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Answer: A
Topic: Quota
Skill: Level 1: Deinition
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
48) When governments specify the maximum amount of a good that may be imported in a
given period of time, they are establishing a
A) tarif.
B) quota.
C) dynamic tarif.
D) tax.
E) dumping limit.
Skill: Level 1: Deinition
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
49) A speciied maximum amount of the good that may be imported in a given period of
time is a
A) forcible limit.
B) quota.
C) tarif.
D) sanction.
E) dumping limit.
Skill: Level 1: Deinition
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
41
50) The imposition of a quota ________ domestic production, ________ imports, and ________
domestic purchases.
A) increases; decreases; decreases
B) increases; decreases; increases
C) decreases; increases; decreases
D) decreases; decreases; decreases
E) increases; increases; increases
Skill: Level 3: Using models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
51) Of the following, who gains with a quota?
A) domestic buyers of the good or service
B) the importer of the good or service
C) the foreign exporter of the good or service
D) the government of the importing nation
E) the government of the exporting nation
Skill: Level 2: Using deinitions
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
52) If the United States imposed a quota on the amount of salmon imported from Chile, the
result would be ________ salmon prices in the United States and ________ in the quantity of
salmon demanded in the United States.
A) higher; an increase
B) higher; a decrease
C) lower; an increase
D) lower; a decrease
E) higher; no change
Skill: Level 3: Using models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
42
53) If a quota is imposed on imports of shrimp into the United States, U.S. consumers
________ and U.S. producers ________.
A) gain; gain
B) gain; lose
C) lose; gain
D) lose; lose
E) gain; are unafected
Skill: Level 4: Applying models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
54) If an import quota is imposed on imports of shrimp into the United States, U.S.
consumers ________ and the U.S. economy will ________.
A) gain; gain
B) gain; lose
C) lose; gain
D) lose; lose
E) gain; be unafected
Skill: Level 4: Applying models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
55) If an import quota is imposed on imports of shrimp into the United States, U.S.
producers ________ and the U.S. economy will ________.
A) gain; gain
B) gain; lose
C) lose; gain
D) lose; lose
E) gain; be unafected
Skill: Level 4: Applying models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
43
56) The above igure shows the U.S. market for 1 carat diamonds. With free trade,
Americans buy ________ diamonds and pay a price of ________ per diamond.
A) 500,000; $4,000
B) 300,000; $3,000
C) 700,000; $3,000
D) 300,000; $4,000
E) 900,000; $2,000
Skill: Level 3: Using models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
57) The above igure shows the U.S. market for 1 carat diamonds. With free trade, the
United States produces ________ diamonds and imports ________ diamonds.
A) 300,000; 600,000
B) 0; 900,000
C) 100,000; 900,000
D) 100,000; 800,000
E) 500,000; 400,000
Skill: Level 3: Using models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
44
58) The above igure shows the U.S. market for 1 carat diamonds. Suppose the United
States imposes the import quota shown in the igure. With the import quota, how many
diamonds can be imported?
A) 500,000
B) 700,000
C) 400,000
D) 900,000
E) 300,000
Skill: Level 3: Using models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
59) The above igure shows the U.S. market for 1 carat diamonds. The free trade, the price
in the United States for diamonds is equal to ________ and with the quota illustrated in the
igure, the price in the United States is equal to ________.
A) $4,000; $2,000
B) $2,000; $3,000
C) $4,000; $3,000
D) $2,000; $2,000
E) $2,000; $4,000
Skill: Level 3: Using models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
60) The above igure shows the U.S. market for 1 carat diamonds. With free trade, U.S.
production of diamonds is equal to ________ diamonds. When the quota illustrated in the
igure is in place, U.S. production is equal to ________ diamonds.
A) 100,000; 300,000
B) 100,000; 500,000
C) 300,000; 100,000
D) 300,000; 500,000
E) 900,000; 700,000
Skill: Level 3: Using models
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
45
61) If the United States negotiates a voluntary export restraint with international sugar
producing nations, then
A) U.S. sugar buyers pay a lower price for sugar.
B) U.S. sugar producers produce a smaller quantity.
C) imports of sugar increase.
D) the U.S. government collects less revenue than if it imposed a tarif on sugar.
E) the foreign governments collect more revenue than if a tarif is imposed on sugar.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
62) Which of the following methods of restricting trade does NOT harm the overall
economy?
A) a tarif
B) a quota
C) a voluntary export restraint
D) Both answers A and B are correct.
E) None of the above answers is correct because all the methods harm the overall economy.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
63) A tax on a good that is imposed when it is imported is called
A) an import quota.
B) a VER.
C) a tarif.
D) a sanction.
E) a border tax.
Skill: Level 1: Deinition
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
46
64) The average U.S. tarif was highest in the
A) 1930s.
B) 1940s.
C) 1970s.
D) 1980s.
E) 1990s.
Skill: Level 1: Deinition
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
65) Suppose the world price of a shirt is $10. If the United States imposes a tarif 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 deinitions
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
66) When a tarif 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 deinitions
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
47
67) When a tarif 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 deinitions
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
68) Which of the following parties beneits from an import quota but not from a tarif?
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 deinitions
Section: Checkpoint 18.2
Status: Old
AACSB: Analytical thinking
18.3 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: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
48
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 irms from dumping by foreign companies.
D) A country must protect its consumers from foreign inluences.
E) A country must preserve its jobs.
Skill: Level 1: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
3) What is the national security argument to support protection from international trade?
A) Domestic irms must be protected until they gain a comparative advantage.
B) Any irm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic irms 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: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
4) What is the infant-industry argument for protection from international trade?
A) Domestic irms must be protected until they gain a comparative advantage.
B) Any irm necessary in wartime must be protected.
C) Foreign producers selling below cost to drive domestic irms 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: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
49
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: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical 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 irms to dump in the United States.
Skill: Level 1: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
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 irms.
E) saving jobs in the U.S. economy.
Skill: Level 1: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
50
