ch06 international econ 13th edition

8/12/2019 Ch06 International econ 13th edition

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CHAPTER 6TRADE REGULATIONS AND INDUSTRIAL POLICIES

MULTIPLE CHOICE

1. The World Trade Organization was established by the ____ of multilateral trade negotiations:a.

Kennedy Round

b

.

Tokyo Round

c.

ruguay Round

d.

!linton Round

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&. nder .$. commercial 'olicy( the esca'e clause results in:a.

Tem'orary )uotas granted to firms in*ured by im'ort com'etition

b.

Tariffs that offset e+'ort subsidies granted to foreign 'roducers

c.

Ta+ ad,antages e+tended to minority-owned e+'orting firms

d.

uties which offset commercial dum'ing on the 'art of foreign firms

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/. "d*ustment assistance is sometimes used to assist:

a. 0n retraining workers dis'laced by im'orts

b.

0n retraining workers dis'laced by e+'orts

c.

oreign firms in*ured by our )uotas

d.

oreign firms in*ured by our tariffs

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2. The 3+'ort-0m'ort 4ank of the nited $tates encourages "merican firms to sell o,erseas by 'ro,idingdirect loans and loan guarantees to foreign 'urchasers of "merican goods. To "merican firms( thisre'resents a:a.

$'ecific subsidy

b.

"d ,alorem subsidy

c.

omestic subsidy


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d.

3+'ort subsidy

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5. The $moot-6awley Tariff "ct of 17/8 has generally been associated with:a

.

alling tariffs

b.

0ncreases in the ,olume of trade

c.

0ntensifying the worldwide de'ression

d.

3fforts to liberalize nontariff trade barriers

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9. " trade 'olicy designed to alle,iate some domestic economic 'roblem by e+'orting it to foreign

countries is known as a an;:a.

0nternational dum'ing 'olicy

b.

Trade ad*ustment assistance 'olicy

c.


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.b.

Trade ad*ustment assistance

c.

omestic subsidies

d.

a.

3+'ort-0m'ort 4ank

b.

omestic 0nternational $ales !or'oration

c

.

Organization for 3conomic !oo'eration and e,elo'ment

d.

!ommodity !redit !or'oration

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1&. The high 'oint of .$. 'rotection culminated with the 'assage of the:


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a.

$moot-6awley "ct of 17/8

b.

@eneral "greements on Tariffs and Trade in 172=

c.

Trade Reduction "ct of 179&

d.

"d*ustment "ssistance "ct of 17=8

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1/. !ounter,ailing duties are intended to neutralize any unfair ad,antage that foreign e+'orters might gaino,er domestic 'roducers because of foreign:a.

Tariffs

b.

$ubsidies

c.

Auotas

d.

4uy-national 'olicies

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12. Trade theory suggests that the nited $tates would gain from a subsidy 'ro,ided by Ba'an to itscalculator 'roducers if the gains to "merican consumers of calculators more than offset the losses to"merican calculator 'roducers. This occurs as long as the nited $tates:a.

0s a net im'orter of calculators

b

.

0s a net e+'orter of calculators

c.

6as an absolute ad,antage in calculator 'roduction

d.

6as a com'arati,e ad,antage in calculator 'roduction

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15. nder the original 'ro,isions of the Reci'rocal Trade "greements "ct( the 'resident of the nited$tates was authorized to cut tariffs u' to:a

.

18 'ercent

b.

58 'ercent

c.

=5 'ercent

d.

188 'ercent


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19. The .$. Ctrade-remedy lawsC could establish all of the following e+ce't:a.

0m'ort tariffs to 'rotect .$. firms seriously in*ured by foreign com'etition

b.

!ounter,ailing duties which neutralize foreign e+'ort subsidies

c.

"ntidum'ing duties which 'rotect .$. firms from im'orts sold at less-than-fair-,alue

d.

3conomic sanctions le,ied against hostile nations

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1=. The 'rinci'le of normal trade relations most-fa,ored-nation;treatment was established with the'assage of the:a.

ordney-


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.d.

The more inelastic the target countryDs su''ly schedule

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&2. $u''ose the 'resident lowers tariffs on radios as the result of negotiations under the trade agreements

'rogram. Radio 'roducers in the nited $tates can a''eal under the:a.

3sca'e clause if rising im'orts substantially in*ure the .$. radio industry

b.

3sca'e clause if rising unem'loyment occurs e,en though im'orts remain unchanged

c.

0nfant industry clause if rising im'orts cause unem'loyment to rise among .$. radioworkers

d.

0nfant industry clause if rising im'orts result in losses for .$. radio com'anies

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&5. uring the 'ast four decades:a.

#ontariff barriers #T4s; and tariffs ha,e increased in im'ortance

b.

#T4s and tariffs ha,e decreased in im'ortance

c.

#T4s ha,e increased and tariffs ha,e decreased in im'ortance

d.

