Question 1

Indian exporters are concerned about trade diversion because
_________ made an agreement with the ASEAN free­trade area.

Accepted Answer

A) India 
B) China 
C) the United States 
D) Mexico 
A) India 
B) China 
C) the United States 
D) Mexico B

Question 2

In which type of trade agreement does the WTO allow exclusions
To the most favored nation principle?

Accepted Answer

A) multilateral trade agreements 
B) free­trade areas 
C) customs unions 
D) free­trade areas and customs unions 
A) multilateral trade agreements 
B) free­trade areas 
C) customs unions 
D) free­trade areas and customs unions D

Question 3

Suppose that there is a negative externality associated with
Alcohol consumption in the United States.Will the United States
Be better or worse off if it eliminates all tariffs on alcohol
Imports?

Accepted Answer

A) The United States will always be better off when tariffs on imported alcohol are eliminated. 
B) The United States will always be worse off when tariffs on imported alcohol are eliminated. 
C) The United States will be no better or worse off when tariffs on imported alcohol are eliminated. 
D) The United States will be better off only if the private gains from trade exceed the increased social costs of alcohol
Consumption when tariffs on imported alcohol are eliminated. 
A) The United States will always be better off when tariffs on imported alcohol are eliminated. 
B) The United States will always be worse off when tariffs on imported alcohol are eliminated. 
C) The United States will be no better or worse off when tariffs on imported alcohol are eliminated. 
D) The United States will be better off only if the private gains from trade exceed the increased social costs of alcohol
Consumption when tariffs on imported alcohol are eliminated. D

Question 4

A "prisoner's dilemma" can arise when:

Accepted Answer

A) two large countries simultaneously and independently apply tariffs on imports from each other. 
B) two large countries simultaneously and independently eliminate tariffs on imports from each other. 
C) one large country eliminates tariffs on imports from another large country. 
D) one small country eliminates tariffs on imports from a large country. 
A) two large countries simultaneously and independently apply tariffs on imports from each other. 
B) two large countries simultaneously and independently eliminate tariffs on imports from each other. 
C) one large country eliminates tariffs on imports from another large country. 
D) one small country eliminates tariffs on imports from a large country.

Question 5

Have the GATT­WTO rulings on environmental cases adversely
affected the U.S.environment?

Accepted Answer

No; labeling and consumer concerns are e

Question 6

Which of the following statements is(are) FALSE?
I.Trade creation is always bad for countries.
II.Trade diversion is always good for countries.
III.Regional trade agreements never cause welfare losses.

Accepted Answer

A) I 
B) II 
C) III 
D) I, II, and III 
A) I 
B) II 
C) III 
D) I, II, and III

Question 7

Which of the following groups favored the suspension of
Preferential trade treatment for Bangladesh in 2013?

Accepted Answer

A) the U.S.Congress 
B) the Bangladeshi garment industry 
C) U.S labor leaders 
D) U.S.consumers 
A) the U.S.Congress 
B) the Bangladeshi garment industry 
C) U.S labor leaders 
D) U.S.consumers

Question 8

Why is NAFTA a free­trade area requiring rules of origin rather
Than a customs union?

Accepted Answer

A) A free­trade agreement allows politically sensitive tariffs of each nation to remain unchanged. 
B) A customs union also requires rules of origin. 
C) The overall level of U.S.tariffs was much higher than the overall level of tariffs in Mexico and Canada. 
D) The overall levels of tariffs in Canada, Mexico, and the United States are similar, making rules of origin irrelevant. 
A) A free­trade agreement allows politically sensitive tariffs of each nation to remain unchanged. 
B) A customs union also requires rules of origin. 
C) The overall level of U.S.tariffs was much higher than the overall level of tariffs in Mexico and Canada. 
D) The overall levels of tariffs in Canada, Mexico, and the United States are similar, making rules of origin irrelevant.

Question 9

The phenomenon known as the tragedy of the commons occurs
Whenever:

Accepted Answer

A) the private sector owns resources and manages them tragically. 
B) the government owns resources and manages them tragically. 
C) there is no ownership of resources, so they become depleted due to lack of management. 
D) two countries own the same resource and cannot agree on its management. 
A) the private sector owns resources and manages them tragically. 
B) the government owns resources and manages them tragically. 
C) there is no ownership of resources, so they become depleted due to lack of management. 
D) two countries own the same resource and cannot agree on its management.

