Question 1

Under U.S. commercial policy, which clause permits the modification of a trade liberalization agreement on a temporary basis if serious injury occurs to domestic producers as a result of the agreement?

Accepted Answer

A)  Adjustment assistance clause 
B)  Escape clause 
C)  Most-favored-nation clause 
D)  Reciprocal-trade clause

Question 2

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 3

The average tariff rate today on dutiable imports in the United States is approximately:

Accepted Answer

A)  5 percent of the value of imports 
B)  15 percent of the value of imports 
C)  20 percent of the value of imports 
D)  25 percent of the value of imports

Question 4

It is widely recognized that the economic sanctions levied against Iraq in 1990 were a major factor causing Iraq to withdraw its military forces from Kuwait.

Accepted Answer

A) True 
 B)False

Question 5

According to the strategic-trade-policy hypothesis, government can alter the terms of competition to favor domestic companies, thus increasing their profits at the expense of their rivals.

Accepted Answer

A) True 
 B)False

Question 6

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable 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. With free trade, Mexican consumers purchase ____ calculators, Mexican firms produce ____ calculators, and ____ calculators are imported.

Accepted Answer

A)  10, 4, 6 
B)  10, 6, 4 
C)  10, 8, 2 
D)  10, 2, 8

Question 7

Economic theory suggests that if France is a net importer of automobiles, whose production is subsidized by the Korean government, the overall welfare of France decreases because of the Korean subsidy.

Accepted Answer

A) True 
 B)False

Question 8

Export embargoes induce greater losses in consumer surplus for the target country:

Accepted Answer

A)  The lesser its initial dependence on foreign produced goods 
B)  The more elastic the target country's demand schedule 
C)  The greater the available output from alternative suppliers 
D)  The more inelastic the target country's supply schedule

Question 9

The strategic-trade-policy hypothesis assumes that domestic firms operate under increasing cost conditions as well as in perfectly competitive markets.

Accepted Answer

A) True 
 B)False

Question 10

The fast-track provision of U.S. trade law has the affect of speeding up the timetable during which the President negotiates trade agreements with foreign governments.

Accepted Answer

A) True 
 B)False

Question 11

Industrial policies

Accepted Answer

A)  Require formal explicit efforts by governments 
B)  May be implicit 
C)  Have never been used by the U.S. government 
D)  Both a and b

Question 12

Concerning industrial policy, the United States has nationalized its major industries in an attempt to promote global champions.

Accepted Answer

A) True 
 B)False

Question 13

Among the codes of conduct addressed at the Tokyo Round of multilateral trade negotiations were customs valuation, product standards, subsidies and countervailing duties, government procurement policies, and import licensing procedures.

Accepted Answer

A) True 
 B)False

Question 14

According to U.S. trade law, the escape clause provides relief to U.S. firms due to unfair foreign competition.

Accepted Answer

A) True 
 B)False

Question 15

According to the fast-track provision of U.S. trade law, once the President has completed trade negotiations, their outcome is subject to a vote (without amendment) in Congress within 90 legislative days of submission.

Accepted Answer

A) True 
 B)False

Question 16

Assume Boeing Inc. (of the United States) and Airbus Industrie (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. At the monopoly price as established by Boeing, Canadian consumers realize $____ of consumer surplus from the availability of aircraft.

Accepted Answer

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

Question 17

During the post World War II era, the United States has adopted explicit industrial policies similar to those of France and Japan.

Accepted Answer

A) True 
 B)False

Question 18

According to the strategic- trade- policy hypothesis, governmental subsidies granted to domestic producers can help them in capturing economic profits from foreign competitors.

Accepted Answer

A) True 
 B)False

Question 19

The implicit industrial policies of the U.S. government have included:

Accepted Answer

A)  Formulating industry-specific economic policies designed to promote national champions 
B)  Nationalizing basic industries such as steel and autos 
C)  Encouraging cartelization of aircraft and aluminum manufacturers 
D)  Improving the setting for industry such as communications and infrastructure

Question 20

The United States

Accepted Answer

A)  Has been a heavy user of antidumping laws to protect domestic producers 
B)  Has rarely used antidumping laws to protect domestic producers 
C)  Has targeted antidumping action against China, Japan, Canada, Italy, and Germany 
D)  Both a and c

Exam 6: Trade Regulations and Industrial Policies

Under U.S. commercial policy, which clause permits the modification of a trade liberalization agreement on a temporary basis if serious injury occurs to domestic producers as a result of the agreement?

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

The average tariff rate today on dutiable imports in the United States is approximately:

It is widely recognized that the economic sanctions levied against Iraq in 1990 were a major factor causing Iraq to withdraw its military forces from Kuwait.

According to the strategic-trade-policy hypothesis, government can alter the terms of competition to favor domestic companies, thus increasing their profits at the expense of their rivals.

Economic theory suggests that if France is a net importer of automobiles, whose production is subsidized by the Korean government, the overall welfare of France decreases because of the Korean subsidy.

Export embargoes induce greater losses in consumer surplus for the target country:

The strategic-trade-policy hypothesis assumes that domestic firms operate under increasing cost conditions as well as in perfectly competitive markets.

The fast-track provision of U.S. trade law has the affect of speeding up the timetable during which the President negotiates trade agreements with foreign governments.

Industrial policies

Concerning industrial policy, the United States has nationalized its major industries in an attempt to promote global champions.

Among the codes of conduct addressed at the Tokyo Round of multilateral trade negotiations were customs valuation, product standards, subsidies and countervailing duties, government procurement policies, and import licensing procedures.

According to U.S. trade law, the escape clause provides relief to U.S. firms due to unfair foreign competition.

According to the fast-track provision of U.S. trade law, once the President has completed trade negotiations, their outcome is subject to a vote (without amendment) in Congress within 90 legislative days of submission.

During the post World War II era, the United States has adopted explicit industrial policies similar to those of France and Japan.

According to the strategic- trade- policy hypothesis, governmental subsidies granted to domestic producers can help them in capturing economic profits from foreign competitors.

The implicit industrial policies of the U.S. government have included:

The United States