Question 1

One reason economists oppose trade restrictions is that:

Accepted Answer

A) it is difficult to limit trade restrictions to instances when their use is justified. 
B) they are an ineffective way to raise tax revenue. 
C) they protect national security, particularly in wartime. 
D) no nation can benefit from trade restrictions. 
A) it is difficult to limit trade restrictions to instances when their use is justified. 
B) they are an ineffective way to raise tax revenue. 
C) they protect national security, particularly in wartime. 
D) no nation can benefit from trade restrictions.

Question 2

Strategic bargaining:

Accepted Answer

A) always reduces the number of trade restrictions. 
B) always increases the number of trade restrictions. 
C) may increase the number of trade restrictions if it is successful. 
D) may reduce the number of trade restrictions if it is successful. 
A) always reduces the number of trade restrictions. 
B) always increases the number of trade restrictions. 
C) may increase the number of trade restrictions if it is successful. 
D) may reduce the number of trade restrictions if it is successful.

Question 3

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 4

A 50 percent tax on imports of Danish cheese 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 5

Becoming better at a task the more often you perform is referred to as:

Accepted Answer

A) inherent advantage. 
B) economies of scope. 
C) learning by doing. 
D) economies of performance. 
A) inherent advantage. 
B) economies of scope. 
C) learning by doing. 
D) economies of performance.

Question 6

Define the term "the trade balance." Does the United States have a trade balance that is in deficit or surplus? Explain your answer.

Accepted Answer

The trade balance is the diffe

Question 7

What are trade adjustment assistance programs? Describe the arguments for and against them.

Accepted Answer

Trade adjustment assistance programs are

Question 8

Infant industry protection can be justified in theory by:

Accepted Answer

A) both the "learning by doing" argument and the existence of economies of scale. 
B) the "learning by doing" argument but not by the existence of economies of scale. 
C) the existence of economies of scale but not by the "learning by doing" argument. 
D) neither the "learning by doing" argument nor the existence of economies of scale. 
A) both the "learning by doing" argument and the existence of economies of scale. 
B) the "learning by doing" argument but not by the existence of economies of scale. 
C) the existence of economies of scale but not by the "learning by doing" argument. 
D) neither the "learning by doing" argument nor the existence of economies of scale.

Question 9

What are the benefits of being a debtor nation? What are the costs?

Accepted Answer

The main benefit of being a debtor natio

Question 10

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 11

The United States has a trade deficit when the value of the goods and services we import exceeds the value of the goods and services we export.

Accepted Answer

A) True 
 B)False

Question 12

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, an import quota of 2,500 would cause domestic production to:

Accepted Answer

A) increase from 6,100 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 6,100 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 13

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. If government imposes a tariff in the amount of $2 per unit, it will collect revenue in the amount of:

Accepted Answer

A) $0. 
B) $2,400. 
C) $5,000. 
D) $10,000. 
A) $0. 
B) $2,400. 
C) $5,000. 
D) $10,000.

Question 14

A quota differs from a tariff in that quotas:

Accepted Answer

A) limit the volume of imports more than tariffs. 
B) do not increase the price of imports as much as tariffs. 
C) do not generate tax revenues, unlike tariffs. 
D) reduce consumer welfare more than do tariffs. 
A) limit the volume of imports more than tariffs. 
B) do not increase the price of imports as much as tariffs. 
C) do not generate tax revenues, unlike tariffs. 
D) reduce consumer welfare more than do tariffs.

Question 15

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 16

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 17

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 18

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

Accepted Answer

A) supporting infant industries. 
B) preserving domestic employment. 
C) increasing global trade. 
D) promoting national security. 
A) supporting infant industries. 
B) preserving domestic employment. 
C) increasing global trade. 
D) promoting national security.

Question 19

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 20

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.

Exam 10: International Trade Policy

One reason economists oppose trade restrictions is that:

Strategic bargaining:

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

A 50 percent tax on imports of Danish cheese is an example of:

Becoming better at a task the more often you perform is referred to as:

Define the term "the trade balance." Does the United States have a trade balance that is in deficit or surplus? Explain your answer.

What are trade adjustment assistance programs? Describe the arguments for and against them.

Infant industry protection can be justified in theory by:

What are the benefits of being a debtor nation? What are the costs?

One reason trade restrictions exist is that:

The United States has a trade deficit when the value of the goods and services we import exceeds the value of the goods and services we export.

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, an import quota of 2,500 would cause domestic production to:

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. If government imposes a tariff in the amount of $2 per unit, it will collect revenue in the amount of:

A quota differs from a tariff in that quotas:

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

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:

What are trade adjustment assistance programs?

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

Economists generally agree that:

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

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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

Monetary Policy

Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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