47) If the U.S. Department of Education put out a contract for 150,000 laptop computers and the
contract stated that preference would be given to bids that declared at least 51 percent of the
materials by value in the computers were produced in the United States, which legislative act is
this stipulation based on?
A) Export Administration Act
B) Helms-Burton Act
C) Hawley-Burton Act
D) Buy America Act
E) Volcker Rule
48) ________ are put in place to make it difficult for imports to enter a country.
A) Free trade policies
B) Consumer regulations
C) Subsidies
D) Administrative trade policies
E) Open market plans
49) If France decides it wants to make it difficult for other countries to export wine to French
businesses and creates bottling standards that don’t exist anywhere else in the world, it would be
implementing ________ policies as a way to restrict these imports.
A) antidumping
B) voluntary export restraint
C) administrative trade
D) monopolistic competition
E) tariff rent
50) If Indonesia exports vast quantities of cheap textiles to Italy, selling them at below their costs
of production, it would be an example of
A) monopolism.
B) dumping.
C) offshoring.
D) nearshoring.
E) subsidizing.
51) Dumping takes place when foreign producers
A) attempt hostile takeovers of domestic firms and usurp the available resources for production.
B) indiscriminately exploit the natural resources of a foreign country to create a later demand that
can be met only by imports.
C) eliminate competition by subsidizing prices in a foreign market with home market profits and
eventually raising prices to earn substantial profits.
D) capture the niche market rather than the masses.
E) export only a small quantity of their products into an importing country.
52) Firms engage in dumping in order to
A) unload excess production in foreign markets.
B) cut labor costs to reduce the costs of production.
C) provide a wider range of products for consumers in foreign markets.
D) meet the voluntary export requirements imposed on it.
E) obtain subsidies from the importing country.
53) Ultimately, antidumping policies are put in place to
A) protect consumers from high prices.
B) prevent domestic firms from unloading their excess production in domestic markets.
C) protect domestic producers from unfair foreign competition.
D) protect consumers from substandard and hazardous products.
E) prevent foreign products from entering domestic market.
54) Arguments for international trade typically focus on political and ________ reasons.
A) theoretical
B) social
C) economic
D) ethical
E) human rights
55) Some governments “threaten” trade sanctions or other measures as a way to get another
government to enforce safety standards or enforce intellectual property laws. This method of
intervention is known as
A) diversification.
B) deregulation.
C) retaliation.
D) liberalization.
E) monopolization.
56) Why is retaliation by government intervention a risky strategy?
A) It encourages dumping by foreign companies.
B) It could result in increased tariff barriers by the country that is being pressured.
C) It may expose certain industries that are important for national security to foreign competition.
D) It allows firms to sell goods in the foreign market at below their fair market value.
E) It makes it difficult for domestic firms to make any investments by borrowing money from the
domestic capital market.
57) Paint products containing lead are banned from entering the United States. This ban is in place
to
A) protect domestic businesses from unfair pricing.
B) protest the pricing of paint below its costs of production.
C) protect consumers from unsafe products.
D) increase the trade surplus of the United States.
E) reduce dumping of lead paint.
58) The principal function of the trade sanctions the United States has in place against Cuba is to
A) prevent other countries from trading with Cuba.
B) aid Cuba in creating a direct trade route to the United States
C) create a nearby dumping site for large businesses.
D) impoverish Cuba to lead to the downfall of the communist government.
E) force Cuba to enter into the NATO agreement.
59) During the 1980s and 1990s, trade sanctions were put in place by Western governments
against South Africa in response to the apartheid policies in place there. These trade sanctions
were a response to
A) voluntary export restraints.
B) excess tariffs on imports.
C) decreasing birth rates.
D) human rights violations.
E) environmental abuses.
60) Many developing countries have a potential comparative advantage in manufacturing, but new
manufacturing industries cannot initially compete with well-established industries in developed
countries. This demonstrates the
A) economic development argument.
B) comparative advantage theory.
C) national security argument.
D) infant industry argument.
E) mixed economy theory.
61) Indonesia might have a potential comparative advantage in manufacturing textiles but is
unable to compete with established textile manufacturing in Japan, at least for the near future.
Indonesia could claim the
A) economic development argument.
B) comparative advantage theory.
C) national security argument.
D) infant industry argument.
E) mixed economy theory.
62) One of the main reasons why many economists remain critical of the infant industry argument
is its reliance on the assumption that
A) protection of manufacturing from foreign competition is harmful.
B) absolute advantage cannot sustain productivity of an industry.
C) foreign firms too come under the definition of infant industry when they newly enter a foreign
market.
D) firms are unable to make efficient long-term investments by borrowing money from the
domestic or international capital markets.
E) foreign competition will eventually cause domestic firms to improve the quality of their
products.
63) A major reason why many economists remain critical of the infant industry argument is
because it
A) makes the domestic industry inefficient.
B) does not provide guaranteed employment for citizens.
C) affects the standards of living and per capita income of the people.
D) promotes foreign direct investment.
E) leads to reduced prices in domestic markets.
