Question 1

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

Accepted Answer

A) True 
 B)False  True

Question 2

A customs union is an organization of nations whose members:

Accepted Answer

A) have impenetrable trade barriers among themselves but impose no trade barriers on nonmembers. 
B) have no trade barriers among themselves but impose common trade barriers on nonmembers. 
C) have no trade barriers among themselves but each member country chooses its own trade policies toward nonmember countries. 
D) retaliate each other by raising reciprocal tariffs. 
E) neither have trade barriers among themselves nor impose any restriction on the nonmember countries. 
A) have impenetrable trade barriers among themselves but impose no trade barriers on nonmembers. 
B) have no trade barriers among themselves but impose common trade barriers on nonmembers. 
C) have no trade barriers among themselves but each member country chooses its own trade policies toward nonmember countries. 
D) retaliate each other by raising reciprocal tariffs. 
E) neither have trade barriers among themselves nor impose any restriction on the nonmember countries. 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 21.1   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 21.1.If the government imposes a tariff such that the price of the good in the domestic market is P2 when the international price is P1:

Accepted Answer

A) the import of the good by the domestic country increases by Q5 - Q4 units. 
B) the import of the good by the domestic country declines. 
C) the quantity of the good exported by the domestic country declines. 
D) the domestic country is in equilibrium. 
E) the quantity of the good exported by the domestic country increases. 
A) the import of the good by the domestic country increases by Q5 - Q4 units. 
B) the import of the good by the domestic country declines. 
C) the quantity of the good exported by the domestic country declines. 
D) the domestic country is in equilibrium. 
E) the quantity of the good exported by the domestic country increases. B

Question 4

One danger associated with calls for fairness based on reciprocity is that, calls for fair trade may be invoked in cases where, foreign restrictions on U.S.imports do not actually exist.

Accepted Answer

A) True 
 B)False

Question 5

The figure below shows the demand (D)and supply (S)curves of cocoa in the U.S. Figure 21.4   Refer to Figure 21.4.If cocoa sells for $6 per pound in the world market, determine the volume of U.S.cocoa imports.

Accepted Answer

A) 250 pounds 
B) 350 pounds 
C) 300 pounds 
D) 150 pounds 
E) 200 pounds 
A) 250 pounds 
B) 350 pounds 
C) 300 pounds 
D) 150 pounds 
E) 200 pounds

Question 6

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 7

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 8

The European Economic Community was created in 1957 by:

Accepted Answer

A) France, the United Kingdom, Italy, Belgium, the Netherlands, and Luxembourg. 
B) France, West Germany, Italy, Belgium, the Netherlands, and Luxemburg. 
C) France, West Germany, Italy, Belgium, the Netherlands, and the United Kingdom. 
D) France, West Germany, Italy, the United Kingdom, Belgium, the Netherlands, and Luxembourg. 
E) France, West Germany, Italy, Belgium, the United Kingdom, and Luxembourg. 
A) France, the United Kingdom, Italy, Belgium, the Netherlands, and Luxembourg. 
B) France, West Germany, Italy, Belgium, the Netherlands, and Luxemburg. 
C) France, West Germany, Italy, Belgium, the Netherlands, and the United Kingdom. 
D) France, West Germany, Italy, the United Kingdom, Belgium, the Netherlands, and Luxembourg. 
E) France, West Germany, Italy, Belgium, the United Kingdom, and Luxembourg.

Question 9

Suppose the production of helicopters is an industry characterized by increasing returns to scale and an Argentine firm, Cicare, is the only player in this market.The firm caters to the global market and earns a profit of $10 million.Flettner, a German firm has been considering entering this market for a while, but it is aware that its entry will cause each firm to lose about $4 million.However, a government subsidy allows Flettner to enter the helicopter market and Cicare incurs a loss of $4 million due to its entry.Eventually, Flettner evolves as the monopoly supplier of helicopters while Cicare is forced to shut down.This conclusion rests on which of the following assumptions?

