Deck 21: International Trade Restrictions

Question 1

Which of the following statements about international trade restrictions is true?

A)They ensure that only efficient producers survive.
B)They ensure that countries specialize only in those products that they can produce most efficiently.
C)In the majority of cases,they harm domestic consumers.
D)They typically benefit foreign producers at the expense of domestic consumers.
E)They ensure that higher-quality goods are provided at lower prices.

Answer 1

C

Question 2

When restrictions alter the pattern of international trade,the _____ benefit and the _____ suffer(s).

A)domestic consumers; domestic producers
B)domestic consumers; government
C)domestic producers; domestic consumers
D)foreign producers; domestic producers
E)foreign producers; domestic consumers

Answer 2

C

Question 3

Which of the following statements is true of the impact of trade restrictions on domestic employment?

A)Domestic firms will produce the goods that otherwise would have been produced abroad,thus employing foreign workers instead of domestic workers.
B)Beside the protected industry,other industries will also benefit in terms of employment.
C)Domestic consumers will be required to pay lower prices for the output of the protected industry.
D)Restrictions imposed on trade simply redistribute jobs by creating employment in the protected industry and reducing employment elsewhere.
E)If other countries retaliate by restricting the entry of the domestic exports,the output of domestic firms that produce for export will rise.

Answer 3

D

Question 4

Typically,restrictions to "save domestic jobs" simply redistribute jobs by creating:

A)employment in the protected industry and reducing employment elsewhere.
B)employment in nonprotected industries and reducing employment in the protected industry.
C)inflation in the overall economy.
D)employment in the primary sector at the expense of the secondary sector.
E)labor unions in the protected industries at the expense of employment in nonunionized industries

Question 5

If international trade is restricted by the government:

A)domestic consumers are benefited.
B)domestic producers are adversely affected.
C)consumers in the importing country are required to pay higher prices for the goods.
D)consumers can access to better quality product at lower prices.
E)the resources are allocated to their highest paid uses.

Question 6

Which of the following probably best explains why trade restrictions are imposed even if the costs to consumers are greater than the benefits to protected industries?

A)Indifference on the government's part to the interests of domestic workers
B)A desire to make other countries suffer
C)Successful lobbying by consumers
D)Successful lobbying by employers and workers
E)The government's preference to safeguard the interest of the producers at the expense of the consumers

Question 7

Employers and workers in the protected industry know that the consequences of protection are principally:

A)lower prices for their output,lower profits for owners,and lower wages for workers.
B)higher prices for their output,lower profits for owners,and lower wages for workers.
C)higher prices for their output,lower profits for owners,and higher wages for workers.
D)lower prices for their output,higher profits for owners,and higher wages for workers.
E)higher prices for their output,higher profits for owners,and higher wages for workers.

Question 8

The notion of reciprocity means that one nation will impose import restrictions on another in order to:

A)stimulate an increase in trade restrictions in the latter.
B)stimulate a decrease in trade restrictions in the latter.
C)eliminate trade restrictions immediately in both countries.
D)improve the government revenue collections through tariffs in both countries.
E)enforce standards of product quality in the latter.

Question 9

Developing countries often justify imposition of tariffs because:

A)it creates a burden on government budget.
B)it is easy to collect direct taxes from people in the developing countries.
C)a large number of people in the developing countries earn a taxable income.
D)developing countries find income taxes difficult to levy and collect.
E)the volume of imports of these countries is considerably low.

Question 10

People who call for creating a "level playing field" believe that:

A)a country with relatively low wages is typically a country with an abundance of low-skilled labor.
B)trading on the basis of comparative advantage benefits both domestic and foreign firms.
C)creating a "level playing field" undermines the basis for specialization and economic efficiency.
D)production in accordance with comparative advantage is unfair.
E)free trade allocates the scarce resources in an efficient way.

Question 11

Steel producers in the United States observe that foreign sales of U.S.steel has drastically declined due to stringent trade policies adopted by the foreign governments and unfair treatment of U.S.steel exports in foreign countries.The lobbying efforts of such loss making U.S.steel manufacturers induces the domestic government to restrict the entry of imported steel and help stimulate the sales of domestically produced steel.Which of the following is most similar to the example mentioned above?

