47) Tariff rate quotas are common in agriculture, where their goal is to
A) reduce the use of synthetic fertilizers.
B) limit imports over quota.
C) increase agricultural imports.
D) increase foreign competition.
48) A quota rent is
A) a quota on trade imposed by the exporting country.
B) levied as a fixed charge for each unit of a good imported.
C) levied as a proportion of the value of the imported good.
D) the extra profit producers make when supply is artificially limited by an import quota.
49) Foreign producers typically agree to voluntary export restrictions because
A) their manufacturing capacity is limited.
B) they can divert their exports to other countries and charge more for their products.
C) they fear far more damaging punitive tariffs or import quotas might follow if they do not.
D) they are required to by the World Trade Organization.
50) 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.
51) According to ________, some specific fraction of a good must be produced domestically.
A) import quotas
B) voluntary export restraints
C) local content requirements
D) antidumping duties
52) According to the Buy America Act, if a company wishes to win a contract from a U.S.
government agency to provide some equipment, it must ensure that at least 51 percent of the
product by value is manufactured in the United States. This is an example of
A) antidumping duties.
B) voluntary export restraints.
C) import quotas.
D) local content requirements.
53) Local content regulations
A) protect domestic producers by limiting foreign competition.
B) lower the prices of imported components.
C) tend to benefit consumers and not producers.
D) encourage outsourcing of production units.
54) Administrative trade policies are
A) requirements that some specific fraction of a good be produced domestically.
B) quotas on trade imposed by the exporting country.
C) bureaucratic rules designed to make it difficult for imports to enter a country.
D) designed to punish foreign firms that engage in dumping.
55) 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
56) ________ 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
57) In 1997, two South Korean manufacturers of semiconductors, LG Semicon and Hyundai
Electronics, were accused of selling dynamic random access memory chips (DRAMs) in the U.S.
market at below their costs of production. It was alleged that the firms were trying to unload their
excess production in the United States. This is an example of
A) an ad valorem tariff.
B) a subsidy.
C) dumping.
D) an import quota.
58) 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
59) According to the infant industry argument, many developing countries have a potential
________ in manufacturing, but new manufacturing industries cannot initially compete with
established industries in developed countries.
A) absolute advantage
B) comparative advantage
C) opportunity cost
D) competitive advantage
60) 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
61) The U.S. government has used the threat of punitive trade sanctions to try to get the Chinese
government to enforce intellectual property laws. This is an example of government intervention
based on
A) human rights protection.
B) national security.
C) consumer protection.
D) retaliation.
62) According to the ________ argument, governments should temporarily support new industries
until they have grown strong enough to meet international competition.
A) retaliatory action
B) human rights
C) infant industry
D) antidumping
63) The infant industry argument is criticized because it relies on an assumption that
A) new manufacturing industries in developing nations can initially compete with established
industries in developed countries.
B) selling goods in a foreign market at below their “fair” market value is legally and ethically
justified.
C) the domestic industry in a developing nation lacks the capacity to meet demand.
D) firms are unable to make efficient long-term investments by borrowing money from the
domestic or international capital market.
64) According to the strategic trade policy argument,
A) government intervention is not required because firms can borrow money from the capital
markets to finance the required investments.
B) selling goods in a foreign market at below their “fair” market value is legally and ethically
justified.
C) government support can help domestic firms overcome the first-mover advantages enjoyed by
foreign competitors.
D) a government should use subsidies to support promising firms that are active in old, established
industries.
65) 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