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Q:
Discuss an example that substantiates Dunning s argument about location-specific advantages.
Q:
Discuss the reasons for the growth in FDI over the past 30 years.
Q:
Discuss the trends in FDI over the past 30 years. Be sure to differentiate between the stock of FDI and the flow of FDI.
Q:
Tariff barriers lower the costs of exporting products to a country.
⊚ true
⊚ false
Q:
Tariffs on industrial goods remain higher than tariffs on services.
⊚ true
⊚ false
Q:
The TRIPS regulations oblige WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years.
⊚ true
⊚ false
Q:
The WTO does not have the power to impose trade sanctions.
⊚ true
⊚ false
Q:
Trade wars benefit countries with interventionist governments.
⊚ true
⊚ false
Q:
Protecting industries deemed important for national security, consumer protection, and retaliating against unfair foreign competition are economic arguments for government intervention.
⊚ true
⊚ false
Q:
Export tariffs are far less common than import tariffs.
⊚ true
⊚ false
Q:
Tariffs are generally pro-consumer and anti-producer.
⊚ true
⊚ false
Q:
Business firms that lobby their governments to engage in protectionism may miss the opportunity to build _____ by constructing a globally dispersed production system.
A) an absolute advantage
B) a competitive advantage
C) a strategic trade advantage
D) a comparative advantage
Q:
Identify the true statement about trade barriers.
A) They lower the costs of exporting products to a country.
B) They may put a firm at a competitive advantage to indigenous competitors.
C) They may help a firm to serve a country from locations outside of that country.
D) To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.
Q:
Many firms, of all national origins, increasingly depend on _____ for their competitive advantage.
A) globally dispersed production systems
B) specific tariffs
C) infant industries
D) subsidies
Q:
Which of the following is a trade barrier that affects a firm s strategy?
A) Tariffs lower the cost of exporting.
B) Quotas may enhance a firm s ability to serve a country from outside of that country.
C) To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.
D) The threat of antidumping actions promotes the firm s ability to use aggressive pricing to gain market share in a country.
Q:
Which of the following is a drawback of government intervention?
A) It may invite retaliation and trigger a trade war.
B) The policies may be captured by foreign investors and turned to their advantage.
C) Despite being well executed, the intervention is unlikely to work.
D) They usually establish new tariff levels on technology to the detriment of all in the industry.
Q:
________ in agriculture could jump-start economic growth among the world s poorer nations and alleviate global poverty.
A) Quota rents
B) Free trade
C) Strategic trade policy
D) Subsidies
Q:
Inadequate protections for intellectual property
A) increase the incentive for innovation.
B) led to the Smoot-Hawley Act.
C) reduce the incentive for innovation.
D) are one of the issues addressed by the local content requirement.
Q:
A key issue in the millennium round of the WTO was to
A) increase barriers to cross-border trade in agricultural products.
B) extend GATT to cover trade in commodities.
C) further reduce barriers to cross-border trade and investment.
D) extend GATT rules to cover trade in services.
Q:
A key goal of the 1986 Uruguay Round was to
A) extend GATT to cover trade in commodities.
B) extend GATT rules to cover trade in services.
C) increase agricultural subsidies.
D) loosen the GATT s monitoring and enforcement mechanisms.
Q:
The _____ raised tariff barriers in the hope of protecting jobs and diverting consumer demand away from foreign products.
A) Smoot-Hawley Act
B) Helms-Burton Act
C) General Agreement on Tariffs and Trade
D) Buy America Act
Q:
WTO rules allow countries to _____ foreign goods that are being sold cheaper than at home, or below their cost of production, when domestic producers can show that they are being harmed.
A) impose antidumping duties on
B) subsidize
C) lower the import quota on
D) place countervailing duties on
Q:
Tariff rates on agricultural products are generally
A) much lower than tariff rates on manufactured products or services.
B) much lower than import fees on electronics.
C) much higher than tariff rates on manufactured products or services.
D) much higher than import fees on electronics.
Q:
The WTO s GATS has taken the lead in
A) providing enhanced protection for intellectual property.
B) extending free trade agreements to services.
C) reducing agricultural subsidies.
D) enforcing GATT rules.
Q:
_____ are the highest rate that can be charged, which is often, but not always, the rate that is charged.
A) Ad valorem tariff rates
B) Tariff rents
C) Specific tariff rates
D) Bound tariff rates
Q:
TRIPS regulations oblige WTO members to
A) grant and enforce patents lasting at least 100 years.
B) grant and enforce copyrights lasting 100 years.
C) comply with the rules within five years in the case of the rich countries.
D) comply with the rules within 10 years in the case of the poorest countries.
Q:
The TRIPS regulations established at the 1995 Uruguay Round
A) established regulations on patents and copyrights.
B) set a new level of agriculture subsidies.
C) organized OECD countries to eliminate tariffs on textiles.
D) established new tariff levels on technology.
Q:
After the Uruguay Round of GATT negotiations extended global trading rules to cover trade in services, the first two industries targeted for reform by the WTO were
A) textiles and technology.
