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61
Copyright © 2011 Pearson Education, Inc.
72) A tax on a good that is imposed when it is imported is called
A) an import quota.
B) a VER.
C) a tariff.
D) a sanction.
E) a border tax.
Skill: Level 1: Definition
Section: Checkpoint 9.3
Author: STUDY GUIDE
AACSB: Reflective thinking
73) The average U.S. tariff was highest in the
A) 1930s.
B) 1940s.
C) 1970s.
D) 1980s.
E) 1990s.
Skill: Level 1: Definition
Section: Checkpoint 9.3
Author: STUDY GUIDE
AACSB: Reflective thinking
74) Suppose the world price of a shirt is $10. If the United States imposes a tariff of $5 a shirt,
then the price of a shirt in the
A) United States falls to $5.
B) United States rises to $15.
C) world falls to $5.
D) world rises to $5.
E) world rises to $15
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Author: STUDY GUIDE
AACSB: Analytical reasoning
62
Copyright © 2011 Pearson Education, Inc.
75) When a tariff is imposed on a good, the ________ increases.
A) domestic quantity purchased
B) domestic quantity produced
C) quantity imported
D) quantity exported
E) world price
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Author: STUDY GUIDE
AACSB: Reflective thinking
76) When a tariff is imposed on a good, domestic consumers of the good ________ and domestic
producers of the good ________.
A) win; lose
B) lose; win
C) win; win
D) lose; lose
E) lose; neither win nor lose
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Author: STUDY GUIDE
AACSB: Reflective thinking
77) Which of the following parties benefits from an import quota but not from a tariff?
A) the domestic government
B) domestic producers
C) domestic consumers
D) the person with the right to import the good
E) the foreign government
Skill: Level 2: Using definitions
Section: Checkpoint 9.3
Author: STUDY GUIDE
AACSB: Reflective thinking
63
Copyright © 2011 Pearson Education, Inc.
9.4 The Case Against Protection
1) If supporters of restrictions on imports argue that protection is needed to preserve a strategic
industry; which of the following is being used?
A) Save domestic jobs argument.
B) National security argument.
C) Dumping argument.
D) Infant-industry argument.
E) Protecting national culture argument.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: TPS
AACSB: Reflective thinking
2) Which of the following is the national security argument against free trade?
A) A country must protect industries that produce defense equipment and armaments.
B) A country must protect new industries to give them a chance to mature before facing foreign
competition.
C) A country must protect firms from dumping by foreign companies.
D) A country must protect its consumers from foreign influences.
E) A country must preserve its jobs.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: SB
AACSB: Reflective thinking
3) What is the national security argument to support protection from international trade?
A) Domestic firms must be protected until they gain a comparative advantage.
B) Any firm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic firms bankrupt must be stopped.
D) Domestic jobs must be protected from competition from low-paid foreign workers.
E) Foreigners selling products in the economy limit the nation's diversity and stability.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: TS
AACSB: Reflective thinking
64
Copyright © 2011 Pearson Education, Inc.
4) What is the infant-industry argument for protection from international trade?
A) Domestic firms must be protected until they gain a comparative advantage.
B) Any firm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic firms bankrupt must be stopped.
D) Domestic jobs must be protected from competition from low-paid foreign workers.
E) Foreigners selling products in the economy limit the nation's diversity and stability.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: TS
AACSB: Reflective thinking
5) When protection is encouraged to protect a growing domestic industry; which of the following
is being used?
A) Save domestic jobs argument
B) National security argument
C) Anti-dumping argument
D) Infant-industry argument
E) Diversity and stability argument
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: TPS
AACSB: Reflective thinking
6) The infant-industry argument is used by those who assert they want to
A) limit imports to protect new industries.
B) increase exports to encourage growth of new industries.
C) limit exports.
D) increase imports to earn money to support new industries.
E) encourage foreign firms to dump in the United States.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: WM
AACSB: Reflective thinking
65
Copyright © 2011 Pearson Education, Inc.
7) The infant-industry argument for protection is based on the idea of
A) learning-by-doing.
B) dumping.
C) absolute advantage.
D) quotas are the least harmful method of protecting domestic firms.
E) saving jobs in the U.S. economy.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: SB
AACSB: Reflective thinking
8) What is the dumping argument for protection from international trade?
A) Domestic firms must be protected until they gain a comparative advantage.
B) Any firm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic firms bankrupt must be stopped.
D) Domestic jobs must be protected from competition from low-paid foreign workers.
E) Foreigners selling products in the economy limit the nation's diversity and stability.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: TS
AACSB: Reflective thinking
9) When a tariff supporter argues that foreign producers are selling their products for prices
below the costs of production, which of the following is being used?
A) Save domestic jobs argument
B) National security argument
C) Dumping argument
D) Infant-industry argument
E) Diversity and stability argument
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: TPS
AACSB: Reflective thinking
66
Copyright © 2011 Pearson Education, Inc.
10) Dumping is defined as the situation in which
A) domestic producers sell a product at prices below the cost of production.
B) foreign producers sell a product at a price below the cost of production.
C) foreign producers sell a product at a price above a fair level.
D) domestic producers cut production to drive up domestic prices.
