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Assignment 6 (Chapter 6)
1. Adjustment assistance is sometimes used to assist:
a)
b)
c)
d)
In retraining workers displaced by imports
In retraining workers displaced by exports
Foreign firms injured by our quotas
Foreign firms injured by our tariffs
2. A trade policy designed to alleviate some domestic economic problem by exporting it to foreign
countries is known as a(n):
a)
b)
c)
d)
International dumping policy
Trade adjustment assistance policy
Most-favored-nation policy
Beggar-thy-neighbor policy
3. Trade theory suggests that the United States would gain from a subsidy provided by Japan to its
calculator producers if the gains to American consumers of calculators more than offset the losses to
American calculator producers. This occurs as long as the United States:
a)
b)
c)
d)
Is a net importer of calculators
Is a net exporter of calculators
Has an absolute advantage in calculator production
Has a comparative advantage in calculator production
4. Under the original provisions of the Reciprocal Trade Agreements Act, the president of the United
States was authorized to cut tariffs up to:
a)
b)
c)
d)
10 percent
50 percent
75 percent
100 percent
5. The U.S. “trade-remedy laws” could establish all of the following except:
a)
b)
c)
d)
Import tariffs to protect U.S. firms seriously injured by foreign competition
Countervailing duties which neutralize foreign export subsidies
Antidumping duties which protect U.S. firms from imports sold at less than fair value
Economic sanctions levied against hostile nations
6. 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:
a)
b)
c)
d)
Export trade associations
Domestic international sales corporations
Export-import banks
Commodity sales corporations
7. Suppose the United States imposes trade sanctions (export quotas) on grain sold to the Russians.
Assuming other nations do not increase grain exports to the Russians, all of the following would occur
except:
a)
b)
c)
d)
Grain prices would rise in Russia
Consumer surplus would decrease for the Russians
Grain prices would rise in the United States
Export revenues would decrease for U.S. producers
8. Suppose the president lowers tariffs on radios as the result of negotiations under the trade agreements
program. Radio producers in the United States can appeal under the:
a)
b)
c)
d)
Escape clause if rising imports substantially injure the U.S. radio industry
Escape clause if rising unemployment occurs even though imports remain unchanged
Infant industry clause if rising imports cause unemployment to rise among U.S. radio workers
Infant industry clause if rising imports result in losses for U.S. radio companies
9. During the past four decades:
a)
b)
c)
d)
Nontariff barriers (NTBs) and tariffs have increased in importance
Nontariff barriers (NTBs) and tariffs have decreased in importance
Nontariff barriers (NTBs) have increased and tariffs have decreased in importance
Nontariff barriers (NTBs) have decreased and tariffs have increased in importance
10. The strongest political pressure for a trade policy that results in higher protectionism comes from:
a)
b)
c)
d)
Domestic workers lobbying for import restrictions
Domestic workers lobbying for export restrictions
Domestic consumers lobbying for export restrictions
Domestic consumers lobbying for import restrictions
11. Which international organization stipulates procedures for the settlement of international trade
disputes?
a)
b)
c)
d)
World Trade Organization
World Bank
International Monetary Fund
Organization of Economic Development
12. Assume Boeing Inc. (of the United States) and Airbus Industrie (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. Answer the question(s) on the basis of this information.
Figure 6.1. Strategic Trade Policy: Boeing versus Airbus
Canadian Market
Consider Figure 6.1. At the monopoly price as established by Boeing, Canadian consumers realize $____
of consumer surplus from the availability of aircraft.
a)
b)
c)
d)
$4 million
$8 million
$12 million
$16 million
13. Assume Boeing Inc. (of the United States) and Airbus Industrie (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. Answer the question(s) on the basis of this information.
Figure 6.1. Strategic Trade Policy: Boeing versus Airbus
Canadian Market
Refer to Figure 6.1. The Airbus subsidy leads to a(n) increase/decrease in Canadian consumer surplus
of $____, as compared to the consumer surplus that existed in the absence of a subsidy.
a)
b)
c)
d)
Increase of $8 million
Increase of $10 million
Decrease of $8 million
Decrease of $10 million
14. Assume Boeing Inc. (of the United States) and Airbus Industrie (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. Answer the question(s) on the basis of this information.