A)A tariff imposed by the government to stimulate domestic production of a high-technology good with positive spillover effects
B)A tariff imposed by the government on the import of cotton textiles because it is an infant industry in the domestic country
C)An import tariff applied against a foreign monopoly supplying the domestic market
D)Taxes imposed by the government on an import competing industry that generates a negative production externality
E)Reciprocal tariffs introduced by the government of Mexico on tobacco imports from Brazil in retaliation to unfair treatment of Mexican tobacco exports to the latter

Question 12

In the light of the infant industry argument,identify the industry which is likely to have substantially high initial costs.

A)Fashion designing
B)Retail industry
C)Iron and steel industry
D)Dairy industry
E)Software industry

Question 13

Protection of an infant industry should be withdrawn once that industry:

A)charges the same price as foreign competitors.
B)goes public on the stock exchange.
C)raises a large amount of sales revenue.
D)achieves sufficient size to compete with foreign firms.
E)earns enough profit as a result of the subsidies to remain in business.

Question 14

The infant industry argument is that:

A)those industries that produce products for infants should be protected.
B)protectionism will provide consumers with lower prices.
C)protectionism should be used to create a level playing field for the domestic firms to compete with foreign firms.
D)protectionism promotes complete specialization in the country on the basis of comparative advantage.
E)new industries should be protected from foreign competition until they have had adequate time to develop.

Question 15

Commercial policy is government policy that influences:

A)the operation of commercial banks.
B)domestic trade flows.
C)domestic private corporations.
D)international trade flows.
E)the operation of capital markets.

Question 16

Nascent industries require adequate protection from foreign competition because:

A)they experience economies of scale.
B)they experience diseconomies of scale.
C)the quality of the products of such industries are comparatively inferior than the products of their foreign competitors.
D)they do not have adequate resources to undertake research and development.
E)their initial costs of production are considerably higher than the foreign firms.

Question 17

Protection provided to the infant industries is rarely withdrawn because:

A)the costs of withdrawing protection outweigh the benefits.
B)the industries begin to experience diseconomies of scale.
C)it leads to a loss of government revenue.
D)the industries produce goods which are close substitutes of the imported goods.
E)the larger and more successful the industry becomes,the more political power it wields.

Question 18

According to empirical observations,the cost of restricting international trade in the U.S.is much greater than the benefits generated from restriction.In the light of the above observation,which of the following statements is true?

A)The benefits of protecting domestic jobs typically outweigh the costs.
B)Consumers end up paying much more for the goods they buy in order to subsidize the relatively inefficient domestic producer.
C)U.S.GDP would be over $14 billion higher with import restrictions than without restrictions.
D)Protection of the U.S.textile and sugar industries means that all consumers pay a lower price for clothing and sugar.
E)Protection of the domestic industries enable the producers to charge lower prices for their products.

Question 19

It is often argued that if foreign goods are kept out of the domestic economy:

A)jobs will be lost at home.
B)jobs will be created abroad.
C)foreign consumers will enjoy product surpluses.
D)jobs will be created at home.
E)foreign consumers will suffer product shortages.

Question 20

Generally speaking,protection from foreign competition benefits:

A)both domestic producers and foreign producers.
B)both domestic consumers and foreign consumers
C)domestic consumers and foreign consumers.
D)neither domestic producers nor foreign producers.
E)domestic producers at the expense of domestic consumers.

Question 21

One of the primary objectives of the WTO is:

A)to create trade restrictions across the countries.
B)to reduce trade barriers created by the different countries.
C)to enable certain countries to maintain their autarkic conditions.
D)to enable the western countries to emerge as major players in the international trade.
E)to redistribute wealth from the first world to the third world countries.

Question 22

Suppose the production of helicopters is an industry characterized by increasing returns to scale and an Argentine firm,Cicare,is the only player in this market.The firm caters to the global market and earns a profit of $10 million.Flettner,a German firm has been considering entering this market for a while,but it is aware that its entry will cause each firm to lose about $4 million.However,a government subsidy allows Flettner to enter the helicopter market and Cicare incurs a loss of $4 million due to its entry.Eventually,Flettner evolves as the monopoly supplier of helicopters while Cicare is forced to shut down.This conclusion rests on which of the following assumptions?

