ECON 340 mid-term II study guide Multiple Choice Identify the letter of the choice that best completes the statement or answers the question. ____ 1. A specification of a maximum amount of a foreign produced good that will be allowed to enter the country over a given time period is referred to as a(n): a. Domestic subsidy b. Export subsidy c. Import quota d. Export quota Figure 5.4 illustrates the calculator market for Venezuela, assumed to be a "small" country that is unable to affect the world price. SVenezuela is the domestic supply schedule and DVenezuela is the domestic demand schedule. On the basis of this information answer the question(s). Figure 5.4. Venezuelan Calculator Market____ 2. Consider Figure 5.4. Suppose the rest of the world supplies calculators to Venezuela at a price of $4 each. With free trade, Venezuelan imports total: a. 8 calculators b. 16 calculators c. 20 calculators d. 24 calculators ____ 3. Consider Figure 5.4. Assume the Venezuelan government grants its manufacturers a production subsidy of $4 per calculator. After the subsidy is granted, Venezuelan imports total: a. 8 calculators b. 12 calculators c. 16 calculators d. 20 calculators ____ 4. The Smoot-Hawley Tariff Act of 1930 has generally been associated with: a. Falling tariffs b. Increases in the volume of trade c. Intensifying the worldwide depression d. Efforts to liberalize nontariff trade barriers ____ 5. Under U.S. commercial policy, which clause permits the modification of a trade liberalization agreement on a temporary basis if serious injury occurs to domestic producers as a result of the agreement? a. Adjustment assistance clause b. Escape clause c. Most-favored-nation clause d. Reciprocal-trade clause ____ 6. The General Agreement on Tariffs and Trade and its successor, the World Trade Organization, have resulted in: a. Termination of export subsidies applied to manufactured goods b. Termination of import tariffs applied to manufactured goods c. Encouragement of beggar-thy-neighbor policies d. Reductions in trade barriers via multilateral negotiations ____ 7. Throughout the post-World War II era, the importance of tariffs as a trade barrier has: a. Increased b. Decreased c. Remained the same d. None of the above ____ 8. 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. Grain prices would rise in Russia b. Consumer surplus would decrease for the Russians c. Grain prices would rise in the United States d. Export revenues would decrease for U.S. producers ____ 9. The strongest political pressure for a trade policy that results in higher protectionism comes from: a. Domestic workers lobbying for import restrictions b. Domestic workers lobbying for export restrictions c. Domestic consumers lobbying for export restrictions d. Domestic consumers lobbying for import restrictions____ 10. The most recent round of multilateral trade negotiations is the: a. Kennedy Round b. Tokyo Round c. Doha Round d. Geneva Round ____ 11. One factor that has prevented the formation of cartels for producers of commodities is that: a. The demand for commodities tends to be price inelastic b. Substitute products exist for many commodities c. Commodity produces have been able to dominate world markets d. Production of most commodities is capital intensive ____ 12. Which trade strategy have developing countries used to restrict imports of manufactured goods so that the domestic market is preserved for home producers, who thus can take over markets already established in the country? a. International commodity agreement b. Export promotion c. Multilateral contract d. Import substitution ____ 13. To help developing countries expand their industrial base, some industrial countries have reduced tariffs on designated manufactured imports from developing countries below the levels applied to imports from industrial countries. This scheme is referred to as: a. Generalized system of preferences b. Export-led growth c. International commodity agreement d. Reciprocal trade agreement ____ 14. Concerning the hypothesis that there has occurred a long-run deterioration in the developing countries' terms of trade, empirical studies provide: a. Mixed evidence that does not substantiate the deterioration hypothesis b. Overwhelming support for the deterioration hypothesis c. Overwhelming opposition to the deterioration hypothesis d. None of the above ____ 15. Which economic integration scheme is solely intended to abolish trade restrictions among member countries, while setting up common tariffs against nonmembers? a. Economic union b. Common market c. Free trade area d. Customs union ____ 16. Which of the following organizations is considered a regional trading arrangement? a. Organization of Petroleum Exporting Countries b. North Atlantic Treaty Organization c. Benelux d. International Tin Agreement ____ 17. A static welfare effect resulting from the formation of the European Union would be: a. Economies of scale b. Trade diversion c. Investment incentives d. Increased competition____ 18. Which nation is not a member of the North American Free Trade Association? a. Canada b. Greenland c. Mexico d. United States Figure 8.1 depicts the supply and demand schedules of calculators for Greece, a "small" country that is unable to affect the world price. Greece's supply and demand schedules of calculators are respectively depicted by SG and DG. Assume that Greece imports calculators from either Germany or France. Suppose Germany is the world's low-cost producer who can supply calculators to Greece at $20 per unit, while France can supply calculators at $30 per unit. Answer the question(s) on the basis of this information. Figure 8.1. Effects of a Customs Union ____ 19. Consider Figure 8.1. The value of the trade diversion effect resulting from the Greece/France customs union equals: a. $5 b. $10 c. $15 d. $20 ____ 20. Suppose that Canada has domestic firms that could supply its entire market for radios at a price of $50, while U.S. firms could supply radios at $40 and Mexico at $30. Suppose that Canada initially has a 50 percent tariff on imports of radios and then forms a free trade area with the United States. As a result, Canada realizes: a. Trade creation, no trade