Question 1

When dealing with strategic trade policy, one practical problem for government is the likelihood of retaliation by the foreign government.

Accepted Answer

A) True 
 B)False

Question 2

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,?P₁: Price of the good in the international market.?P₂: Price of the good in the domestic market after the imposition of tariff by the government.?P₃: No-trade price of the good in the domestic market.
  
-Refer to Figure 20.1. If the government imposes a tariff such that the price of the good in the domestic market is P₂ while the international price is P₁, the dollar value of the tariff is equal to:

Accepted Answer

A)  P₃ - P₁. 
B)  P₂ - P₃. 
C)  P₂ - P₁. 
D)  P₁ - P₂. 
E)  P₁ - P₃. 
A)  P₃ - P₁. 
B)  P₂ - P₃. 
C)  P₂ - P₁. 
D)  P₁ - P₂. 
E)  P₁ - P₃.

Question 3

Which of the following is true of a tariff?

Accepted Answer

A)  It is a tax levied by the government on domestic production of goods and services. 
B)  It is a quantitative restriction on imports imposed by the government. 
C)  It is a monetary benefit received by exporters from the government. 
D)  It is a monetary benefit received by importers from the government. 
E)  It is a tax on import and export levied by the government. 
A)  It is a tax levied by the government on domestic production of goods and services. 
B)  It is a quantitative restriction on imports imposed by the government. 
C)  It is a monetary benefit received by exporters from the government. 
D)  It is a monetary benefit received by importers from the government. 
E)  It is a tax on import and export levied by the government.

Question 4

When production does not proceed on the basis of comparative advantage, resources are expended on their most efficient uses.

Accepted Answer

A) True 
 B)False

Question 5

A limit on the dollar worth of oranges imported into the United States is an example of a quantity quota.

Accepted Answer

A) True 
 B)False

Question 6

If the average costs of production decline with increases in output, then the larger a firm is, the lower its per unit costs will be.

Accepted Answer

A) True 
 B)False

Question 7

Developing countries often justify imposition of tariffs because:

Accepted Answer

A)  it creates a burden on government budget. 
B)  it is easy to collect direct taxes from people in the developing countries. 
C)  a large number of people in the developing countries earn a taxable income. 
D)  developing countries find income taxes difficult to levy and collect. 
E)  the volume of imports of these countries is considerably low. 
A)  it creates a burden on government budget. 
B)  it is easy to collect direct taxes from people in the developing countries. 
C)  a large number of people in the developing countries earn a taxable income. 
D)  developing countries find income taxes difficult to levy and collect. 
E)  the volume of imports of these countries is considerably low.

Question 8

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 9

Preferential trade agreements have a beneficial trade-diversion effect when they reduce prices for traded goods and stimulate the volume of international trade.

Accepted Answer

A) True 
 B)False

Question 10

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,?P₁: Price of the good in the international market.?P₂: Price of the good in the domestic market after the imposition of tariff by the government.?P₃: 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.

Question 11

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S.?Figure 20.4
  
-Refer to Figure 20.4. Assume that Ghana is the only cocoa exporter supplying cocoa in the world market at $6 per pound. If the U.S. enters into a free trade agreement (FTA) with Ghana, what would be its total cocoa imports?

Accepted Answer

A)  100 pounds 
B)  300 pounds 
C)  200 pounds 
D)  150 pounds 
E)  250 pounds 
A)  100 pounds 
B)  300 pounds 
C)  200 pounds 
D)  150 pounds 
E)  250 pounds

Question 12

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 13

Typically, restrictions to "save domestic jobs" simply redistribute jobs by creating:

Accepted Answer

A)  employment in the protected industry and reducing employment elsewhere. 
B)  employment in nonprotected industries and reducing employment in the protected industry. 
C)  inflation in the overall economy. 
D)  employment in the primary sector at the expense of the secondary sector. 
E)  labor unions in the protected industries at the expense of employment in nonunionized industries 
A)  employment in the protected industry and reducing employment elsewhere. 
B)  employment in nonprotected industries and reducing employment in the protected industry. 
C)  inflation in the overall economy. 
D)  employment in the primary sector at the expense of the secondary sector. 
E)  labor unions in the protected industries at the expense of employment in nonunionized industries

Question 14

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.

Question 15

Which of the following tools of commercial policy acts as a quantitative restriction on imports?

Accepted Answer

A)  Tariff 
B)  Subsidy 
C)  Health and Safety regulations 
D)  Quota 
E)  Government procurement 
A)  Tariff 
B)  Subsidy 
C)  Health and Safety regulations 
D)  Quota 
E)  Government procurement

Question 16

After the U.S. government had approved the feeding of hormones to U.S. beef cattle, several western European nations restricted the import of beef from the U.S. Which of the following tools of commercial policy had been put to use in this situation?

Accepted Answer

A)  Tariff 
B)  Quota 
C)  Health and safety standards 
D)  Subsidy 
E)  Government procurement 
A)  Tariff 
B)  Quota 
C)  Health and safety standards 
D)  Subsidy 
E)  Government procurement

Question 17

When the world price of the traded good is lower than the domestic no-trade equilibrium price, free trade causes domestic production to fall and domestic consumption to rise.

