Chapter 6
Student: ___________________________________________________________________________
1. Which of the following refers to a situation where a government does not attempt to restrict what its
citizens can buy from another country or what they can sell to another country?
A. Free trade
B. Unencumbered trade
C. Sovereign trade
D. Autonomous trade
E. Open trade
2. Which of the following is not an example of one of the main instruments in trade policy used by
governments around the world?
A. Tariffs
B. Political mandate
C. Subsidies
D. Import quotas
E. Local content requirements
3. __________ are the oldest and simplest instrument of trade policy.
A. Subsidies
B. Administrative policies
C. Tariffs
D. Voluntary export restraints
E. Price discrimination
4. A __________ is a tax levied on imports.
A. tariff
B. special assessment
C. penalty
D. globalization assessment
E. GST
5. Components of ___________ include tariffs, subsidies, import quotas, voluntary export restraints, local
content requirements, administrative policies, and antidumping duties.
A. trade policy
B. ad valorem
C. tradereconciliation
D. sociocultural dimension
E. national economic development
6. __________ are levied as a fixed charge for each for each unit of a good imported.
A. Specific tariffs
B. General tariffs
C. Ad valorem tariffs
D. Global tariffs
E. Sales taxes
7. While __________ tariffs are levied as a fixed charge for each unit of a good imported, __________
tariffs are levied as a proportion of the value of the imported good.
A. general; special
B. ad valorem; special
C. global; special
D. specific; ad valorem
E. predatory; percentage
8. Tariffs fall into two categories–
A. specific tariffs and ad valorem tariffs.
B. global tariffs and domestic tariffs.
C. general tariffs and specific tariffs.
D. flexible tariffs and ad valorem tariffs.
E. domestic tariffs and GATT
9. Tariffs cause the most damage to __________, According to the author of the textbook, because this
group bears the economic brunt of tariffs.
A. trade associations
B. governments
C. retailers
D. producers
E. consumers
10. According to the author of the textbook, tariffs benefit the following two groups:
A. government and producers.
B. consumers and trade associations.
C. government and consumers.
D. producers and consumers.
E. retailers and wholesalers.
11. The 15 to 20 percent tariff the EU placed on imported bananas from Latin America is an example of what
kind of tariff?
A. General
B. Ad valorem
C. Special
D. Global
E. Anti-Dumping
12. American Consumers for Affordable Homes calculated that the 27 percent tariff that the U.S. imposed on
Canadian softwood lumber adds approximately _________ to the cost of a new home.
A. $750
B. $500
C. $800
D. $1100
E. $1000
13. Tariffs
A. reduce the price of foreign goods.
B. reduce efficiency because a protective tariff encourages domestic firms to produce products at home.
C. create efficient utilization of resources.
D. are unambiguously pro-consumer and anti-producer.
E. help domestic producers increase their efficiency and resist foreign competition
14. Tariffs on foodstuffs, cosmetics and chemicals into Japan cost the average Japanese consumer about
__________ dollars per year.
A. 890
B. 650
C. 900
D. 1100
E. 400
15. According to the author of the textbook, tariffs are __________ and __________.
A. pro-producer and pro consumer
B. anti-consumer and pro-producer
C. anti-consumer and anti-producer
D. pro-producer and anti-consumer
E. pro-government and pro-consumer
16. According to your text in the opening case, the tariff on banana imports into the EU cost consumers about
__________ per year.
A. $4 billion
B. $2 billion
C. $37 billion
D. $45 billion
E. $56 billion
17. In a 1999 study, Howard Wall found that while the United States imported more than $499 billion in
merchandise from countries outside NAFTA in 1996, it would have imported over $________ billion
more if it had a policy of pure free trade.
A. 51
B. 864
C. 111
D. 396
E. 211
18. In a 1999 study, Howard Wall found that while the United States exported more than $723 billion in
merchandise to countries outside NAFTA in 1996, it would have exported over $________ billion more
if those countries practiced free trade.
A. 51
B. 864
C. 111
D. 396
E. 130
19. Which of the following is a government payment to a domestic producer?
A. Duty
B. Subsidy
C. Quota
D. Tariff
E. Grant
20. By lowering production costs, ____________ help domestic producers compete against foreign
imports.
A. tariffs
B. duties
C. quotas
D. ad valorems
E. subsidies
21. Lowering production costs helps domestic producers
A. gain export markets.
B. develop trade reconciliation.
C. create voluntary export subsidy.
D. determine specialized quotas.
E. increase their value
22. _______________ tends to be one of the largest beneficiaries of subsidies in most countries.
A. Technology
B. Agriculture
C. Commodities
D. Domestic product
E. Consumers
23. VER stands for
A. Very economic reversal
B. Voluntary economic report
C. Voluntary economic restraint
D. Voluntary export restraint
E. Voluntary economic reversal
24. According to _______, subsidies can help a firm achieve a first-mover advantage in an emerging
industry.
A. strategic trade policy
B. antidumping policies
C. consumers
D. importers
E. farmers
25. The main gains from subsidies accrue to __________, whose international competitiveness is increased
as a result of them.