Question 10

With respect to environmental issues, the GATT:

Accepted Answer

A) does not allow countries to adopt environmental laws that affect imports. 
B) allows countries to adopt environmental laws that affect domestic production but not imports. 
C) allows countries to adopt environmental laws that are applied uniformly against domestic producers and imports. 
D) allows countries to adopt more stringent laws affecting imports than domestic producers. 
A) does not allow countries to adopt environmental laws that affect imports. 
B) allows countries to adopt environmental laws that affect domestic production but not imports. 
C) allows countries to adopt environmental laws that are applied uniformly against domestic producers and imports. 
D) allows countries to adopt more stringent laws affecting imports than domestic producers.

Question 11

In a large­country case, an optimal tariff would be:

Accepted Answer

A) one that increases the producer surplus. 
B) one that raises the price of the product imported. 
C) one in which the terms­of­trade gain exceeds the deadweight loss. 
D) one that easily passes the legislative process. 
A) one that increases the producer surplus. 
B) one that raises the price of the product imported. 
C) one in which the terms­of­trade gain exceeds the deadweight loss. 
D) one that easily passes the legislative process.

Question 12

(Figure: U.S.Imports from Mexico and Asia) The graph illustrates
A customs union between the United States and Mexico.
According to the graph, under free trade the United States will
Import ________ units of the good from _______ at the price of
_______.

Accepted Answer

A) 600; Mexico; $150 
B) 600; China; $250 
C) 350; China; $150 
D) 500; China; $250 
A) 600; Mexico; $150 
B) 600; China; $250 
C) 350; China; $150 
D) 500; China; $250

Question 13

Implementing a regional free­trade agreement may have an
Effect in which, due to reduced tariffs, a nation in the agreement
Begins to import a product it had previously produced itself.This
Effect is called:

Accepted Answer

A) trade creation. 
B) trade diversion. 
C) reciprocal trade agreements. 
D) the employment effect of FTAs. 
A) trade creation. 
B) trade diversion. 
C) reciprocal trade agreements. 
D) the employment effect of FTAs.

Question 14

An example of how trade diversion results in a suboptimal
Situation is auto parts trade between Mexico and the United
States.After NAFTA:

Accepted Answer

A) Mexico decreased its sales of auto parts to the United States. 
B) the United States purchased more auto parts from Mexico due to the elimination of tariffs and reduced purchases from East
Asia, which was the lowest­cost producer. 
C) the United States brought a complaint against Mexico for low­ quality auto parts. 
D) the United States purchased fewer auto parts from Mexico due to the elimination of tariffs and increased purchases from East
Asia, which was the lowest­cost producer. 
A) Mexico decreased its sales of auto parts to the United States. 
B) the United States purchased more auto parts from Mexico due to the elimination of tariffs and reduced purchases from East
Asia, which was the lowest­cost producer. 
C) the United States brought a complaint against Mexico for low­ quality auto parts. 
D) the United States purchased fewer auto parts from Mexico due to the elimination of tariffs and increased purchases from East
Asia, which was the lowest­cost producer.

Question 15

Figure: The Home and World Market   (Figure: The Home and World Markets) The terms­of­trade gain is
_______, and the deadweight loss is _____.

Accepted Answer

A) $120; $160 
B) $160; $160 
C) $160; $120 
D) $120; $120 
A) $120; $160 
B) $160; $160 
C) $160; $120 
D) $120; $120

Question 16

Because it is difficult to negotiate multilateral trade agreements,
Some economists argue that preferential trade agreements are
Always beneficial since they represent a movement toward freer
Trade, which is better than no movement at all.Is this argument
Always correct?

Accepted Answer

A) Yes; any movement toward freer trade is better than no movement at all. 
B) No; some preferential trade agreements may have higher trade diversion costs than trade creation gains. 
C) Yes; all preferential trade agreements have higher trade creation gains than trade diversion losses. 
D) No; all preferential trade agreements have higher trade diversion losses than trade creation gains. 
A) Yes; any movement toward freer trade is better than no movement at all. 
B) No; some preferential trade agreements may have higher trade diversion costs than trade creation gains. 
C) Yes; all preferential trade agreements have higher trade creation gains than trade diversion losses. 
D) No; all preferential trade agreements have higher trade diversion losses than trade creation gains.