A)The German government was experiencing a budget surplus.
B)There was low demand for Cicare automobiles in the world market.
C)The German government was able to forecast accurately the subsidy required to induce Flettner to produce helicopters.
D)The quality of Flettner's helicopters were inferior compared to that of Cicare's.
E)Cicare diversified into the production of automobiles.

Question 23

If the world price of a good is lower than its domestic equilibrium price,the country will:

A)import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically.
B)export a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied domestically.
C)import a quantity of the good equal to the difference between the quantity demanded domestically and the quantity supplied by foreign producers.
D)export a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied domestically.
E)import a quantity of the good equal to the difference between the quantity demanded by foreign consumers and the quantity supplied by foreign producers.

Question 24

Which of the following tools of commercial policy yields a revenue to the government?

A)Quota
B)Tariff
C)Export subsidy
D)Government procurement policy
E)Health and safety standards

Question 25

Which of the following statements about an increasing-returns-to-scale industry is not true?

A)It will tend to concentrate production in the hands of a very few large firms.
B)Firms in the industry face higher costs per unit of production as their level of output increases.
C)Opportunity costs may fall with the level of output.
D)Proponents of strategic trade policy contend that tariffs can be used to stimulate production by a domestic industry capable of achieving increasing returns to scale.
E)The costs of producing a unit of output fall as more output is produced.

Question 26

If average costs of production decline with increases in output for a particular firm:

A)many small firms will be more efficient than a single large firm.
B)one large producer will be more efficient than many small producers.
C)product diversification is necessary to spread the overhead.
D)diseconomies of scale become significant as output increases.
E)the variable cost of production must exceed the fixed costs.

Question 27

The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market. Figure 21.1 In the figure,
P₁: Price of the good in the international market.
P₂: Price of the good in the domestic market after the imposition of tariff by the government.
P₃: No-trade price of the good in the domestic market.
Refer to Figure 21.1.If the government imposes a tariff such that the price of the good in the domestic market is P₂ while the international price is P_1,the dollar value of the tariff is equal to:

A)P₃ - P₁.
B)P_{2 -} P₃.
C)P₂ - P₁.
D)P₁ - P₂.
E)P₁ - P₃.

Question 28

Suppose the production of helicopters is an industry characterized by increasing returns to scale and an Argentine firm,Cicare,is the only player in this market.The firm caters to the global market and earns a profit of $10 million.Flettner,a German firm has been considering entering this market for a while,but it is aware that its entry will cause each firm to lose about $4 million.Although a government subsidy allows Flettner to enter the helicopter market,the company is unable to reap profits in the long run.Which of the following could have led to this outcome?

A)Flettner experienced high production costs due to inadequate supply of inputs.
B)New firms had entered the helicopter industry.
C)The German government ran a balance of payment deficit.
D)The Argentine government retaliated by subsidizing Cicare.
E)There was very low investment in research and development in this industry.

Question 29

The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market. Figure 21.1 In the figure,
P₁: Price of the good in the international market.
P₂: Price of the good in the domestic market after the imposition of tariff by the government.
P₃: No-trade price of the good in the domestic market.
According to Figure 21.1,if the international price of the good is P₁,which of the following statements is true?

A)The domestic market is in equilibrium.
B)There is an excess supply in the domestic market by the amount Q₄ - Q₂.
C)The country will export Q₃ - Q₁ units of the good.
D)There is an excess demand of Q₄ - Q₂ units in the domestic market.
E)The country needs to import Q₅ - Q₁ units of the good to satisfy domestic demand.

Question 30

Which of the following isa tool of commercial policy?

