Question 1

When the United States imposed restrictions on imported steel in the 1950s and 1960s, the U.S. steel industry responded by:

Accepted Answer

A)  raising prices and investing more in steel production. 
B)  raising prices and channeling profits from their steel production into other activities. 
C)  lowering prices and investing more in steel production. 
D)  lowering prices and channeling profits from their steel production into other activities. 
A)  raising prices and investing more in steel production. 
B)  raising prices and channeling profits from their steel production into other activities. 
C)  lowering prices and investing more in steel production. 
D)  lowering prices and channeling profits from their steel production into other activities.

Question 2

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. Starting from a free trade equilibrium, a tariff in the amount of $2 per unit would be expected to cause domestic production to:

Accepted Answer

A)  increase from 2,400 to 7,400. 
B)  increase from 2,400 to 3,600. 
C)  decrease from 4,800 to 3,600. 
D)  decrease from 7,400 to 6,100. 
A)  increase from 2,400 to 7,400. 
B)  increase from 2,400 to 3,600. 
C)  decrease from 4,800 to 3,600. 
D)  decrease from 7,400 to 6,100.

Question 3

One impact of an import quota is to:

Accepted Answer

A)  decrease the price of the imported good for the consumer. 
B)  increase the price of the domestic good for the consumer. 
C)  redistribute income from domestic producers to domestic consumers. 
D)  decrease the price received by foreign producers. 
A)  decrease the price of the imported good for the consumer. 
B)  increase the price of the domestic good for the consumer. 
C)  redistribute income from domestic producers to domestic consumers. 
D)  decrease the price received by foreign producers.

Question 4

Transshipments, which are used commonly in international trade, tend to:

Accepted Answer

A)  undermine the effectiveness of a sanction. 
B)  strengthen the national security argument for trade restrictions. 
C)  increase the effectiveness of trade restrictions. 
D)  reduce the volume of world trade. 
A)  undermine the effectiveness of a sanction. 
B)  strengthen the national security argument for trade restrictions. 
C)  increase the effectiveness of trade restrictions. 
D)  reduce the volume of world trade.

Question 5

After one cow in Alberta, Canada was found with mad cow disease, the United States banned all imports of Canadian cattle and beef. This action is an example of:

Accepted Answer

A)  a tariff. 
B)  a quota. 
C)  a regulatory trade restriction. 
D)  a sanction. 
A)  a tariff. 
B)  a quota. 
C)  a regulatory trade restriction. 
D)  a sanction.

Question 6

The United States does not allow U.S. citizens to trade with Iraq. This is an example of:

Accepted Answer

A)  a quota. 
B)  a tariff. 
C)  a sanction. 
D)  a regulatory trade restriction. 
A)  a quota. 
B)  a tariff. 
C)  a sanction. 
D)  a regulatory trade restriction.

Question 7

If the United States were to impose 100 percent tariffs on imports of Chinese shrimp, what would most economists conclude?

Accepted Answer

A)  This decision can be justified by using the infant-industry argument. 
B)  This decision can be justified by using the national defense argument. 
C)  This policy is a way to keep foreign producers from being exploited by Americans. 
D)  This decision is not justified in terms of economic well-being but may make sense for political reasons. 
A)  This decision can be justified by using the infant-industry argument. 
B)  This decision can be justified by using the national defense argument. 
C)  This policy is a way to keep foreign producers from being exploited by Americans. 
D)  This decision is not justified in terms of economic well-being but may make sense for political reasons.

Question 8

Voluntary restraint agreements:

Accepted Answer

A)  are prohibited by NAFTA. 
B)  do not affect imports in both the short run and the long run. 
C)  hurt consumers in both the short run and the long run. 
D)  hurt workers in both the short run and the long run. 
A)  are prohibited by NAFTA. 
B)  do not affect imports in both the short run and the long run. 
C)  hurt consumers in both the short run and the long run. 
D)  hurt workers in both the short run and the long run.

Question 9

What are trade adjustment assistance programs?

Accepted Answer

A)  Away of subsidizing exports 
B)  A form of regulatory trade restriction 
C)  The use of exchange rate policies to equalize exports and imports 
D)  Attempts to compensate those who suffer losses when trade restrictions are reduced 
A)  Away of subsidizing exports 
B)  A form of regulatory trade restriction 
C)  The use of exchange rate policies to equalize exports and imports 
D)  Attempts to compensate those who suffer losses when trade restrictions are reduced

Question 10

The percentage of goods and services the United States has imported from China and India over the last 15 years:

Accepted Answer

A)  has remained roughly the same. 
B)  has risen. 
C)  has fallen. 
D)  initially rose and then dropped back to the original level. 
A)  has remained roughly the same. 
B)  has risen. 
C)  has fallen. 
D)  initially rose and then dropped back to the original level.

Question 11

Refer to the graph shown.   As a result of a tariff T imposed on speedboats, the price that foreign suppliers will receive probably will be:

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 12

Free trade associations can potentially be harmful to international trade.