B) telecommunications and financial services.
C) automotive and aerospace.
D) agriculture and consulting services.
Q:
Until 1995, GATT rules applied only to
A) services.
B) industrial goods.
C) textiles.
D) agricultural products.
Q:
What was the result of the Smoot-Hawley Act?
A) Other countries reacted by raising their own tariff barriers.
B) Other countries reacted by lowering their trade barriers.
C) U.S. exports increased.
D) The United States began to get out of the Great Depression.
Q:
The Smoot-Hawley Act was aimed at
A) diverting consumer demand toward foreign products.
B) promoting unrestricted free trade.
C) limiting global warming.
D) avoiding rising unemployment.
Q:
Free trade as a government policy was first officially embraced by Great Britain in 1846, when the British Parliament repealed a law that placed a high tariff on
A) all agricultural products.
B) wheat.
C) textiles.
D) corn.
Q:
Economist Paul Krugman suggests that strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that
A) provides enhanced protection for intellectual property of those firms.
B) boosts national income at the expense of other countries.
C) reduces domestic agricultural profits.
D) depletes national income to the benefit of other countries.
Q:
Economist Paul Krugman has suggested that trade policy designed to retaliate against another country s trade policy would
A) benefit the multinational firms of both countries.
B) benefit the citizens of both countries.
C) hurt the multinational firms of both countries.
D) hurt the citizens of both countries.
Q:
Strategic trade policy suggests that in industries where the existence of substantial scale economies implies that the world will profitably support only a few firms, countries may predominate in the export of certain products simply because they had firms that were able to
A) influence the assignment of tariffs.
B) influence the assignment of quotas
C) capture first-mover advantages.
D) capitalize on late-mover advantages.
Q:
Which of the following is a political reason for governments to intervene in markets?
A) to help citizens obtain jobs in foreign markets
B) to aid their country s businesses in foreign markets
C) to subsidize multinational companies
D) to protect jobs and industries
Q:
Strategic trade policy suggests that a government should use _____ to support promising firms that are active in newly emerging industries.
A) tariff rate quotas
B) quota rents
C) subsidies
D) ad valorem tariffs
Q:
What was the purpose of the establishment of the Common Agricultural Policy (CAP) by the European Union?
A) to increase imports and raise prices
B) to protect the jobs of Europe s farmers
C) to increase the import of grapes for the wine industry
D) to make farmers in Europe more productive
Q:
_____ 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.
A) Export restraint
B) Dumping
C) Local content requirement
D) Ad valorem
Q:
The Netherlands exports tulip bulbs to almost every country in the world except Japan. This was because in Japan, customs inspectors insisted on checking every tulip bulb by cutting it vertically down the middle. This is an example of which of the following trade barriers?
A) export restraint
B) administrative trade policies
C) local content requirement
D) ad valorem
Q:
Which of the following statements concerning a voluntary export restraint is true?
A) It benefits domestic producers by limiting import competition.
B) In most cases, it benefits consumers.
C) It lowers the domestic price of an imported good.
D) It is a variant of the ad valorem tariff.
Q:
The Japanese government was pressured by the U.S. government to place limits on the number of vehicles exported to the United States by Japanese automobile producers in 1981. This is an example of
A) tariff rate quota.
B) specific tariffs.
C) voluntary export restraint.
D) ad valorem tariff.
Q:
_____ is a quota on trade imposed by the exporting country, typically at the request of the importing country s government.
A) Voluntary export restraint
B) Specific tariff quota
C) Trade reconciliation
D) Ad valorem tariff
Q:
Who benefits from an import tariff?
A) the government
B) consumers
C) foreign producers
D) everyone
Q:
A common hybrid of a quota and a tariff is known as
A) an import tariff quota.
B) a voluntary export restraint.
C) an ad valorem tariff.
D) a tariff rate quota.
Q:
An ____ is a direct restriction on the quantity of some good that may be imported into a country.
A) import tariff
B) import quota
C) import subsidy
D) ad valorem tariff
Q:
_____ a requirement that some specific fraction of a good be produced domestically.
A) Administrative trade policies are
B) The Buy American Act is
C) A local content requirement is
D) Bureaucratic rules are
Q:
In the United States, the only firms allowed to import cheese are certain trading companies, each of which is allocated the right to import a maximum number of pounds of cheese each year. This is an example of
A) a subsidy.
B) an import quota.
C) a local content requirement.
D) an ad valorem tariff.
Q:
Antidumping duties are often called
A) export duties.
B) positive duties.
C) retroactive duties.
D) countervailing duties.
Q:
Which of the following observations about tariffs is true?
A) Tariffs are generally anti-producer and pro-consumer.
B) Export tariffs are used to raise revenue for the government.
C) Export tariffs are far more common than import tariffs.
D) Import tariffs increase the overall efficiency of the world economy.
Q:
Which of the following is one of the main instruments of trade policy?