A)Corporate income tax
B)Payroll tax
C)Excise duty
D)Tariff
E)Octroi duty

Question 31

The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market. Figure 21.1 In the figure,
P₁: Price of the good in the international market.
P₂: Price of the good in the domestic market after the imposition of tariff by the government.
P₃: No-trade price of the good in the domestic market.
Refer to Figure 21.1.If the government imposes a tariff such that the price of the good in the domestic market is P₂ when the international price is P₁:

A)the import of the good by the domestic country increases by Q₅ - Q₄ units.
B)the import of the good by the domestic country declines.
C)the quantity of the good exported by the domestic country declines.
D)the domestic country is in equilibrium.
E)the quantity of the good exported by the domestic country increases.

Question 32

The abbreviation GATT stands for:

A)General Analysis of Taxes and Transfers.
B)General Agreement on Tariffs and Trade.
C)Government Agency for Trade and Transportation.
D)Government Agency for Treaties and Taxes.
E)General Agreement on Terms of Trade.

Question 33

The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market. Figure 21.1 In the figure,
P₁: Price of the good in the international market.
P₂: Price of the good in the domestic market after the imposition of tariff by the government.
P₃: No-trade price of the good in the domestic market.
According to Figure 21.1,the domestic equilibrium quantity of the good is:

A)Q₁.
B)Q₅.
C)Q₂.
D)Q₃.
E)Q₄.

Question 34

Proponents of strategic trade policy contend that:

A)government should tax domestic firms to generate greater revenues.
B)government should encourage imports to prevent monopoly in the domestic market.
C)government should provide subsidies to domestic firms with decreasing costs.
D)government should discourage domestic firms with decreasing costs from continuing production.
E)government should tax domestic import competing firms.

Question 35

One important unintended consequence of the Smoot-Hawley Tariff Act was to:

A)lessen the severity of the Great Depression by increasing exports.
B)provide the federal government with an effective tool for exercising monetary policy.
C)increase the efficiency of domestic automobile production.
D)increase the severity of the Great Depression by causing other countries to retaliate,and thus leading to a decline in exports.
E)increase the U.S.government budget deficit by $15 million.

Question 36

According to strategic trade policy,international trade largely involves firms which:

A)enjoy monopolistic power in the domestic market.
B)has a high initial cost of production.
C)pursues economies of scale.
D)experiences diseconomies of scale.
E)generates adequate employment in the domestic economy.

Question 37

Which of the following is true of a tariff?

A)It is a tax levied by the government on domestic production of goods and services.
B)It is a quantitative restriction on imports imposed by the government.
C)It is a monetary benefit received by exporters from the government.
D)It is a monetary benefit received by importers from the government.
E)It is a tax on import and export levied by the government.

Question 38

Which of the following would result from a tariff?

A)An increase in government budget deficit
B)An increase in domestic production
C)A greater volume of international trade
D)Increased domestic consumption
E)Decrease in prices of the imported goods

Question 39

According to economists,which of the following acts was partially responsible for the Great Depression of the 1930s?

A)The Robinson-Patman Act
B)The National Recovery Act
C)The Smoot-Hawley Tariff Act
D)The Sarbanes-Oxley Act
E)The Sherman Antitrust Act

Question 40

The figure below shows the demand (D) and supply (S) curves of a good produced domestically in an economy as well as traded in the international market. Figure 21.1 In the figure,
P₁: Price of the good in the international market.
P₂: Price of the good in the domestic market after the imposition of tariff by the government.
P₃: No-trade price of the good in the domestic market.
According to Figure 21.1,the tariff revenue earned by the domestic government is equal to the:

A)area ABEFH.
B)area FEQ₄Q₂.
C)area ABH.
D)area HFP₁P₂.
E)area BEFH

Question 41

The figure below shows the demand (D) and supply (S) curves of corn syrups. Figure 21.3 In Figure 21.3,if the world price per gallon is $8,then without quotas:

A)50 gallons of corn syrup will be imported.
B)35 gallons of corn syrup will be imported.
C)30 gallons of corn syrup will be imported.
D)20 gallons of corn syrup will be imported.
E)45 gallons of corn syrup will be imported.

Question 42

The figure below shows the demand (D) and supply (S) curves of corn syrups. Figure 21.3 In Figure 21.3,with an import quota of 30 gallons of corn syrup,what is the new equilibrium price?

