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OSU BUSMHR 2000 - TBChap007

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Chapter 07The Political Economy of International Trade True / False Questions 1. Subsidies are a trade policy instrument. True False 2. Tariffs are the oldest instrument of trade policy. True False 3. Tariffs are the most complex instrument of trade policy. True False 4. In recent decades, a fall in subsidies, quotas, and voluntary export restraints has been accompanied by a rise in tariff barriers. True False 5. Specific tariffs are levied as a proportion of the value of the imported good. True False 6. Ad valorem tariffs are levied as a proportion of the value of the imported good. True False 7. In most cases, tariffs are placed on imports to protect domestic producers from foreign competition by raising the price of imported goods. True False 8. Tariffs are generally pro-producer and anti-consumer. True False 9. Import tariffs increase the overall efficiency of the world economy. True False 7-1© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.10. Export tariffs are far more common than import tariffs. True False 11. The main gains from subsidies accrue to importers, whose international competitiveness is increased as a result of these subsidies. True False 12. A voluntary export restraint (VER) is a quota on trade imposed by the exporting country, typically at the request of the importing country’s government. True False 13. Under a tariff rate quota, a lower tariff rate is applied to imports within the quota than those over the quota. True False 14. Both import quotas and VERs benefit domestic producers by limiting import competition. True False 15. Quotas benefit consumers the most. True False 16. The Buy America Act specifies that government agencies must give preference to American products when putting contracts for equipment out for bid unless the foreign products have a significant advantage. True False 17. Administrative trade policies are bureaucratic rules that are designed to make it easy for imports to enter a country. True False 18. Dumping is variously defined as selling goods in a foreign market at below their costsof production, or as selling goods in a foreign market at below their "fair" market value. True False 19. Dumping is viewed as a method by which firms unload excess production in their domestic markets. True False 7-2© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.20. Antidumping policies are designed to punish the firms that engage in dumping industrial waste into the environment. True False 21. The ultimate objective of antidumping policies is to protect domestic producers from unfair foreign competition. True False 22. A political argument for government intervention in international trade is that it is necessary to protect certain industries because they are important for national security. True False 23. D’Amato Act allows Americans to sue foreign firms that use property in Cuba confiscated from them after the 1959 revolution. True False 24. The infant industry argument is the oldest economic argument for government intervention in international trade. True False 25. The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade and this justification challenges the rationale for unrestricted free trade. True False 26. Paul Krugman argues that although strategic trade policy looks unappealing in theory, in practice it is most likely to be workable. True False 27. Free trade as a government policy was first officially embraced by Germany in 1846, when the Bundestag repealed the Corn Laws. True False 28. The Smoot-Hawley Act aimed to liberalize trade by eliminating tariffs, subsidies, and import quotas. True False 7-3© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.29. Pressures for greater protectionism increased around the world during the 1980s and early 1990s due to the strain caused by the persistent trade deficit in the world’s largest economy, Japan. True False 30. One of the reasons for the trend toward greater protectionism was that many countries found ways to get around GATT regulations. True False 31. In the Uruguay Round of the WTO, member countries sought to exempt trade in services from GATT rules. True False 32. According to a provision of the Uruguay Round of GATT, agricultural subsidies were tobe increased substantially. True False 33. Antidumping actions seem to be concentrated in certain sectors of the economy suchas basic metal industries (e.g., aluminum and steel), chemicals, plastics, and machinery and electrical equipment. True False 34. The 1995 Uruguay agreement that established the WTO also contained an agreementto protect intellectual property. True False 35. Tariff rates on agricultural products are generally much lower than tariff rates on manufactured products or services. True False 36. The threat of antidumping action enhances the ability of a firm to use aggressive pricing to gain market share in a country. True False 37. Government intervention can be self-defeating because it tends to protect the inefficient rather than help firms become efficient global competitors. True False 7-4© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.Multiple Choice Questions 38. Which of the following is a trade policy instrument that the GATT and WTO have beenmost successful in limiting? A. Local content requirements B. Tariffs C. Subsidies D. Voluntary export restraints E. Import quotas 39. _____ tariffs are


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