94. Economic theory suggests that if France is a net importer of automobiles, whose production is subsidized by the
Korean government, the overall welfare of France decreases because of the Korean subsidy.
a.
True
b.
False
False
Moderate
95. An antidumping duty levied on imports of foreign-produced steel leads to an increase in consumer surplus in the home
country.
a.
True
b.
False
False
Moderate
Finance
96. U.S. antidumping duties are intended to neutralize exports to the United States at prices below average total cost or
exports to the United States at prices lower than those charged in the exporter’s home market.
a.
True
b.
False
True
Moderate
Finance
True
Moderate
97. Intellectual property refers to holdings of rare books and pieces of art that are traded on the world market.
a.
True
b.
False
98. Copyrights, trademarks, and patents are used to protect the intellectual property of a nation from foreign imitators.
a.
True
b.
False
True
Moderate
99. Under the trade adjustment assistance program, a domestic firm or worker can file for governmental assistance only if
it demonstrates that it suffered economic hardship due to imports of foreign-subsidized goods.
a.
True
b.
False
False
Moderate
100. Industrial policy attempts to foster the development of industries that offer long-run comparative disadvantages and
which are insulated from other sectors of the economy.
a.
True
b.
False
False
Moderate
False
Moderate
101. During the post World War II era, the United States has adopted explicit industrial policies similar to those of France
and Japan.
a.
True
b.
False
False
Moderate
102. Industrial policies of the U.S. government have included subsidizing particular firms to promote national champions,
nationalizing basic industries, and encouraging cartelization of industries.
a.
True
b.
False
False
Moderate
Finance
103. The Export-Import Bank provides export-credit subsidies to U.S. producers of agricultural goods.
a.
True
b.
False
False
Moderate
104. Major beneficiaries of export-credit subsidies, granted by the Export-Import Bank, have included U.S. producers of
aircraft, telecommunications, and power-generating equipment.
a.
True
b.
False
True
Finance
105. The Commodity Credit Corporation makes available export credit financing for U.S. agricultural exports.
a.
True
b.
False
True
Moderate
106. As a way of helping U.S. business firms trade in the world market on a more equal terms with their organized foreign
competitors, the U.S. government permits them to form export trade associations and export trading companies.
a.
True
b.
False
True
Moderate
107. If the U.S. government pursued a “knowledge-based growth policy,” it would subsidize particular firms to help them
compete in the world economy.
a.
True
b.
False
False
Moderate
108. In the post World War II era, the Japanese government formed industrial policies to encourage the development of its
Moderate
steel, auto, shipbuilding, and machine tool industries.
a.
True
b.
False
109. Unlike Japan and the United States, France has refrained from forming explicit industrial policies to enhance the
competitiveness of its national champions.
a.
True
b.
False
False
Moderate
110. According to the strategic- trade- policy hypothesis, governmental subsidies granted to domestic producers can help
them in capturing economic profits from foreign competitors.
a.
True
b.
False
True
Moderate
111. The strategic-trade-policy hypothesis assumes that domestic firms operate under increasing cost conditions as well as
in perfectly competitive markets.
a.
True
b.
False
False
Moderate
True
Moderate
Finance
112. According to the strategic-trade-policy hypothesis, government can alter the terms of competition to favor domestic
companies, thus increasing their profits at the expense of their rivals.
a.
True
b.
False
True
Moderate
113. The classical theory of comparative advantage assumes that firms operate in imperfectly competitive markets, while
the theory of strategic trade policy assumes that firms operate in perfectly competitive markets.
a.
True
b.
False
False
Moderate
Finance
114. According to the strategic-trade-policy hypothesis, a subsidy granted to domestic exporters may lead to increased
export profits which more than offset the cost of the subsidy to domestic taxpayers.
a.
True
b.
False
True
Moderate
115. By reducing available supplies of a product, an export embargo leads to falling prices in the target nation and
increasing target-nation consumer surplus.
a.
True
b.
False
Finance
116. Assume that the United States is the only supplier of grain to China and that it levies a partial export embargo against
China. The embargo leads to increased U.S. welfare if the resulting improvement in the U.S. terms of trade with China
more than offset the costs of the lower export volume to China.
a.
True
b.
False
True
Moderate
117. Economic sanctions are most effective in pressuring the target country to modify its behavior when the sanctions are
imposed by a small number of countries and when the target country had weak economic ties to the imposing countries
before the sanctions were initiated.
a.
True
b.
False
False
Moderate
118. It is widely recognized that the economic sanctions levied against Iraq in 1990 were a major factor causing Iraq to
withdraw its military forces from Kuwait.
a.
True
b.
False
False
Moderate
Finance
False
Moderate
119. Assume that Russia has a comparative advantage in vodka. If the United States extends Russia the benefits of the
normal-trade-relations (most favored nation)principle, U.S. consumer surplus decreases in the vodka market.
a.
True
b.
False
False
Moderate
120. Assume that the United States imports chemicals from Germany. Trade theory predicts that if the German
government grants an export subsidy to its chemical firms, the overall welfare of the United States will increase.
a.
True
b.
False
True
Moderate
121. Concerning industrial policy, the United States has nationalized its major industries in an attempt to promote global
champions.
a.
True
b.
False
False
Moderate
122. The Uruguay Round of multilateral trade negotiations succeeded in establishing the World Trade Organization.
a.
True
b.
False
True
123. Established in 1995, the World Trade Organization took charge of administering the new global trade rules agreed in
the Uruguay Round of multilateral trade negotiations.
a.
True
b.
False
True
Moderate
124. The World Trade Organization brings into the multilateral trading system manufactured goods and agricultural
products, but not trade in services, intellectual property protection, and investment.
a.
True
b.
False
False
Moderate
125. The General Agreement on Tariffs and Trade was founded in 1995 as a successor to the World Trade Organization.
a.
True
b.
False
False
Moderate
126. What is the essential idea behind strategic trade policy?
Moderate
127. What is the basis for trade adjustment assistance?
128. Has industrial policy contributed significantly to Japan’s economic growth?
129. Explain how advocates of strategic trade policy differ from the classical free traders in their treatment of
externalities?