#T4s ha,e decreased and tariffs ha,e increased in im'ortance

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&9. The strongest 'olitical 'ressure for a trade 'olicy that results in higher 'rotectionism comes from:a.

omestic workers lobbying for im'ort restrictions

b.

omestic workers lobbying for e+'ort restrictions

c.

omestic consumers lobbying for e+'ort restrictions

d.

omestic consumers lobbying for im'ort restrictions

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&=. The ruguay Round of trade negotiations was 'rimarily concerned with:a.

0m'ort tariffs

b.

3+'ort tariffs


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.b.

Fess elastic 0ra)Ds demand schedule

c.

Fesser the a,ailable out'ut from alternati,e su''liers

d.


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.b.

"ssistance in the settlement of trade disagreements

c.

a.

"ntidum'ing duty

b.

!ounter,ailing duty

c.

#ational security clause

d.

3sca'e clause

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/=. Which international organization sti'ulates 'rocedures for the settlement of international tradedis'utes>a.

World Trade Organization

b.

World 4ank

c

.

0nternational


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/7. 0n 17?9 the nited $tates enacted the !om'rehensi,e "nti-"'artheid "ct which 'ro,ided for all of thefollowing e+ce't the termination of:a.

#ew .$. loans to the $outh "frican go,ernment

b.

#ew .$. in,estment in $outh "frica

c.

.$. im'orts of $outh "frican gold coins

d

.

.$. im'orts of all $outh "frican goods

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Assume Boeing Inc. (of the United States) and Airbus Industrie (of Europe) rival for monopoly profitsin the Canadian aircraft maret. Suppose the t!o firms face identical cost and demand conditions" asseen in #igure $.%.

Figure 6.1. Strategic Trade P!ic"# $ei%g &er'u' Air(u'

28. Referring to igure 9.1( assume that 4oeing is the first to enter the !anadian market. Without ago,ernmental subsidy( the firm ma+imizes 'rofits by selling ____ aircraft at a 'rice of G____( andrealizes 'rofits totaling G____.a.

2( G1& million( G19 million

b

.

2( G19 million( G1& million

c.

?( G1& million( G19 million

d.

?( G19 million( G1& million

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25. !onsider igure 9.1. or 3uro'e as a whole "irbus and 3uro'ean ta+'ayers;( the subsidy leads to aan; increaseEdecrease in net re,enues of G____.a.

0ncrease of G1& million

b. 0ncrease of G19 million

c.

ecrease of G1& million

d.

ecrease of G19 million

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#igure $.& illustrates the calculator maret for 'eico" assumed to be a small nation that is unableinfluence the South orean (!orld) price. Assume the South orean price to be *$+ per calculator.

Figure 6.). E**ect' * a% E+,rt Su('id"

29. !onsider igure 9.&. With free trade(


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d.

18( &( ?

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2=. !onsider igure 9.&. With free trade(


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b.

Rising by G&&8

c.

alling by G198

d.

alling by G&&8

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51. !onsider igure 9.&. or


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b.

/8( G/(888( G/5(888

c.

/8( G/(888( G25(888

d.

/8( G/(888( G55(888

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5/. !onsider igure 9./. 0n res'onse to 0ra)Ds armed in,asion of neighboring countries( su''ose the nited$tates im'oses a 'artial embargo that limits e+'orts to 0ra) to 18 com'uters. The e+'ort )uota leads toan increaseEdecrease in the 'rice of com'uters e)ual to G____( and an increaseEdecrease in consumersur'lus e)ual to G____.a.

0ncrease( G&888( decrease( G28(888

b.

0ncrease( G2888( decrease( G98(888

c.

ecrease( G&888( increase( G28(888

d.

ecrease( G2888( increase( G98(888

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52. !onsider igure 9./. Of the )uota-induced change in 0ra)i consumer sur'lus( G____ is not transferredto other sectors of 0ra)Ds economy and re'resents deadweight loss.a.

G5888

b.

G18(888

c. G15(888

d.

G&8(888

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55. !onsider igure 9./. Of the )uota-induced change in 0ra)i consumer sur'lus( the amount of the changein 0ra)Ds consumer sur'lus that is transferred to other sectors of 0ra)Ds economy is ca'tured by thenited $tates as:a

.

Ta+ re,enue

b.

3+'ort re,enue

c.

%roducer sur'lus

d.

!onsumer sur'lus


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59. !onsider igure 9./. or the nited $tates( the e+'ort )uota results in a an;:a.

0m'ro,ement in its terms of trade with 0ra)

b.

0ncrease in its e+'ort re,enue

c.

0ncrease in domestic com'uter 'rices

d.

ecrease in domestic consumer sur'lus

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5=. The im'licit industrial 'olicies of the .$. go,ernment ha,e included:a.

ormulating industry-s'ecific economic 'olicies designed to 'romote nationalcham'ions

b.