A. traders
B. consumers
C. governments
D. importers
E. domestic producers
26. According to official national figures, during the late 1980s government subsidies to industry in most
industrialized countries amounted to between
A. 40% and 50% of the value of industrial output.
B. 15% and 20% of the value of industrial output.
C. 2% and 3.5% of the value of industrial output.
D. 10% and 15% of the value of industrial output.
E. 3.5% and 4% of the value of industrial output.
27. An import quota is a direct restriction on the quantity of some good that may be
A. subsidized by a country.
B. imported into a country.
C. exported out of a country.
D. produced in a country.
E. qualified for tariff relief
28. A quota on trade imposed by the exporting country, typically at the request of the importing country’s
government is referred to as a(n)
A. voluntary export restraint.
B. involuntary export restraint.
C. trade reconciliation.
D. refereed export restraint.
E. limited market access
29. One of the most famous examples of a(n) __________ is the limitation on auto exports to the United
States enforced by Japanese automobile producers in 1981.
A. involuntary import restraint
B. voluntary export restraint
C. trade reconciliation
D. referred export restraint
E. limited market access
30. Both import quotas and VERs benefit ___________ by limiting import competition, but they result in
higher prices, which hurts __________.
A. domestic producers; consumers
B. governments; consumers
C. consumers; foreign producers
D. foreign producers; governments
E. balance of trade; consumers
31. Local content requirements benefit the ______________ of component parts, but they raise prices of
imported components, which hurts _____________.
A. consumers; producers
B. producers; governments
C. consumers; governments
D. producers; consumers
E. users; importers
32. What demands that some specific fraction of a good be produced domestically?
A. International content requirement
B. Local content requirement
C. Specific content requirement
D. Ad valorem content requirement
E. WTO local content convention
33. If Westvaco decided to produce paper in Spain, and the Spanish government stipulated that 50% of the
component parts that went into Westvaco’s paper must be produced locally, that requirement would be an
example of a(n)
A. ad valorem content requirement.
B. international content requirement.
C. specific content requirement.
D. local content requirement.
E. barter content
34. If Apple won an order to sell 500 of its new minicomputers to Australia, but the Australian government
stipulated that 20 percent of the component parts of the minicomputers that it purchased must be
produced in Australia, that stipulation would be an example of a(n)
A. ad valorem content requirement.
B. specific content requirement.
C. ad hoc content requirement.
D. local content requirement.
E. domestic producer content
35. Local content regulations have been widely used by __________ to shift their manufacturing base from
the simple assembly of products whose parts are manufactured elsewhere into the local manufacture of
component parts.
A. United Nations
B. developed nations
C. developing nations
D. 1st world countries
E. Canadian governments
36. Some would argue that ___________ are the masters of administrative trade policies.
A. United States
B. Japan
C. France
D. Germany
E. Canada
37. Local content requirements provide protection in the same way an import quota does _____________ for
a domestic producer of component parts.
A. by limiting foreign competition
B. by increasing tariffs
C. by eliminating foreign competition
D. by encouraging foreign competition
E. by increasing the price of imported products
38. Bureaucratic rules that are designed to make it difficult for imports to enter a country are referred to
as
A. situational trade policies.
B. ad valorem trade policies.
C. supplemental trade policies.
D. administrative trade policies.
E. public service intransigence
39. Consider the following scenario. The Netherlands exports tulip bulbs to almost every country in the
world except Japan. The reason is that Japanese customs inspectors insist on checking every tulip bulb by
cutting it down the middle (which destroys the bulb). The insistence on the part of the Japanese to inspect
the bulbs in this manner (which makes it impractical for the Netherlands to export to Japan) is an example
of a(n)
A. administrative trade policy.
B. ad valorem trade policy.
C. contingent trade policy.
D. supplemental trade policy.
E. Plant protection Law
40. At one time, the French government required that all imported videocassette recorders arrive in France
through a small customs entry point that was both remote and poorly staffed. This policy, which in effect
made it impractical for a foreign company to import videocassette recorders to France, is an example of
a(n)
A. supplemental trade policy.
B. contingent trade policy.
C. administrative trade policy.
D. ad valorem trade policy.
E. administrative cost reduction strategy
41. An example of a(n) _______ that limits imports is if a country restricted the import of a particular good to
a remote seaport that made it extremely difficult for any other country to import the good profitably.
A. ad valorem trade policy
B. administrative trade policy
C. situational trade policy
D. directional trade policy
E. anti-dumping policy
42. An administrative policy is an informal instrument or bureaucratic rule that can be used to restrict imports
and boost exports. Such policies benefit __________ but hurt __________.
A. trade associations; producers
B. consumers; producers
C. consumers; trade associations
D. producers; consumers
E. consumer lobbyists; farmers
43. The Canadian company Clearwater Seafoods sees China as both a current competitor and a large potential
future consumer because of ____________.
A. the size of the population
B. environmental degradation of China’s coastline
C. the inefficiencies of state-owned enterprises
D. the growing wealth of the population
E. the removal of import quotas on imported seafood
44. In the context of international trade, __________ is defined as selling goods in a foreign market at a
price below their costs of production or as selling goods in a foreign market at below their “fair” market
price.
A. slicing
B. dumping
C. slashing
D. subsidizing
E. skimming
45. If _______ exist, a charge of “dumping” can be levied against a foreign firm.
A.
goods are being sold that do not meet local content requirements or goods are being sold that do not
meet local quality standards
B.
goods are being sold at predatory prices or goods are being sold that do not meet local product safety
standards
C.
goods are being sold without the consent of the host government or goods are being sold that do not
meet local quality standards
D.
goods are being sold at below their cost of production or goods are being sold at below their “fair”
market value
E. goods are being sold at a price that domestic producers cannot match and workers are losing jobs
46. An alleged example of __________ occurred in 1997, when two Korean manufacturers of
