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Quiz 3 Chapter 5 and 6
CHAPTER 5
NONTARIFF TRADE BARRIERS
MULTIPLE
CHOICE
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
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
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:
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. Permit less efficient home production
b. Distort choices for domestic consumers
c. Result in higher tax rates for domestic
residents
d. Redistribute revenue from domestic
producers to consumers
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
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
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
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
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
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
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
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
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
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
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
17. The
practice of Canadian firms dumping their products in Sweden poses a problem for
economic policymakers since dumping tends to:
a. Favor Swedish consumers over Canadian
consumers
b. Favor Swedish producers over Canadian
producers
c. Become widespread as firms operate at
full productive capacity
d. Result in firms charging prices above
the total costs of production
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
19. A
main factor behind the president's decision to extend relief to steel firms in
the form of trigger prices was that:
a. Dumping complaints can be time
consuming and expensive to implement
b. The Tokyo Round outlawed the granting
of subsidies to steel firms
c. Trigger prices involve zero deadweight
welfare loss for the economy
d. Orderly marketing agreements were too
costly to administer
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
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
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
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
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
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
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
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
29. For
years the U.S. government levied quotas on inexpensive oil imported from the
Middle East. The quotas led to cost increases for U.S. consumers totaling $3
billion for oil products. An apparent justification for this policy was that:
a. U.S. oil companies and workers deserved
higher incomes
b. U.S. oil was of superior quality and
merited higher prices
c. One should not be too dependent on
foreign suppliers of crucial resources
d. The U.S. government needed the quota
revenue to balance its budget
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
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