Question 1

One of the negative impacts of export subsidy is that:

Accepted Answer

A)  the price of the domestic good increases in the world market. 
B)  the domestic supply of the goods increases more than proportionately than increase in demand. 
C)  the domestic cost of production of the exportable increase. 
D)  it results in a general deflation and hence the domestic producers incur losses. 
E)  the domestic consumers are harmed as the subsidies are financed by taxing them. 
A)  the price of the domestic good increases in the world market. 
B)  the domestic supply of the goods increases more than proportionately than increase in demand. 
C)  the domestic cost of production of the exportable increase. 
D)  it results in a general deflation and hence the domestic producers incur losses. 
E)  the domestic consumers are harmed as the subsidies are financed by taxing them. E

Question 2

The figure below shows the demand (D) and supply (S) curves of corn syrups.
Figure 20.3
  
-In Figure 20.3, what are the equilibrium price and quantity in the absence of trade?

Accepted Answer

A)  $8, 50 gallons 
B)  $12, 35 gallons 
C)  $8, 35 gallons 
D)  $4, 20 gallons 
E)  $16, 50 gallons 
A)  $8, 50 gallons 
B)  $12, 35 gallons 
C)  $8, 35 gallons 
D)  $4, 20 gallons 
E)  $16, 50 gallons B

Question 3

The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market.
Figure 20.1
   In the figure,
PS1U1B11S1U1B0: Price of the good in the international market.
PS1U1B12S1U1B0: Price of the good in the domestic market after the imposition of tariff by the government.
PS1U1B13S1U1B0: No-trade price of the good in the domestic market.
-According to Figure 20.1, the domestic equilibrium quantity of the good is:

Accepted Answer

A)  Q1. 
B)  Q5. 
C)  Q2. 
D)  Q3. 
E)  Q4. 
A)  Q1. 
B)  Q5. 
C)  Q2. 
D)  Q3. 
E)  Q4. D

Question 4

If international trade is restricted by the government:

Accepted Answer

A)  domestic consumers are benefited. 
B)  domestic producers are adversely affected. 
C)  consumers in the importing country are required to pay higher prices for the goods. 
D)  consumers can access to better quality product at lower prices. 
E)  the resources are allocated to their highest paid uses. 
A)  domestic consumers are benefited. 
B)  domestic producers are adversely affected. 
C)  consumers in the importing country are required to pay higher prices for the goods. 
D)  consumers can access to better quality product at lower prices. 
E)  the resources are allocated to their highest paid uses.

Question 5

A monopoly exists when there is only one producer in an industry, and no close substitutes for the product exist.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following probably best explains why trade restrictions are imposed even if the costs to consumers are greater than the benefits to protected industries?

Accepted Answer

A)  Indifference on the government's part to the interests of domestic workers 
B)  A desire to make other countries suffer 
C)  Successful lobbying by consumers 
D)  Successful lobbying by employers and workers 
E)  The government's preference to safeguard the interest of the producers at the expense of the consumers 
A)  Indifference on the government's part to the interests of domestic workers 
B)  A desire to make other countries suffer 
C)  Successful lobbying by consumers 
D)  Successful lobbying by employers and workers 
E)  The government's preference to safeguard the interest of the producers at the expense of the consumers

Question 7

While it is possible to erect barriers to foreign competition and save domestic jobs, restricting international trade may impose large costs on an economy.

Accepted Answer

A) True 
 B)False

Question 8

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country.
Figure 20.2
  
-In Figure 20.2, if the world price per bushel of wheat is $25 and a tariff of $10 is imposed by the domestic government, what is the domestic demand?

Accepted Answer

A)  400 bushels 
B)  450 bushels 
C)  200 bushels 
D)  300 bushels 
E)  150 bushels 
A)  400 bushels 
B)  450 bushels 
C)  200 bushels 
D)  300 bushels 
E)  150 bushels

Question 9

As a result of the government procurement policy in the U.S.:

Accepted Answer

A)  the domestic consumers are required to pay a higher price than the government for the domestically produced goods. 
B)  the government wields the sole authority of importing goods from abroad. 
C)  the government wields the sole authority of exporting goods. 
D)  the government is required to buy the domestic goods if the domestic price is less than the world price. 
E)  the government is required to sponsor research and development for the domestic firms. 
A)  the domestic consumers are required to pay a higher price than the government for the domestically produced goods. 
B)  the government wields the sole authority of importing goods from abroad. 
C)  the government wields the sole authority of exporting goods. 
D)  the government is required to buy the domestic goods if the domestic price is less than the world price. 
E)  the government is required to sponsor research and development for the domestic firms.