Question 17

A free­trade area is:

Accepted Answer

A) a group of countries that agrees there will be "no rules" about trade-anything goes. 
B) a group of countries that agrees to eliminate customs fees and containerized shipping charges on goods traded among
Them. 
C) a group of countries that agrees to eliminate barriers to trade between themselves while keeping tariffs in place against the rest
Of the world. 
D) a group of countries that eliminates trade barriers among themselves and erects a common tariff against all other nations. 
A) a group of countries that agrees there will be "no rules" about trade-anything goes. 
B) a group of countries that agrees to eliminate customs fees and containerized shipping charges on goods traded among
Them. 
C) a group of countries that agrees to eliminate barriers to trade between themselves while keeping tariffs in place against the rest
Of the world. 
D) a group of countries that eliminates trade barriers among themselves and erects a common tariff against all other nations.

Question 18

What is the Kyoto Protocol?

Accepted Answer

A) It is a treaty on abolishing child labor and forced labor camps. 
B) It is a guideline for using "force" when interrogating prisoners. 
C) It is based on the 1992 UN climate treaty that set specific air pollution reduction targets for each nation. 
D) It is a set of rules for shipping dangerous chemicals to avoid harm and to lower the risk of a terrorist attack. 
A) It is a treaty on abolishing child labor and forced labor camps. 
B) It is a guideline for using "force" when interrogating prisoners. 
C) It is based on the 1992 UN climate treaty that set specific air pollution reduction targets for each nation. 
D) It is a set of rules for shipping dangerous chemicals to avoid harm and to lower the risk of a terrorist attack.

Question 19

What happens when two countries apply tariffs against each
Other in an attempt to capture their terms­of­trade gain?

Accepted Answer

A) Both countries lose because the terms­of­trade gain for one country is canceled by the tariff in the other country. 
B) Both countries gain because the terms­of­trade gain for one country is canceled by the tariff in the other country. 
C) Neither country gains nor loses because the terms­of­trade gain for one country is canceled by the tariff in the other country. 
D) The country initially applying the tariff gains because it captures the terms­of­trade gain; the other country neither gains
Nor loses. 
A) Both countries lose because the terms­of­trade gain for one country is canceled by the tariff in the other country. 
B) Both countries gain because the terms­of­trade gain for one country is canceled by the tariff in the other country. 
C) Neither country gains nor loses because the terms­of­trade gain for one country is canceled by the tariff in the other country. 
D) The country initially applying the tariff gains because it captures the terms­of­trade gain; the other country neither gains
Nor loses.

Question 20

Did the United States ratify the Kyoto Protocol? Why or why not?

Accepted Answer

A) Yes; but it has failed to meet targets for a number of years. 
B) No; the United States had promised to sign on January 1, 2008, but never did. 
C) Yes; and it has met its target each year. 
D) No; he United States believed the targets were impossible to meet without great harm to the industrial base. 
A) Yes; but it has failed to meet targets for a number of years. 
B) No; the United States had promised to sign on January 1, 2008, but never did. 
C) Yes; and it has met its target each year. 
D) No; he United States believed the targets were impossible to meet without great harm to the industrial base.

Indian exporters are concerned about trade diversion because _________ made an agreement with the ASEAN freetrade area.

In which type of trade agreement does the WTO allow exclusions To the most favored nation principle?

Suppose that there is a negative externality associated with Alcohol consumption in the United States.Will the United States Be better or worse off if it eliminates all tariffs on alcohol Imports?

A "prisoner's dilemma" can arise when:

Have the GATTWTO rulings on environmental cases adversely affected the U.S.environment?

Which of the following statements is(are) FALSE? I.Trade creation is always bad for countries. II.Trade diversion is always good for countries. III.Regional trade agreements never cause welfare losses.

Which of the following groups favored the suspension of Preferential trade treatment for Bangladesh in 2013?

Why is NAFTA a freetrade area requiring rules of origin rather Than a customs union?

The phenomenon known as the tragedy of the commons occurs Whenever:

With respect to environmental issues, the GATT:

In a largecountry case, an optimal tariff would be:

(Figure: U.S.Imports from Mexico and Asia) The graph illustrates A customs union between the United States and Mexico. According to the graph, under free trade the United States will Import ____ units of the good from _ at the price of _____.

Implementing a regional freetrade agreement may have an Effect in which, due to reduced tariffs, a nation in the agreement Begins to import a product it had previously produced itself.This Effect is called:

An example of how trade diversion results in a suboptimal Situation is auto parts trade between Mexico and the United States.After NAFTA:

Figure: The Home and World Market (Figure: The Home and World Markets) The termsoftrade gain is ___, and the deadweight loss is _.

