Question 1

Assume that trade restrictions are adopted by a country.The World Trade Organization would generally prefer a tariff to a quota because a tariff is more easily seen and its trade effects are more easily determined.

Accepted Answer

A) True 
 B)False

Question 2

Assume Boeing Inc. (of the United States) and Airbus Industries (of Europe) rival for monopoly profits in the Canadian aircraft market. Suppose the two firms face identical cost and demand conditions, as seen in Figure 6.1.
Figure 6.1. Strategic Trade Policy: Boeing versus Airbus 
-Referring to Figure 6.1, assume that Boeing is the first to enter the Canadian market.Without a governmental subsidy, the firm maximizes profits by selling ______________ aircraft at a price of $______________, and realizes profits totaling $______________.

Accepted Answer

A)  4, $12 million, $16 million 
B)  4, $16 million, $12 million 
C)  8, $12 million, $16 million 
D)  8, $16 million, $12 million

Question 3

Under the World Trade Organization, when countries agree to open their markets for goods or services, they will "bind" their commitments.These bindings amount to ceilings on import tariff rates.

Accepted Answer

A) True 
 B)False

Question 4

The principle of normal trade relations (most-favored-nation) treatment was established with the passage of the

Accepted Answer

A)  Fordney-McCumber Act of 1922. 
B)  Smoot-Hawley Act of 1930. 
C)  Reciprocal Trade Agreements Act of 1934. 
D)  Trade Act of 1974.

Question 5

Which of the following is NOT true about economic sanctions?

Accepted Answer

A)  They protect domestic economy. 
B)  They increases nuclear proliferation. 
C)  They combat international terrorism. 
D)  They protect human rights.

Question 6

According to the escape clause, temporary trade restrictions may be imposed in industries where domestic producers are substantially being harmed by surging imports.

Accepted Answer

A) True 
 B)False

Question 7

In U.S.trade law, which measure permits the levying of restrictions on fairly traded imports that harm or threaten to harm American manufacturers?

Accepted Answer

A)  antidumping duty 
B)  countervailing duty 
C)  national security clause 
D)  escape clause

Question 8

As a way of helping American firms trade in the world market, U.S.trade law provides antitrust exemptions for horizontal combinations of American firms engaged solely in export trade.Such firms are permitted to form

Accepted Answer

A)  export trade associations. 
B)  domestic international sales corporations. 
C)  export-import banks. 
D)  commodity sales corporations.

Question 9

Assume Boeing Inc. (of the United States) and Airbus Industries (of Europe) rival for monopoly profits in the Canadian aircraft market. Suppose the two firms face identical cost and demand conditions, as seen in Figure 6.1.
Figure 6.1. Strategic Trade Policy: Boeing versus Airbus 
-Consider Figure 6.1.For Europe as a whole (Airbus and European taxpayers), the subsidy leads to a (an) ______________ in net revenues of $______________.

Accepted Answer

A)  increase, $12 million 
B)  increase, $16 million 
C)  decrease, $12 million 
D)  decrease, $16 million

Question 10

Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the United States.
Figure 6.3 Iraqi Computer Market and Economic Sanctions 
-Consider Figure 6.3.For the United States, the export quota results in a (an)

Accepted Answer

A)  improvement in its terms of trade with Iraq. 
B)  increase in its export revenue. 
C)  increase in domestic computer prices. 
D)  decrease in domestic consumer surplus.

Question 11

Under U.S.trade law, safeguards (the escape clause) allow for the setting of trade restrictions on unfairly traded products that harm American producers.

Accepted Answer

A) True 
 B)False

Question 12

Under U.S.commercial policy, the escape clause results in

Accepted Answer

A)  temporary quotas granted to firms injured by import competition. 
B)  tariffs that offset export subsidies granted to foreign producers. 
C)  tax advantages extended to minority-owned exporting firms. 
D)  duties that offset commercial dumping on the part of foreign firms.

