Question 1

By restricting the amount of a good that may be imported, quotas:

Accepted Answer

A)  increase the price, thus causing domestic producers to sell less than they would with free trade. 
B)  lower the price, thus allowing domestic producers to sell more than they would with free trade. 
C)  increase the price and allow domestic producers to sell more at a higher price than they would with free trade. 
D)  lower the price, thus causing domestic producers to realize lower total revenue from the quota item. 
E)  simply replace foreign production with domestic production. 
A)  increase the price, thus causing domestic producers to sell less than they would with free trade. 
B)  lower the price, thus allowing domestic producers to sell more than they would with free trade. 
C)  increase the price and allow domestic producers to sell more at a higher price than they would with free trade. 
D)  lower the price, thus causing domestic producers to realize lower total revenue from the quota item. 
E)  simply replace foreign production with domestic production.

Question 2

The world output is higher if the countries follow restrictive trade policies rather than free trade.

Accepted Answer

A) True 
 B)False

Question 3

The trade-creation effect refers to:

Accepted Answer

A)  a reduction in economic efficiency as a result of a preferential trade agreement. 
B)  a production shift to a higher-cost producer as a result of a preferential trade agreement. 
C)  the outcome of a preferential trade agreement that allows a country to obtain goods at a lower cost than is available at home. 
D)  diversion of production from a country that has comparative advantage. 
E)  a production shift to a country that does not have comparative advantage. 
A)  a reduction in economic efficiency as a result of a preferential trade agreement. 
B)  a production shift to a higher-cost producer as a result of a preferential trade agreement. 
C)  the outcome of a preferential trade agreement that allows a country to obtain goods at a lower cost than is available at home. 
D)  diversion of production from a country that has comparative advantage. 
E)  a production shift to a country that does not have comparative advantage.

Question 4

The figure below shows the demand (D) and supply (S) curves of corn syrups.?Figure 20.3
  
-In Figure 20.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium quantity demanded?

Accepted Answer

A)  35 gallons 
B)  50 gallons 
C)  20 gallons 
D)  65 gallons 
E)  5 gallons 
A)  35 gallons 
B)  50 gallons 
C)  20 gallons 
D)  65 gallons 
E)  5 gallons

Question 5

People who call for creating a "level playing field" believe that:

Accepted Answer

A)  a country with relatively low wages is typically a country with an abundance of low-skilled labor. 
B)  trading on the basis of comparative advantage benefits both domestic and foreign firms. 
C)  creating a "level playing field" undermines the basis for specialization and economic efficiency. 
D)  production in accordance with comparative advantage is unfair. 
E)  free trade allocates the scarce resources in an efficient way. 
A)  a country with relatively low wages is typically a country with an abundance of low-skilled labor. 
B)  trading on the basis of comparative advantage benefits both domestic and foreign firms. 
C)  creating a "level playing field" undermines the basis for specialization and economic efficiency. 
D)  production in accordance with comparative advantage is unfair. 
E)  free trade allocates the scarce resources in an efficient way.

Question 6

The figure below shows the demand (D) and supply (S) curves of corn syrups.?Figure 20.3
  
-In Figure 20.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium price?

Accepted Answer

A)  $4 
B)  $6 
C)  $8 
D)  $10 
E)  $12 
A)  $4 
B)  $6 
C)  $8 
D)  $10 
E)  $12

Question 7

Agreements to abolish most barriers to trade among nations are known as:

Accepted Answer

A)  free trade cartels. 
B)  discriminatory trade agreements. 
C)  neutral trade agreements. 
D)  preferential trade agreements. 
E)  retaliatory trade agreements. 
A)  free trade cartels. 
B)  discriminatory trade agreements. 
C)  neutral trade agreements. 
D)  preferential trade agreements. 
E)  retaliatory trade agreements.

Question 8

Tariff accounts for 32% of the total government revenue in the U.K. and only 1.2% in India.