A)$4
B)$6
C)$8
D)$10
E)$12

Question 43

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 In Figure 21.2,if the world price of wheat is $35 and a $15 tariff is imposed:

A)domestic consumption will decrease from 400 to 350 bushels of wheat.
B)the government will collect $200 in revenue from the tariff.
C)domestic consumption will increase from 150 to 200 bushels of wheat.
D)imports will be eliminated.
E)domestic consumption will increase from 150 to 300 bushels of wheat.

Question 44

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 According to Figure 21.2,if the world price of wheat is $25 and a tariff of $10 is imposed by the domestic government,the total tariff revenue collected by the government is:

A)$4,000.
B)$0.
C)$5,000.
D)$2,000.
E)$1,000.

Question 45

Suppose that the world price of kiwi fruit ($10 per box) is below the domestic price ($12 per box).A tariff of $1 per box would:

A)cause foreign producers to be better off,because the price they charge is now higher by $1 per box.
B)cause domestic producers to be worse off by $5 per box.
C)allow domestic consumers to enjoy kiwi fruit for $5 more per box than the free trade price,but still $2 less than the domestic price.
D)allow domestic consumers to enjoy kiwi fruit for $1 more per box than the free trade price,but still $1 less than the domestic price.
E)cause domestic producers to be worse off by $10 per box.

Question 46

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 According to Figure 21.2,if the world price per bushel of wheat is $25,how much is the domestic demand?

A)400 bushels
B)450 bushels
C)200 bushels
D)300 bushels
E)150 bushels

Question 47

The figure below shows the demand (D) and supply (S) curves of corn syrups. Figure 21.3 In Figure 21.3,with an import quota of 30 gallons of corn syrup,what is the new equilibrium quantity demanded?

A)35 gallons
B)50 gallons
C)20 gallons
D)65 gallons
E)5 gallons

Question 48

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 According to Figure 21.2,if the world price per bushel of wheat is $25,what is the domestic production?

A)300 bushels
B)450 bushels
C)400 bushels
D)150 bushels
E)200 bushels

Question 49

By restricting the amount of a good that may be imported,quotas:

A)increase the price,thus causing domestic producers to sell less than they would with free trade.
B)lower the price,thus allowing domestic producers to sell more than they would with free trade.
C)increase the price and allow domestic producers to sell more at a higher price than they would with free trade.
D)lower the price,thus causing domestic producers to realize lower total revenue from the quota item.
E)simply replace foreign production with domestic production.

Question 50

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 According to Figure 21.2,if the world price of wheat is $25 and a tariff of $25 is imposed by the domestic government,the total tariff revenue collected by the government is:

A)$2,000.
B)$0.
C)$200.
D)$100.
E)$4,000

Question 51

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 In Figure 21.2,if the world price per bushel of wheat is $25 and a tariff of $10 is imposed by the domestic government,what is the domestic demand?

A)400 bushels
B)450 bushels
C)200 bushels
D)300 bushels
E)150 bushels

Question 52

The figure below shows the demand (D) and supply (S) curves of corn syrups. Figure 21.3 In Figure 21.3,suppose an import quota of 30 gallons of corn syrup is imposed.If the world price per gallon is $4:

A)there will be an excess domestic demand of approximately 35 gallons.
B)the domestic market will be in equilibrium.
C)there will be an excess domestic demand for 10 gallons.
D)there will be an excess supply of 20 gallons.
E)there will be an excess domestic demand for 20 gallons.

Question 53

The effect of an import quota on the domestic market is to shift the:

A)demand curve to the right by the amount of the quota.
B)demand curve to the left by the amount of the quota.
C)supply curve to the right by the amount of the quota.
D)supply curve to the left by the amount of the quota.
E)consumers' marginal utility curves if they prefer foreign goods to domestic goods.

Question 54

Which of the following tools of commercial policy acts as a quantitative restriction on imports?

A)Tariff
B)Subsidy
C)Health and Safety regulations
D)Quota
E)Government procurement

Question 55

The figure below shows the demand (D) and supply (S) curves of corn syrups. Figure 21.3 In Figure 21.3,what are the equilibrium price and quantity in the absence of trade?

