1.
The imposition of a tariff on imported steel for the home country results in:
a.
Improving terms of trade and rising volume of trade
b.
Higher steel prices and falling steel consumption
c.
Lower profits for domestic steel companies
d.
Higher unemployment for domestic steel workers
2. Which of the following refers to a market-sharing pact negotiated by trading partners to moderate the intensity of
international competition?
a.
Orderly marketing agreement
b.
Local content requirements
c.
Import quota
d.
Trigger price mechanism
United States – BPROG: Reflective Thinking – BPROG: Analysis
Export Quotas
BLOOM’S: Knowledge
3. Suppose the United States and Japan enter into a voluntary export agreement in which Japan imposes an export quota
on its automakers. The largest share of the export quota’s “revenue effect” would tend to be captured by:
a.
The U.S. government
b.
Japanese automakers
c.
American auto consumers
d.
American autoworkers
United States – BPROG: Reflective Thinking – BPROG: Analysis
Export Quotas
BLOOM’S: Comprehension
4. Suppose the government grants a subsidy to domestic producers of an import-competing good. The subsidy tends to
result in deadweight losses for the domestic economy in the form of the:
United States – BPROG: Reflective Thinking – BPROG: Analysis
Absolute Import Quota
BLOOM’S: Comprehension
a.
Consumption effect
b.
Redistribution effect
c.
Revenue effect
d.
Protective effect
5. Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic
subsidies. This is because, unlike domestic subsidies, import tariffs and quotas:
a.
b.
c.
d.
United States – BPROG: Reflective Thinking – BPROG: Analysis
BLOOM’S: Comprehension
6. Suppose the government grants a subsidy to its export firms that permits them to charge lower prices on goods sold
abroad. The export revenue of these firms would rise if the foreign demand is:
a.
Elastic in response to the price reduction
b.
Inelastic in response to the price reduction
c.
Unit elastic in response to the price reduction
d.
None of the above
United States – BPROG: Reflective Thinking – BPROG: Analysis
BLOOM’S: Comprehension
7. Because export subsidies tend to result in domestic exporters charging lower prices on their goods sold overseas, the
home country’s:
a.
Export revenues will decrease
b.
Export revenues will rise
United States – BPROG: Reflective Thinking – BPROG: Analysis
BLOOM’S: Comprehension
c.
Terms of trade will worsen
d.
Terms of trade will improve
8. Which trade restriction stipulates the percentage of a product’s total value that must be produced domestically in order
for that product to be sold domestically?
a.
Import quota
b.
Orderly marketing agreement
c.
Local content requirement
d.
Government procurement policy
c
Easy
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
Domestic Content Requirements
BLOOM’S: Comprehension
9. The imposition of a domestic content requirement by the United States would cause consumer surplus for Americans
to:
a.
Rise
b.
Fall
c.
Remain unchanged
d.
None of the above
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
Domestic Content Requirements
BLOOM’S: Comprehension
10. Domestic content legislation applied to autos would tend to:
a.
Support wage levels of American autoworkers
b.
Lower auto prices for American autoworkers
c.
Encourage American automakers to locate production overseas
d.
Increase profits of American auto companies
a
c
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Subsidies
BLOOM’S: Comprehension
11. Compared to an import quota, an equivalent tariff may provide a less certain amount of protection for home producers
since:
a.
A tariff has no deadweight loss in terms of production and consumption
b.
Foreign firms may absorb the tariff by offering exports at lower prices
c.
Tariffs are effective only if home demand is perfectly elastic
d.
Quotas do not result in increases in the price of the imported good
United States – BPROG: Reflective Thinking – BPROG: Analysis
Absolute Import Quota
BLOOM’S: Comprehension
12. Empirical studies show that because voluntary export quotas are typically administered by exporting countries, foreign
exporters tend to:
a.
Raise their export prices, thus capturing much of the quota’s revenue effect
b.
Lower their export prices, thus losing much of the quota’s revenue effect
c.
Raise their export prices, thus selling more goods overseas
d.
Lower their export prices, thus selling fewer goods overseas
United States – BPROG: Reflective Thinking – BPROG: Analysis
Export Quotas
BLOOM’S: Comprehension
13. Concerning the restrictive impact of an import quota, assume there occurs an increase in the domestic demand for the
import product. As long as the quota falls short of what would be imported under free market conditions, the economy’s
adjustment to the increase in demand would take the form of:
a.