Accepted Answer

A) True 
 B)False

Question 9

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country.?Figure 20.2
  
-According to Figure 20.2, if the world price per bushel of wheat is $25, how much 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 10

One of the primary objectives of the WTO is:

Accepted Answer

A)  to create trade restrictions across the countries. 
B)  to reduce trade barriers created by the different countries. 
C)  to enable certain countries to maintain their autarkic conditions. 
D)  to enable the western countries to emerge as major players in the international trade. 
E)  to redistribute wealth from the first world to the third world countries. 
A)  to create trade restrictions across the countries. 
B)  to reduce trade barriers created by the different countries. 
C)  to enable certain countries to maintain their autarkic conditions. 
D)  to enable the western countries to emerge as major players in the international trade. 
E)  to redistribute wealth from the first world to the third world countries.

Question 11

Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.

Accepted Answer

A) True 
 B)False

Question 12

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

Accepted Answer

A) True 
 B)False

Question 13

Protection is rarely withdrawn from infant industries because such firms are necessary to ensure creation of domestic jobs.

Accepted Answer

A) True 
 B)False

Question 14

Proponents of strategic trade policy contend that:

Accepted Answer

A)  government should tax domestic firms to generate greater revenues. 
B)  government should encourage imports to prevent monopoly in the domestic market. 
C)  government should provide subsidies to domestic firms with decreasing costs. 
D)  government should discourage domestic firms with decreasing costs from continuing production. 
E)  government should tax domestic import competing firms. 
A)  government should tax domestic firms to generate greater revenues. 
B)  government should encourage imports to prevent monopoly in the domestic market. 
C)  government should provide subsidies to domestic firms with decreasing costs. 
D)  government should discourage domestic firms with decreasing costs from continuing production. 
E)  government should tax domestic import competing firms.

Question 15

Domestic firms often claim that foreign firms have an unfair advantage because foreign workers are willing to work for very low wages.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements is true of the impact of trade restrictions on domestic employment?

Accepted Answer

A)  Domestic firms will produce the goods that otherwise would have been produced abroad, thus employing foreign workers instead of domestic workers. 
B)  Beside the protected industry, other industries will also benefit in terms of employment. 
C)  Domestic consumers will be required to pay lower prices for the output of the protected industry. 
D)  Restrictions imposed on trade simply redistribute jobs by creating employment in the protected industry and reducing employment elsewhere. 
E)  If other countries retaliate by restricting the entry of the domestic exports, the output of domestic firms that produce for export will rise. 
A)  Domestic firms will produce the goods that otherwise would have been produced abroad, thus employing foreign workers instead of domestic workers. 
B)  Beside the protected industry, other industries will also benefit in terms of employment. 
C)  Domestic consumers will be required to pay lower prices for the output of the protected industry. 
D)  Restrictions imposed on trade simply redistribute jobs by creating employment in the protected industry and reducing employment elsewhere. 
E)  If other countries retaliate by restricting the entry of the domestic exports, the output of domestic firms that produce for export will rise.

Question 17

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 18

Steel producers in the United States observe that foreign sales of U.S. steel has drastically declined due to stringent trade policies adopted by the foreign governments and unfair treatment of U.S. steel exports in foreign countries. The lobbying efforts of such loss making U.S. steel manufacturers induces the domestic government to restrict the entry of imported steel and help stimulate the sales of domestically produced steel. Which of the following is most similar to the example mentioned above?

Accepted Answer

A)  A tariff imposed by the government to stimulate domestic production of a high-technology good with positive spillover effects 
B)  A tariff imposed by the government on the import of cotton textiles because it is an infant industry in the domestic country 
C)  An import tariff applied against a foreign monopoly supplying the domestic market 
D)  Taxes imposed by the government on an import competing industry that generates a negative production externality 
E)  Reciprocal tariffs introduced by the government of Mexico on tobacco imports from Brazil in retaliation to unfair treatment of Mexican tobacco exports to the latter 
A)  A tariff imposed by the government to stimulate domestic production of a high-technology good with positive spillover effects 
B)  A tariff imposed by the government on the import of cotton textiles because it is an infant industry in the domestic country 
C)  An import tariff applied against a foreign monopoly supplying the domestic market 
D)  Taxes imposed by the government on an import competing industry that generates a negative production externality 
E)  Reciprocal tariffs introduced by the government of Mexico on tobacco imports from Brazil in retaliation to unfair treatment of Mexican tobacco exports to the latter

