Question 1

Figure 5.2 illustrates the revenue and cost conditions of ABC Inc. which sells calculators in Canada and France.
Figure 5.2. International Dumping
 
-Consider Figure 5.2. With international dumping, ABC Inc. sells ____ calculators to Canadian buyers at a price of $____ and ____ calculators to French buyers at a price of $____.

Accepted Answer

A)  15, $4, 12, $7 
B)  15, $7, 12, $4 
C)  9, $5, 15, $6 
D)  9, $6, 15, $5

Question 2

A firm would increase profits from dumping if it charges a lower price at home, where demand is inelastic, and a higher price abroad where demand is elastic.

Accepted Answer

A) True 
 B)False

Question 3

The margin of dumping equals the amount by which the foreign price is greater than the domestic price, or the amount by which the foreign price exceeds the cost of production.

Accepted Answer

A) True 
 B)False

Question 4

An effective Buy American law results in deadweight welfare losses for the United States in the form of the protective effect and consumption effect.

Accepted Answer

A) True 
 B)False

Question 5

Predatory dumping would occur if Toyota Inc. of Japan sells autos to U.S. consumers at lower prices than to Japanese consumers in order to put Chrysler Inc. out of business.

Accepted Answer

A) True 
 B)False

Question 6

A subsidy granted to an import-competing producer shifts its supply schedule outward to the right.

Accepted Answer

A) True 
 B)False

Question 7

The imposition of a domestic content requirement by the United States would cause consumer surplus for Americans to:

Accepted Answer

A)  Rise 
B)  Fall 
C)  Remain unchanged 
D)  None of the above

Question 8

Figure 5.2 illustrates the revenue and cost conditions of ABC Inc. which sells calculators in Canada and France.
Figure 5.2. International Dumping
 
-Consider Figure 5.2. In the absence of international dumping, ABC Inc. maximizes profits by selling ____ calculators at a price of $____; the firm realizes profits totaling $____.

Accepted Answer

A)  27, $5, $54 
B)  27, $5, $36 
C)  24, $4, $46 
D)  24, $4, $28

Question 9

The United Auto Workers union attempted to win the approval of legislation that would moderate the practice of foreign sourcing on the part of American auto manufacturers. Which of the following best represents this legislation?

Accepted Answer

A)  Voluntary export quotas 
B)  Trigger price mechanism 
C)  Tariff quotas 
D)  Local content laws

Question 10

Figure 5.3 illustrates the apple market for Sweden, assumed to be a "small" country that is unable to affect the world price. SS1U1B1SwedenS1U1B0 is the domestic supply and DS1U1B1SwedenS1U1B0 is the domestic demand. SS1U1B1Sweden+QuotaS1U1B0 is Sweden's supply schedule with an import quota.
Figure 5.3. Sweden's Apple Market
 
-Consider Figure 5.3. At the free-trade price of $0.60 per pound, Sweden's consumer surplus totals $____ and producer surplus totals $____.

Accepted Answer

A)  $10.80, $2.40 
B)  $14.60, $3.90 
C)  $24.20, $1.80 
D)  $32.40, $2.30

Question 11

Figure 5.3 illustrates the apple market for Sweden, assumed to be a "small" country that is unable to affect the world price. SS1U1B1SwedenS1U1B0 is the domestic supply and DS1U1B1SwedenS1U1B0 is the domestic demand. SS1U1B1Sweden+QuotaS1U1B0 is Sweden's supply schedule with an import quota.
Figure 5.3. Sweden's Apple Market
 
-Consider Figure 5.3. As a result of the quota, Sweden's consumer surplus:

Accepted Answer

A)  Increases by $6 
B)  Increases by $8 
C)  Decreases by $6 
D)  Decreases by $8

Question 12

A firm suffering idle plant capacity would minimize losses by selling its product abroad at a lower price than at home, provided that the foreign price more than covers average variable cost.

Accepted Answer

A) True 
 B)False

Question 13

Although the Tokyo Round of international trade negotiations reduced the Buy-American restrictions of the U.S. government, many state governments have maintained restrictive Buy-American policies.

Accepted Answer

A) True 
 B)False

Question 14

From the perspective of the American public as a whole, export subsidies levied by overseas governments on goods sold to the United States:

Accepted Answer

A)  Help more than they hurt 
B)  Hurt more than they help 
C)  Are equivalent to an import quota 
D)  Are equivalent to an export quota

Question 15

To the extent that domestic importing companies organize as a monopoly buyer, and foreign exporting companies behave as competitive sellers, the importing companies capture the revenue effect of a quota.

Accepted Answer

A) True 
 B)False

Question 16

Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic subsidies. This is because, $\underline {  \text { unlike } }$domestic subsidies, import tariffs and quotas:

Accepted Answer

A)  Permit less efficient home production 
B)  Distort choices for domestic consumers 
C)  Result in higher tax rates for domestic residents 
D)  Redistribute revenue from domestic producers to consumers

Question 17

For most nations, the ratio of imports to total purchases in the public sector is much higher than in the private sector.

