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Student name:__________
1) Compare and contrast import quotas and voluntary export restraints.
2) Describe the Buy America Act. What is its connection with local content requirements?
3) Define dumping. How do governments respond to charges of dumping?
4) Explain the notion of predatory behavior with regard to dumping.
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5) Discuss the economic reasons for government intervention in markets.
6) Discuss the infant industry argument for intervention in markets. What is GATT’s
position on the argument?
7) Summarize Paul Krugman’s arguments against adopting a trade policy that benefits
domestic firms at the expense of other countries.
8) Discuss the establishment of GATT. What was GATT’s objective?
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9) What happened to GATT during the 1980s and early 1990s?
10) What has been the experience of the WTO to date? What does the future look like for the
organization?
11) What are the central issues facing the WTO at the present time?
12) Why are tariff rates on agricultural products generally higher than tariff rates on
manufactured products or services?
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13) What is the TRIPS agreement? Why was it established?
14) Discuss the Doha Round of trade talks.
15) Explain the disadvantages of government protectionism as it relates to competitive
advantage.
16) _____ are levied as a proportion of the value of the imported good.
A) Specific tariffs
B) Import quotas
C) Ad valorem tariffs
D) Tariff rate quotas
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17) A(n) _____ provided by the government helps domestic producers to compete against
foreign imports.
A) ad valorem tariff
B) specific tariff
C) import quota
D) subsidy
18) The extra profit that producers make when supply is artificially limited by an import
quota is referred to as a
A) quota rent.
B) specific tariff.
C) tariff rate quota.
D) subsidy.
19) The _____ specifies that government agencies must give preference to American
products when putting contracts for equipment out to bid unless the foreign products have a
significant price advantage.
A) General Agreement on Tariffs and Trade
B) Buy America Act
C) American Reinvestment Act
D) Smoot-Hawley Act
20) What term refers to a situation in which a government does not attempt to restrict what its
citizens can buy or sell to another country?
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A) tariffs
B) import quotas
C) free trade
D) subsidies
21) Which of the following is one of the main instruments of trade policy?
A) tariffs
B) credit portfolios
C) opportunity costs
D) countervailing duties
22) Specific tariffs are
A) levied as a proportion of the value of the imported good.
B) government payment to domestic producers.
C) in the form of manufacturing or production requirements of goods.
D) levied as a fixed charge for each unit of a good imported.
23) Tariffs do not benefit
A) consumers.
B) domestic producers.
C) governments.
D) domestic firms.
24) Which of the following observations about tariffs is true?
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A) Tariffs are generally anti-producer and pro-consumer.
B) Export tariffs are used to raise revenue for the government.
C) Export tariffs are far more common than import tariffs.
D) Import tariffs increase the overall efficiency of the world economy.
25) Antidumping duties are often called
A) export duties.
B) positive duties.
C) retroactive duties.
D) countervailing duties.
26) Import tariffs
A) reduce the price of foreign goods.
B) create efficient utilization of resources.
C) reduce the overall efficiency of the world economy.
D) are generally pro-consumer and anti-producer.
27) In the United States, the only firms allowed to import cheese are certain trading
companies, each of which is allocated the right to import a maximum number of pounds of
cheese each year. This is an example of
A) a subsidy.
B) an import quota.
C) a local content requirement.
D) an ad valorem tariff.
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28) _____ a requirement that some specific fraction of a good be produced domestically.
A) Administrative trade policies are
B) The Buy American Act is
C) A local content requirement is
D) Bureaucratic rules are
29) A company that sells its product in a foreign market below the cost of production may be
accused of
A) pandering.
B) profiteering.
C) carnivorous behavior.
D) dumping.
30) By lowering production costs, _____ help domestic producers compete against foreign
imports.
A) subsidies
B) duties
C) quotas
D) tariffs
31) Which of the following observations about subsidies is true?
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A) Government subsidies must be paid for, typically by taxing individuals and
corporations.
B) Subsidies are used to reduce exports from a sector, often for political reasons.
C) All subsidies are successful at increasing the international competitiveness of
domestic producers.
D) Subsidies help foreign producers gain a competitive advantage over domestic
producers.
32) Which of the following is a consequence of subsidies?
A) Subsidies make domestic producers vulnerable to foreign competition.
B) Subsidies lead to lowered production.
C) Subsidies protect inefficient domestic producers.
D) Subsidies produce revenue for the government.
33) According to the _____ policy, subsidies can help a firm achieve a first-mover advantage
in an emerging industry.
A) strategic trade
B) antidumping
C) tariff quota
D) free trade
34) An ____ is a direct restriction on the quantity of some good that may be imported into a
country.
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A) import tariff
B) import quota
C) import subsidy
D) ad valorem tariff
35) A common hybrid of a quota and a tariff is known as
A) an import tariff quota.
B) a voluntary export restraint.
C) an ad valorem tariff.
D) a tariff rate quota.
36) Who benefits from an import tariff?
A) the government
B) consumers
C) foreign producers
D) everyone
37) _____ is a quota on trade imposed by the exporting country, typically at the request of the
importing country’s government.
A) Voluntary export restraint
B) Specific tariff quota
C) Trade reconciliation
D) Ad valorem tariff
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38) The Japanese government was pressured by the U.S. government to place limits on the
number of vehicles exported to the United States by Japanese automobile producers in 1981.
This is an example of
A) tariff rate quota.
B) specific tariffs.
C) voluntary export restraint.
D) ad valorem tariff.
39) 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.
40) 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.
41) Foreign producers typically agree to voluntary export restrictions because
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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.
42) 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.
43) 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
44) 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.
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45) 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.
46) 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.
47) 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
48) _____ 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.
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A) Export restraint
B) Dumping
C) Local content requirement
D) Ad valorem
49) 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.
50) 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
51) 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.
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A) absolute advantage
B) comparative advantage
C) opportunity cost
D) competitive advantage
52) 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
53) 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.
54) 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
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55) 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.
56) 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.
57) 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
58) Strategic trade policy suggests that in industries where the existence of substantial scale
economies implies that the world will profitably support only a few firms, countries may
predominate in the export of certain products simply because they had firms that were able to
A) influence the assignment of tariffs.
B) influence the assignment of quotas
C) capture first-mover advantages.
D) capitalize on late-mover advantages.
59) Economist Paul Krugman has suggested that trade policy designed to retaliate against
another country’s trade policy would
A) benefit the multinational firms of both countries.
B) benefit the citizens of both countries.
C) hurt the multinational firms of both countries.
D) hurt the citizens of both countries.
60) Economist Paul Krugman suggests that strategic trade policy aimed at establishing
domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that
A) provides enhanced protection for intellectual property of those firms.
B) boosts national income at the expense of other countries.
C) reduces domestic agricultural profits.
D) depletes national income to the benefit of other countries.
61) Economic problems during the Great Depression were compounded in 1930 when the
U.S. Congress passed the _____, aimed at avoiding rising unemployment by protecting domestic
industries and diverting consumer demand away from foreign products.