Q&A Hero

Q: NAFTA refers to a 1994 agreement that eliminated most tariffs among which countries? A) Canada, the United Kingdom and Mexico B) the United States, the United Kingdom and Mexico C) the United States, Canada and Mexico D) the United States, Mexico and Cuba

Q: Twenty-seven countries in Europe have eliminated all tariffs with each other. This group of countries is known as the A) European Union. B) United Federation of Europe. C) Gruppo Euro. D) European Free Trade Association.

Q: As a percentage of GDP, exports are greater than imports for which of the following countries? A) the United Kingdom B) France C) the United States D) China

Q: Which of the following statements is true? A) Japan is more dependent on foreign trade than is the United States. B) Imports and exports account for over one-half of the GDP of Belgium. C) France is the leading exporting country, accounting for 10 percent of total world exports. D) Because the cost of labor used on farms is so high, the United States exports very little of its wheat, rice and corn crops.

Q: Goodyear's sales were negatively affected by the tariff on Chinese tires because A) Goodyear operates factories in China, and some of the tires produced there were exported to the United States and subject to the tariff. B) China retaliated and imposed a tariff on Goodyear tires exported to China. C) despite being a U.S. company, all of Goodyear's tires are produced in China. D) the tariff raised the price on Chinese tires, allowing these tires to compete more directly with the more expensive Goodyear tires.

Q: In 2013, ________ of Goodyear's sales were outside North America. A) only 11 percent B) more than 60 percent C) less than half D) 95 percent

Q: In 2012, the largest exporter in the world was A) Japan. B) Germany. C) China. D) the United States.

Q: Which of the following statements about the importance of trade to the U.S. economy is true? A) Since 1950, both exports and imports have steadily decreased as a fraction of U.S. gross domestic product. B) Overall, about 80 percent of U.S. manufacturing jobs depend directly or indirectly on exports. C) The United States is the second largest exporter in the world. D) The U.S. economy is highly dependent on international trade for growth in its gross domestic product.

Q: When BMW, an German company, purchases a welding machine that was made in Toronto, the purchase is A) both a German and a Canadian import. B) a German import and a Canadian export. C) a German export and a Canadian import. D) neither an export nor an import for either country.

Q: When Roxanne, a U.S. citizen, purchases a designer dress from Barneys of New York that was made in Milan, the purchase is A) both a U.S. and an Italian import. B) a U.S. import and an Italian export. C) a U.S. export and an Italian import. D) neither an export nor an import for either country.

Q: Exports are domestically produced goods and services A) sold to other countries. B) sold to the government. C) sold at home. D) which are used to produce other goods and services.

Q: Goods and services bought domestically but produced in other countries are referred to as A) exports. B) imports. C) transfer payments. D) foreign consumption.

Q: A tariff is a tax imposed by a government on A) exports. B) services. C) imports. D) luxury items.

Q: In the 1930s, the United States charged an average tariff rate ________. Today, the rate is ________. A) of 100 percent; 20 percent B) above 50 percent; less than 1.5 percent C) of less than 10 percent; over 40 percent D) of 17 percent; 33 percent

Q: The intention of the U.S. tariff on Chinese tries was to A) protect jobs in the U. S. tire industry. B) protect infant industries in tire U.S. tire market. C) insure that Chinese tires meet U.S. quality and safety standards. D) save the government money by restricting the sale of more expensive Chinese-made tires.

Q: Workers in industries protected by tariffs and quotas are likely to support these trade restrictions because A) they do not want to offend their employers who want them. B) politicians lobby to convince workers the restrictions will make them better off. C) they believe the restrictions will protect their jobs. D) they don't understand that the restrictions will threaten their jobs.

Q: Following the tariff imposed on Chinese tires, some businesspeople correctly argued that the U.S. tariff would result in A) China retaliating by raising tariffs on some U.S. exports. B) China halting the sale of all products in the United States. C) U.S. firms never being able to meet the demand for U.S.-produced tires. D) the government demanding price cuts from U.S. tire manufacturers.

Q: Anti-globalization and protectionism are both arguments against free trade. How do these two arguments differ?

Q: Dalton, Georgia, a town with a population less than 35,000, has developed into a leading producer of carpets, despite its small size. Some government officials argue that the success achieved by firms in Dalton in developing a comparative advantage in carpet making because of external economies can be used to justify trade barriers as a means to protect an "infant industry." After an infant industry gains experience it can compete in international markets and the trade barriers can be removed. What objections do economists make to this argument in favor of trade barriers?

Q: What is dumping? Who benefits and who loses from dumping?

Q: a. What is the World Trade Organization? b. When was it established? c. How many countries are members of the World Trade Organization?

Q: Jobs lost to foreign trade are generally easy to identify, but jobs created by foreign trade are generally less easy to identify.

Q: The process of countries becoming more open to foreign trade and investment is known as outsourcing.

Q: Protectionism refers to the use of trade barriers to shield domestic firms from foreign competition.

Q: Selling a product at a price below its cost is known as dumping.

Q: Article Summary Roberto Azevedo, director-general of the World Trade Organization (WTO), reported that global trade growth estimates will be lowered for 2013 and 2014 because of increasing global protectionism. The current protectionism is based primarily in regulations rather than the more common tariffs and subsidies. Since 2008, almost 700 new trade restrictions have materialized - over 150 of those in 2012 alone - with Russia being singled out as one of the primary offenders. Source: Kiran Moodley, "WTO warns of trade slowdown due to protectionism," CNBC, September 6, 2013. Refer to the Article Summary. The protectionism being granted to Russian firms will cause the greatest harm to A) Russian manufacturers. B) the Russian government. C) manufacturers who export to Russia. D) Russian consumers.

Q: One reason for the success that firms have in getting the government to erect barriers to foreign competition is that jobs lost to foreign competition are easy to identify but jobs created by foreign trade are often hard to identify. Which of the following is a second reason? A) The costs that tariffs and quotas impose on consumers are large in total but relatively small per person. B) People who benefit from foreign trade tend not to vote in elections; people who are harmed by foreign trade are much more likely to vote. C) Firms that benefit from trade barriers have more money to lobby government officials to support the barriers than do firms that are harmed by trade barriers. D) The benefits from free trade are less than the costs.

Q: Measuring the impact of a quota or tariff on the U.S. economy is an example of ________. Stating that a quota or tariff should be eliminated is an example of ________. A) statistical analysis; economic analysis B) positive analysis; normative analysis C) econometric analysis; protectionism D) trade analysis; an opinion

Q: Imposing tariffs in cases of dumping A) is allowed under the WTO agreement. B) is not allowed under the WTO agreement. C) is not addressed by the WTO agreement. D) has never occurred, even though it is allowed under the WTO agreement.

Q: The selling of a product for a price below its cost of production is called A) fair competition. B) dumping. C) unfair competition. D) operating at a loss.

Q: Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries with a "Buy Canadian" provision. This policy, similar to the original "Buy American" provision in the 2009 U.S. stimulus bill, is likely to cause A) exporting countries to retaliate by placing trade barriers on Canadian imports. B) Canadian manufacturers to become more efficient. C) Canadian companies to pay lower prices for protected products. D) most countries to reduce their own trade barriers to be able to better compete with Canadian imports at home.

Q: Suppose thatAmerican firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries. This protectionism will cause the greatest harm to A) Canadian manufacturers. B) the Canadian government. C) manufacturers who export to Canada. D) Canadian consumers.

Q: Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback? A) Governments always make the level of protection for infant industries too high. B) Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets. C) Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue). D) Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never "growing up."

Q: The process of countries becoming more open to foreign trade and investment is known as A) autarky. B) foreign exchange. C) globalization. D) protectionism.

Q: Which of the following describes the infant industry argument for protectionism? A) An industry must be protected in its early stages of development so that firms can compete with government-subsidized foreign competition. B) Some strategic industries must be protected to ensure adequate supplies of resources needed for national defense in emergencies. C) Domestic producers in high-wage countries must be protected from foreign producers in low-wage countries to produce a level playing field. D) Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.

Q: Which of the following statements is used to justify protectionism? A) Free trade leads to higher prices for imported goods. B) Free trade increases employment by protecting domestic firms. C) A country should not rely on other countries for goods that are critical to its national defense. D) Trade restrictions are not necessary to protect new firms since they can gain experience and become more productive without protection.

Q: Many economists criticize protectionism because it causes losses to consumers and eliminates jobs in domestic industries that use protected products. Why, then, do some people support protectionism? A) The criticisms of economists are based on theory. In fact, protectionism increases consumer and producer surplus as well as employment. B) Supporters of protectionism in high-income countries believe that wages will fall as a result of competition with firms from developing countries. C) Supporters of protectionism believe free trade will cause their countries to lose their comparative advantage. D) Supporters of protectionism believe that free trade will lead to inflation.

Q: Free trade ________ living standards by ________ economic efficiency. A) raises; increasing B) lowers; decreasing C) raises; equalizing D) lowers; eliminating

Q: Protectionism A) is the use of cheap labor to protect firms from paying high wages. B) is the use of trade barriers to protect domestic firms from foreign competition. C) refers to reductions in tariffs and other barriers that protect consumers from paying high prices. D) refers to the use of copyright and trademark laws to protect inventors and artists from losing the rights to their creative efforts.

Q: Many people assume that if child workers in developing countries weren't working in factories, they would be in school. In fact, children in developing countries A) split their time evenly between work and school. B) usually have few good alternatives to work. C) are only allowed to work if they have attended school up to age 15. D) who work are relatively rare, as most do attend school full time.

Q: The World Trade Organization (WTO) promotes foreign trade and investment, or globalization. In recent years opposition to globalization has led to violent protests at meetings of the WTO. One reason for these anti-globalization protests is A) foreign trade and investment are examples of zero-sum games. B) protesters believe that globalization will result in a return to communism in developing countries. C) protesters believe that free trade destroys the distinctive cultures of many countries. D) protesters object to the loss of intellectual property (such as software programs and movies) that results from foreign trade and investment.

Q: In 1995 ________, which was established in 1948, was replaced by ________. A) the GATT; the WTO B) the WTO; NAFTA C) the Smoot-Hawley Tariff; the GATT D) NAFTA; the Smoot-Hawley Tariff

Q: In 1930, the U.S. government attempted to help domestic firms that were harmed by the Great Depression by A) establishing the General Agreement on Tariffs and Trade (GATT). B) passing the Smoot-Hawley Tariff. C) establishing the World Trade Organization (WTO). D) passing the North American Free Trade Agreement (NAFTA).

Q: ________ raised average tariff rates by over 50 percent in the United States in 1930. A) The GATT B) The WTO C) NAFTA D) The Smoot-Hawley Tariff

Q: Disagreements about whether the U.S. government should regulate international trade A) began during the Great Depression. B) began after World War I when government officials no longer believed in isolationism. C) date back to the beginning of the country. D) did not occur until the end of the Mexican War in 1848.

Q: Figure 9-5 Bragabong currently both produces and imports almonds. The government of Bragabong decides to restrict international trade in almonds by imposing a quota that allows imports of only 10 million kilos each year. Figure 9-5 shows the estimated demand and supply curves for almonds in Bragabong and the results of imposing the quota. Use Figure 9-5 to answer questions a-j . a. If there is no quota what is the domestic price of almonds and what is the quantity of almonds demanded by consumers? b. If there is no quota how many kilos of almonds would domestic producers supply and what quantity would be imported? c. If there is no quota what is the dollar value of consumer surplus? d. If there is no quota what is the dollar value of producer surplus received by producers in Bragabong? e. If there is no quota what is the revenue received by foreign producers who supply almonds to Bragabong? f. With a quota in place what is the price that consumers of Bragabong must now pay and what is the quantity demanded? g. With a quota in place what is the dollar value of consumer surplus? Are consumers better off? h. With a quota in place what is the dollar value of producer surplus received by producers in Bragabong? Are domestic producers better off? i. Calculate the revenue to foreign producers who are granted permission to sell in Bragabong after the imposition of the quota. j. Calculate the deadweight loss as a result of the quota.

Q: Figure 9-4 Suppose the U.S. government imposes a $0.50 per pound tariff on sugar imports. Figure 9-4 shows the demand and supply curves for sugar and the impact of this tariff. Use Figure 9-4 to answer questions a-i. a. Following the imposition of the tariff, what is the price that domestic consumers must now pay and what is the quantity purchased? b. Calculate the value of consumer surplus with the tariff in place. c. What is the quantity supplied by domestic sugar producers with the tariff in place? d. Calculate the value of producer surplus received by U.S. sugar producers with the tariff in place. e. What is the quantity of sugar imported with the tariff in place? f. What is the amount of tariff revenue collected by the government? g. The tariff has reduced consumer surplus. Calculate the loss in consumer surplus due to the tariff. h. What portion of the consumer surplus loss is redistributed to domestic producers? To the government? i. Calculate the deadweight loss due to the tariff.

Q: Distinguish between a voluntary export restraint and a quota.

Q: A quota is the same as a voluntary export restraint.

Q: The U.S. economy would gain from the elimination of tariffs and quotas even if other countries do not reduce their tariffs and quotas.

Q: Free trade refers to trade between countries without government restrictions.

Q: A tariff is a numerical limit on the quantity of a good that can be imported.

Q: As a result of the tariff on Chinese tires, U.S. consumers are estimated to have spent ________ on imported tires and ________ on U.S.-produced tires. A) more; more B) more; less C) less; more D) less; less

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. What is the area that represents the deadweight loss as a result of the quota? A) G + H B) G + H + I + J C) E + I + J + M D) E + M

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. What is the area that represents revenue to foreign producers who are granted permission to sell in the U.S. market when there is a quota? A) I + J B) E + I + J + M C) I + J + K+ L D) G + H + I + J

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. What is the area of domestic producer surplus after the imposition of a quota? A) B B) B + C C) B + E + I + J + M D) E + I + J + M

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. What is the area of consumer surplus after the imposition of the quota? A) A + G + H B) G + H + E + I+ J + M C) G + H D) A

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. With a quota in place, what is the quantity supplied by domestic producers? A) 8 million pounds B) 10 million pounds C) 16 million pounds D) 18 million pounds

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. With a quota in place, what is the quantity consumed in the domestic market? A) 10 million pounds B) 28 million pounds C) 34 million pounds D) 40 million pounds

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. What is the area of domestic producer surplus without a quota? A) C B) C + B C) A + B + C D) A + B + C + D

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. If there was no quota, how many pounds of peanuts would be imported? A) 16 million B) 24 million C) 30 million D) 40 million

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. If there was no quota, how many pounds of peanuts would domestic consumers purchase? A) 10 million B) 28 million C) 34 million D) 40 million

Q: Figure 9-3 Since 1953 the United States has imposed a quota to limit the imports of peanuts. Figure 9-3 illustrates the impact of the quota. Refer to Figure 9-3. Without the quota, the domestic price of peanuts equals the world price which is $2.00 per pound. What is the quantity of peanuts supplied by domestic producers in the absence of a quota? A) 10 million pounds B) 28 million pounds C) 30 million pounds D) 40 million pounds

Q: The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being spent. In the U.S. steel market, a "Buy American" provision in the 2009 stimulus package would A) convert some consumer surplus to deadweight loss. B) transfer some deadweight loss to producer surplus. C) transfer some producer surplus to consumer surplus. D) reduce the producer surplus received by foreign manufacturers.

Q: The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being spent. In the market for steel, the "Buy American" provision would ________ the price of steel in the United States and ________ the quantity of steel demanded in the United States. A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease

Q: In order to avoid the imposition of other types of trade barriers, foreign producers will sometimes agree to voluntary export restraints. With voluntary export restraints, foreign producers A) agree to meet specific quality standards required by the importing country. B) limit their exports to a country. C) pay a tax on all products they export. D) must agree to import an equal quantity of products that they export.

Q: Which of the following is the best example of a voluntary export restraint? A) a limit imposed by the U.S. government on the number of cell phones that the United States can import from Korea B) a subsidy granted by the U.S. government to domestic cell phone manufacturers so they can compete more effectively with foreign cell phone manufacturers C) a limit set by the Korean government on the number of cell phones that the United States can import fro Korea. D) a $50 per-cell phone-fee imposed on all cell phones vehicles imported into the United States

Q: Which of the following is the best example of a quota? A) a limit imposed on the number of sport utility vehicles that the United States can import from Japan B) a subsidy granted by the U.S. government to domestic garment manufacturers so they can compete more effectively with foreign garment manufacturers C) a tax placed on all sport utility vehicles sold in the domestic market D) a $5,000 per-car fee imposed on all sport utility vehicles imported into the United States

Q: The main purpose of most tariffs and quotas is to A) raise revenue for the government. B) reduce the prices consumers pay for goods and services. C) reduce the foreign competition that domestic firms face. D) improve the quality of goods and services imported into the country.

Q: An agreement negotiated by two countries that places a numerical limit on the quantity of a good that can be imported by one country from another country is called A) a non-tariff trade barrier. B) an export quota. C) an import quota. D) a voluntary export restraint.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. If the tariff was replaced by a quota which limited rice imports to 16 million pounds, the amount of revenue received by rice importers would equal A) $6.4 million. B) $9.6 million. C) $16 million. D) $19.8 million.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. The loss in domestic consumer surplus as a result of the tariff is equal to the area A) B + D + E + F. B) D + E + F. C) C + D + E + F. D) B.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. The tariff causes domestic consumption of rice A) to fall by 27 million pounds. B) to fall by 11 million pounds. C) to rise by 6 million pounds. D) to rise by 16 million pounds.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. The increase in domestic producer surplus as a result of the tariff is equal to the area A) C. B) C + G. C) A + C + G. D) C + D + G + H + I.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. As a result of the tariff, domestic producers increase their quantity supplied by A) 31 million pounds of rice. B) 22 million pounds of rice. C) 15 million pounds or rice. D) 6 million pounds of rice.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. With the tariff in place, the United States A) imports 16 million pounds of rice. B) imports 9 million pounds of rice. C) imports 15 million pounds of rice. D) exports 31 million pounds of rice.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. With the tariff in place, the United States produces A) 9 million pounds of rice. B) 15 million pounds of rice. C) 31 million pounds of rice. D) 42 million pounds of rice.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. With the tariff in place, the United States consumes A) 9 million pounds of rice. B) 15 million pounds of rice. C) 31 million pounds of rice. D) 42 million pounds of rice.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. Without the tariff in place, the United States produces A) 9 million pounds of rice. B) 15 million pounds of rice. C) 31 million pounds of rice. D) 42 million pounds of rice.

Q: Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. Refer to Figure 9-2. Without the tariff in place, the United States consumes A) 9 million pounds of rice. B) 15 million pounds of rice. C) 31 million pounds of rice. D) 42 million pounds of rice.