Question 1

Protection provided to the infant industries is rarely withdrawn because: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 2

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 3

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 4

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 5

The effect of an import quota on the domestic market is to shift the:

Accepted Answer

A) demand curve to the right by the amount of the quota. 
B) demand curve to the left by the amount of the quota. 
C) supply curve to the right by the amount of the quota. 
D) supply curve to the left by the amount of the quota. 
E) consumers' marginal utility curves if they prefer foreign goods to domestic goods. 
A) demand curve to the right by the amount of the quota. 
B) demand curve to the left by the amount of the quota. 
C) supply curve to the right by the amount of the quota. 
D) supply curve to the left by the amount of the quota. 
E) consumers' marginal utility curves if they prefer foreign goods to domestic goods.

Question 6

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 7

Which of the following isa tool of commercial policy?

Accepted Answer

A) Corporate income tax 
B) Payroll tax 
C) Excise duty 
D) Tariff 
E) Octroi duty 
A) Corporate income tax 
B) Payroll tax 
C) Excise duty 
D) Tariff 
E) Octroi duty

Question 8

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 9

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 10

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2  
- According to Figure 21.2,if the world price of wheat is $25 and a tariff of $10 is imposed by the domestic government,the total tariff revenue collected by the government is:

Accepted Answer

A) $4,000. 
B) $0. 
C) $5,000. 
D) $2,000. 
E) $1,000. 
A) $4,000. 
B) $0. 
C) $5,000. 
D) $2,000. 
E) $1,000.

Question 11

Which of the following would result from a tariff?

Accepted Answer

A) An increase in government budget deficit 
B) An increase in domestic production 
C) A greater volume of international trade 
D) Increased domestic consumption 
E) Decrease in prices of the imported goods 
A) An increase in government budget deficit 
B) An increase in domestic production 
C) A greater volume of international trade 
D) Increased domestic consumption 
E) Decrease in prices of the imported goods

Question 12

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2  
- In Figure 21.2,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 13

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 21.4   
-According to Figure 21.4,the no-trade equilibrium price and quantity of cocoa in the U.S.market are:

Accepted Answer

A) $8 and 150 pounds. 
B) $10 and 250 pounds. 
C) $4 and 200 pounds. 
D) $10 and 200 pounds. 
E) $6 and 300 pounds. 
A) $8 and 150 pounds. 
B) $10 and 250 pounds. 
C) $4 and 200 pounds. 
D) $10 and 200 pounds. 
E) $6 and 300 pounds.

Question 14

Subsidies are payments made by the government of a country to:

Accepted Answer

A) foreign firms to encourage imports. 
B) foreign firms to encourage domestic exports. 
C) domestic firms to encourage exports. 
D) domestic firms to encourage imports. 
E) domestic firms to ensure domestic consumption of their goods. 
A) foreign firms to encourage imports. 
B) foreign firms to encourage domestic exports. 
C) domestic firms to encourage exports. 
D) domestic firms to encourage imports. 
E) domestic firms to ensure domestic consumption of their goods.

Question 15

According to strategic trade policy,international trade largely involves firms which:

Accepted Answer

A) enjoy monopolistic power in the domestic market. 
B) has a high initial cost of production. 
C) pursues economies of scale. 
D) experiences diseconomies of scale. 
E) generates adequate employment in the domestic economy. 
A) enjoy monopolistic power in the domestic market. 
B) has a high initial cost of production. 
C) pursues economies of scale. 
D) experiences diseconomies of scale. 
E) generates adequate employment in the domestic economy.

Question 16

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 17

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 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

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 21.4  
- From Figure 21.4,determine the total volume of U.S.cocoa imports if its government imposes tariff at the rate of $2 per pound on cocoa.

Accepted Answer

A) 200 pounds 
B) 250 pounds 
C) 100 pounds 
D) 300 pounds 
E) 350 pounds 
A) 200 pounds 
B) 250 pounds 
C) 100 pounds 
D) 300 pounds 
E) 350 pounds

Question 20

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.

Exam 21: International Trade Restrictions

Protection provided to the infant industries is rarely withdrawn because:

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

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

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 effect of an import quota on the domestic market is to shift the:

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

Which of the following isa tool of commercial policy?

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.

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

Which of the following would result from a tariff?

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 - In Figure 21.2,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?

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 21.4 -According to Figure 21.4,the no-trade equilibrium price and quantity of cocoa in the U.S.market are:

Subsidies are payments made by the government of a country to:

According to strategic trade policy,international trade largely involves firms which:

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.

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?

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

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 21.4 - From Figure 21.4,determine the total volume of U.S.cocoa imports if its government imposes tariff at the rate of $2 per pound on cocoa.

One of the primary objectives of the WTO is:

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

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopoly

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

Filters