Question 10

Trade diversion reduces worldwide efficiency, because:

Accepted Answer

A)  production is diverted to the country with the comparative advantage. 
B)  production is diverted from the country with the comparative advantage. 
C)  unnecessary trade restrictions are created in the economies. 
D)  consumption is diverted to the country having inadequate demand. 
E)  the cost of transshipment of the goods increases thus raising their prices in the world market. 
A)  production is diverted to the country with the comparative advantage. 
B)  production is diverted from the country with the comparative advantage. 
C)  unnecessary trade restrictions are created in the economies. 
D)  consumption is diverted to the country having inadequate demand. 
E)  the cost of transshipment of the goods increases thus raising their prices in the world market.

Question 11

According to empirical observations, the cost of restricting international trade in the U.S. is much greater than the benefits generated from restriction. In the light of the above observation, which of the following statements is true?

Accepted Answer

A)  The benefits of protecting domestic jobs typically outweigh the costs. 
B)  Consumers end up paying much more for the goods they buy in order to subsidize the relatively inefficient domestic producer. 
C)  U.S. GDP would be over $14 billion higher with import restrictions than without restrictions. 
D)  Protection of the U.S. textile and sugar industries means that all consumers pay a lower price for clothing and sugar. 
E)  Protection of the domestic industries enable the producers to charge lower prices for their products. 
A)  The benefits of protecting domestic jobs typically outweigh the costs. 
B)  Consumers end up paying much more for the goods they buy in order to subsidize the relatively inefficient domestic producer. 
C)  U.S. GDP would be over $14 billion higher with import restrictions than without restrictions. 
D)  Protection of the U.S. textile and sugar industries means that all consumers pay a lower price for clothing and sugar. 
E)  Protection of the domestic industries enable the producers to charge lower prices for their products.

Question 12

The most successful free trade agreements achieve all of the following goals, except:

Accepted Answer

A)  benefiting exporters by increasing exports to member countries. 
B)  ensuring that production occurs on the basis of comparative advantage. 
C)  benefiting consumers by making a wider variety of goods available at a lower price. 
D)  stimulating trade creation to allow the benefits of trade to be realized. 
E)  protecting domestic industries from foreign competition. 
A)  benefiting exporters by increasing exports to member countries. 
B)  ensuring that production occurs on the basis of comparative advantage. 
C)  benefiting consumers by making a wider variety of goods available at a lower price. 
D)  stimulating trade creation to allow the benefits of trade to be realized. 
E)  protecting domestic industries from foreign competition.

Question 13

In reality international trade is determined solely by comparative advantage and the free market forces of supply and demand.

Accepted Answer

A) True 
 B)False

Question 14

In the United States, a "buy American" act was passed in 1933 to create larger markets for domestic goods.

Accepted Answer

A) True 
 B)False

Question 15

Creating conditions for fair trade by limiting imports will make the domestic consumers better off, as they will be required to pay low prices for the products.

Accepted Answer

A) True 
 B)False

Question 16

Protecting infant industries from foreign competition may make sense, but only until the industry matures.

Accepted Answer

A) True 
 B)False

Question 17

In the light of the infant industry argument, identify the industry which is likely to have substantially high initial costs.

Accepted Answer

A)  Fashion designing 
B)  Retail industry 
C)  Iron and steel industry 
D)  Dairy industry 
E)  Software industry 
A)  Fashion designing 
B)  Retail industry 
C)  Iron and steel industry 
D)  Dairy industry 
E)  Software industry

Question 18

In 1992 the EEC was replaced by the EU with an agreement to:

Accepted Answer

A)  reduce trade barriers among the member countries. 
B)  reduce trade barriers against nonmember countries. 
C)  mutually restrict imports from nonmember countries. 
D)  create a single market for goods and services in western Europe. 
E)  enable the countries of Western Europe to emerge as major world powers. 
A)  reduce trade barriers among the member countries. 
B)  reduce trade barriers against nonmember countries. 
C)  mutually restrict imports from nonmember countries. 
D)  create a single market for goods and services in western Europe. 
E)  enable the countries of Western Europe to emerge as major world powers.

Question 19

Protection provided to the infant industries is rarely withdrawn because:

Accepted Answer

A)  the costs of withdrawing protection outweigh the benefits. 
B)  the industries begin to experience diseconomies of scale. 
C)  it leads to a loss of government revenue. 
D)  the industries produce goods which are close substitutes of the imported goods. 
E)  the larger and more successful the industry becomes, the more political power it wields. 
A)  the costs of withdrawing protection outweigh the benefits. 
B)  the industries begin to experience diseconomies of scale. 
C)  it leads to a loss of government revenue. 
D)  the industries produce goods which are close substitutes of the imported goods. 
E)  the larger and more successful the industry becomes, the more political power it wields.