64) According to ________, a government should use subsidies to support promising firms that are
active in newly emerging industries.
A) strategic trade policy
B) public policy
C) absolute advantage
D) product life-cycle theory
E) industrialization
65) Paul Krugman believed that a country that attempts to use strategic trade policy to establish a
domestic firm in a dominant position in a global industry, is most likely to
A) dominate the industry.
B) move away from protectionism.
C) provoke retaliation.
D) incur huge financial debts.
E) upset the special-interest groups within the economy.
66) According to Krugman, ________ is the best indicator of the dangers of a strategic trade
policy.
A) a decrease in subsidies
B) a decrease in protectionism
C) the occurrence of a trade war
D) huge financial debts for the countries involved
E) the occurrence of a global recession
67) AllMetal Corp., based in Houston, believes the ideal way for the United States to respond
when foreign competitors are already being supported by government subsidies is not to retaliate
but to establish rules that help minimize trade-distorting subsidies. Which theorist does AllMetal’s
management agree with?
A) Krugman
B) Hofstede
C) Hamilton
D) Heckscher-Ohlin
E) Ricardo
68) Another basis for Krugman’s argument is that strategic trade policy can be captured by
________, which will distort the policy so it benefits their own needs.
A) consumers
B) special-interest groups
C) government committees
D) state-owned businesses
E) national leaders
69) The first official government policy for free trade occurred in which country?
A) China
B) Great Britain
C) United States
D) Germany
E) Argentina
70) The Smoot-Hawley Act tried to divert consumer demand away from foreign products by
A) subsidizing domestic businesses.
B) establishing tariff barriers.
C) exporting more products to Europe.
D) demanding local content requirements.
E) creating a trade deal with Canada and Mexico.
71) The Smoot-Hawley Act had a damaging effect on
A) the balance-of-payment of the United States.
B) cash flow in the domestic economy of the United States.
C) prices of natural resources in the United States.
D) employment abroad.
E) accrued liabilities of the United States.
72) Which multilateral trade agreement was established under U.S. leadership in 1947, with the
objective to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like?
A) General Agreement on Tariffs and Trade (GATT)
B) North American Free Trade Agreement (NAFTA)
C) Central American Free Trade Agreement (CAFTA)
D) Free Trade Areas of the Americas (FTAA)
E) North Atlantic Treaty Organization (NATO)
73) The ultimate purpose of GATT was to
A) promote U.S. imports of electronics.
B) diminish U.S. exports.
C) subsidize agricultural workers.
D) safeguard intellectual property rights.
E) establish free trade.
74) One of the reasons why protectionist pressures arose around the world during the 1980s was
A) the different ways many countries found to get around GATT regulations.
B) the opening up of national markets to cheap products from China.
C) the fall of the Soviet Union.
D) the persistent trade lead taken by the United States.
E) the Japanese failure in industries such as automobiles and semiconductors that strained the
world trading system.
75) The economic prosperity enjoyed by ________ during the 1980s and 1990s strained the world
trading system and created the demand for increased protectionist measures.
A) the United States
B) India
C) the Soviet Union
D) Japan
E) China
76) Bilateral voluntary export restraints, or VERs, circumvented GATT agreements because
A) these nations withdrew their membership to the GATT.
B) the member nations had ceased to recognize GATT as a regulatory body for international trade.
C) VERs were not a recognized trade barrier under the GATT constitution.
D) neither the importing country nor the exporting country complained to the GATT bureaucracy
for it to take action.
E) member nations erected a wall of tariff barriers.
77) What is one provision of the Uruguay Round Agreement?
A) A wide range of services were to be excluded from GATT fair trade and market access rules.
B) Tariffs on industrial goods were to be raised by more than one-third, and tariffs were to be
scrapped on more than 50 percent on a wide range of services.
C) The International Monetary Fund (IMF) was to be created to implement the GATT agreement.
D) Barriers on trade in textiles were to be significantly reduced over 10 years.
E) Average tariff rates imposed by developed nations on manufactured goods were to be raised by
20 percent of the value, the highest level in modern history.
78) What is one major advantage the World Trade Organization had over the GATT agreement?
A) Disagreements with the GATT policy were punishable by law.
B) Procedures under the WTO had strict time limits.
C) The WTO was not allowed to make rulings on intellectual property.
D) The WTO procedures had to be mandated by the federal government.
E) The procedures under GATT could only be between two nations.
79) The WTO’s Agreement on ________ is an attempt to narrow the gaps in the way intellectual
property rights are protected around the world and to bring them under common international
rules.
A) Intellectual Property Rights Enforcement Directive (IPRED)
B) Court of Arbitration of Intellectual Property (CAIP)
C) Trade-Related Aspects of Intellectual Property Rights (TRIPS)
D) Intellectual Property Rights Enforcement and Resolution (IPRER)
E) International Body on Intellectual Property (IBIP)
80) GATS, a sister body of the World Trade Organization, is responsible for extending free trade
agreements in what area?
A) services
B) commodities
C) intellectual property
D) agriculture
E) start-up companies