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Q:
Which of the following refers to a quota on trade imposed by the exporting country, typically at the request of the importing country's government?
A.Tariff rate quota
B.Quota rent
C.Voluntary export restraint (VER)
D.Quota share
E.Export embargo
Q:
The country of Argonia imposes an ad valorem tariff of 10 percent on 1 million tons of rice imports, after which an out-of-quota tariff of 80 percent is applied. Which of the following trade policy instruments is Argonia using?
A.Subsidy
B.Tariff rate quota
C.Voluntary export restraint
D.Tariff ceiling
E.Local content requirement
Q:
Which of the following is the term for when a lower tariff rate is applied to imports within the quota than those over the quota?
A.Tariff rate quota
B.Voluntary import restraint
C.Import duty
D.Quota rent
E.Import quota
Q:
Which of the following statements is true about import quotas?
A.Import quotas benefit domestic producers by limiting import competition.
B.Import quotas always lower the prices for domestically produced goods.
C.Higher tariff rates are usually applied to imports within the quota than those over the quota.
D.Import quotas benefit consumers by decreasing the domestic price of an imported good.
E.Import quotas help foreign producers gain a competitive advantage.
Q:
Which of the following groups would benefit the most from receiving subsidies?
A.Governments
B.International organizations such as the WTO
C.Domestic producers
D.Importers
E.Foreign competitors
Q:
By lowering production costs, subsidies help domestic producers to:
A.gain export markets.
B.meet import quotas.
C.meet voluntary export restraints.
D.meet the local content requirement.
E.compete in the domestic market against local producers.
Q:
Which of the following is most likely to be an objective of export tariffs?
A.Abiding by the rules enforced by the WTO
B.Curbing the competition offered by foreign firms to domestic firms
C.Reducing exports from a sector, often for political reasons
D.Maintaining a positive trade deficit
E.Increasing the flow of capital in the international market
Q:
Which of the following identifies an attribute of tariffs?
A.Tariffs reduce the price of foreign goods for domestic consumers.
B.Tariffs reduce the overall efficiency of the world economy.
C.Tariffs increase exports from a sector.
D.Tariffs increase foreign competition for domestic producers.
E.Tariffs increase efficient utilization of resources.
Q:
A charge of 15-20% was levied by the government of Cadmia on the value of automobile accessories imported from a neighboring country. This increased the price of those imported car accessories for the consumers in Cadmia. Which of the following instruments of trade policy is being used by the government of Cadmia?
A.Local content tariff
B.Ad valorem tariff
C.Subsidies
D.Import quotas
E.Antidumping duties
Q:
Which of the following groups benefits the most from the imposition of tariffs?
A.Domestic producers
B.Consumers
C.Exporters and importers
D.Foreign producers
E.International bodies such as WTO
Q:
Which of the following is a trade policy instrument that the GATT and WTO have been most successful in limiting?
A.Local content requirements
B.Tariffs
C.Subsidies
D.Voluntary export restraints
E.Import quotas
Q:
Government intervention can be self-defeating because it tends to protect the inefficient rather than help firms become efficient global competitors.
Q:
The threat of antidumping action enhances the ability of a firm to use aggressive pricing to gain market share in a country.
Q:
A firm may set up production activities in a foreign country, where trade barriers do not currently exist, to reduce the threat of trade barriers being imposed later.
Q:
Trade barriers encourage firms to disperse their productive activitiesdesign, production, and assemblyto foreign nations.
Q:
Antidumping actions seem to be concentrated in certain sectors of the economy such as basic metal industries (e.g., aluminum and steel), chemicals, plastics, and machinery and electrical equipment.
Q:
Governments of developed nations are setting an example by unilaterally lowering their trade barriers.
Q:
In the Uruguay Round of the WTO, member countries sought to exempt trade in services from GATT rules.
Q:
One of the reasons for the trend toward greater protectionism was that many countries found ways to get around GATT regulations.
Q:
Pressures for greater protectionism increased around the world during the 1980s and early 1990s due to the strain caused by the persistent trade deficit in the world's largest economy, Japan.