A decrease in domestic production of the import good
b.
An increase in the amount of the good being imported
c.
An increase in the domestic price of the import good
d.
A decrease in domestic consumption of the import good
United States – BPROG: Reflective Thinking – BPROG: Analysis
Domestic Content Requirements
14. Assume the U.S. has a competitive advantage in producing calculators, while the rest of the world has a competitive
advantage in steel. Suppose the U.S. and the rest of the world enter into an agreement to lower import quotas below
existing levels on calculators and steel. Which of the following would least likely occur for the U.S.? Rising levels of:
a.
Consumer surplus for American buyers of steel
b.
Producer surplus for American steelmakers
c.
Production in the American calculator industry
d.
Producer surplus for American calculator producers
United States – BPROG: Reflective Thinking – BPROG: Analysis
Absolute Import Quota
BLOOM’S: Comprehension
15. A firm that faces problems of falling sales and excess productive capacity might resort to international dumping if it:
a.
Can charge higher prices in markets that are elastic to price changes
b.
Earns revenues on foreign sales that at least cover variable costs
c.
Can sell at that price where domestic and foreign demand elasticities equate
d.
Is able to force foreign prices below marginal production costs
United States – BPROG: Reflective Thinking – BPROG: Analysis
BLOOM’S: Comprehension
16. A producer successfully practicing international dumping would charge:
a.
A relatively higher price in the more inelastic market
b.
A relatively higher price in the more elastic market
c.
The same price in all markets, regardless of their elasticities
d.
Different prices in all markets, regardless of their elasticities
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – PA – DESC: International Trade and Fi – DESC: International Trade and
United States – 6
Absolute Import Quota
BLOOM’S: Comprehension
17. Anti-dumping law has been called unfair for all of the following reasons EXCEPT:
a.
they do not reflect currency fluctuations
b.
they are based on average variable cost
c.
they are based on average total cost
d.
all of these are reasons to call these laws unfair
United States – BPROG: Reflective Thinking – BPROG: Analysis
BLOOM’S: Comprehension
18. The United Auto Workers union attempted to win the approval of legislation that would moderate the practice of
foreign sourcing on the part of American auto manufacturers. Which of the following best represents this legislation?
a.
Voluntary export quotas
b.
Trigger price mechanism
c.
Tariff quotas
d.
Local content laws
United States – BPROG: Reflective Thinking – BPROG: Analysis
Domestic Content Requirements
BLOOM’S: Knowledge
19. The U.S.-Japaneses agreement in 1981 to limit imports of small Japanese cars to the U.S.
a.
affected Japanese automakers uniformly
b.
resulted in losses to the Japanese auto industry
c.
cost the U.S.consumer an extra $660 or so per Japanese import purchased
d.
did not save any U.S. jobs
United States – BPROG: Reflective Thinking – BPROG: Analysis
Export Quotas
BLOOM’S: Comprehension
BLOOM’S: Comprehension
20. If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then:
a.
The quota results in efficiency reductions but the tariff does not
b.
The tariff results in efficiency reductions but the quota does not
c.
They have different impacts on how much is produced and consumed
d.
They have different impacts on how income is distributed
21. If a tariff and an import quota lead to equivalent increases in the domestic price of steel, then:
a.
The quota results in efficiency reductions but the tariff does not
b.
The tariff results in efficiency reductions but the quota does not
c.
They have identical impacts on how much is produced and consumed
d.
They have identical impacts on how income is distributed
United States – BPROG: Reflective Thinking – BPROG: Analysis
Absolute Import Quota
BLOOM’S: Comprehension
22. From the perspective of the American public as a whole, export subsidies levied by overseas governments on goods
sold to the United States:
a.
Help more than they hurt
b.
Hurt more than they help
c.
Are equivalent to an import quota
d.
Are equivalent to an export quota
United States – BPROG: Reflective Thinking – BPROG: Analysis
BLOOM’S: Comprehension
23. Export subsidies levied by foreign governments on products in which the United States has a comparative
disadvantage:
a.
Lower the welfare of all Americans
b.
Lead to increases in U.S. consumer surplus
United States – BPROG: Reflective Thinking – BPROG: Analysis
Absolute Import Quota
BLOOM’S: Comprehension
c.
Encourage U.S. production of competing goods
d.
Encourage U.S. workers to demand higher wages
24. If import licenses are auctioned off to domestic importers in a competitive market, their scarcity value (revenue effect)
accrues to:
a.
Foreign corporations
b.
Foreign workers
c.
Domestic corporations
d.
The domestic government
United States – BPROG: Reflective Thinking – BPROG: Analysis
Absolute Import Quota
BLOOM’S: Comprehension
25. A specification of a maximum amount of a foreign produced good that will be allowed to enter the country over a
given time period is referred to as:
a.
A domestic subsidy
b.
An export subsidy
c.
An import quota
d.
An export quota
United States – 6
Absolute Import Quota
BLOOM’S: Comprehension
26. Import quotas tend to lead to all of the following except:
a.
Domestic producers of the imported good being harmed
b.
Domestic consumers of the imported good being harmed
c.
Prices increasing in the importing country
d.
Prices falling in the exporting country
United States – BPROG: Reflective Thinking – BPROG: Analysis
Absolute Import Quota
BLOOM’S: Comprehension
27. To maintain that South Koreans are dumping their VCRs in the United States is to maintain that:
a.
Koreans are selling VCRs in the United States below their production cost
b.
Koreans are selling VCRs in the United States above their production cost
c.
The cost of manufacturing VCRs in Korea is lower in Korea than in the United States since wages are lower in
Korea
d.
The cost of manufacturing VCRs in Korea is higher in Korea than in the United States since wages are higher
in Korea
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – PA – DESC: International Trade and Fi – DESC: International Trade and
BLOOM’S: Comprehension
28. If the home country’s government grants a subsidy on a domestically produced good, domestic producers tend to:
a.
Capture the entire subsidy in the form of higher profits
b.
Increase their level of production
c.
Reduce wages paid to domestic workers
d.
Consider the subsidy as an increase in production cost
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – PA – DESC: International Trade and Fi – DESC: International Trade and
BLOOM’S: Comprehension
29. Government subsidies may take the form of all of these EXCEPT:
a.
cash disbursements
b.
tax breaks
c.
bank credits
d.
insurance arrangements
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – BPROG: Reflective Thinking – BPROG: Analysis
United States – PA – DESC: International Trade and Fi – DESC: International Trade and
Finance
Absolute Import Quota
30. In certain industries, Japanese employers do not lay off workers. Therefore, they sometimes have excess supplies of
goods that they cannot sell on the home market without lowering prices. To hold down losses, they sell goods in overseas
markets at prices well beneath those in Japan. This practice is best referred to as:
a.
Orderly marketing
b.
Trigger pricing
c.
Domestic content pricing
d.
Dumping
Moderate
United States – BPROG: Reflective Thinking – BPROG: Analysis
Finance
Dumping
BLOOM’S: Comprehension
Figure 5.1 illustrates the steel market for Mexico, assumed to be a “small” country that is unable to affect the world price.
Suppose the world price of steel is given and constant at $200 per ton. Now suppose the Mexican steel industry is able to
obtain trade protection.
Figure 5.1. Alternative Nontariff Trade Barriers Levied by a “Small” Country
31. Consider Figure 5.1. With free trade, the quantity of steel imported by Mexico equals:
Subsidies
BLOOM’S: Knowledge
a.
2 tons
b.
4 tons
c.
6 tons
d.
8 tons
32. Consider Figure 5.1. With free trade, Mexico’s consumer surplus and producer surplus respectively equal:
a.
$2000 and $1200
b.
$3200 and $200
c.
$3600 and $800
d.
$4000 and $600
United States – BPROG: Analytic
BLOOM’S: Analysis
33. Referring to Figure 5.1, suppose the Mexican government imposes an import quota equal to 2 tons of steel.
If Mexican steel importers behave as monopoly buyers and foreign exporters behave as competitive sellers, the overall
welfare loss of the quota to Mexico equals:
a.
$200
b.
$400
c.
$600
d.
$800
United States – BPROG: Analytic
BLOOM’S: Analysis
34. Referring to Figure 5.1, suppose the Mexican government imposes an import quota equal to 2 tons of steel.
If foreign exporters behave as monopoly sellers, and Mexican importers behave as competitive buyers, the overall welfare
United States – BPROG: Analytic
BLOOM’S: Analysis
loss of the quota to Mexico equals:
a.