Accepted Answer

A) True 
 B)False

Question 18

Concerning the restrictive impact of an import quota, assume there occurs an $\underline { \text { increase }  }$ in the domestic demand for the import product. As long as the quota falls short of what would be imported under free market conditions, the economy's adjustment to the $\underline { \text { increase }  }$ in demand would take the form of:

Accepted Answer

A)  A decrease in domestic production of the import good 
B)  An increase in the amount of the good being imported 
C)  An increase in the domestic price of the import good 
D)  A decrease in domestic consumption of the import good

Question 19

Figure 5.5 illustrates the television market for Mexico, assumed to be a small country that is unable to affect the world price. SS1U1B1MexicoS1U1B0 is the domestic supply schedule and DS1U1B1MexicoS1U1B0 is the domestic demand schedule. Suppose that Japan can supply televisions to Mexico at a price of $100 per set.
Figure 5.5. Mexico's Television Market
 
-Consider Figure 5.5. The Japanese export quota's revenue effect totals $1200.

Accepted Answer

A) True 
 B)False

Question 20

Import quotas tend to lead to all of the following except:

Accepted Answer

A)  Domestic producers of the imported good being harmed 
B)  Domestic consumers of the imported good being harmed 
C)  Prices increasing in the importing country 
D)  Prices falling in the exporting country

Exam 5: Nontariff Trade Barriers

A firm would increase profits from dumping if it charges a lower price at home, where demand is inelastic, and a higher price abroad where demand is elastic.

The margin of dumping equals the amount by which the foreign price is greater than the domestic price, or the amount by which the foreign price exceeds the cost of production.

An effective Buy American law results in deadweight welfare losses for the United States in the form of the protective effect and consumption effect.

Predatory dumping would occur if Toyota Inc. of Japan sells autos to U.S. consumers at lower prices than to Japanese consumers in order to put Chrysler Inc. out of business.

A subsidy granted to an import-competing producer shifts its supply schedule outward to the right.

The imposition of a domestic content requirement by the United States would cause consumer surplus for Americans to:

The United Auto Workers union attempted to win the approval of legislation that would moderate the practice of foreign sourcing on the part of American auto manufacturers. Which of the following best represents this legislation?

A firm suffering idle plant capacity would minimize losses by selling its product abroad at a lower price than at home, provided that the foreign price more than covers average variable cost.

Although the Tokyo Round of international trade negotiations reduced the Buy-American restrictions of the U.S. government, many state governments have maintained restrictive Buy-American policies.

From the perspective of the American public as a whole, export subsidies levied by overseas governments on goods sold to the United States:

To the extent that domestic importing companies organize as a monopoly buyer, and foreign exporting companies behave as competitive sellers, the importing companies capture the revenue effect of a quota.

Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic subsidies. This is because, $\underline { \text { unlike } }$ domestic subsidies, import tariffs and quotas:

For most nations, the ratio of imports to total purchases in the public sector is much higher than in the private sector.

Import quotas tend to lead to all of the following except:

Exam 5: Nontariff Trade Barriers

A firm would increase profits from dumping if it charges a lower price at home, where demand is inelastic, and a higher price abroad where demand is elastic.

The margin of dumping equals the amount by which the foreign price is greater than the domestic price, or the amount by which the foreign price exceeds the cost of production.

An effective Buy American law results in deadweight welfare losses for the United States in the form of the protective effect and consumption effect.

Predatory dumping would occur if Toyota Inc. of Japan sells autos to U.S. consumers at lower prices than to Japanese consumers in order to put Chrysler Inc. out of business.

A subsidy granted to an import-competing producer shifts its supply schedule outward to the right.

The imposition of a domestic content requirement by the United States would cause consumer surplus for Americans to:

The United Auto Workers union attempted to win the approval of legislation that would moderate the practice of foreign sourcing on the part of American auto manufacturers. Which of the following best represents this legislation?

A firm suffering idle plant capacity would minimize losses by selling its product abroad at a lower price than at home, provided that the foreign price more than covers average variable cost.

Although the Tokyo Round of international trade negotiations reduced the Buy-American restrictions of the U.S. government, many state governments have maintained restrictive Buy-American policies.

From the perspective of the American public as a whole, export subsidies levied by overseas governments on goods sold to the United States:

To the extent that domestic importing companies organize as a monopoly buyer, and foreign exporting companies behave as competitive sellers, the importing companies capture the revenue effect of a quota.

Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic subsidies. This is because, unlike ‾\underline { \text { unlike } } unlike ​ domestic subsidies, import tariffs and quotas:

For most nations, the ratio of imports to total purchases in the public sector is much higher than in the private sector.

Import quotas tend to lead to all of the following except:

Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic subsidies. This is because, $\underline { \text { unlike } }$ domestic subsidies, import tariffs and quotas: