Test Bank Docx Ch.4 Differences in Culture 13th Edition

Student name:__________

1) Compare and contrast import quotas and voluntary export restraints.

2) Describe the Buy America Act. What is its connection with local content requirements?

3) Define dumping. How do governments respond to charges of dumping?

4) Explain the notion of predatory behavior with regard to dumping.

5) Discuss the economic reasons for government intervention in markets.

6) Discuss the infant industry argument for intervention in markets. What is GATT’s position on the argument?

7) Summarize Paul Krugman’s arguments against adopting a trade policy that benefits domestic firms at the expense of other countries.

8) Discuss the establishment of GATT. What was GATT’s objective?

9) What happened to GATT during the 1980s and early 1990s?

10) What has been the experience of the WTO to date? What does the future look like for the organization?

11) What are the central issues facing the WTO at the present time?

12) Why are tariff rates on agricultural products generally higher than tariff rates on manufactured products or services?

13) What is the TRIPS agreement? Why was it established?

14) Discuss the Doha Round of trade talks.

15) Explain the disadvantages of government protectionism as it relates to competitive advantage.

16) _____ are levied as a proportion of the value of the imported good.

A) Specific tariffs
B) Import quotas
C) Ad valorem tariffs
D) Tariff rate quotas

17) A(n) _____ provided by the government helps domestic producers to compete against foreign imports.

A) ad valorem tariff
B) specific tariff
C) import quota
D) subsidy

18) The extra profit that producers make when supply is artificially limited by an import quota is referred to as a

A) quota rent.
B) specific tariff.
C) tariff rate quota.
D) subsidy.

19) The _____ specifies that government agencies must give preference to American products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage.

A) General Agreement on Tariffs and Trade
B) Buy America Act
C) American Reinvestment Act
D) Smoot-Hawley Act

20) What term refers to a situation in which a government does not attempt to restrict what its citizens can buy or sell to another country?

A) tariffs
B) import quotas
C) free trade
D) subsidies

21) Which of the following is one of the main instruments of trade policy?

A) tariffs
B) credit portfolios
C) opportunity costs
D) countervailing duties

22) Specific tariffs are

A) levied as a proportion of the value of the imported good.
B) government payment to domestic producers.
C) in the form of manufacturing or production requirements of goods.
D) levied as a fixed charge for each unit of a good imported.

23) Tariffs do not benefit

A) consumers.
B) domestic producers.
C) governments.
D) domestic firms.

24) Which of the following observations about tariffs is true?

A) Tariffs are generally anti-producer and pro-consumer.
B) Export tariffs are used to raise revenue for the government.
C) Export tariffs are far more common than import tariffs.
D) Import tariffs increase the overall efficiency of the world economy.

25) Antidumping duties are often called

A) export duties.
B) positive duties.
C) retroactive duties.
D) countervailing duties.

26) Import tariffs

A) reduce the price of foreign goods.
B) create efficient utilization of resources.
C) reduce the overall efficiency of the world economy.
D) are generally pro-consumer and anti-producer.

27) In the United States, the only firms allowed to import cheese are certain trading companies, each of which is allocated the right to import a maximum number of pounds of cheese each year. This is an example of

A) a subsidy.
B) an import quota.
C) a local content requirement.
D) an ad valorem tariff.

28) _____ a requirement that some specific fraction of a good be produced domestically.

A) Administrative trade policies are
B) The Buy American Act is
C) A local content requirement is
D) Bureaucratic rules are

29) A company that sells its product in a foreign market below the cost of production may be accused of

A) pandering.
B) profiteering.
C) carnivorous behavior.
D) dumping.

30) By lowering production costs, _____ help domestic producers compete against foreign imports.

A) subsidies
B) duties
C) quotas
D) tariffs

31) Which of the following observations about subsidies is true?

A) Government subsidies must be paid for, typically by taxing individuals and corporations.
B) Subsidies are used to reduce exports from a sector, often for political reasons.
C) All subsidies are successful at increasing the international competitiveness of domestic producers.
D) Subsidies help foreign producers gain a competitive advantage over domestic producers.

32) Which of the following is a consequence of subsidies?

A) Subsidies make domestic producers vulnerable to foreign competition.
B) Subsidies lead to lowered production.
C) Subsidies protect inefficient domestic producers.
D) Subsidies produce revenue for the government.

33) According to the _____ policy, subsidies can help a firm achieve a first-mover advantage in an emerging industry.

A) strategic trade
B) antidumping
C) tariff quota
D) free trade

34) An ____ is a direct restriction on the quantity of some good that may be imported into a country.

A) import tariff
B) import quota
C) import subsidy
D) ad valorem tariff

35) A common hybrid of a quota and a tariff is known as

A) an import tariff quota.
B) a voluntary export restraint.
C) an ad valorem tariff.
D) a tariff rate quota.

36) Who benefits from an import tariff?

A) the government
B) consumers
C) foreign producers
D) everyone

37) _____ is a quota on trade imposed by the exporting country, typically at the request of the importing country’s government.

A) Voluntary export restraint
B) Specific tariff quota
C) Trade reconciliation
D) Ad valorem tariff

38) The Japanese government was pressured by the U.S. government to place limits on the number of vehicles exported to the United States by Japanese automobile producers in 1981. This is an example of

A) tariff rate quota.
B) specific tariffs.
C) voluntary export restraint.
D) ad valorem tariff.

39) Tariff rate quotas are common in agriculture, where their goal is to

A) reduce the use of synthetic fertilizers.
B) limit imports over quota.
C) increase agricultural imports.
D) increase foreign competition.

40) A quota rent is

A) a quota on trade imposed by the exporting country.
B) levied as a fixed charge for each unit of a good imported.
C) levied as a proportion of the value of the imported good.
D) the extra profit producers make when supply is artificially limited by an import quota.

41) Foreign producers typically agree to voluntary export restrictions because

A) their manufacturing capacity is limited.
B) they can divert their exports to other countries and charge more for their products.
C) they fear far more damaging punitive tariffs or import quotas might follow if they do not.
D) they are required to by the World Trade Organization.

42) Which of the following statements concerning a voluntary export restraint is true?

A) It benefits domestic producers by limiting import competition.
B) In most cases, it benefits consumers.
C) It lowers the domestic price of an imported good.
D) It is a variant of the ad valorem tariff.

43) According to _____, some specific fraction of a good must be produced domestically.

A) import quotas
B) voluntary export restraints
C) local content requirements
D) antidumping duties

44) According to the Buy America Act, if a company wishes to win a contract from a U.S. government agency to provide some equipment, it must ensure that at least 51 percent of the product by value is manufactured in the United States. This is an example of

A) antidumping duties.
B) voluntary export restraints.
C) import quotas.
D) local content requirements.

45) Local content regulations

A) protect domestic producers by limiting foreign competition.
B) lower the prices of imported components.
C) tend to benefit consumers and not producers.
D) encourage outsourcing of production units.

46) Administrative trade policies are

A) requirements that some specific fraction of a good be produced domestically.
B) quotas on trade imposed by the exporting country.
C) bureaucratic rules designed to make it difficult for imports to enter a country.
D) designed to punish foreign firms that engage in dumping.

47) The Netherlands exports tulip bulbs to almost every country in the world except Japan. This was because in Japan, customs inspectors insisted on checking every tulip bulb by cutting it vertically down the middle. This is an example of which of the following trade barriers?

A) export restraint
B) administrative trade policies
C) local content requirement
D) ad valorem

48) _____ is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their “fair” market value.

A) Export restraint
B) Dumping
C) Local content requirement
D) Ad valorem

49) In 1997, two South Korean manufacturers of semiconductors, LG Semicon and Hyundai Electronics, were accused of selling dynamic random access memory chips (DRAMs) in the U.S. market at below their costs of production. It was alleged that the firms were trying to unload their excess production in the United States. This is an example of

A) an ad valorem tariff.
B) a subsidy.
C) dumping.
D) an import quota.

50) What was the purpose of the establishment of the Common Agricultural Policy (CAP) by the European Union?

A) to increase imports and raise prices
B) to protect the jobs of Europe’s farmers
C) to increase the import of grapes for the wine industry
D) to make farmers in Europe more productive

51) According to the infant industry argument, many developing countries have a potential _____ in manufacturing, but new manufacturing industries cannot initially compete with established industries in developed countries.

A) absolute advantage
B) comparative advantage
C) opportunity cost
D) competitive advantage

52) Strategic trade policy suggests that a government should use _____ to support promising firms that are active in newly emerging industries.

A) tariff rate quotas
B) quota rents
C) subsidies
D) ad valorem tariffs

53) The U.S. government has used the threat of punitive trade sanctions to try to get the Chinese government to enforce intellectual property laws. This is an example of government intervention based on

A) human rights protection.
B) national security.
C) consumer protection.
D) retaliation.

54) According to the _____ argument, governments should temporarily support new industries until they have grown strong enough to meet international competition.

A) retaliatory action
B) human rights
C) infant industry
D) antidumping

55) The infant industry argument is criticized because it relies on an assumption that

A) new manufacturing industries in developing nations can initially compete with established industries in developed countries.
B) selling goods in a foreign market at below their “fair” market value is legally and ethically justified.
C) the domestic industry in a developing nation lacks the capacity to meet demand.
D) firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market.

56) According to the strategic trade policy argument,

A) government intervention is not required because firms can borrow money from the capital markets to finance the required investments.
B) selling goods in a foreign market at below their “fair” market value is legally and ethically justified.
C) government support can help domestic firms overcome the first-mover advantages enjoyed by foreign competitors.
D) a government should use subsidies to support promising firms that are active in old, established industries.

57) Which of the following is a political reason for governments to intervene in markets?

A) to help citizens obtain jobs in foreign markets
B) to aid their country’s businesses in foreign markets
C) to subsidize multinational companies
D) to protect jobs and industries

58) Strategic trade policy suggests that in industries where the existence of substantial scale economies implies that the world will profitably support only a few firms, countries may predominate in the export of certain products simply because they had firms that were able to

A) influence the assignment of tariffs.
B) influence the assignment of quotas
C) capture first-mover advantages.
D) capitalize on late-mover advantages.

59) Economist Paul Krugman has suggested that trade policy designed to retaliate against another country’s trade policy would

A) benefit the multinational firms of both countries.
B) benefit the citizens of both countries.
C) hurt the multinational firms of both countries.
D) hurt the citizens of both countries.

60) Economist Paul Krugman suggests that strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that

A) provides enhanced protection for intellectual property of those firms.
B) boosts national income at the expense of other countries.
C) reduces domestic agricultural profits.
D) depletes national income to the benefit of other countries.

61) Economic problems during the Great Depression were compounded in 1930 when the U.S. Congress passed the _____, aimed at avoiding rising unemployment by protecting domestic industries and diverting consumer demand away from foreign products.

A) Smoot-Hawley Act
B) Antidumping Act
C) Helms-Burton Act
D) D’Amato Act

62) Free trade as a government policy was first officially embraced by Great Britain in 1846, when the British Parliament repealed a law that placed a high tariff on

A) all agricultural products.
B) wheat.
C) textiles.
D) corn.

63) The Smoot-Hawley Act was aimed at

A) diverting consumer demand toward foreign products.
B) promoting unrestricted free trade.
C) limiting global warming.
D) avoiding rising unemployment.

64) What was the result of the Smoot-Hawley Act?

A) Other countries reacted by raising their own tariff barriers.
B) Other countries reacted by lowering their trade barriers.
C) U.S. exports increased.
D) The United States began to get out of the Great Depression.

65) Which of the following is a reason for the pressure for greater protectionism that occurred during the 1980s and early 1990s?

A) The U.S. Congress erected an enormous wall of tariff barriers.
B) Japanese economic failure strained the world trading system.
C) The persistent trade surplus in the United States strained the world trading system.
D) Many countries found ways to get around GATT regulations.

66) Until 1995, GATT rules applied only to

A) services.
B) industrial goods.
C) textiles.
D) agricultural products.

67) According to the 1986 Uruguay Round, the _____ was to be created to implement the GATT agreement.

A) World Trade Organization
B) International Monetary Fund
C) United Nations
D) World Bank

68) After the Uruguay Round of GATT negotiations extended global trading rules to cover trade in services, the first two industries targeted for reform by the WTO were

A) textiles and technology.
B) telecommunications and financial services.
C) automotive and aerospace.
D) agriculture and consulting services.

69) The WTO argues that removing tariff barriers and subsidies in the agricultural sector could

A) protect domestic agriculture in developed nations.
B) lower the overall level of agricultural trade.
C) restrict global economic growth.
D) lower prices to consumers and make it fairer for developing nations.

70) The TRIPS regulations established at the 1995 Uruguay Round

A) established regulations on patents and copyrights.
B) set a new level of agriculture subsidies.
C) organized OECD countries to eliminate tariffs on textiles.
D) established new tariff levels on technology.

71) TRIPS regulations oblige WTO members to

A) grant and enforce patents lasting at least 100 years.
B) grant and enforce copyrights lasting 100 years.
C) comply with the rules within five years in the case of the rich countries.
D) comply with the rules within 10 years in the case of the poorest countries.

72) _____ are the highest rate that can be charged, which is often, but not always, the rate that is charged.

A) Ad valorem tariff rates
B) Tariff rents
C) Specific tariff rates
D) Bound tariff rates

73) The WTO’s GATS has taken the lead in

A) providing enhanced protection for intellectual property.
B) extending free trade agreements to services.
C) reducing agricultural subsidies.
D) enforcing GATT rules.

74) Tariff rates on agricultural products are generally

A) much lower than tariff rates on manufactured products or services.
B) much lower than import fees on electronics.
C) much higher than tariff rates on manufactured products or services.
D) much higher than import fees on electronics.

75) One issue at the forefront of the current agenda of the WTO is the

A) decrease in antidumping policies.
B) low level of protectionism in agriculture.
C) strong protection for intellectual property rights in many nations.
D) continued high tariff rates on goods and services in many nations.

76) WTO rules allow countries to _____ foreign goods that are being sold cheaper than at home, or below their cost of production, when domestic producers can show that they are being harmed.

A) impose antidumping duties on
B) subsidize
C) lower the import quota on
D) place countervailing duties on

77) The _____ raised tariff barriers in the hope of protecting jobs and diverting consumer demand away from foreign products.

A) Smoot-Hawley Act
B) Helms-Burton Act
C) General Agreement on Tariffs and Trade
D) Buy America Act

78) A key goal of the 1986 Uruguay Round was to

A) extend GATT to cover trade in commodities.
B) extend GATT rules to cover trade in services.
C) increase agricultural subsidies.
D) loosen the GATT’s monitoring and enforcement mechanisms.

79) A key issue in the “millennium round” of the WTO was to

A) increase barriers to cross-border trade in agricultural products.
B) extend GATT to cover trade in commodities.
C) further reduce barriers to cross-border trade and investment.
D) extend GATT rules to cover trade in services.

80) Inadequate protections for intellectual property

A) increase the incentive for innovation.
B) led to the Smoot-Hawley Act.
C) reduce the incentive for innovation.
D) are one of the issues addressed by the local content requirement.

81) ________ in agriculture could jump-start economic growth among the world’s poorer nations and alleviate global poverty.

A) Quota rents
B) Free trade
C) Strategic trade policy
D) Subsidies

82) Which of the following is a drawback of government intervention?

A) It may invite retaliation and trigger a trade war.
B) The policies may be captured by foreign investors and turned to their advantage.
C) Despite being well executed, the intervention is unlikely to work.
D) They usually establish new tariff levels on technology—to the detriment of all in the industry.

83) Which of the following is a trade barrier that affects a firm’s strategy?

A) Tariffs lower the cost of exporting.
B) Quotas may enhance a firm’s ability to serve a country from outside of that country.
C) To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.
D) The threat of antidumping actions promotes the firm’s ability to use aggressive pricing to gain market share in a country.

84) Many firms, of all national origins, increasingly depend on _____ for their competitive advantage.

A) globally dispersed production systems
B) specific tariffs
C) infant industries
D) subsidies

85) Identify the true statement about trade barriers.

A) They lower the costs of exporting products to a country.
B) They may put a firm at a competitive advantage to indigenous competitors.
C) They may help a firm to serve a country from locations outside of that country.
D) To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.

86) Many firms, of all national origins, increasingly depend on _____ for their competitive advantage.

A) globally dispersed production systems
B) specific tariffs
C) infant industries
D) subsidies

87) Business firms that lobby their governments to engage in protectionism may miss the opportunity to build _____ by constructing a globally dispersed production system.

A) an absolute advantage
B) a competitive advantage
C) a strategic trade advantage
D) a comparative advantage

88) Tariffs are generally pro-consumer and anti-producer.

⊚ true
⊚ false

89) Export tariffs are far less common than import tariffs.

⊚ true
⊚ false

90) Under a tariff rate quota, a higher tariff rate is applied to imports within the quota than those over the quota.

⊚ true
⊚ false

91) Unlike other trade policies, local content regulations tend to benefit consumers and not producers.

⊚ true
⊚ false

92) Local content regulations provide protection for a domestic producer of parts by limiting foreign competition.

⊚ true
⊚ false

93) Antidumping policies are designed to punish foreign firms that are engaged in dumping.

⊚ true
⊚ false

94) Protecting industries deemed important for national security, consumer protection, and retaliating against unfair foreign competition are economic arguments for government intervention.

⊚ true
⊚ false

95) The infant industry argument is the latest argument for government intervention in trade.

⊚ true
⊚ false

96) GATT has not recognized the infant industry argument as a legitimate reason for protectionism.

⊚ true
⊚ false

97) Governments do not always act in the national interest when they intervene in the economy; politically important interest groups often influence them.

⊚ true
⊚ false

98) Trade wars benefit countries with interventionist governments.

⊚ true
⊚ false

99) During the 1980s and early 1990s, the world trading system erected by the GATT gained momentum as protectionist demands generally decreased across the world.

⊚ true
⊚ false

100) The World Trade Organization was created as part of the Uruguay Round.

⊚ true
⊚ false

101) The WTO does not have the power to impose trade sanctions.

⊚ true
⊚ false

102) Antidumping actions are concentrated in certain sectors of the economy such as basic metal industries, chemicals, plastics, and machinery and electrical equipment.

⊚ true
⊚ false

103) The TRIPS regulations oblige WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years.

⊚ true
⊚ false

104) One of the successful outcomes of the Doha Round negotiations has been that many nations have proceeded with bilateral free trade agreements.

⊚ true
⊚ false

105) Tariffs on industrial goods remain higher than tariffs on services.

⊚ true
⊚ false

106) Tariff barriers lower the costs of exporting products to a country.

⊚ true
⊚ false

107) To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.

⊚ true
⊚ false