EconGlow Institute

The theory of __ suggests that government can assist domestic companies in capturing economic profits from foreign competitors a. international dumping b. countervailing duties c. strategic trade policy d. export promotion policy Ans:C

The organization that currently establishes rules of conduct for firms engaging in international trade is the a. World Bank b. International Trade Commission c. Department of Justice d. World Trade Organization Ans:D

_ are quotas that result in a total prohibition of trade a. embargoes b. tariff-rate quotas c. voluntary export restraints d. nontariff barriers Ans A

Suppose that Russia steel firms engage in dumping in the German market. In terms of overall economic welfare, German welfare would __ as the result of the dumping. a. increase b. decrease c. not change Ans: A

Concerning economic sanctions, export embargos induce greater losses in consumer surplus for the target country the: a. lesser its initial dependence on foreign produced goods b. more elastic the target country demand schedule c. greater the available output from alternative suppliers d. more inelastic the target country supply schedule Ans: D

According to the cost-based definition of dumping, dumping occurs when a firm sells a product abroad at a price that is less than a. average total cost b. average variable cost c. average fixed cost d. marginal cost Answer: A

The welfare effects of a quota depend to a considerable extent upon a. who has the quota license b. the size of the quota c. elasticities of domestic demand and supply d. all of the above

Similar to import tariffs, import quotas tend to result in a. higher prices and reduced imports b. increased government revenue c. increased consumer surplus d. decreased producer surplus Answer:A

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 Answer: C

Throughout the world, governments tend to auction quota licenses to their highest bidder a. always b. often c. seldom d. never Answer: B

If the home country 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 Answer: B

To maintain that South Koreans are dumping their DVDs in the United States is to maintain that: a. Koreans are selling DVDs in the U.S. below their production cost b. Koreans are selling DVDs in the U.S. above their production cost c. the cost of manufacturing DVDs in Korea is lower in Korea than in the U.S. since wages are lower in Korea d. the cost of manufacturing DVDs in Korea is higher in Korea than in the U.S. since wages are higher in Korea Answer: A

A tariff-rate quota a. is a limit on the number of tariffs that a country can place on imports b. uses a single tariff along with import quotas to restrict imports c. is designed to avoid the price increases caused by simple tariffs d. is a two-tier tariff system intended to restrict imports Ans: D

Import quotas tend to result in 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 Ans: A

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 Ans: D

Export subsidies levied by foreign governments on products in which the United States has 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 Ans: B

During periods of growing domestic demand, an import quota a. is less restrictive on a country’s imports than a tariff b. is more restrictive on a country’s imports than a tariff c. has the same restrictive effect on a country’s imports as a tariff d. will always generate increased tax revenue for the government Answer: B

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 then they help c. are equivalent to an import quota d. are equivalent to an export quota Answer:A