Q:
The Smoot-Hawley Act aimed to liberalize trade by eliminating tariffs, subsidies, and import quotas.
Q:
Free trade as a government policy was first officially embraced by Germany in 1846, when the Bundestag repealed the Corn Laws.
Q:
Paul Krugman argues that although strategic trade policy looks unappealing in theory, in practice it is most likely to be workable.
Q:
The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade and this justification challenges the rationale for unrestricted free trade.
Q:
Paul Krugman asserts that a strategic trade policy is almost certain to be captured by special-interest groups within the economy, who will distort it to their own needs.
Q:
Dumping is variously defined as selling goods in a foreign market at below their costs of production, or as selling goods in a foreign market at below their "fair" market value.
Q:
The Buy America Act specifies that government agencies must give preference to American products when putting contracts for equipment out for bid unless the foreign products have a significant advantage.
Q:
Both import quotas and voluntary export restraints (VERs) benefit domestic producers by limiting import competition.
Q:
According to Paul Krugman, a country that adopts a strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry will probably provoke retaliation.
Q:
According to Alexander Hamilton, governments must temporarily support new industries until they have grown strong enough to meet international competition.
Q:
The main gains from subsidies accrue to importers, whose international competitiveness is increased as a result of these subsidies.
Q:
The Common Agricultural Policy (CAP) established by the European Union was designed to reduce prices of domestic produce and protect consumers from unfair premiums.
Q:
Some countries argue that government intervention to protect certain domestic industries can compromise national security.
Q:
Governments can protect consumers from unsafe products by issuing a limit or a ban on such products.
Q:
Political arguments for government intervention are usually concerned with protecting consumer interests within the country.
Q:
Government intervention in international trade can take the form of reducing restrictions on imports and encouraging foreign direct investment.
Q:
Specific tariffs are levied as a proportion of the value of the imported good.
Q:
In recent decades, a fall in subsidies, quotas, and voluntary export restraints has been accompanied by a rise in tariff barriers.
Q:
By lowering production costs, subsidies help foreign competitors gain export markets.
Q:
Import tariffs protect domestic producers against foreign competitors.
Q:
Subsidies are a trade policy instrument.
Q:
How does the increasing integration of the world economy and internationalization of production affect the selection of a trade policy?
Q:
How do trade barriers constrain a firm's ability to disperse its productive activities?
Q:
What are the issues that are at the forefront of the current agenda of the WTO?
Q:
Explain the organizational structure and the key functions of the WTO.
Q:
During the 1980s and early 1990s, why did the world trade system, erected by GATT, come under strain due to increased pressures for greater protectionism?
Q:
Give a brief description of the origin, functions, and successes of GATT from 1947 to 1979, before protectionist trends gained momentum across the world.
Q:
What constitutes the revised case for free trade?
Q:
Briefly describe the implications of the strategic trade policy as applied to international trade.
Q:
What is the "infant industry argument"? What are its implications for the world economy? What are the criticisms of this argument?
Q:
Describe briefly, with examples, the use of trade policies by governments to support their foreign policy objectives.
Q:
What are the political arguments for government intervention into international trade?
Q:
Explain with an example the administrative trade policies used by governments in addition to the formal instruments of trade policy.
Q:
What is a voluntary export restraint? Why do exporting countries agree to VERs?
Q:
What conclusions can be derived from economic analysis of the effect of import tariffs?
Q:
Define local content requirements. Explain how this helps domestic firms.
Q:
The threat of antidumping action:
A.helps the firm raise capital in the primary market.
B.limits the ability of a firm to raise prices in response to high demand.
C.enhances the firm's ability to disperse its productive activities in an efficient manner.
D.limits the ability of a firm to use aggressive pricing to gain market share in a country.
E.enhances a firm's competitive advantage to indigenous competitors in that country.
Q:
Which of the following has been excluded from the agenda for the Doha round of WTO talks that began in 2001?