E) domestic producers are protected by tariffs.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: WM
AACSB: Reflective thinking
11) Which of the following is NOT a major argument for restricting international trade?
A) the promotion of dumping in America
B) the national security argument
C) the infant industry argument
D) the prevention of dumping argument
E) saves U.S. jobs argument
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: JC
AACSB: Reflective thinking
12) A flawed argument for protection from foreign trade is that
i. tariffs save domestic jobs.
ii. tariffs protect the national culture.
iii. quotas bring about diversity and stability.
A) i only.
B) ii only.
C) iii only.
D) i and ii.
E) i, ii, and iii.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: JC
AACSB: Reflective thinking
67
Copyright © 2011 Pearson Education, Inc.
13) Which of the following is an argument that is used for protection from free trade?
i. the national security argument
ii. the infant-industry argument
iii. the dumping argument
A) i only.
B) ii only.
C) iii only.
D) i and iii.
E) i, ii, and iii.
Skill: Level 1: Definition
Section: Checkpoint 9.4
Author: SB
AACSB: Reflective thinking
14) When politicians debated the North American Free Trade Agreement (NAFTA), some told
stories of U.S. workers whose jobs would be moved to Mexico. Which of the following
arguments in favor of protection was being used?
A) Save domestic jobs argument
B) National security argument
C) Anti-dumping argument
D) Infant-industry argument
E) Diversity and stability argument
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: TPS
AACSB: Reflective thinking
15) The argument that jobs are lost to free trade is
A) totally false because no jobs are lost to free trade.
B) correct because jobs are lost but foreign countries are helped and we can afford losses.
C) incorrect because no jobs are lost and new jobs are created by trade.
D) correct because some jobs are lost but incorrect because new jobs also are created.
E) true only when tariffs are imposed on the goods being imported.
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: WM
AACSB: Reflective thinking
68
Copyright © 2011 Pearson Education, Inc.
16) International trade decreases the demand for workers in domestic industries that
A) produce goods that are exported from the country.
B) produce goods that also are imported into the country.
C) help businesses import and export.
D) service imported goods.
E) produce the goods in which the nation has a comparative advantage.
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: SB
AACSB: Reflective thinking
17) What is an effective counter against the argument that international trade should be restricted
to protect domestic jobs?
A) A more effective policy would be to support the industry with subsidies.
B) The more diversified the economy, the more stable it is.
C) Free trade increases the number of jobs in which workers earn higher incomes.
D) Rent seeking behavior should be encouraged.
E) Free trade in "green" goods will increase jobs.
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: TS
AACSB: Reflective thinking
18) The typical relationship between a worker's productivity and the worker's wage rate is
A) high productivity workers receive low wage rates.
B) low productivity workers receive low wage rates.
C) no link between productivity and wages earned.
D) high productivity workers find that their jobs are often outsourced.
E) that workers with high productivity need to have their high wages protected by tariffs.
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: WM
AACSB: Reflective thinking
69
Copyright © 2011 Pearson Education, Inc.
19) While high-paid American workers fear competition with low-paid foreign workers, low-
paid foreign workers fear competition with high-paid American workers. Why?
A) It is completely irrational and unfounded.
B) Because America has such a large market it can protect its workers.
C) Because high wages reflect high worker productivity and the low-paid foreign workers are not
as productive.
D) Because high wages are the result of extensive tariff and other trade restrictions.
E) Because high wages mean that U.S. workers can buy more goods and services.
Skill: Level 5: Critical thinking
Section: Checkpoint 9.4
Author: TS
AACSB: Reflective thinking
20) What is the best hope for reducing environmental pollution in less-developed nations?
A) strong international standards for pollution control
B) free international trade that raises incomes in less-developed nations
C) boycott of polluting nation's products
D) limiting international trade
E) producing the goods in advanced, economically developed nations
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: TS
AACSB: Reflective thinking
21) The ________ are hurt by importing a good.
A) domestic consumers of the good
B) domestic producers of the good
C) domestic governments
D) foreign producers of the good
E) foreign governments
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: TS
AACSB: Reflective thinking
70
Copyright © 2011 Pearson Education, Inc.
22) When the United States imports goods from the rest of the world, which of the following
parties is harmed?
i. domestic producers of the good
ii. domestic consumers of the good
iii. foreign producers of the good
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: SB
AACSB: Reflective thinking
23) The two main reasons why international trade is restricted is because restricting trade means
that governments can ________ and because domestic businesses ________.
A) create jobs; earn profits
B) obtain revenue; rent seek
C) rent seek; want to dump
D) prevent dumping; want to dump
E) rent seek; obtain revenue
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: JC
AACSB: Reflective thinking
24) Comparing developed and developing nations in their use of tariffs, we see that
A) the developing nations' governments get very little revenue from tariffs.
B) both governments get large amounts of revenue from tariffs.
C) many developing nations' governments get a large portion of their revenue from tariffs.
D) developing nations almost never impose tariffs because they want their people to obtain
goods and services at the lowest possible price.
E) developed nations rely much more than developing nations on tariff revenue.
Skill: Level 2: Using definitions
Section: Checkpoint 9.4
Author: WM
AACSB: Reflective thinking
