Question 1

Summarize the Smoot-Hawley Tariff Act and its effects.

Accepted Answer

The Smoot-Hawley Tariff Act was passed in 1930.It raised the average tariff in the United States to an all-time high of 59% by 1932.President Hoover signed the bill in spite the urging of thousands of economists to veto it.The act resulted in severe foreign retaliation.World trade collapsed,deepening the worldwide depression.

Question 2

The WTO was established during the

Accepted Answer

A) Kennedy Round 
B) Uruguay Round 
C) Tokyo Round 
D) Doha Round 
A) Kennedy Round 
B) Uruguay Round 
C) Tokyo Round 
D) Doha Round B

Question 3

How can strategic trade policy justify trade protection?
 What difficulties arise in carrying out a strategic trade policy?

Accepted Answer

According to strategic trade policy,a nation can create a comparative advantage through temporary trade protection in such fields as semiconductors,computers,telecommunications,and other industries that are deemed crucial to future growth in the nation.These high-technology industries are subject to high risks,require large scale production to achieve economies of scale and give rise to extensive external economies when successful.Strategic trade policy suggests that by encouraging such industries,the nation can enhance its future growth prospects.This is similar to the infant-industry argument in developing nations,except that it is advanced for industrial nations to acquire a comparative advantage in crucial high-technology industries.Most nations do some of this.Indeed,some economists would go so far as to say that a great deal of the postwar industrial and technological success of Japan is due to its strategic industrial and trade policies.
There are three serious difficulties in carrying out strategic trade policy.First,it is extremely difficult to pick winners (i.e. ,choose the industries that will provide large external economies in the future)and devise appropriate policies to successfully nurture them.Second,since most leading nations undertake strategic trade policies at the same time,their efforts are largely neutralized so that the potential benefits to each may be small.Third,when a country does achieve substantial success with strategic trade policy,this comes at the expense of other countries (i.e. ,it is a beggar-thy-neighbor policy)and so other countries are likely to retaliate.Faced with all these practical difficulties,even supporters of strategic trade policy grudgingly acknowledge that free trade is still the best policy,after all.

Question 4

Carefully explain the current status of the Doha Round of trade negotiations and the challenges presented.

Accepted Answer

The Doha Round of negotiations collapsed

Question 5

An international cartel refers to:

Accepted Answer

A) dumping 
B) an organization of exporters 
C) an international commodity agreement 
D) voluntary export restraints 
A) dumping 
B) an organization of exporters 
C) an international commodity agreement 
D) voluntary export restraints

Question 6

Industrial policy refers to:

Accepted Answer

A) an activist policy by the government of an industrial country to stimulate the development of an industry 
B) the granting of a subsidy to a domestic industry to stimulate the development of an industry 
C) the granting of a subsidy to a domestic industry to counter a foreign subsidy 
D) all of the above 
A) an activist policy by the government of an industrial country to stimulate the development of an industry 
B) the granting of a subsidy to a domestic industry to stimulate the development of an industry 
C) the granting of a subsidy to a domestic industry to counter a foreign subsidy 
D) all of the above

Question 7

Quotas are similar to tariffs in that they do all of the following except

Accepted Answer

A) increase domestic production 
B) decrease consumption 
C) directly raise price 
D) reduce imports 
A) increase domestic production 
B) decrease consumption 
C) directly raise price 
D) reduce imports

Question 8

What is an infant industry,and why would a country want to protect it?

Accepted Answer

A new industry may have the potential to

Question 9

Which of the following is true with respect to the infant-industry argument for protection?

Accepted Answer

A) It refers to temporary protection to establish a domestic industry. 
B) To be valid,the return to the grown-up industry must be sufficiently high also to repay for the higher prices paid by domestic consumers of the commodity during the infancy period. 
C) It is inferior to an equivalent production subsidy to the infant industry. 
D) All of the above 
A) It refers to temporary protection to establish a domestic industry. 
B) To be valid,the return to the grown-up industry must be sufficiently high also to repay for the higher prices paid by domestic consumers of the commodity during the infancy period. 
C) It is inferior to an equivalent production subsidy to the infant industry. 
D) All of the above

Question 10

The WTO grew out of the following organization

Accepted Answer

A) the Bretton Woods system 
B) The UN 
C) The World Bank 
D) The GATT 
A) the Bretton Woods system 
B) The UN 
C) The World Bank 
D) The GATT

Question 11

As of 2012,the status of the Doha Round is

Accepted Answer

A) There is a new agreement in place. 
B) Negotiations are continuing. 
C) Negotiations have collapsed. 
D) Negotiations have not yet begun. 
A) There is a new agreement in place. 
B) Negotiations are continuing. 
C) Negotiations have collapsed. 
D) Negotiations have not yet begun.