Accepted Answer

A) The German government was experiencing a budget surplus. 
B) There was low demand for Cicare automobiles in the world market. 
C) The German government was able to forecast accurately the subsidy required to induce Flettner to produce helicopters. 
D) The quality of Flettner's helicopters were inferior compared to that of Cicare's. 
E) Cicare diversified into the production of automobiles. 
A) The German government was experiencing a budget surplus. 
B) There was low demand for Cicare automobiles in the world market. 
C) The German government was able to forecast accurately the subsidy required to induce Flettner to produce helicopters. 
D) The quality of Flettner's helicopters were inferior compared to that of Cicare's. 
E) Cicare diversified into the production of automobiles.

Question 10

The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 21.3   In Figure 21.3, 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 11

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 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, 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 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

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 15

Industries that are truly critical to the national defense should be protected from foreign competition if that is the only way to ensure their existence.

Accepted Answer

A) True 
 B)False

Question 16

According to economists, which of the following acts was partially responsible for the Great Depression of the 1930s?

Accepted Answer

A) The Robinson-Patman Act 
B) The National Recovery Act 
C) The Smoot-Hawley Tariff Act 
D) The Sarbanes-Oxley Act 
E) The Sherman Antitrust Act 
A) The Robinson-Patman Act 
B) The National Recovery Act 
C) The Smoot-Hawley Tariff Act 
D) The Sarbanes-Oxley Act 
E) The Sherman Antitrust Act

Question 17

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 18

The abbreviation GATT stands for:

Accepted Answer

A) General Analysis of Taxes and Transfers. 
B) General Agreement on Tariffs and Trade. 
C) Government Agency for Trade and Transportation. 
D) Government Agency for Treaties and Taxes. 
E) General Agreement on Terms of Trade. 
A) General Analysis of Taxes and Transfers. 
B) General Agreement on Tariffs and Trade. 
C) Government Agency for Trade and Transportation. 
D) Government Agency for Treaties and Taxes. 
E) General Agreement on Terms of Trade.

Question 19

Employers and workers in the protected industry know that the consequences of protection are principally:

Accepted Answer

A) lower prices for their output, lower profits for owners, and lower wages for workers. 
B) higher prices for their output, lower profits for owners, and lower wages for workers. 
C) higher prices for their output, lower profits for owners, and higher wages for workers. 
D) lower prices for their output, higher profits for owners, and higher wages for workers. 
E) higher prices for their output, higher profits for owners, and higher wages for workers. 
A) lower prices for their output, lower profits for owners, and lower wages for workers. 
B) higher prices for their output, lower profits for owners, and lower wages for workers. 
C) higher prices for their output, lower profits for owners, and higher wages for workers. 
D) lower prices for their output, higher profits for owners, and higher wages for workers. 
E) higher prices for their output, higher profits for owners, and higher wages for workers.

Question 20

In order to protect key industries, some countries impose taxes on their exports instead of imports, mainly because it is easier to collect taxes from the export industry.

Accepted Answer

A) True 
 B)False

Exam 40: International Trade Restrictions

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

A customs union is an organization of nations whose members:

One danger associated with calls for fairness based on reciprocity is that, calls for fair trade may be invoked in cases where, foreign restrictions on U.S.imports do not actually exist.

The figure below shows the demand (D)and supply (S)curves of cocoa in the U.S. Figure 21.4 Refer to Figure 21.4.If cocoa sells for $6 per pound in the world market, determine the volume of U.S.cocoa imports.

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:

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

The European Economic Community was created in 1957 by:

The figure below shows the demand (D)and supply (S)curves of corn syrups. Figure 21.3 In Figure 21.3, with an import quota of 30 gallons of corn syrup, what is the new equilibrium quantity demanded?

Which of the following is true of 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, what is the domestic production?

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

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.

Industries that are truly critical to the national defense should be protected from foreign competition if that is the only way to ensure their existence.

According to economists, which of the following acts was partially responsible for the Great Depression of the 1930s?

Trade diversion reduces worldwide efficiency, because:

The abbreviation GATT stands for:

Employers and workers in the protected industry know that the consequences of protection are principally:

In order to protect key industries, some countries impose taxes on their exports instead of imports, mainly because it is easier to collect taxes from the export industry.

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

National Income Accounting

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

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

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

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

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

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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