$200
b.
$400
c.
$600
d.
$800
35. Referring to Figure 5.1, suppose the Mexican government imposes an import quota equal to 2 tons of steel.
If the Mexican government auctions import licenses to the highest foreign bidder, the overall welfare loss of the quota to
Mexico equals:
a.
$200
b.
$400
c.
$600
d.
$800
United States – BPROG: Analytic
BLOOM’S: Analysis
36. Consider Figure 5.1. Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as
indicated by the supply schedule SM (with subsidy).
The quantity of imports equals:
a.
1 ton
b.
2 tons
c.
3 tons
d.
4 tons
United States – BPROG: Analytic
BLOOM’S: Analysis
United States – BPROG: Analytic
BLOOM’S: Analysis
37. Consider Figure 5.1. Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as
indicated by the supply schedule SM (with subsidy).
The total cost of the subsidy to the Mexican government equals:
a.
$200
b.
$400
c.
$600
d.
$800
38. Consider Figure 5.1. Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as
indicated by the supply schedule SM (with subsidy).
As a result of the subsidy Mexican steel producers gain ____ of producer surplus.
a.
$200
b.
$400
c.
$600
d.
$800
39. Consider Figure 5.1. Suppose instead that the Mexican government provides a subsidy of $200 per ton to its steel
producers, as indicated by the supply schedule SM (with subsidy).
As a result of the subsidy, the welfare loss to Mexico due to inefficient domestic production equals:
a.
$200
b.
$400
c.
$600
d.
$800
40. Consider Figure 5.1. Suppose the Mexican government provides a subsidy of $200 per ton to its steel producers, as
indicated by the supply schedule SM (with subsidy).
The overall deadweight welfare loss to Mexico equals:
a.
$200
b.
$400
c.
$600
d.
$800
41. Consider Figure 5.1. Suppose the rest of the world voluntarily agrees to reduce steel shipments to Mexico vis-a-vis an
export quota equal to 2 tons.
Assuming Mexican importers behave as competitive buyers while foreign exporters behave as monopoly sellers, the
overall welfare loss of the quota to Mexico is:
a.
$200
b.
$400
c.
$600
d.
$800
42. Consider Figure 5.1. Suppose the rest of the world voluntarily agrees to reduce steel shipments to Mexico vis-a-vis an
export quota equal to 2 tons.
Assuming Mexican importers behave as monopoly buyers while foreign exporters behave as competitive sellers, the
overall welfare loss of the quota to Mexico is:
a.
$200
b.
$400
c.
$600
d.
$800
Figure 5.2 illustrates the revenue and cost conditions of ABC Inc. which sells calculators in Canada and France.
Figure 5.2. International Dumping
43. Consider Figure 5.2. In the absence of international dumping, ABC Inc. maximizes profits by selling ____ calculators
at a price of $____; the firm realizes profits totaling $____.
a.
27, $5, $54
b.
27, $5, $36
c.
24, $4, $46
d.
24, $4, $28
44. Referring to Figure 5.2, consider if ABC Inc. sells 27 calculators at a price of $5 each, realizing profits totaling $54.
Of this quantity, ABC Inc. sells ____ calculators in Canada and realizes revenues totaling $____; the firm sells ____
calculators in France and realizes revenues totaling $____.
a.
15, $35, 9, $45
b.
15, $45, 9, $35
c.
21, $105, 6, $30
d.
21, $30, 6, $105
45. Consider Figure 5.2. With international dumping, ABC Inc. sells ____ calculators to Canadian buyers at a price of
$____ and ____ calculators to French buyers at a price of $____.
a.
15, $4, 12, $7
b.
15, $7, 12, $4
c.
9, $5, 15, $6
d.
9, $6, 15, $5
United States – BPROG: Analytic
BLOOM’S: Analysis
46. Consider Figure 5.2. Compared with the total revenue and total profit that ABC Inc. realizes in the absence of
dumping, with dumping the firm attains a:
a.
Fall in revenue of $18; fall in profits of $15
b.
Fall in revenue of $18, fall in profits of $18
c.
Rise in revenue of $18, rise in profits of $15
d.