Question 12

An import quota does all of the following except:

Accepted Answer

A) increases the domestic price of the imported commodity 
B) reduces domestic consumption 
C) increases domestic production 
D) increases domestic social welfare 
A) increases the domestic price of the imported commodity 
B) reduces domestic consumption 
C) increases domestic production 
D) increases domestic social welfare

Question 13

The most-favored-nation principle refers to:

Accepted Answer

A) extension to all trade partners of any reciprocal tariff reduction negotiated by the U.S.with any of its trade partners 
B) multilateral trade negotiation 
C) the General Agreement on Tariffs and Trade 
D) the International Trade Organization 
A) extension to all trade partners of any reciprocal tariff reduction negotiated by the U.S.with any of its trade partners 
B) multilateral trade negotiation 
C) the General Agreement on Tariffs and Trade 
D) the International Trade Organization

Question 14

Explain why and under what conditions the infant-industry argument for an import tariff is valid.How must this argument be qualified?

Accepted Answer

The infant-industry argument for tariffs

Question 15

On which of the following principles does GATT rest?

Accepted Answer

A) nondiscrimination 
B) elimination of nontariff barriers 
C) consultation among nations in solving trade disputes 
D) all of the above 
A) nondiscrimination 
B) elimination of nontariff barriers 
C) consultation among nations in solving trade disputes 
D) all of the above

Question 16

A fallacious argument for protection is:

Accepted Answer

A) the infant industry argument 
B) protection for national defense 
C) the scientific tariff 
D) to correct domestic distortions 
A) the infant industry argument 
B) protection for national defense 
C) the scientific tariff 
D) to correct domestic distortions

Question 17

Suppose that domestic demand for a product is more inelastic than demand in the foreign country.A seller with market power would set a price in the foreign market that is ______ than the domestic price;this is an example of _________.

Accepted Answer

A) higher,predatory dumping 
B) lower,predatory dumping 
C) higher,international price discrimination 
D) lower,international price discrimination 
A) higher,predatory dumping 
B) lower,predatory dumping 
C) higher,international price discrimination 
D) lower,international price discrimination

Question 18

All of the following are examples of protectionism except

Accepted Answer

A) most favored nation treatment 
B) voluntary export restraints 
C) tariffs 
D) dumping 
A) most favored nation treatment 
B) voluntary export restraints 
C) tariffs 
D) dumping

Question 19

The temporary sale of a commodity at below cost or at a lower price abroad in order to drive foreign producers out of business is called:

Accepted Answer

A) predatory dumping 
B) sporadic dumping 
C) continuous dumping 
D) voluntary export restraints 
A) predatory dumping 
B) sporadic dumping 
C) continuous dumping 
D) voluntary export restraints

Question 20

Game theory refers to:

Accepted Answer

A) a method of choosing the optimal strategy in conflict situations 
B) the granting of a subsidy to correct a domestic distortion 
C) the theory of tariff protection 
D) the theory of comparative advantage 
A) a method of choosing the optimal strategy in conflict situations 
B) the granting of a subsidy to correct a domestic distortion 
C) the theory of tariff protection 
D) the theory of comparative advantage

Exam 9: Nontariff Trade Barriers and the New Protectionism

Summarize the Smoot-Hawley Tariff Act and its effects.

The WTO was established during the

How can strategic trade policy justify trade protection? What difficulties arise in carrying out a strategic trade policy?

Carefully explain the current status of the Doha Round of trade negotiations and the challenges presented.

An international cartel refers to:

Industrial policy refers to:

Quotas are similar to tariffs in that they do all of the following except

What is an infant industry,and why would a country want to protect it?

Which of the following is true with respect to the infant-industry argument for protection?

The WTO grew out of the following organization

As of 2012,the status of the Doha Round is

An import quota does all of the following except:

The most-favored-nation principle refers to:

Explain why and under what conditions the infant-industry argument for an import tariff is valid.How must this argument be qualified?

On which of the following principles does GATT rest?

A fallacious argument for protection is:

Suppose that domestic demand for a product is more inelastic than demand in the foreign country.A seller with market power would set a price in the foreign market that is ______ than the domestic price;this is an example of _________.

All of the following are examples of protectionism except

The temporary sale of a commodity at below cost or at a lower price abroad in order to drive foreign producers out of business is called:

Game theory refers to:

Introduction

The Law of Comparative Advantage

The Standard Theory of International Trade

Demand and Supply, offer Curves, and the Terms of Trade

Factor Endowments and the Heckscher-Ohlin Theory

Economies of Scale, imperfect Competition, and International Trade

Economic Growth and International Trade

Economic Growth and International Trade

Economic Integration: Customs Unions and Free Trade Areas

International Trade and Economic Development

International Resource Movements and Multinational Corporations

Balance of Payments

Foreign Exchange Markets and Exchange Rates

Exchange Rate Determination

The Price Adjustment Mechanism With Flexible and Fixed Exchange

The Income Adjustment Mechanism and Synthesis of Automatic

Open-Economy Macroeconomics: Adjustment Policies

Prices and Output in an Open Economy: Aggregate Demand and Aggregate Supply

Flexible Versus Fixed Exchange Rates, the European Monetary System, and Macroeconomic Policy Coordination

The International Monetary System: Past,present,and Future

Filters

Suppose that domestic demand for a product is more inelastic than demand in the foreign country.A seller with market power would set a price in the foreign market that is than the domestic price;this is an example of ___.