Chapter 7 quiz

1. Which of the following is not one of the main instruments of trade policy?
a. Credit portfolios
b. Administrative policies
c. Local content requirements
d. Tariffs
2. After the Uruguay Round of GATT extended global trading rules to cover trade in
services, the first two industries targeted for reform by the WTO were
a. Telecommunications and financial services
b. Automotives and aerospace
c. Textiles and technology
d. Agriculture and consulting services
3. Identify the incorrect statement pertaining to trade barriers.
a. They raise the costs of exporting products to a country
b. To conform to local content regulations, a firm may have to locate more
production activities in a given market than it would otherwise
c. They may put a firm at a competitive advantage to indigenous competitors
d. They may limit a firm's ability to serve a country from locations outside
of that country
4. In the 1986 Uruguay Round, GATT members sought to write rules for promoting
all of the following except
a. Agricultural subsidies
b. GATT's monitoring and enforcement mechanisms
c. GATT rules to cover trade in services
d. Intellectual property protection
5. This is levied as a proportion of the value of the imported good.
a. Ad valorem tariff
b. Specific tariff
c. Special tariff
d. Tariff quota
6. Foreign producers typically agree to voluntary export restrictions because
a. They fear far more damaging punitive tariffs or import quotas might
follow if they do not
b. Their manufacturing capacity is limited
c. They can divert their exports to other countries and charge more for their
products
d. They are required to by the World Trade Organization
7. _____ has occurred when foreign goods are being sold cheaper than at home or
below their cost of production.
a. Production efficiency

b. Market saturation
c. Dumping
d. Price elasticity
8. The EU's Common Agricultural Policy is an example of a tax policy designed to
a. Benefit consumers
b. Benefit taxpayers
c. Benefit special interest politics
d. Benefit free trade in a developed country
9. _____ suggests that a government should use subsidies to support promising
firms that are active in newly emerging industries.
a. The national security argument
b. The infant industry argument
c. Strategic trade policy
d. Retaliation policy
10. A common hybrid of a quota and a tariff is known as a
a. Tariff rate quota
b. Quota rent
c. Ad valorem tariff
d. Voluntary export restraint
11. 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. D'Amato Act
b. Anti-Dumping Act
c. Helms-Burton Act
d. Buy America Act
12. According to the _____ policy, subsidies can help a firm achieve a first-mover
advantage in an emerging industry.
a. Free trade
b. Antidumping
c. Strategic trade
d. Tariff quota
13. According to the _____ argument, governments should temporarily support new
industries until they have grown strong enough to meet international competition.
a. Retaliatory action
b. Anti-dumping
c. Infant industry
d. Human rights

14. Administrative trade policies are

a. Designed to punish foreign firms that engage in dumping
b. Bureaucratic rules designed to make it difficult for imports to enter a
country
c. Quotas on trade imposed by the exporting country
d. Requirements that some specific fraction of a good be produced domestically
15. These are requirements that some specific fraction of a good be produced
domestically.
a. Antidumping duties
b. Local content requirements
c. Import quotas
d. Voluntary export restraints
16. All of the following are true of tariffs, except
a. They reduce the revenue for the government
b. They can be levied as a proportion of the value of the imported good
c. They impose significant costs on domestic consumers
d. They can be levied as a fixed charge for each unit of a good imported
17. Which of the following is not a reason why WTO is being criticized by those
opposing free trade?
a. The adverse impact that some of its rulings have had on environmental
policies
b. Its trade laws allow imports from low-wage countries and result in a loss of
jobs in high-wage countries
c. Its rules outlawing the ability of nations to stop imports from countries where
working conditions are hazardous
d. Its lack of ability to force any member nation to take an action to which
it is opposed.
18. The WTO argues that by removing all tariff barriers and subsidies to agriculture
all of the following would occur, except
a. There would be overproduction of products that are heavily subsidized
b. Global economic growth would rise
c. The overall level of trade would increase
d. Prices would fall for consumers
19. 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. Anti
b. Helms