A.Reducing barriers to cross-border investment
B.Phasing out subsidies to agricultural producers
C.Limiting the use of antidumping laws
D.Attempts to tie trade to labor standards in a country
E.Cutting tariffs on industrial goods and services
Q:
Which of the following does NOT reinforce that the best interests of international business are served by a free trade stance?
A.The increasing integration of the world economy
B.The internationalization of production
C.The trend toward greater protectionism
D.The drawbacks of government intervention
E.The dispersion of production activities
Q:
Myra is a firm producing premium handbags for women. These bags are manufactured and patented in the country of Ceria. Manufacturers in the country of Argonia create counterfeit Myra bags and sell them in the local markets of Argonia. These bags are sold at almost similar prices to the original in other countries. Which of the following is likely to happen?
A.Expansion of world market for Cerian products
B.Reduction in the export opportunities for Myra's hand bags in Argonia
C.Reduction in import of all Argonian goods
D.Increase in the prices of handbags produced by Myra in Argonia
E.Reduction in opportunities of export from Argonia to other countries
Q:
Which of the following is a loophole in antidumping laws that is being exploited by many countries to pursue protectionism?
A.The slackness of enforcement agencies
B.WTO's noncommittal approach to antidumping laws
C.Bilateral VERs which subvert antidumping laws
D.The rather vague definition of what constitutes "dumping"
E.Lack of consensus among member nations
Q:
Which of the following is NOT a constraint on a firm's ability to disperse its productive activities to foreign countries?
A.Tariff barriers raising the costs of exporting products to a country
B.Quotas restricting the quantity of a good that can be imported into a country
C.Local content requirements demanding a specific fraction of domestic production
D.The increasing integration of the world economy
E.Antidumping policies limiting the ability of a firm to use aggressive pricing
Q:
The WTO was encouraged to extend its reach to encompass regulations governing foreign direct investment, something the GATT had never done. Two of the first industries targeted for this reform were:
A.global telecommunication and financial services industries.
B.scientific research and defense sector.
C.pharmaceuticals and heavy metal industry.
D.pharmaceuticals and biotechnology.
E.scientific research and global telecommunication.
Q:
Why did telecommunications companies welcome the telecommunication deal brokered by WTO in 1997?
A.It enhanced protection of patents, copyrights, and trademarks (intellectual property).
B.It helped resolve deadlock situations arising out of the unwillingness to lower trade barriers between neighboring countries.
C.It offered a greater ability for companies to offer a global, seamless service for all their corporate needs.
D.It liberalized trade policies by eliminating tariffs, subsidies, import quotas, antidumping duties, and local content requirements.
E.It reduced the export of pirated imitations of patented innovations pioneered in a different country.
Q:
Which of the following is true regarding the difference between GATT and WTO?
A.The WTO was encouraged to extend its reach to encompass regulations governing foreign direct investment unlike GATT.
B.WTO operates on the basis of consensus unlike GATT.
C.GATT gives trading partners the right to compensation or, in the last resort, to impose (commensurate) trade sanctions unlike WTO.
D.GATT's verdict is binding unlike that of WTO's.
E.WTO allows member-countries to block adoption of arbitration reports unlike GATT.
Q:
Which of the following indicates the difference between GATT and WTO?
A.WTO has strict time limits unlike GATT.
B.WTO operates on the basis of consensus unlike GATT.
C.GATT gives trading partners the right to compensation or, in the last resort, to impose (commensurate) trade sanctions unlike WTO.
D.GATT's verdict is binding unlike that of WTO's.
E.WTO allows member-countries to block adoption of arbitration reports unlike GATT.
Q:
The WTO's Agreement on which of the following is an attempt to narrow the gaps in the way intellectual property rights are protected around the world and to bring them under common international rules?
A.Intellectual Property Rights Enforcement Directive (IPRED)
B.Court of Arbitration of Intellectual Property (CAIP)
C.Trade-Related Aspects of Intellectual Property Rights (TRIPS)
D.Intellectual Property Rights Enforcement and Resolution (IPER)
E.International Body on Intellectual Property (IBIP)
Q:
According to Krugman, which of the following best indicates the dangers of a strategic trade policy?