A) tariffs
B) credit portfolios
C) opportunity costs
D) countervailing duties
Q:
The _____ specifies that government agencies must give preference to American products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage.
A) General Agreement on Tariffs and Trade
B) Buy America Act
C) American Reinvestment Act
D) Smoot-Hawley Act
Q:
The extra profit that producers make when supply is artificially limited by an import quota is referred to as a
A) quota rent.
B) specific tariff.
C) tariff rate quota.
D) subsidy.
Q:
A(n) _____ provided by the government helps domestic producers to compete against foreign imports.
A) ad valorem tariff
B) specific tariff
C) import quota
D) subsidy
Q:
_____ are levied as a proportion of the value of the imported good.
A) Specific tariffs
B) Import quotas
C) Ad valorem tariffs
D) Tariff rate quotas
Q:
Discuss the establishment of GATT. What was GATT s objective?
Q:
Summarize Paul Krugman s arguments against adopting a trade policy that benefits domestic firms at the expense of other countries.
Q:
Discuss the infant industry argument for intervention in markets. What is GATT s position on the argument?
Q:
Define dumping. How do governments respond to charges of dumping?
Q:
Describe the Buy America Act. What is its connection with local content requirements?
Q:
New trade theorists stress the role of luck, entrepreneurship, and innovation in giving a firm first-mover advantages.
⊚ true
⊚ false
Q:
Apple s iPhone was unique when it first came out, with many features that no other phones had. As such, it enjoyed great success and dominated the cell phone market. This demonstrates the first-mover advantage.
⊚ true
⊚ false
Q:
According to Paul Samuelson s critique, a poor country will rapidly improve its productivity if a rich country enters into a free trade agreement with it.
⊚ true
⊚ false
Q:
Resources always move easily from one economic activity to another.
⊚ true
⊚ false
Q:
The simple model of free trade assumed away transportation costs between countries.
⊚ true
⊚ false
Q:
XYZ Toys manufactures and sells small quantities of each of its products, but it can still benefit from economies of scale.
⊚ true
⊚ false
Q:
Heckscher-Ohlin theory stresses that comparative advantage arises from differences in productivity.
⊚ true
⊚ false
Q:
Factor endowments refer to a country s factors of production, such as land, labor, and capital.
⊚ true
⊚ false
Q:
Mercantilist doctrine advocates unrestricted free trade between countries.
⊚ true
⊚ false
Q:
Porter s theory of national competitive advantage recommends that government should never interfere in free trade policies .
⊚ true
⊚ false
Q:
The theories of Smith and Ricardo show that trade makes every nation better off.
⊚ true
⊚ false
Q:
Porter contends that government
A) can influence the domestic demand conditions and the domestic rivalry components of the diamond, but not the other two components.
B) can influence each of the four components of the diamond either positively or negatively.
C) can influence the factor endowments and the related and supporting industries components of the diamond, but not the other two components.
D) has little or no effect on the four components that shape the environment in which firms compete.
Q:
The commercial aircraft industry can support only a limited number of firms, largely because the existence of established firms would make it difficult to be competitive. This is a basic tenet of
A) mercantilism.
B) the theory of absolute advantage.
C) Heckscher-Ohlin theory.
D) new trade theory.
Q:
New trade theory suggests that nations
A) increase their commitment to research and development.
B) adopt policies that promote strong competition within domestic markets.
C) cannot benefit from trade when they do not differ in resource endowments or technology.
D) may benefit from trade even when they do not differ in resource endowments or technology.
Q:
Which of the following theories suggests that first-mover advantage is significant in the export of a good?
A) product life-cycle theory
B) Ricardo s theory
C) new trade theory
D) theory of comparative advantage
Q:
What will happen, according to Paul Samuelson s critique, if a rich country enters into a free trade agreement with a poor country?
A) Both the countries will incur losses due to the exchanges between them.
B) The productivity of the poor country will decline rapidly.
C) The poor country will rapidly improve its productivity.
D) Both the countries will garner benefits from the exchanges between them.
Q:
Diminishing returns to specialization occur when
A) each additional unit is produced with lesser number of laborers.
B) a nation s gross domestic product declines for a few years.
C) production possibility frontier appears as a rectangle.
D) more units of resources are required to produce each additional unit.
Q:
One of the advantages of being the first mover in a market is
A) there is little risk involved.
B) to benefit from a higher cost structure.
C) the ability to capture scale economies ahead of later entrants.
D) local governments are more favorable to the first movers.
Q:
Economies of scale have a number of sources, including the ability
A) to average out the variable costs of production.
B) of large-volume producers to utilize specialized employees and equipment.
C) to adjust the scale of production based upon product saturation in the marketplace.
D) to utilize nonspecialized employees interchangeably.
Q:
The _____ theory was based on the observation that for most of the twentieth century a very large proportion of the world s new products had been developed by U.S. firms and sold first in the U.S. market.
A) product life-cycle
B) Heckscher-Ohlin
C) new trade
D) Ricardo