Question 19

The figure below shows the demand (D) and supply (S) curves of corn syrups.?Figure 20.3
  
-In Figure 20.3, suppose an import quota of 30 gallons of corn syrup is imposed. If the world price per gallon is $4:

Accepted Answer

A)  there will be an excess domestic demand of approximately 35 gallons. 
B)  the domestic market will be in equilibrium. 
C)  there will be an excess domestic demand for 10 gallons. 
D)  there will be an excess supply of 20 gallons. 
E)  there will be an excess domestic demand for 20 gallons. 
A)  there will be an excess domestic demand of approximately 35 gallons. 
B)  the domestic market will be in equilibrium. 
C)  there will be an excess domestic demand for 10 gallons. 
D)  there will be an excess supply of 20 gallons. 
E)  there will be an excess domestic demand for 20 gallons.

Question 20

Tariffs are considered to be a popular tax in the first world countries, who justify them on the basis of the revenue they generate for government spending.

Accepted Answer

A) True 
 B)False

By restricting the amount of a good that may be imported, quotas:

The world output is higher if the countries follow restrictive trade policies rather than free trade.

The trade-creation effect refers to:

The figure below shows the demand (D) and supply (S) curves of corn syrups.?Figure 20.3 -In Figure 20.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium quantity demanded?

People who call for creating a "level playing field" believe that:

The figure below shows the demand (D) and supply (S) curves of corn syrups.?Figure 20.3 -In Figure 20.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium price?

Agreements to abolish most barriers to trade among nations are known as:

Tariff accounts for 32% of the total government revenue in the U.K. and only 1.2% in India.

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country.?Figure 20.2 -According to Figure 20.2, if the world price per bushel of wheat is $25, how much is the domestic demand?

One of the primary objectives of the WTO is:

Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

Protection is rarely withdrawn from infant industries because such firms are necessary to ensure creation of domestic jobs.

Proponents of strategic trade policy contend that:

Domestic firms often claim that foreign firms have an unfair advantage because foreign workers are willing to work for very low wages.

Which of the following statements is true of the impact of trade restrictions on domestic employment?

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

The figure below shows the demand (D) and supply (S) curves of corn syrups.?Figure 20.3 -In Figure 20.3, suppose an import quota of 30 gallons of corn syrup is imposed. If the world price per gallon is $4:

Tariffs are considered to be a popular tax in the first world countries, who justify them on the basis of the revenue they generate for government spending.

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

By restricting the amount of a good that may be imported, quotas:

The world output is higher if the countries follow restrictive trade policies rather than free trade.

The trade-creation effect refers to:

The figure below shows the demand (D) and supply (S) curves of corn syrups.?Figure 20.3 -In Figure 20.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium quantity demanded?

People who call for creating a "level playing field" believe that:

The figure below shows the demand (D) and supply (S) curves of corn syrups.?Figure 20.3 -In Figure 20.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium price?

Agreements to abolish most barriers to trade among nations are known as:

Tariff accounts for 32% of the total government revenue in the U.K. and only 1.2% in India.

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country.?Figure 20.2 -According to Figure 20.2, if the world price per bushel of wheat is $25, how much is the domestic demand?

One of the primary objectives of the WTO is:

Protection from foreign competition benefits domestic producers in the protected industry at the expense of domestic consumers.

When barriers to trade are imposed, we should expect some groups to be harmed at the expense of other groups.

Protection is rarely withdrawn from infant industries because such firms are necessary to ensure creation of domestic jobs.

Proponents of strategic trade policy contend that:

Domestic firms often claim that foreign firms have an unfair advantage because foreign workers are willing to work for very low wages.

Which of the following statements is true of the impact of trade restrictions on domestic employment?

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

The figure below shows the demand (D) and supply (S) curves of corn syrups.?Figure 20.3 -In Figure 20.3, suppose an import quota of 30 gallons of corn syrup is imposed. If the world price per gallon is $4:

Tariffs are considered to be a popular tax in the first world countries, who justify them on the basis of the revenue they generate for government spending.

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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