Florida 
D)  Shipping companies that import agricultural goods from other countries

Question 8

The central goal of the General Agreement on Tariffs and Trade (GATT) was to:

Accepted Answer

A)  promote free trade associations and customs unions. 
B)  ensure a balance of trade between countries. 
C)  reduce trade barriers. 
D)  promote international security. 
A)  promote free trade associations and customs unions. 
B)  ensure a balance of trade between countries. 
C)  reduce trade barriers. 
D)  promote international security.

Question 9

Duties imposed by the U.S. government on imported Chinese frozen and canned shrimp are an example of:

Accepted Answer

A)  tariffs. 
B)  quotas. 
C)  voluntary restrictions. 
D)  regulatory trade restrictions. 
A)  tariffs. 
B)  quotas. 
C)  voluntary restrictions. 
D)  regulatory trade restrictions.

Question 10

In general, why are trade sanctions implemented?

Accepted Answer

A)  To benefit emerging industries 
B)  To lower domestic unemployment rates 
C)  For political reasons 
D)  To raise revenue from trade 
A)  To benefit emerging industries 
B)  To lower domestic unemployment rates 
C)  For political reasons 
D)  To raise revenue from trade

Question 11

Refer to the graph shown for a small country that is a price taker internationally.   Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. To have the same effect on imports as a $2 per-unit tariff, the government would need to set an import quota of:

Accepted Answer

A)  1,200 units. 
B)  1,300 units. 
C)  2,500 units. 
D)  5,000 units. 
A)  1,200 units. 
B)  1,300 units. 
C)  2,500 units. 
D)  5,000 units.

Question 12

Threats to put tariffs on a nation in an attempt to get that nation to reduce its restrictions on trade are called:

Accepted Answer

A)  strategic trade policies. 
B)  trade adjustment assistance programs. 
C)  learning by doing. 
D)  inertia and cachet. 
A)  strategic trade policies. 
B)  trade adjustment assistance programs. 
C)  learning by doing. 
D)  inertia and cachet.

Question 13

Which of the following is a free trade association?

Accepted Answer

A)  G7 
B)  NAFTA 
C)  WTO 
D)  NATO 
A)  G7 
B)  NAFTA 
C)  WTO 
D)  NATO

Question 14

One reason trade restrictions exist is that:

Accepted Answer

A)  workers can be shifted easily from one industry to another. 
B)  workers cannot be shifted easily from one industry to another. 
C)  the long-run gains from free trade are small relative to the short-run costs. 
D)  the short-run gains from free trade are small relative to the long-run costs. 
A)  workers can be shifted easily from one industry to another. 
B)  workers cannot be shifted easily from one industry to another. 
C)  the long-run gains from free trade are small relative to the short-run costs. 
D)  the short-run gains from free trade are small relative to the long-run costs.

Question 15

All of the following are arguments in support of protectionist legislation except:

Accepted Answer

A)  increasing competition for domestic producers. 
B)  increasing political pressure on rogue nations. 
C)  increasing income equality. 
D)  increasing tax revenues. 
A)  increasing competition for domestic producers. 
B)  increasing political pressure on rogue nations. 
C)  increasing income equality. 
D)  increasing tax revenues.

Question 16

The international organization whose primary function is to promote free and fair trade between countries worldwide is the:

Accepted Answer

A)  WTO. 
B)  IMF. 
C)  NAFTA. 
D)  EU. 
A)  WTO. 
B)  IMF. 
C)  NAFTA. 
D)  EU.

Question 17

Free trade is:

Accepted Answer

A)  a policy all economists agree is the best policy. 
B)  a policy all economists agree is a bad policy. 
C)  more complicated than it sometimes seems. 
D)  less complicated than it sometimes seems. 
A)  a policy all economists agree is the best policy. 
B)  a policy all economists agree is a bad policy. 
C)  more complicated than it sometimes seems. 
D)  less complicated than it sometimes seems.

Question 18

The text suggests that if economists had a mantra, it would be:

Accepted Answer

A)  do unto others before they do unto you. 
B)  justice is the measure of all things. 
C)  when one person benefits, another is hurt. 
D)  trade is good. 
A)  do unto others before they do unto you. 
B)  justice is the measure of all things. 
C)  when one person benefits, another is hurt. 
D)  trade is good.

Question 19

Import duties ranging from 28 percent to 113 percent on Chinese frozen and canned shrimp are an example of a policy that:

Accepted Answer

A)  protects domestic fisheries from overfishing. 
B)  uses regulations and taxes to protect domestic consumers. 
C)  protects domestic producers from foreign producers. 
D)  protects domestic consumers from foreign producers. 
A)  protects domestic fisheries from overfishing. 
B)  uses regulations and taxes to protect domestic consumers. 
C)  protects domestic producers from foreign producers. 
D)  protects domestic consumers from foreign producers.

Question 20

A country imposing trade restrictions can benefit only if other countries also impose trade restrictions.

Accepted Answer

A) True 
 B)False

Exam 10: International Trade Policy

A voluntary restraint agreement:

Analysts have suggested that the cost of bras is related to trade restrictions on textile imports. What does the price of bras have to do with tariffs and quotas?

Many call centers that provide telephone customer services for U.S. companies have been established in India, but few or none have been established in China. Why?

The infant industry argument for protection is rejected by most economists because:

Trade adjustment assistance is:

A tariff designed to eliminate foreign competition completely will be expected to raise:

Which of the following groups might be expected to support high United States Department of Agriculture standards for imported citrus fruit?

The central goal of the General Agreement on Tariffs and Trade (GATT) was to:

Duties imposed by the U.S. government on imported Chinese frozen and canned shrimp are an example of:

In general, why are trade sanctions implemented?

Refer to the graph shown for a small country that is a price taker internationally. Assume the foreign supply of this product is perfectly elastic at a price of $4 per unit. To have the same effect on imports as a $2 per-unit tariff, the government would need to set an import quota of:

Threats to put tariffs on a nation in an attempt to get that nation to reduce its restrictions on trade are called:

Which of the following is a free trade association?

One reason trade restrictions exist is that:

All of the following are arguments in support of protectionist legislation except:

The international organization whose primary function is to promote free and fair trade between countries worldwide is the:

Free trade is:

The text suggests that if economists had a mantra, it would be:

Import duties ranging from 28 percent to 113 percent on Chinese frozen and canned shrimp are an example of a policy that:

A country imposing trade restrictions can benefit only if other countries also impose trade restrictions.

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Monopoly and Monopolistic Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

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