A.Decrease in subsidies
B.Decrease in protectionism
C.Occurrence of a trade war
D.Huge financial debts for the countries involved
E.Occurrence of a global recession
Q:
According to Paul Krugman, a country that attempts to use strategic trade policy to establish a domestic firm in a dominant position in a global industry, is most likely to:
A.dominate the industry.
B.move away from protectionism.
C.provoke retaliation.
D.incur huge financial debts.
E.upset the special-interest groups within the economy.
Q:
A government should use subsidies to support promising firms that are active in newly emerging industries, according to:
A.strategic trade policy.
B.public policy.
C.absolute advantage.
D.product life-cycle.
E.industrialization.
Q:
Which of the following is a major reason why many economists remain critical of the infant industry argument?
A.It makes the domestic industry inefficient.
B.It does not provide guaranteed employment for the citizens.
C.It affects the standards of living and per capita income of the people.
D.It promotes foreign direct investment.
E.It leads to reduced prices in domestic markets.
Q:
One of the main reasons why many economists remain critical of the infant industry argument is its reliance on the assumption that:
A.protection of manufacturing from foreign competition is harmful.
B.absolute advantage cannot sustain productivity of an industry.
C.foreign firms too come under the definition of infant industry when they newly enter a foreign market.
D.firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital markets.
E.foreign competition will eventually cause domestic firms to improve the quality of their products.
Q:
Many developing countries have a potential comparative advantage in manufacturing, but new manufacturing industries cannot initially compete with well-established industries in developed countries, according to:
A.economic development argument.
B.comparative advantage theory.
C.national security argument.
D.infant industry argument.
E.mixed economy theory.
Q:
The act that allows Americans to sue foreign firms that use property in Cuba confiscated from them after the 1959 revolution is known as the:
A.Frederick-Peterson Act.
B.D'Amato-Perkins Act.
C.Perkins-Dole Act.
D.Helms-Burton Act.
E.Godfrey-Milliken Act.
Q:
Cadmia banned imports of Mattel toys with high levels of toxic lead, manufactured in Argonia. The underlying motive for such a move could be:
A.protecting domestic businesses from unfair pricing.
B.protesting the pricing of toys below their costs of production.
C.protecting consumers from unsafe products.
D.increasing the trade surplus of the United States.
E.reducing dumping of cheap toys.
Q:
Why is retaliation by government intervention a risky strategy?
A.It encourages dumping by foreign companies.
B.It could result in increased tariff barriers by the country that is being pressured.
C.It may expose certain industries that are important for national security to foreign competition.
D.It allows firms to sell goods in the foreign market at below their fair market value.
E.It makes it difficult for domestic firms to make any investments by borrowing money from the domestic capital market.
Q:
The country of Cadmia, which is a leading producer of bauxite, had to impose trade sanctions on Cerian soda cans in order to get the government of Ceria to enforce export restraints. This imposition by Cadmian government was undertaken to protect domestic producers of soda cans. Which of the following government intervention is being used by Cadmia?
A.Diversification
B.Deregulation
C.Retaliation
D.Liberalization
E.Monopolization
Q:
Which of the following is the most common political argument for government intervention in international trade?
A.Decreasing the prices of products in the domestic market
B.Promoting strategic trade policy
C.Protecting jobs and industries from unfair foreign competition
D.Improving efficiency of domestic labor
E.Protecting human rights
Q:
Which of the following is considered to be the ultimate objective of antidumping policies?
A.Protecting consumers from high prices
B.Preventing domestic firms from unloading their excess production in domestic markets
C.Protecting domestic producers from unfair foreign competition
D.Protecting consumers from substandard and hazardous products
E.Preventing foreign products from entering domestic market
Q:
Which of the following best indicates the motive for foreign firms to engage in dumping?
A.Unloading excess production in foreign markets
B.Cutting labor costs to reduce the costs of production
C.Providing a wider range of products for consumers in foreign markets
D.Meeting the voluntary export requirements imposed on it
E.Obtaining subsidies from the importing country