Figure 6.1. Strategic Trade Policy: Boeing versus Airbus
Canadian Market
Consider Figure 6.1. For Europe as a whole (Airbus and European taxpayers), the subsidy leads to a(n)
increase/decrease in net revenues of $____.
a)
b)
c)
d)
Increase of $12 million
Increase of $16 million
Decrease of $12 million
Decrease of $16 million
15. Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable
influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Answer the question(s) on the basis of this information.
Figure 6.2. Effects of an Export Subsidy
Mexican Calculator Market
Consider Figure 6.2. The South Korean subsidy helps/hurts Mexican manufacturers, since their producer
surplus rises/falls by $____.
a)
b)
c)
d)
Helps, rises, $60
Helps, rises, $100
Hurts, falls, $60
Hurts, falls, $100
16. Figure 6.2 illustrates the calculator market for Mexico, assumed to be a small nation that is unable
influence the South Korean (world) price. Assume the South Korean price to be $60 per calculator.
Answer the question(s) on the basis of this information. Figure 6.2. Effects of an Export Subsidy
Mexican Calculator Market
Consider Figure 6.2. For Mexico's producers and consumers as a whole, the South Korean subsidy leads
to a:
a)
b)
c)
d)
$120 welfare gain
$320 welfare gain
$120 welfare loss
$320 welfare loss
17. Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the
United States. Answer the question(s) on the basis of this information.
Figure 6.3. Iraqi Computer Market and Economic Sanctions
Iraqi computer Market
Consider Figure 6.3. With free trade, Iraq purchases ____ computers at a price of $____, and realizes
$____ of consumer surplus from the availability of computers.
a)
b)
c)
d)
30, $3,000, $25,000
30, $3,000, $35,000
30, $3,000, $45,000
30, $3,000, $55,000
18. Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the
United States. Answer the question(s) on the basis of this information.
Figure 6.3. Iraqi Computer Market and Economic Sanctions
Iraqi computer Market
Consider Figure 6.3. In response to Iraq's armed invasion of neighboring countries, suppose the United
States imposes a partial embargo that limits exports to Iraq to 10 computers. The export quota leads to
an increase/decrease in the price of computers equal to $____, and an increase/decrease in consumer
surplus equal to $____.
a)
b)
c)
d)
Increase, $2,000, decrease, $40,000
Increase, $4,000, decrease, $60,000
Decrease, $2,000, increase, $40,000
Decrease, $4,000, increase, $60,000
19. Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the
United States. Answer the question(s) on the basis of this information.
Figure 6.3. Iraqi Computer Market and Economic Sanctions
Iraqi computer Market
Consider Figure 6.3 and refer to the previous question. The remainder of the change in Iraq's consumer
surplus is captured by the United States as:
a)
b)
c)
d)
Tax revenue
Export revenue
Producer surplus
Consumer surplus
20. Figure 6.3 represents the Iraqi computer market. Assume Iraq purchases all of its computers from the
United States. Answer the question(s) on the basis of this information.
Figure 6.3. Iraqi Computer Market and Economic Sanctions
Iraqi computer Market
Consider Figure 6.3. For the United States, the export quota results in a(n):
a)
b)
c)
d)
Improvement in its terms of trade with Iraq
Increase in its export revenue
Increase in domestic computer prices
Decrease in domestic consumer surplus
21. Economic sanctions are most effective in causing the target nation to modify its behavior when the:
a) Target nation had negligible economic relationships with the imposing nation prior to the
sanctions
b) People of the target nation have weak cultural ties to the people of the imposing nation
c) Sanctions are levied by a large number of nations
d) Target government is supported by the majority of its people
22. Under the trade adjustment assistance program, a domestic firm or worker can file for governmental
assistance only if it demonstrates that it suffered economic hardship due to imports of foreign-subsidized
goods.
a) True
b) False
23. The Export-Import Bank provides export-credit subsidies to U.S. producers of agricultural goods.
a) True
b) False
24. The Commodity Credit Corporation makes available export credit financing for U.S. agricultural
exports.
a) True
b) False
25. Established in 1995, the World Trade Organization took charge of administering the new global trade
rules agreed in the Uruguay Round of multilateral trade negotiations.
a) True
b) False