Q&A Hero

Q: Which of the following is true about tariffs? A. It reduces the price of foreign goods for domestic consumers. B. Tariffs reduce the overall efficiency of the world economy. C. The tariffs that are levied as a fixed charge for each unit of a good imported are known as ad valorem tariffs. D. Tariffs are mainly pro-consumer and anti-producer. E. Tariffs are always levied on imports.

Q: A tariff 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 by the government of Cadmia? A. Local content tariff B. Ad valorem tariff C. Subsidies D. Quotas E. Antidumping tariff

Q: Which of the following groups benefits the most from the imposition of tariffs? A. Government and domestic producers B. Consumers and trade associations C. Exporters and importers D. Foreign producers E. International bodies such as WTO

Q: Tariffs cause damage to _____ as they must pay more for certain imports. A. investors B. governments C. consumers D. domestic producers E. administrators

Q: _____ tariffs are levied as a proportion of the value of the imported good. A. Ad valorem B. Primary C. Direct D. Specific E. External

Q: _____ tariffs are levied as a fixed charge for each unit of a good imported. A. Ground B. Primary C. Direct D. Specific E. Internal

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: Tariff rates on agricultural products are generally much lower than tariff rates on manufactured products or services.

Q: The 1995 Uruguay agreement that established the WTO also contained an agreement to protect intellectual property.

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: According to a provision of the Uruguay Round of GATT, agricultural subsidies were to be increased substantially.

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 worlds 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: The infant industry argument is the oldest economic argument for government intervention in international trade.

Q: DAmato Act allows Americans to sue foreign firms that use property in Cuba confiscated from them after the 1959 revolution.

Q: A political argument for government intervention in international trade is that it is necessary to protect certain industries because they are important for national security.

Q: The ultimate objective of antidumping policies is to protect domestic producers from unfair foreign competition.

Q: Antidumping policies are designed to punish the firms that engage in dumping industrial waste into the environment.

Q: Dumping is viewed as a method by which firms unload excess production in their domestic markets.

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: Administrative trade policies are bureaucratic rules that are designed to make it easy for imports to enter a country.

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: Quotas benefit consumers the most.

Q: Both import quotas and VERs benefit domestic producers by limiting import competition.

Q: Under a tariff rate quota, a lower tariff rate is applied to imports within the quota than those over the quota.

Q: A voluntary export restraint (VER) is a quota on trade imposed by the exporting country, typically at the request of the importing countrys government.

Q: The main gains from subsidies accrue to importers, whose international competitiveness is increased as a result of these subsidies.

Q: Export tariffs are far more common than import tariffs.

Q: Import tariffs increase the overall efficiency of the world economy.

Q: Tariffs are generally pro-producer and anti-consumer.

Q: In most cases, tariffs are placed on imports to protect domestic producers from foreign competition by raising the price of imported goods.

Q: Ad valorem tariffs are levied as a proportion of the value of the imported good.

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: Tariffs are the most complex instrument of trade policy.

Q: Tariffs are the oldest instrument of trade policy.

Q: Subsidies are a trade policy instrument.

Q: The Heckscher-Ohlin theory is the best predictor of real-world international trade patterns.

Q: Most economists prefer Ricardo's theory to the Heckscher-Ohlin theory because it makes fewer simplifying assumptions.

Q: Factor endowments refer to the extent to which free trade impacts the wealth of a country.

Q: Despite the short-term adjustment costs associated with adopting a free trade regime, trade would seem to produce greater economic growth and higher living standards in the long run.

Q: Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.

Q: A certain amount of friction is involved when resources are required to move from one economic activity to another.

Q: The Nobel Prizewinning economist Paul Samuelson argued that contrary to the standard interpretation, in certain circumstances the theory of comparative advantage predicts that a rich country might actually be worse off by switching to a free trade regime with a poor nation.

Q: Ricardo's theory of comparative advantage is a major intellectual weapon for advocates of free trade because it provides a strong rationale for encouraging free trade.

Q: According to the theory of comparative advantage, potential world production is greater with unrestricted free trade than it is with restricted trade.

Q: According to Ricardo's theory of comparative advantage, it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to import goods that it produces less efficiently.