Question 20

Which of the following can be considered as a cultural barrier to trade?

Accepted Answer

A)  Prohibition on Zimbabwean aircrafts from flying over or landing in Canada. 
B)  Restriction on the export of luxury goods to the Democratic Peoples Republic of Korea from Canada. 
C)  An arms embargo imposed on China by the U.K. government 
D)  Japanese law requiring a new retail firm to receive permission from other retailers in the area in order to open a business. 
E)  Restriction on the export of strategic goods to Ghana imposed by the government of U.K. 
A)  Prohibition on Zimbabwean aircrafts from flying over or landing in Canada. 
B)  Restriction on the export of luxury goods to the Democratic Peoples Republic of Korea from Canada. 
C)  An arms embargo imposed on China by the U.K. government 
D)  Japanese law requiring a new retail firm to receive permission from other retailers in the area in order to open a business. 
E)  Restriction on the export of strategic goods to Ghana imposed by the government of U.K.

One of the negative impacts of export subsidy is that:

The figure below shows the demand (D) and supply (S) curves of corn syrups. Figure 20.3 -In Figure 20.3, what are the equilibrium price and quantity in the absence of trade?

If international trade is restricted by the government:

A monopoly exists when there is only one producer in an industry, and no close substitutes for the product exist.

Which of the following probably best explains why trade restrictions are imposed even if the costs to consumers are greater than the benefits to protected industries?

While it is possible to erect barriers to foreign competition and save domestic jobs, restricting international trade may impose large costs on an economy.

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 20.2 -In Figure 20.2, if the world price per bushel of wheat is $25 and a tariff of $10 is imposed by the domestic government, what is the domestic demand?

As a result of the government procurement policy in the U.S.:

Trade diversion reduces worldwide efficiency, because:

According to empirical observations, the cost of restricting international trade in the U.S. is much greater than the benefits generated from restriction. In the light of the above observation, which of the following statements is true?

The most successful free trade agreements achieve all of the following goals, except:

In reality international trade is determined solely by comparative advantage and the free market forces of supply and demand.

In the United States, a "buy American" act was passed in 1933 to create larger markets for domestic goods.

Creating conditions for fair trade by limiting imports will make the domestic consumers better off, as they will be required to pay low prices for the products.

Protecting infant industries from foreign competition may make sense, but only until the industry matures.

In the light of the infant industry argument, identify the industry which is likely to have substantially high initial costs.

In 1992 the EEC was replaced by the EU with an agreement to:

Protection provided to the infant industries is rarely withdrawn because:

Which of the following can be considered as a cultural barrier to trade?

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

Filters

Exam 20: International Trade Restrictions

One of the negative impacts of export subsidy is that:

The figure below shows the demand (D) and supply (S) curves of corn syrups. Figure 20.3 -In Figure 20.3, what are the equilibrium price and quantity in the absence of trade?

If international trade is restricted by the government:

A monopoly exists when there is only one producer in an industry, and no close substitutes for the product exist.

Which of the following probably best explains why trade restrictions are imposed even if the costs to consumers are greater than the benefits to protected industries?

While it is possible to erect barriers to foreign competition and save domestic jobs, restricting international trade may impose large costs on an economy.

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 20.2 -In Figure 20.2, if the world price per bushel of wheat is $25 and a tariff of $10 is imposed by the domestic government, what is the domestic demand?

As a result of the government procurement policy in the U.S.:

Trade diversion reduces worldwide efficiency, because:

According to empirical observations, the cost of restricting international trade in the U.S. is much greater than the benefits generated from restriction. In the light of the above observation, which of the following statements is true?

The most successful free trade agreements achieve all of the following goals, except:

In reality international trade is determined solely by comparative advantage and the free market forces of supply and demand.

In the United States, a "buy American" act was passed in 1933 to create larger markets for domestic goods.

Creating conditions for fair trade by limiting imports will make the domestic consumers better off, as they will be required to pay low prices for the products.

Protecting infant industries from foreign competition may make sense, but only until the industry matures.

In the light of the infant industry argument, identify the industry which is likely to have substantially high initial costs.

In 1992 the EEC was replaced by the EU with an agreement to:

Protection provided to the infant industries is rarely withdrawn because:

Which of the following can be considered as a cultural barrier to trade?

Economics: the World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

National Income Accounting

An Introduction to the Foreign Exchange Market and the Balance of Payments

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Aggregate Expenditures

Income and Expenditures Equilibrium

Fiscal Policy

Money and Banking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

Economic Growth

Development Economics

Globalization

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

Filters