Accepted Answer

A) True 
 B)False

Question 13

In strategic trade bargaining it is sometimes reasonable to be unreasonable.

Accepted Answer

A) True 
 B)False

Question 14

The type of goods being imported has changed from primarily low-tech goods to agricultural goods.

Accepted Answer

A) True 
 B)False

Question 15

A group of countries that allows free trade among its members and puts up common barriers against all other countries' goods is called:

Accepted Answer

A)  a tariff-free zone. 
B)  a most-favored-nation agreement. 
C)  an autarky. 
D)  a free trade association. 
A)  a tariff-free zone. 
B)  a most-favored-nation agreement. 
C)  an autarky. 
D)  a free trade association.

Question 16

Countries restrict international trade for all of the following reasons except:

Accepted Answer

A)  international trade probably will lead to the displacement of workers. 
B)  the benefits of trade usually are limited to small groups, whereas the costs are widely scattered across the population. 
C)  it is sometimes difficult to decide where a country's comparative advantage lies when "learning by doing" effects are important. 
D)  economies of scale can mean that a country is able to develop a comparative advantage by protecting infant industries. 
A)  international trade probably will lead to the displacement of workers. 
B)  the benefits of trade usually are limited to small groups, whereas the costs are widely scattered across the population. 
C)  it is sometimes difficult to decide where a country's comparative advantage lies when "learning by doing" effects are important. 
D)  economies of scale can mean that a country is able to develop a comparative advantage by protecting infant industries.

Question 17

Economists generally agree that:

Accepted Answer

A)  trade restrictions will increase the welfare of a large country even if other countries retaliate. 
B)  trade between two nations generally benefits one at the expense of the other. 
C)  infant industry protection, although justified in theory, often becomes permanent because infant industries fail to grow up. 
D)  trade sanctions are not an effective way of achieving international political objectives. 
A)  trade restrictions will increase the welfare of a large country even if other countries retaliate. 
B)  trade between two nations generally benefits one at the expense of the other. 
C)  infant industry protection, although justified in theory, often becomes permanent because infant industries fail to grow up. 
D)  trade sanctions are not an effective way of achieving international political objectives.

Question 18

Refer to the graph shown.   As a result of a tariff T imposed on speedboats, the price domestic consumers pay for speedboats probably will likely be:

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 19

According to most economists, outsourcing service jobs:

Accepted Answer

A)  helps both countries in the long run. 
B)  hurts both countries because the United States loses jobs and the employees of the call center are exploited with low wages. 
C)  helps the United States but hurts the country with the low-cost labor. 
D)  helps the country getting the jobs but hurts the United States with the loss of jobs. 
A)  helps both countries in the long run. 
B)  hurts both countries because the United States loses jobs and the employees of the call center are exploited with low wages. 
C)  helps the United States but hurts the country with the low-cost labor. 
D)  helps the country getting the jobs but hurts the United States with the loss of jobs.

Question 20

The outsourcing of service jobs such as those in call centers has become a political issue. Do economists see any benefit to outsourcing?

Accepted Answer

A)  No; it simply shifts jobs overseas. 
B)  No; it only benefits foreign economies. 
C)  Yes; it tends to reduce prices to American companies and consumers. 
D)  Yes; it tends to raise the value of the dollar. 
A)  No; it simply shifts jobs overseas. 
B)  No; it only benefits foreign economies. 
C)  Yes; it tends to reduce prices to American companies and consumers. 
D)  Yes; it tends to raise the value of the dollar.

Exam 10: International Trade Policy

When the United States imposed restrictions on imported steel in the 1950s and 1960s, the U.S. steel industry responded by:

One impact of an import quota is to:

Transshipments, which are used commonly in international trade, tend to:

After one cow in Alberta, Canada was found with mad cow disease, the United States banned all imports of Canadian cattle and beef. This action is an example of:

The United States does not allow U.S. citizens to trade with Iraq. This is an example of:

If the United States were to impose 100 percent tariffs on imports of Chinese shrimp, what would most economists conclude?

Voluntary restraint agreements:

What are trade adjustment assistance programs?

The percentage of goods and services the United States has imported from China and India over the last 15 years:

Refer to the graph shown. As a result of a tariff T imposed on speedboats, the price that foreign suppliers will receive probably will be:

Free trade associations can potentially be harmful to international trade.

In strategic trade bargaining it is sometimes reasonable to be unreasonable.

The type of goods being imported has changed from primarily low-tech goods to agricultural goods.

A group of countries that allows free trade among its members and puts up common barriers against all other countries' goods is called:

Countries restrict international trade for all of the following reasons except:

Economists generally agree that:

Refer to the graph shown. As a result of a tariff T imposed on speedboats, the price domestic consumers pay for speedboats probably will likely be:

According to most economists, outsourcing service jobs:

The outsourcing of service jobs such as those in call centers has become a political issue. Do economists see any benefit to outsourcing?

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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