Question 1

When restrictions alter the pattern of international trade, the _____ benefit and the _____ suffer(s).

Accepted Answer

A) domestic consumers;domestic producers 
B) domestic consumers;government 
C) domestic producers;domestic consumers 
D) foreign producers;domestic producers 
E) foreign producers;domestic consumers 
A) domestic consumers;domestic producers 
B) domestic consumers;government 
C) domestic producers;domestic consumers 
D) foreign producers;domestic producers 
E) foreign producers;domestic consumers

Question 2

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 3

Generally speaking, protection from foreign competition benefits:

Accepted Answer

A) both domestic producers and foreign producers. 
B) both domestic consumers and foreign consumers 
C) domestic consumers and foreign consumers. 
D) neither domestic producers nor foreign producers. 
E) domestic producers at the expense of domestic consumers. 
A) both domestic producers and foreign producers. 
B) both domestic consumers and foreign consumers 
C) domestic consumers and foreign consumers. 
D) neither domestic producers nor foreign producers. 
E) domestic producers at the expense of domestic consumers.

Question 4

Which of the following probably best explains why trade restrictions are imposed even if the costs to consumers are greater than the benefits to protected industries?

Accepted Answer

A) Indifference on the government's part to the interests of domestic workers 
B) A desire to make other countries suffer 
C) Successful lobbying by consumers 
D) Successful lobbying by employers and workers 
E) The government's preference to safeguard the interest of the producers at the expense of the consumers 
A) Indifference on the government's part to the interests of domestic workers 
B) A desire to make other countries suffer 
C) Successful lobbying by consumers 
D) Successful lobbying by employers and workers 
E) The government's preference to safeguard the interest of the producers at the expense of the consumers

Question 5

The United States has no comparative advantage in shipping, so a domestic shipping industry has no reason to exist.

Accepted Answer

A) True 
 B)False

Question 6

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 7

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 of wheat is $35 and a $15 tariff is imposed:

Accepted Answer

A) domestic consumption will decrease from 400 to 350 bushels of wheat. 
B) the government will collect $200 in revenue from the tariff. 
C) domestic consumption will increase from 150 to 200 bushels of wheat. 
D) imports will be eliminated. 
E) domestic consumption will increase from 150 to 300 bushels of wheat. 
A) domestic consumption will decrease from 400 to 350 bushels of wheat. 
B) the government will collect $200 in revenue from the tariff. 
C) domestic consumption will increase from 150 to 200 bushels of wheat. 
D) imports will be eliminated. 
E) domestic consumption will increase from 150 to 300 bushels of wheat.

Question 8

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 9

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 10

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 11

Nascent industries require adequate protection from foreign competition because:

Accepted Answer

A) they experience economies of scale. 
B) they experience diseconomies of scale. 
C) the quality of the products of such industries are comparatively inferior than the products of their foreign competitors. 
D) they do not have adequate resources to undertake research and development. 
E) their initial costs of production are considerably higher than the foreign firms. 
A) they experience economies of scale. 
B) they experience diseconomies of scale. 
C) the quality of the products of such industries are comparatively inferior than the products of their foreign competitors. 
D) they do not have adequate resources to undertake research and development. 
E) their initial costs of production are considerably higher than the foreign firms.

Question 12

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.
According to Figure 21.1, 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 13

Suppose, in the United States, each farmer is given a federal agricultural subsidy worth $30, 000.What will be the effect of such subsidy?

Accepted Answer

A) They discourage domestic agricultural production. 
B) They allow U.S.farmers to sell their products for lower prices in foreign markets. 
C) They give foreign producers an unfair cost advantage. 
D) They increase the amount of agricultural imports into the United States. 
E) The price of the primary products decline in the U.S.market. 
A) They discourage domestic agricultural production. 
B) They allow U.S.farmers to sell their products for lower prices in foreign markets. 
C) They give foreign producers an unfair cost advantage. 
D) They increase the amount of agricultural imports into the United States. 
E) The price of the primary products decline in the U.S.market.

Question 14

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.
According to Figure 21.1, if the international price of the good is P1, which of the following statements is true?

Accepted Answer

A) The domestic market is in equilibrium. 
B) There is an excess supply in the domestic market by the amount Q4 - Q2. 
C) The country will export Q3 - Q1 units of the good. 
D) There is an excess demand of Q4 - Q2 units in the domestic market. 
E) The country needs to import Q5 - Q1 units of the good to satisfy domestic demand. 
A) The domestic market is in equilibrium. 
B) There is an excess supply in the domestic market by the amount Q4 - Q2. 
C) The country will export Q3 - Q1 units of the good. 
D) There is an excess demand of Q4 - Q2 units in the domestic market. 
E) The country needs to import Q5 - Q1 units of the good to satisfy domestic demand.

Question 15

The total tariff revenue to the government of an imported good is found by adding the tariff to the quantity of the good imported.

Accepted Answer

A) True 
 B)False

Question 16

Every country imposes tariffs on at least some imports.

Accepted Answer

A) True 
 B)False

Question 17

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.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 18

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 19

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 20

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

Exam 40: International Trade Restrictions

When restrictions alter the pattern of international trade, the _____ benefit and the _____ suffer(s).

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

Generally speaking, protection from foreign competition benefits:

Which of the following probably best explains why trade restrictions are imposed even if the costs to consumers are greater than the benefits to protected industries?

The United States has no comparative advantage in shipping, so a domestic shipping industry has no reason to exist.

One of the primary objectives of the WTO is:

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 of wheat is $35 and a $15 tariff is imposed:

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

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?

Protection provided to the infant industries is rarely withdrawn because:

Nascent industries require adequate protection from foreign competition because:

Suppose, in the United States, each farmer is given a federal agricultural subsidy worth $30, 000.What will be the effect of such subsidy?

The total tariff revenue to the government of an imported good is found by adding the tariff to the quantity of the good imported.

Every country imposes tariffs on at least some imports.

Which of the following would result from a tariff?

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

Which of the following isa tool of commercial policy?

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

Filters

When restrictions alter the pattern of international trade, the _ benefit and the _ suffer(s).