A)$8,50 gallons
B)$12,35 gallons
C)$8,35 gallons
D)$4,20 gallons
E)$16,50 gallons

Question 56

Which of the following countries is forbidden to impose export tariff by its constitution?

A)The United States
B)Brazil
C)United Kingdom
D)Japan
E)Mexico

Question 57

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 In Figure 21.2,if the world price per bushel of wheat is $25,how much wheat will be imported?

A)450 bushels
B)350 bushels
C)200 bushels
D)150 bushels
E)300 bushels

Question 58

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 Refer to Figure 21.2.In the absence of international trade,what are the domestic equilibrium price and quantity?

A)$30 and 200 bushels
B)$50 and 400 bushels
C)$30 and 400 bushels
D)$50 and 300 bushels
E)$25 and 150 bushels

Question 59

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 In Figure 21.2,if the world price of wheat is $25 and a $10 tariff is imposed:

A)imports will decrease from 300 to 200 bushels of wheat.
B)imports will increase from 200 to 400 bushels of wheat.
C)imports will remain unchanged.
D)domestic production will decrease from 200 to 150 bushels of wheat.
E)domestic production will remain unchanged.

Question 60

The figure given below depicts the negatively sloped demand and positively sloped supply curves of wheat in a country. Figure 21.2 In Figure 21.2,if the world price per bushel of wheat is $25,and a tariff of $10 is imposed,what is the domestic production?

A)300 bushels
B)450 bushels
C)400 bushels
D)150 bushels
E)200 bushels

Question 61

Which of the following can be considered as a cultural barrier to trade?

A)Prohibition on Zimbabwean aircrafts from flying over or landing in Canada.
B)Restriction on the export of luxury goods to the Democratic Peoples Republic of Korea from Canada.
C)An arms embargo imposed on China by the U.K.government
D)Japanese law requiring a new retail firm to receive permission from other retailers in the area in order to open a business.
E)Restriction on the export of strategic goods to Ghana imposed by the government of U.K.

Question 62

After the U.S.government had approved the feeding of hormones to U.S.beef cattle,several western European nations restricted the import of beef from the U.S.Which of the following tools of commercial policy had been put to use in this situation?

A)Tariff
B)Quota
C)Health and safety standards
D)Subsidy
E)Government procurement

Question 63

As a result of the government procurement policy in the U.S.:

A)the domestic consumers are required to pay a higher price than the government for the domestically produced goods.
B)the government wields the sole authority of importing goods from abroad.
C)the government wields the sole authority of exporting goods.
D)the government is required to buy the domestic goods if the domestic price is less than the world price.
E)the government is required to sponsor research and development for the domestic firms.

Question 64

One of the negative impacts of export subsidy is that:

A)the price of the domestic good increases in the world market.
B)the domestic supply of the goods increases more than proportionately than increase in demand.
C)the domestic cost of production of the exportable increase.
D)it results in a general deflation and hence the domestic producers incur losses.
E)the domestic consumers are harmed as the subsidies are financed by taxing them.

Question 65

Agreements to abolish most barriers to trade among nations are known as:

A)free trade cartels.
B)discriminatory trade agreements.
C)neutral trade agreements.
D)preferential trade agreements.
E)retaliatory trade agreements.

Question 66

Suppose,in the United States,each farmer is given a federal agricultural subsidy worth $30,000.What will be the effect of such subsidy?

A)They discourage domestic agricultural production.
B)They allow U.S.farmers to sell their products for lower prices in foreign markets.
C)They give foreign producers an unfair cost advantage.
D)They increase the amount of agricultural imports into the United States.
E)The price of the primary products decline in the U.S.market.

Question 67

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 21.4 Refer to Figure 21.4.If cocoa sells for $6 per pound in the world market,determine the volume of U.S.cocoa imports.

A)250 pounds
B)350 pounds
C)300 pounds
D)150 pounds
E)200 pounds

Question 68

The most successful free trade agreements achieve all of the following goals,except:

A)benefiting exporters by increasing exports to member countries.
B)ensuring that production occurs on the basis of comparative advantage.
C)benefiting consumers by making a wider variety of goods available at a lower price.
D)stimulating trade creation to allow the benefits of trade to be realized.
E)protecting domestic industries from foreign competition.

