Question 1

Under the government procurement policy of the World Trade Organization,federal-state-local governments are prevented from discriminating in favor of the products of domestic suppliers on contracts valued at $1 million and more.

Accepted Answer

A) True 
 B)False

Question 2

What is the basis for trade adjustment assistance?

Accepted Answer

The answer of What is the basis for trade adjustment...

Question 3

Consider Figure 6.1.Suppose the European government provides Airbus a subsidy of $4 million on each aircraft manufactured,and that the subsidy convinces Boeing to exit the Canadian market.As the monopoly seller,Airbus maximizes profit by selling ____ aircraft at a price of $____,and realizes profits totaling $____.

Accepted Answer

A)  6,$10 million,$36 million 
B)  6,$12 million,$24 million 
C)  12,$10 million,$36 million 
D)  12,$12 million,$24 million

Question 4

The Uruguay Round of multilateral trade negotiations succeeded in establishing the World Trade Organization.

Accepted Answer

A) True 
 B)False

Question 5

Under the provisions of the World Trade Organization,Canada would have the right to impose countervailing duties on imports of South Korean steel when the South Korean government provides export subsidies to its steelmakers.

Accepted Answer

A) True 
 B)False

Question 6

The World Trade Organization brings into the multilateral trading system manufactured goods and agricultural products,but not trade in services,intellectual property protection,and investment.

Accepted Answer

A) True 
 B)False

Question 7

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 8

Countervailing duties are intended to neutralize any unfair advantage that foreign exporters might gain over domestic producers because of foreign:

Accepted Answer

A)  Tariffs 
B)  Subsidies 
C)  Quotas 
D)  Buy-national policies

Question 9

Figure 6.5 Japanese Market for Jetliners 
-Consider the Japanese market for jetliners as depicted in Figure 6.5.Suppose lone producer of jetliners in the world is Boeing and Boeing faces a constant marginal cost of $20 million per jetliner but now a European manufacturer,Airbus,begins production.Airbus faces the same marginal cost as Boeing but the European government provides Airbus with a subsidy of $8 million per jetliner produced.As a result of the competition,Boeing leaves the Japanese market leaving Airbus as a monopoly.How many jetlines will airbus produce and what price will they sell them for?

Accepted Answer

A)  23,$30 million 
B)  32,$26 million 
C)  23,$26 million 
D)  32,$30 million

Question 10

Referring to Figure 6.1,the Airbus subsidy leads to a (an)increase/decrease in Canadian consumer surplus of $____,as compared to the consumer surplus that existed in the absence of a subsidy.

Accepted Answer

A)  Increase of $8 million 
B)  Increase of $10 million 
C)  Decrease of $8 million 
D)  Decrease of $10 million

Question 11

Throughout the post-World War II era,the importance of tariffs as a trade barrier has:

Accepted Answer

A)  Increased 
B)  Decreased 
C)  Remained the same 
D)  None of the above

Question 12

Figure 6.5 Japanese Market for Jetliners 
-Consider the Japanese market for jetliners as depicted in Figure 6.5.Suppose lone producer of jetliners in the world is Boeing and Boeing faces a constant marginal cost of $20 million per jetliner but now a European manufacturer,Airbus,begins production.Airbus faces the same marginal cost as Boeing but the European government provides Airbus with a subsidy of $8 million per jetliner produced.As a result of the competition,Boeing leaves the Japanese market leaving Airbus as a monopoly.How much profit will Airbus earn?

Accepted Answer

A)  $230 million 
B)  $350 million 
C)  $416 million 
D)  $450 million

Question 13

The high point of U.S.protectionism occurred with the passage of the Kennedy Act in the 1960s.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Trade theory suggests that the United States would gain from a subsidy provided by Japan to its calculator producers if the gains to American consumers of calculators more than offset the losses to American calculator producers.This occurs as long as the United States:

Accepted Answer

A)  Is a net importer of calculators 
B)  Is a net exporter of calculators 
C)  Has an absolute advantage in calculator production 
D)  Has a comparative advantage in calculator production

Question 16

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 17

In 1990 the United States and its allies imposed trade embargoes on exports/imports to/from Iraq in response to its invasion of Kuwait.The embargoes would induce smaller losses in Iraq's consumer surplus the:

Accepted Answer

A)  Lesser its initial dependence on foreign products 
B)  Less elastic Iraq's demand schedule 
C)  Lesser the available output from alternative suppliers 
D)  More inelastic Iraq's supply schedule

Question 18

The classical theory of comparative advantage assumes that firms operate in imperfectly competitive markets,while the theory of strategic trade policy assumes that firms operate in perfectly competitive markets.

Accepted Answer

A) True 
 B)False

Question 19

Suppose the United States imposes trade sanctions (export quotas)on grain sold to the Russians.Assuming other nations do not increase grain exports to the Russians,all of the following would occur except:

Accepted Answer

A)  Grain prices would rise in Russia 
B)  Consumer surplus would decrease for the Russians 
C)  Grain prices would rise in the United States 
D)  Export revenues would decrease for U.S.producers

Question 20

The most important determinants of sanctions include

Accepted Answer

A)  Cultural factors including nationalistic attitudes 
B)  Strength of political opposition in the targeting nation 
C)  The number of nations imposing sanctions 
D)  All of the above

Exam 6: Trade Regulations and Industrial Policies

Under the government procurement policy of the World Trade Organization,federal-state-local governments are prevented from discriminating in favor of the products of domestic suppliers on contracts valued at $1 million and more.

What is the basis for trade adjustment assistance?

The Uruguay Round of multilateral trade negotiations succeeded in establishing the World Trade Organization.

Under the provisions of the World Trade Organization,Canada would have the right to impose countervailing duties on imports of South Korean steel when the South Korean government provides export subsidies to its steelmakers.

The World Trade Organization brings into the multilateral trading system manufactured goods and agricultural products,but not trade in services,intellectual property protection,and investment.

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.

Countervailing duties are intended to neutralize any unfair advantage that foreign exporters might gain over domestic producers because of foreign:

Referring to Figure 6.1,the Airbus subsidy leads to a (an) increase/decrease in Canadian consumer surplus of $____,as compared to the consumer surplus that existed in the absence of a subsidy.

Throughout the post-World War II era,the importance of tariffs as a trade barrier has:

The high point of U.S.protectionism occurred with the passage of the Kennedy Act in the 1960s.

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.

Trade theory suggests that the United States would gain from a subsidy provided by Japan to its calculator producers if the gains to American consumers of calculators more than offset the losses to American calculator producers.This occurs as long as the United States:

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?

In 1990 the United States and its allies imposed trade embargoes on exports/imports to/from Iraq in response to its invasion of Kuwait.The embargoes would induce smaller losses in Iraq's consumer surplus the:

The classical theory of comparative advantage assumes that firms operate in imperfectly competitive markets,while the theory of strategic trade policy assumes that firms operate in perfectly competitive markets.

Suppose the United States imposes trade sanctions (export quotas) on grain sold to the Russians.Assuming other nations do not increase grain exports to the Russians,all of the following would occur except:

The most important determinants of sanctions include