Accepted Answer

A) True 
 B)False

Question 18

The basic difference between a tariff and quota is that:

Accepted Answer

A)  quota can be imposed both on imports and exports whereas a tariff can be imposed only on imports. 
B)  quota yields revenue to the government whereas tariff does not yield any revenue. 
C)  tariff reduces the import of the goods with greater certainty than quota as the amount of import restricted by quota depends on the price elasticity of demand for importable. 
D)  tariff is a quantitative restriction on imports whereas quota is an import duty. 
E)  a tariff raises the price of the product only in the domestic market whereas with a quota, both domestic and foreign producers receive a higher price. 
A)  quota can be imposed both on imports and exports whereas a tariff can be imposed only on imports. 
B)  quota yields revenue to the government whereas tariff does not yield any revenue. 
C)  tariff reduces the import of the goods with greater certainty than quota as the amount of import restricted by quota depends on the price elasticity of demand for importable. 
D)  tariff is a quantitative restriction on imports whereas quota is an import duty. 
E)  a tariff raises the price of the product only in the domestic market whereas with a quota, both domestic and foreign producers receive a higher price.

Question 19

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, what is the domestic production?

Accepted Answer

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

Question 20

Which of the following statements about an increasing-returns-to-scale industry is not true?

Accepted Answer

A)  It will tend to concentrate production in the hands of a very few large firms. 
B)  Firms in the industry face higher costs per unit of production as their level of output increases. 
C)  Opportunity costs may fall with the level of output. 
D)  Proponents of strategic trade policy contend that tariffs can be used to stimulate production by a domestic industry capable of achieving increasing returns to scale. 
E)  The costs of producing a unit of output fall as more output is produced. 
A)  It will tend to concentrate production in the hands of a very few large firms. 
B)  Firms in the industry face higher costs per unit of production as their level of output increases. 
C)  Opportunity costs may fall with the level of output. 
D)  Proponents of strategic trade policy contend that tariffs can be used to stimulate production by a domestic industry capable of achieving increasing returns to scale. 
E)  The costs of producing a unit of output fall as more output is produced.

When dealing with strategic trade policy, one practical problem for government is the likelihood of retaliation by the foreign government.

Which of the following is true of a tariff?

When production does not proceed on the basis of comparative advantage, resources are expended on their most efficient uses.

A limit on the dollar worth of oranges imported into the United States is an example of a quantity quota.

If the average costs of production decline with increases in output, then the larger a firm is, the lower its per unit costs will be.

Developing countries often justify imposition of tariffs because:

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

Preferential trade agreements have a beneficial trade-diversion effect when they reduce prices for traded goods and stimulate the volume of international trade.

Trade diversion reduces worldwide efficiency, because:

Typically, restrictions to "save domestic jobs" simply redistribute jobs by creating:

One of the negative impacts of export subsidy is that:

Which of the following tools of commercial policy acts as a quantitative restriction on imports?

After the U.S. government had approved the feeding of hormones to U.S. beef cattle, several western European nations restricted the import of beef from the U.S. Which of the following tools of commercial policy had been put to use in this situation?

When the world price of the traded good is lower than the domestic no-trade equilibrium price, free trade causes domestic production to fall and domestic consumption to rise.

The basic difference between a tariff and quota is that:

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, what is the domestic production?

Which of the following statements about an increasing-returns-to-scale industry is not true?

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange 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

Exchapterange Rates and Financial Links Between Countries

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Exam 20: International Trade Restrictions

When dealing with strategic trade policy, one practical problem for government is the likelihood of retaliation by the foreign government.

Which of the following is true of a tariff?

When production does not proceed on the basis of comparative advantage, resources are expended on their most efficient uses.

A limit on the dollar worth of oranges imported into the United States is an example of a quantity quota.

If the average costs of production decline with increases in output, then the larger a firm is, the lower its per unit costs will be.

Developing countries often justify imposition of tariffs because:

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

Preferential trade agreements have a beneficial trade-diversion effect when they reduce prices for traded goods and stimulate the volume of international trade.

Trade diversion reduces worldwide efficiency, because:

Typically, restrictions to "save domestic jobs" simply redistribute jobs by creating:

One of the negative impacts of export subsidy is that:

Which of the following tools of commercial policy acts as a quantitative restriction on imports?

After the U.S. government had approved the feeding of hormones to U.S. beef cattle, several western European nations restricted the import of beef from the U.S. Which of the following tools of commercial policy had been put to use in this situation?

When the world price of the traded good is lower than the domestic no-trade equilibrium price, free trade causes domestic production to fall and domestic consumption to rise.

The basic difference between a tariff and quota is that:

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, what is the domestic production?

Which of the following statements about an increasing-returns-to-scale industry is not true?

The Wealth of Nations: Ownership and Economic Freedom

Scarcity and Opportunity Costs

The Market and Price System

The Aggregate Economy

National Income Accounting

An Introduction to the Foreign Exchapterange 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

Exchapterange Rates and Financial Links Between Countries

Filters