Question 13

Which policy reflects the notion that if society enjoys gains that are due to increased efficiency stemming from trade liberalization, some sort of compensation should be provided to those who are temporarily hurt by import competition?

Accepted Answer

A)  countervailing duties 
B)  trade adjustment assistance 
C)  domestic subsidies 
D)  most-favored-nation standard

Question 14

If the U.S.government pursued a "knowledge-based growth policy," it would subsidize particular firms to help them compete in the world economy.

Accepted Answer

A) True 
 B)False

Question 15

Economic sanctions are most effective in causing the target nation to modify its behavior when the

Accepted Answer

A)  target nation had negligible economic relationships with the imposing nation prior to the sanctions. 
B)  people of the target nation have weak cultural ties to the people of the imposing nation. 
C)  sanctions are levied by a large number of nations. 
D)  target government is supported by the majority of its people.

Question 16

Major beneficiaries of export-credit subsidies, granted by the Export-Import Bank, have included U.S.producers of aircraft, telecommunications, and power-generating equipment.

Accepted Answer

A) True 
 B)False

Question 17

The Smoot-Hawley Tariff Act of 1930 cut U.S.import tariffs to record low levels.

Accepted Answer

A) True 
 B)False

Question 18

Assume that the United States imports chemicals from Germany.Trade theory predicts that if the German government grants an export subsidy to its chemical firms, the overall welfare of the United States will increase.

Accepted Answer

A) True 
 B)False

Question 19

The most recent round of multilateral trade negotiations is the

Accepted Answer

A)  Kennedy Round. 
B)  Tokyo Round. 
C)  Doha Round. 
D)  Geneva Round.

Question 20

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable to influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Figure 6.2. Effects of an Export Subsidy 
-Consider Figure 6.2.The South Korean subsidy ______________ Mexican manufacturers, since their producer surplus ______________ by $______________.

Accepted Answer

A)  helps, rises, $60 
B)  helps, rises, $100 
C)  hurts, falls, $60 
D)  hurts, falls, $100

Exam 6: Trade Regulations and Industrial Policies

Assume that trade restrictions are adopted by a country.The World Trade Organization would generally prefer a tariff to a quota because a tariff is more easily seen and its trade effects are more easily determined.

Under the World Trade Organization, when countries agree to open their markets for goods or services, they will "bind" their commitments.These bindings amount to ceilings on import tariff rates.

The principle of normal trade relations (most-favored-nation) treatment was established with the passage of the

Which of the following is NOT true about economic sanctions?

According to the escape clause, temporary trade restrictions may be imposed in industries where domestic producers are substantially being harmed by surging imports.

In U.S.trade law, which measure permits the levying of restrictions on fairly traded imports that harm or threaten to harm American manufacturers?

As a way of helping American firms trade in the world market, U.S.trade law provides antitrust exemptions for horizontal combinations of American firms engaged solely in export trade.Such firms are permitted to form

Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the United States. Figure 6.3 Iraqi Computer Market and Economic Sanctions -Consider Figure 6.3.For the United States, the export quota results in a (an)

Under U.S.trade law, safeguards (the escape clause) allow for the setting of trade restrictions on unfairly traded products that harm American producers.

Under U.S.commercial policy, the escape clause results in

Which policy reflects the notion that if society enjoys gains that are due to increased efficiency stemming from trade liberalization, some sort of compensation should be provided to those who are temporarily hurt by import competition?

If the U.S.government pursued a "knowledge-based growth policy," it would subsidize particular firms to help them compete in the world economy.

Economic sanctions are most effective in causing the target nation to modify its behavior when the

Major beneficiaries of export-credit subsidies, granted by the Export-Import Bank, have included U.S.producers of aircraft, telecommunications, and power-generating equipment.

The Smoot-Hawley Tariff Act of 1930 cut U.S.import tariffs to record low levels.

Assume that the United States imports chemicals from Germany.Trade theory predicts that if the German government grants an export subsidy to its chemical firms, the overall welfare of the United States will increase.

The most recent round of multilateral trade negotiations is the