Rise in revenue of $18, rise in profits of $18
United States – BPROG: Analytic
BLOOM’S: Analysis
Figure 5.3 illustrates the apple market for Sweden, assumed to be a “small” country that is unable to affect the world
price. SSweden is the domestic supply and DSweden is the domestic demand. SSweden+Quota is Sweden’s supply schedule with
an import quota.
Figure 5.3. Sweden’s Apple Market
United States – BPROG: Analytic
47. Consider Figure 5.3. In the absence of trade, Sweden’s equilibrium price and quantity of apples would be:
a.
$0.60 and 22 pounds
b.
$0.60 and 14 pounds
c.
$1.00 and 18 pounds
d.
$1.40 and 14 pounds
48. Consider Figure 5.3. Suppose the rest of the world can supply apples to Sweden at a price of $0.60 per pound. With
free trade, Sweden produces ____ pounds of apples and imports ____ pounds of apples.
a.
10, 8
b.
10, 18
c.
6, 22
d.
6, 16
United States – BPROG: Analytic
Absolute Import Quota
United States – BPROG: Analytic
Absolute Import Quota
BLOOM’S: Analysis
49. Consider Figure 5.3. At the free-trade price of $0.60 per pound, Sweden’s consumer surplus totals $____ and producer
surplus totals $____.
a.
$10.80, $2.40
b.
$14.60, $3.90
c.
$24.20, $1.80
d.
$32.40, $2.30
United States – BPROG: Analytic
Absolute Import Quota
BLOOM’S: Analysis
50. Consider Figure 5.3. If SSweden+Quota represents the supply schedule after a quota is levied, Sweden’s imports will
equal:
a.
6 apples
b.
8 apples
c.
10 apples
d.
12 apples
United States – BPROG: Analytic
Absolute Import Quota
BLOOM’S: Analysis
51. Consider Figure 5.3. After the quota is levied, the price of apples in Sweden will equal:
a.
$0.60 per pound
b.
$1.00 per pound
c.
$1.40 per pound
d.
$1.80 per pound
United States – BPROG: Analytic
Absolute Import Quota
BLOOM’S: Analysis
52. Consider Figure 5.3. As a result of the quota, Sweden’s consumer surplus:
BLOOM’S: Analysis
a.
Increases by $6
b.
Increases by $8
c.
Decreases by $6
d.
Decreases by $8
53. Consider Figure 5.3. The quota leads to a deadweight welfare loss for Sweden of an amount equaling:
a.
$0.80
b.
$1.60
c.
$2.40
d.
$3.20
Challenging
United States – BPROG: Analytic
BLOOM’S: Analysis
54. Consider Figure 5.3. The quota’s revenue effect equals:
a.
$1.60
b.
$2.40
c.
$3.20
d.
$4.00
c
Challenging
United States – BPROG: Analytic
graphs
Absolute Import Quota
BLOOM’S: Analysis
55. Consider Figure 5.3. Assume that Swedish import companies behave as competitive buyers while foreign export
companies behave as a monopoly seller. Compared to free trade, Sweden’s import quota results in domestic welfare:
a.
Gains totaling $3.20
b.
Gains totaling $4.80
c.
Losses totaling $3.20
Challenging
United States – BPROG: Analytic
Absolute Import Quota
BLOOM’S: Analysis
d.
Losses totaling $4.80
56. Consider Figure 5.3. Assume that Swedish import companies behave as a monopoly buyer while foreign export
companies behave as competitive sellers. Compared to free trade, Sweden’s import quota results in domestic welfare:
a.
Gains totaling $1.60
b.
Gains totaling $3.20
c.
Losses totaling $1.60
d.
Losses totaling $3.20
c
Challenging
United States – BPROG: Analytic
Absolute Import Quota
BLOOM’S: Analysis
57. Consider Figure 5.3. If the Swedish government auctions import licenses to the highest bidder in a competitive
market, it could realize revenues of up to:
a.
$3.20
b.
$4.00
c.
$4.80
d.
$5.60
a
Challenging
United States – BPROG: Analytic
Absolute Import Quota
BLOOM’S: Analysis
Figure 5.4 illustrates the calculator market for Venezuela, assumed to be a “small” country that is unable to affect the
world price. SVenezuela is the domestic supply schedule and DVenezuela is the domestic demand schedule.
Figure 5.4. Venezuelan Calculator Market
Challenging
United States – BPROG: Analytic
Absolute Import Quota
BLOOM’S: Analysis