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| 1 | |
The fall in tariff barriers in recent decades has been matched by an even dramatic reduction in nontariff barriers. |
| | A) | True |
| | B) | False |
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| 2 | |
Subsidies, which include cash grants, low-interest loans, tax breaks and government equity participation, are made to foreign firms exporting into the country. |
| | A) | True |
| | B) | False |
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| 3 | |
Strategic trade policy has two components to raise national income – helping firms to capture first-mover advantages and intervening in an industry where foreign firms have already gained a first-mover advantage. |
| | A) | True |
| | B) | False |
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| 4 | |
Strategic trade policy can create problems by creating a beggar-thy-neighbor policy and by focusing on special interest groups. |
| | A) | True |
| | B) | False |
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| 5 | |
Because of their pivotal role in international trade, firms can and do exert a strong influence on government policy toward trade. |
| | A) | True |
| | B) | False |
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| 6 | |
Tariffs are taxes on imports or exports, and fall into two categories: ____________ tariffs and ad valorem tariffs. |
| | A) | protectionist |
| | B) | specific |
| | C) | general |
| | D) | quota rent |
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| 7 | |
The extra profit that producers make when supply is artificially limited by an import quota is referred to as ____________________. |
| | A) | a windfall profit |
| | B) | an import surcharge |
| | C) | a subsidy |
| | D) | a quota rent |
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| 8 | |
When foreign imports flood a domestic market to attract customers or threaten local firms, most governments will: |
| | A) | declare war. |
| | B) | begin boosting exports. |
| | C) | impose countervailing duties. |
| | D) | seize foreign goods. |
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| 9 | |
Which of the following is not one of the political arguments for government intervention in international trade? |
| | A) | Protecting jobs and industries |
| | B) | Balancing the federal government budget with increased tariffs |
| | C) | Retaliating against other governments’ trade policies |
| | D) | Protecting consumers |
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| 10 | |
The infant industry argument, which was proposed about 20 years after the publication of The Wealth of Nations, continues to be used today. In case after case where industries were protected by governments using high tariffs: |
| | A) | consumers benefited in the end, which has given durability to the idea. |
| | B) | the main effect has been to create inefficient industries with little hope of competing in the world market. |
| | C) | governments have used the revenue generated by the tariffs to modernize the industries and help them reach maturity. |
| | D) | the industries developed robust operations that enabled them to compete at home and abroad. |
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| 11 | |
Because _________________________, governments do not always act in the national interest when they intervene in the economy. |
| | A) | the WTO is more powerful than most countries |
| | B) | democracies operate very differently from totalitarian regimes |
| | C) | free trade is such a powerful idea |
| | D) | politically important groups often exert their influence |
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| 12 | |
Against a background of increasing pressures for protectionism, in 1986 GATT members embarked on an ambitious, seven-year effort to address a number of problems and eventually create the WTO as part of the effort. This was known as the ____________________. |
| | A) | Uruguay Round |
| | B) | Doha Round |
| | C) | Seattle Summit |
| | D) | Bretton Woods Conference |
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| 13 | |
After the successes of the 1990s, the WTO has struggled to make progress on international trade issues. Which of the following is NOT a source of strains on the WTO? |
| | A) | A slower growing economy. |
| | B) | Political opposition has been growing. |
| | C) | As the public face of globalization, the WTO has been blamed for many problems, including high unemployment, poor working conditions, and environmental problems. |
| | D) | The Internet with its greater speed and capacity has reduced the need for an organization like the WTO. |
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| 14 | |
Although the WTO and the GATT have made great strides in reducing tariff rates on nonagricultural products: |
| | A) | tariffs on industrial goods are higher than on services. |
| | B) | the WTO would like to increase the selective use of high tariffs as long as the use is truly selective. |
| | C) | the WTO would like to bring down tariff rates on imports of nonagricultural goods into developed nations. |
| | D) | the ultimate goals are to stabilize the tariff rates at about 4 percent. |
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| 15 | |
Which of the following is NOT one of the ways trade barriers constrain a firm’s strategy? |
| | A) | Trade barriers raise costs of exporting products. |
| | B) | Quotas may limit a firm’s ability to serve a country from locations outside that country. |
| | C) | A firm may have to locate more activities in a specific country due to local content regulations. |
| | D) | Quotas and trade barriers are temporary in nature and make strategic planning difficult. |
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