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8) What is the dumping 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
9) When a tarif 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 deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
10) Dumping is deined 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 tarifs.
Skill: Level 1: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
51
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 deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
12) A lawed argument for protection from foreign trade is that
i. tarifs save domestic jobs.
ii. tarifs 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: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
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: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
52
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 deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical 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 aford losses.
C) incorrect because no jobs are lost and new jobs are created by trade.
D) somewhat correct because some jobs are lost but incorrect because new jobs also are
created.
E) true only when tarifs are imposed on the goods being imported.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
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 deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
53
17) What is an efective counter against the argument that international trade should be
restricted to protect domestic jobs?
A) A more efective policy would be to support the industry with subsidies.
B) The more diversiied 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 deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical 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 ind that their jobs are often outsourced.
E) that workers with high productivity need to have their high wages protected by tarifs.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
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 relect high worker productivity and the low-paid foreign workers
are not as productive.
D) Because high wages are the result of extensive tarif 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 18.3
Status: Old
AACSB: Analytical thinking
54
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 deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical 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 deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
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 deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
55
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 proits
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 deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
24) Comparing developed and developing nations in their use of tarifs, we see that
A) the developing nations' governments get very little revenue from tarifs.
B) both governments get large amounts of revenue from tarifs.
C) many developing nations' governments get a large portion of their revenue from tarifs.
D) developing nations almost never impose tarifs 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 tarif revenue.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
25) A major reason why it is diicult to lower the barriers to free trade is
A) that total beneits are less than total costs from free trade.
B) the uneven distribution of gains and losses from free trade.
C) the loss of jobs without any gain of jobs from free trade.
D) the inability to compensate losers from free trade.
E) that the barriers allow us to compete with cheap foreign labor.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
56
26) What is rent seeking with respect to restricting international trade?
A) The rent on factory buildings increases if trade is restricted.
B) The government avoids paying rent on buildings when importers pay the tarif.
C) An attempt to capture the gains from trade by imposing a tarif.
D) The government's eforts to capture tarif rents.
E) The attempt by importers to avoid paying a tarif.
Skill: Level 1: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
27) Which of the following groups gain from international trade?
i. producers of exported goods
ii. domestic consumers of imported goods
iii. workers in exporting irms
A) i only
B) ii only
C) iii only
D) i and iii
E) i, ii, and iii
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
28) Why are the losers from free international trade not fully compensated for their losses?
A) The amount of compensation needed would bankrupt the government.
B) The people who claim to lose are also the same ones who beneit.
C) Identifying all losers and the size of their losses is extremely diicult.
D) No one actually loses from international trade.
E) The losers are foreigners.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
57
29) Trade is often restricted because the
A) total gain to all producers is larger than the total loss to all consumers.
B) total gain to all producers is smaller than the total loss to all consumers.
C) gain per producer is larger than the loss per consumer.
D) gain per producer is less than the loss per consumer.
E) gain per consumer is larger than the loss per producer.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
30) The national security argument is used by those who assert they want to
A) increase imports as a way of strengthening their country.
B) increase exports as a way of earning money to strengthen their country.
C) limit imports that compete with domestic producers important for national defense.
D) limit exports to control the low of technology to third world nations.
E) limit all imports.
Skill: Level 1: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
31) The argument that it is necessary to protect a new industry to enable it to grow into a
mature industry that can compete in world markets is known as the
A) national security argument.
B) diversity argument.
C) infant-industry argument.
D) environmental protection argument.
E) national youth protection argument.
Skill: Level 1: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
58
32) ________ occurs when a foreign irm sells its exports at a lower price than its cost of
production.
A) Dumping
B) The trickle-down efect
C) Rent seeking
D) Tarif avoidance
E) Nontarif barrier protection
Skill: Level 1: Deinition
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
33) The United States
A) needs tarifs to allow us to compete with cheap foreign labor.
B) does not need tarifs to allow us to compete with cheap foreign labor.
C) should not trade with countries that have cheap labor.
D) will not beneit from trade with countries that have cheap labor.
E) avoids trading with countries that have cheap labor.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
34) Why do governments in less-developed nations impose tarifs?
A) The government gains revenue from the tarif.
B) The government's low-paid workers are protected from high-paid foreign workers.
C) The nation's total income will be increased.
D) The national security of the country deinitely is improved.
E) The government diversiies its economy.
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
59
35) What is a major reason international trade is restricted?
A) rent seeking
B) to allow competition with cheap foreign labor
C) to save jobs
D) to prevent dumping
E) to eliminate monopolies
Skill: Level 2: Using deinitions
Section: Checkpoint 18.3
Status: Old
AACSB: Analytical thinking
60