Q: According to Adam Smith, countries should specialize in the production of goods for which they have an absolute advantage and then trade these for goods produced by other countries.

Q: In his book, "The Wealth of Nations," Adam Smith supported the mercantilist assumption that trade is a zero-sum game.

Q: A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

Q: The major advantage of mercantilism was that it viewed trade as a zero-sum game.

Q: The main tenet of mercantilism was that it was in a country's best interests to maintain a trade surplus.

Q: The first theory of international trade that emerged in England asserted that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

Q: New trade theory stresses that in some cases countries specialize in the production of particular products because of underlying differences in factor endowments.

Q: Limits on imports are often in the interests of domestic consumers, but not domestic producers.

Q: Smith, Ricardo, and Heckscher-Ohlin suggested that a country's economy would gain only if its citizens buy products that are made in that country.

Q: The theories of Smith, Ricardo, and Heckscher-Ohlin failed to identify the specific benefits of international trade.

Q: According to Adam Smith, market mechanism, rather than government policy, should determine a country's imports and exports.

Q: David Ricardo's theory of comparative advantage was the first to explain why unrestricted free trade is beneficial to a country.

Q: Free trade refers to a situation in which a government, through quotas or duties, attempts to influence what its citizens can buy from another country, or what they can produce and sell to another country.

Q: Although mercantilism is an old and largely discredited doctrine, its echoes remain in modern political debate and in the trade policies of many countries.

Q: Mercantilism, propagated in the sixteenth and seventeenth centuries, advocated that countries should simultaneously encourage both imports and exports.

Q: How does Porter's theory predict patterns in international trade? Do his predictions turn out to be accurate in a real-world scenario?

Q: Briefly describe the new trade theory.

Q: Describe the shortcomings of the product life-cycle theory.

Q: What is meant by the term free trade? Is free trade compatible with the concept of mercantilism?

Q: Which of the following helps a firm to preempt available demand, gain cost advantages related to volume, and build an enduring brand ahead of later competitors? A. Monopolistic practices B. Comparative advantages C. Absolute advantages D. First-mover advantages E. Mercantilism

Q: If a company were to draw from the ideas proposed in the various theories of international trade, from a profit perspective, how would it go about selecting locations for its businesses? A. It would concentrate its productive activities mostly in developing countries. B. It would concentrate its productive activities in its home country. C. It would disperse its productive activities to those countries where they can be performed most efficiently. D. It would disperse its productive activities across all countries that serve as its market. E. It would concentrate its productive activities mostly in developed countries.

Q: Does Porter's model of competitive advantage predict the pattern of international trade that we observe in the real world? A. Yes. Porter's model has been supported by detailed empirical testing. B. No. Porter's model has not been subjected to detailed empirical testing. C. No. Porter's model is outdated and cannot be used to predict modern trade patterns. D. Yes. Porter's model stands out as the one single theory that best predicts international trade. E. Yes. Porter's model, like the Heckscher-Ohlin theory, offers an accurate prediction of international trade patterns.

Q: Which of the following was a pervasive finding of Porter's study? A. Successful industries within a country tend to be grouped into clusters of related industries. B. Trade increases the specialization of production within an industry. C. The pattern of trade we observe in the world economy may be the result of first-mover advantages. D. Purchasing power parity of a country determines its demand conditions. E. Differences in technology may lead to differences in productivity, which in turn, drives international trade patterns.

Q: Porter, in his diamond model, suggested that there is a strong association between _____ and the creation and persistence of competitive advantage in an industry. A. trade barriers B. vigorous domestic rivalry C. purchasing power parity D. the availability of a captive market E. first-mover advantages

Q: _____ occur(s) when employees move between firms within a region and when national industry associations bring employees from different companies together for regular conferences or workshops. A. Domestic rivalry B. Organizational restructuring C. Management friction D. Knowledge flows E. Competitive advantage

Q: Porter argues that a nation's firms gain competitive advantage if their domestic consumers are: A. sophisticated and demanding. B. price insensitive and trusting. C. accommodating and flexible. D. nationalistic and protective of their domestic industries. E. biased towards foreign products.