Exam 6: Trade Regulations and Industrial Policies

Assume that trade restrictions are adopted by a country.The World Trade Organization would generally prefer a tariff to a quota because a tariff is more easily seen and its trade effects are more easily determined.

Assume Boeing Inc. (of the United States) and Airbus Industries (of Europe) rival for monopoly profits in the Canadian aircraft market. Suppose the two firms face identical cost and demand conditions, as seen in Figure 6.1. Figure 6.1. Strategic Trade Policy: Boeing versus Airbus -Referring to Figure 6.1, assume that Boeing is the first to enter the Canadian market.Without a governmental subsidy, the firm maximizes profits by selling ______________ aircraft at a price of $______________, and realizes profits totaling $______________.

Under the World Trade Organization, when countries agree to open their markets for goods or services, they will "bind" their commitments.These bindings amount to ceilings on import tariff rates.

The principle of normal trade relations (most-favored-nation) treatment was established with the passage of the

Which of the following is NOT true about economic sanctions?

According to the escape clause, temporary trade restrictions may be imposed in industries where domestic producers are substantially being harmed by surging imports.

In U.S.trade law, which measure permits the levying of restrictions on fairly traded imports that harm or threaten to harm American manufacturers?

As a way of helping American firms trade in the world market, U.S.trade law provides antitrust exemptions for horizontal combinations of American firms engaged solely in export trade.Such firms are permitted to form

Assume Boeing Inc. (of the United States) and Airbus Industries (of Europe) rival for monopoly profits in the Canadian aircraft market. Suppose the two firms face identical cost and demand conditions, as seen in Figure 6.1. Figure 6.1. Strategic Trade Policy: Boeing versus Airbus -Consider Figure 6.1.For Europe as a whole (Airbus and European taxpayers), the subsidy leads to a (an) ______________ in net revenues of $______________.

Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the United States. Figure 6.3 Iraqi Computer Market and Economic Sanctions -Consider Figure 6.3.For the United States, the export quota results in a (an)

Under U.S.trade law, safeguards (the escape clause) allow for the setting of trade restrictions on unfairly traded products that harm American producers.

Under U.S.commercial policy, the escape clause results in

Which policy reflects the notion that if society enjoys gains that are due to increased efficiency stemming from trade liberalization, some sort of compensation should be provided to those who are temporarily hurt by import competition?

If the U.S.government pursued a "knowledge-based growth policy," it would subsidize particular firms to help them compete in the world economy.

Economic sanctions are most effective in causing the target nation to modify its behavior when the

Major beneficiaries of export-credit subsidies, granted by the Export-Import Bank, have included U.S.producers of aircraft, telecommunications, and power-generating equipment.

The Smoot-Hawley Tariff Act of 1930 cut U.S.import tariffs to record low levels.

Assume that the United States imports chemicals from Germany.Trade theory predicts that if the German government grants an export subsidy to its chemical firms, the overall welfare of the United States will increase.

The most recent round of multilateral trade negotiations is the

Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable to influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator. Figure 6.2. Effects of an Export Subsidy -Consider Figure 6.2.The South Korean subsidy ______________ Mexican manufacturers, since their producer surplus ______________ by $______________.