Because it is difficult to negotiate multilateral trade agreements, Some economists argue that preferential trade agreements are Always beneficial since they represent a movement toward freer Trade, which is better than no movement at all.Is this argument Always correct?

A freetrade area is:

What is the Kyoto Protocol?

What happens when two countries apply tariffs against each Other in an attempt to capture their termsoftrade gain?

Did the United States ratify the Kyoto Protocol? Why or why not?

The Global Economy

Trade and Technology: the Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Increasing Returns to Scale and Monopolistic Competition

Import Tariffs and Quotas Under Perfect Competition

Import Tariffs and Quotas Under Imperfect Competition

International Agreements: Trade, Labor, and the Environment

Introduction to Exchange Rates and the Foreign Exchange Market

Filters

Exam 11: Exchange Rates I: the Monetary Approach in the Long Run

Indian exporters are concerned about trade diversion because _________ made an agreement with the ASEAN free­trade area.

In which type of trade agreement does the WTO allow exclusions To the most favored nation principle?

Suppose that there is a negative externality associated with Alcohol consumption in the United States.Will the United States Be better or worse off if it eliminates all tariffs on alcohol Imports?

A "prisoner's dilemma" can arise when:

Have the GATT­WTO rulings on environmental cases adversely affected the U.S.environment?

Which of the following statements is(are) FALSE? I.Trade creation is always bad for countries. II.Trade diversion is always good for countries. III.Regional trade agreements never cause welfare losses.

Which of the following groups favored the suspension of Preferential trade treatment for Bangladesh in 2013?

Why is NAFTA a free­trade area requiring rules of origin rather Than a customs union?

The phenomenon known as the tragedy of the commons occurs Whenever:

With respect to environmental issues, the GATT:

In a large­country case, an optimal tariff would be:

(Figure: U.S.Imports from Mexico and Asia) The graph illustrates A customs union between the United States and Mexico. According to the graph, under free trade the United States will Import ________ units of the good from _______ at the price of _______.

Implementing a regional free­trade agreement may have an Effect in which, due to reduced tariffs, a nation in the agreement Begins to import a product it had previously produced itself.This Effect is called:

An example of how trade diversion results in a suboptimal Situation is auto parts trade between Mexico and the United States.After NAFTA:

Figure: The Home and World Market (Figure: The Home and World Markets) The terms­of­trade gain is _______, and the deadweight loss is _____.

Because it is difficult to negotiate multilateral trade agreements, Some economists argue that preferential trade agreements are Always beneficial since they represent a movement toward freer Trade, which is better than no movement at all.Is this argument Always correct?

A free­trade area is:

What is the Kyoto Protocol?

What happens when two countries apply tariffs against each Other in an attempt to capture their terms­of­trade gain?

Did the United States ratify the Kyoto Protocol? Why or why not?

The Global Economy

Trade and Technology: the Ricardian Model

Gains and Losses From Trade in the Specific-Factors Model

Trade and Resources: the Heckscher-Ohlin Model

Movement of Labor and Capital Between Countries

Increasing Returns to Scale and Monopolistic Competition

Import Tariffs and Quotas Under Perfect Competition

Import Tariffs and Quotas Under Imperfect Competition

International Agreements: Trade, Labor, and the Environment

Introduction to Exchange Rates and the Foreign Exchange Market

Filters

Indian exporters are concerned about trade diversion because _________ made an agreement with the ASEAN freetrade area.

Have the GATTWTO rulings on environmental cases adversely affected the U.S.environment?

Why is NAFTA a freetrade area requiring rules of origin rather Than a customs union?

In a largecountry case, an optimal tariff would be:

(Figure: U.S.Imports from Mexico and Asia) The graph illustrates A customs union between the United States and Mexico. According to the graph, under free trade the United States will Import ____ units of the good from _ at the price of _____.

Implementing a regional freetrade agreement may have an Effect in which, due to reduced tariffs, a nation in the agreement Begins to import a product it had previously produced itself.This Effect is called:

Figure: The Home and World Market (Figure: The Home and World Markets) The termsoftrade gain is ___, and the deadweight loss is _.

A freetrade area is:

What happens when two countries apply tariffs against each Other in an attempt to capture their termsoftrade gain?