#ationalizing basic industries such as steel and autos

c. 3ncouraging cartelization of aircraft and aluminum manufacturers

d.

0m'ro,ing the setting for industry such as communications and infrastructure

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5?. 3conomic sanctions are most effecti,e in causing the target nation to modify its beha,ior when the:a.

Target nation had negligible economic relationshi's with the im'osing nation 'rior to thesanctions

b

.

%eo'le of the target nation ha,e weak cultural ties to the 'eo'le of the im'osing nation

c.

$anctions are le,ied by a large number of nations

d.

Target go,ernment is su''orted by the ma*ority of its 'eo'le

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57. 0n 1775 the ____ was established to administer the new global trade rules agreed in the ruguayRound of multilateral trade negotiations.a

.


b.


c.

@eneral "greement on Tariffs and Trade

d.

nited #ations


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98. 0n 1775 the @eneral "greement on Tariffs and Trade was re'laced by the ____.a.

"gency for 0nternational e,elo'ment

b.


c.

nited #ations !enter for Trade and e,elo'ment

d.


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91. The most im'ortant determinants of sanctions includea.

!ultural factors including nationalistic attitudes

b

.

$trength of 'olitical o''osition in the targeting nation

c.

The number of nations im'osing sanctions

d.

"ll of the abo,e

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9&. 0ndustrial 'oliciesa.

Re)uire formal e+'licit efforts by go,ernments

b.


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92. The nited $tatesa.

6as been a hea,y user of antidum'ing laws to 'rotect domestic 'roducers

b.

6as rarely used antidum'ing laws to 'rotect domestic 'roducers

c.

6as targeted antidum'ing action against !hina( Ba'an( !anada( 0taly( and @ermany

d.

4oth a and c

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TRUEFALSE

1. The high 'oint of .$. 'rotectionism occurred with the 'assage of the Kennedy "ct in the 1798s.

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&. With the 'assage of the $moot-6awley "ct in 17/8( .$. a,erage tariffs were raised to o,er 58 'ercenton 'rotected im'orts.

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/. %ro'onents of the $moot-6awley "ct of 17/8 ,iewed it as a means of combating domesticunem'loyment.

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2. 0t is generally agreed that the $moot-6awley "ct of 17/8 led to im'ro,ements in .$. e+'orts and ano,erall increase in .$. out'ut and em'loyment.

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5. "ccording to the Reci'rocal Trade "greements "ct of 17/2( the %resident could lower tariffs by u' to18 'ercent of the e+isting le,el without congressional a''ro,al.

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9. nder the normal-trade-relations most-fa,ored-nation; 'rinci'le( two nations agree to a''ly tariffs to

each other at rates as low as those a''lied to any other nation.

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=. "ccording to the normal-trade-relations most-fa,ored-nation; 'rinci'le( if the nited $tates e+tends


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/=. "s a way of hel'ing .$. business firms trade in the world market on a more e)ual terms with theirorganized foreign com'etitors( the .$. go,ernment 'ermits them to form e+'ort trade associationsand e+'ort trading com'anies.

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/?. 0f the .$. go,ernment 'ursued a Cknowledge-based growth 'olicy(C it would subsidize 'articularfirms to hel' them com'ete in the world economy.

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/7. 0n the 'ost World War 00 era( the Ba'anese go,ernment formed industrial 'olicies to encourage thede,elo'ment of its steel( auto( shi'building( and machine tool industries.

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28. nlike Ba'an and the nited $tates( rance has refrained from forming e+'licit industrial 'olicies toenhance the com'etiti,eness of its national cham'ions.

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21. "ccording to the strategic- trade- 'olicy hy'othesis( go,ernmental subsidies granted to domestic'roducers can hel' them in ca'turing economic 'rofits from foreign com'etitors.

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2&. The strategic-trade-'olicy hy'othesis assumes that domestic firms o'erate under increasing costconditions as well as in 'erfectly com'etiti,e markets.

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2/. "ccording to the strategic-trade-'olicy hy'othesis( go,ernment can alter the terms of com'etition to

fa,or domestic com'anies( thus increasing their 'rofits at the e+'ense of their ri,als.

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22. The classical theory of com'arati,e ad,antage assumes that firms o'erate in im'erfectly com'etiti,emarkets( while the theory of strategic trade 'olicy assumes that firms o'erate in 'erfectly com'etiti,emarkets.

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25. "ccording to the strategic-trade-'olicy hy'othesis( a subsidy granted to domestic e+'orters may lead

to increased e+'ort 'rofits which more than offset the cost of the subsidy to domestic ta+'ayers.

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29. 4y reducing a,ailable su''lies of a 'roduct( an e+'ort embargo leads to falling 'rices in the targetnation and increasing target-nation consumer sur'lus.

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ch06 international econ 13th edition

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