Question 69

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 21.4 From Figure 21.4,determine the total volume of U.S.cocoa imports if its government imposes tariff at the rate of $2 per pound on cocoa.

A)200 pounds
B)250 pounds
C)100 pounds
D)300 pounds
E)350 pounds

Question 70

In reality international trade is determined solely by comparative advantage and the free market forces of supply and demand.

Question 71

Trade diversion reduces worldwide efficiency,because:

A)production is diverted to the country with the comparative advantage.
B)production is diverted from the country with the comparative advantage.
C)unnecessary trade restrictions are created in the economies.
D)consumption is diverted to the country having inadequate demand.
E)the cost of transshipment of the goods increases thus raising their prices in the world market.

Question 72

The trade-creation effect refers to:

A)a reduction in economic efficiency as a result of a preferential trade agreement.
B)a production shift to a higher-cost producer as a result of a preferential trade agreement.
C)the outcome of a preferential trade agreement that allows a country to obtain goods at a lower cost than is available at home.
D)diversion of production from a country that has comparative advantage.
E)a production shift to a country that does not have comparative advantage.

Question 73

The European Economic Community was created in 1957 by:

A)France,the United Kingdom,Italy,Belgium,the Netherlands,and Luxembourg.
B)France,West Germany,Italy,Belgium,the Netherlands,and Luxemburg.
C)France,West Germany,Italy,Belgium,the Netherlands,and the United Kingdom.
D)France,West Germany,Italy,the United Kingdom,Belgium,the Netherlands,and Luxembourg.
E)France,West Germany,Italy,Belgium,the United Kingdom,and Luxembourg.

Question 74

The basic difference between a tariff and quota is that:

A)quota can be imposed both on imports and exports whereas a tariff can be imposed only on imports.
B)quota yields revenue to the government whereas tariff does not yield any revenue.
C)tariff reduces the import of the goods with greater certainty than quota as the amount of import restricted by quota depends on the price elasticity of demand for importable.
D)tariff is a quantitative restriction on imports whereas quota is an import duty.
E)a tariff raises the price of the product only in the domestic market whereas with a quota,both domestic and foreign producers receive a higher price.

Question 75

Subsidies are payments made by the government of a country to:

A)foreign firms to encourage imports.
B)foreign firms to encourage domestic exports.
C)domestic firms to encourage exports.
D)domestic firms to encourage imports.
E)domestic firms to ensure domestic consumption of their goods.

Question 76

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 21.4 According to Figure 21.4,the no-trade equilibrium price and quantity of cocoa in the U.S.market are:

A)$8 and 150 pounds.
B)$10 and 250 pounds.
C)$4 and 200 pounds.
D)$10 and 200 pounds.
E)$6 and 300 pounds.

Question 77

The figure below shows the demand (D) and supply (S) curves of cocoa in the U.S. Figure 21.4 Refer to Figure 21.4.Assume that Ghana is the only cocoa exporter supplying cocoa in the world market at $6 per pound.If the U.S.enters into a free trade agreement (FTA) with Ghana,what would be its total cocoa imports?

A)100 pounds
B)300 pounds
C)200 pounds
D)150 pounds
E)250 pounds

Question 78

A customs union is an organization of nations whose members:

A)have impenetrable trade barriers among themselves but impose no trade barriers on nonmembers.
B)have no trade barriers among themselves but impose common trade barriers on nonmembers.
C)have no trade barriers among themselves but each member country chooses its own trade policies toward nonmember countries.
D)retaliate each other by raising reciprocal tariffs.
E)neither have trade barriers among themselves nor impose any restriction on the nonmember countries.

Question 79

In 1992 the EEC was replaced by the EU with an agreement to:

A)reduce trade barriers among the member countries.
B)reduce trade barriers against nonmember countries.
C)mutually restrict imports from nonmember countries.
D)create a single market for goods and services in western Europe.
E)enable the countries of Western Europe to emerge as major world powers.

Question 80

International trade on the basis of comparative advantage maximizes world output and allows consumers to access better-quality products at lower prices than would be available in the domestic market alone.