c. Smoot
d. D'Amato Act
20. _____ are the highest rate that can be charged, which is often, but not always,
the rate that is charged.
a. Tariff rents
b. Specific tariff rates
c. Ad valorem tariff rates
d. Bound tariff rates
21. Until 1995, GATT rules applied to all of the following, except
a. Services
b. Textiles
c. Manufactured goods
d. Agricultural products
22. The Millennium Round ended in 1999 with
a. A new agenda for the next round focusing on financial services
b. No agreement on the reduction of barriers to cross-border trade in
agricultural products and trade and investment in services
c. A decision to avoid FDI
d. A successful record on agricultural products
23. Tariffs do not benefit
a. Governments
b. Consumers
c. Domestic firms
d. Domestic producers
24. Specific tariffs are
a. Government payment to domestic producers
b. In the form of manufacturing or production requirements of goods.
c. Levied as a fixed charge for each unit of a good imported
d. Levied as a proportion of the value of the imported good
25. Antidumping duties are often called
a. Special circumstance duties
b. Positive duties
c. Countervailing duties
d. Retroactive duties
26. _____ argues that a strategic trade policy aimed at establishing domestic firms in
a dominant position in a global industry is a beggar-thy-neighbor policy that
boosts national income at the expense of other countries.
a. Michael Porter
b. Paul Krugman
c. David Ricardo

d. Adam Smith
27. A quota on trade imposed by the exporting country, typically at the request of the
importing country's government is referred to as a
a. Specific tariff quota
b. Trade reconciliation
c. Ad valorem tariff
d. Voluntary export restraint
28. According to the 1986 Uruguay Round _____ was to be created to implement the
GATT agreement.
a. World Bank
b. United Nations
c. World Trade Organization
d. International Monetary fund
29. The TRIPS regulations established at the 1995 Uruguay Round
a. Organized OECD countries to eliminate tariffs on textiles
b. Set a new level of agriculture subsidies
c. Established new tariff levels on technology
d. Established regulations on patents and copyrights
30. Which of the following is not a reason for the pressure for greater protectionism
that occurred during the 1980s and early 1990s?
a. The persistent trade deficit in the U.S. strained the world trading system
b. Japanese economic success strained the world trading system
c. Many countries found ways to get around GATT regulations
d. The growing U.S. trade surplus with Japan strained the world
trading system

31. This act allows Americans to sue foreign firms that use property in Cuba
confiscated from them after the 1959 revolution.
a. Anti-Dumping Act
b. Buy America Act
c. Helms-Burton Act
d. D'Amato Act
32. Subsidies have been criticized for all of the following reasons except
a. They allow inefficient farmers stay in business
b. They encourage countries to produce products that could be grown more
cheaply elsewhere and imported
c. They increase international trade in agricultural products
d. They encourage to overproduce heavily subsidized agricultural products
33. By lowering production costs, _____ help domestic producers compete against
foreign imports.
a. Quotas

b. Tariffs
c. Duties
d. Subsidies
34. In recent decades, tariff barriers have been _____ while non tariff barriers have
been _____.
a. Rising, falling
b. Falling, leveling
c. Leveling, rising
d. Falling, rising
35. A quota rent is
a. Levied as a fixed charge for each unit of a good imported
b. Levied as a proportion of the value of the imported good
c. A quota on trade imposed by the exporting country
d. The extra profit producers make when supply is artificially limited by an
import quota
36. In the United States 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. Identify the trade restriction being imposed by the
U.S. here.
a. Subsidy
b. Ad valorem tariff
c. Import quota
d. Specific tariff
37. TRIPS regulations oblige WTO members to all of the following except
a. Comply with the rules within 10 years in the case of the poorest countries
b. Comply with the rules within 5 years in the case of rich countries
c. Grant and enforce copyrights lasting 50 years.
d. Grant and enforce patents lasting at least 20 years.

38. This is a direct restriction on the quantity of some good that may be imported into
a country.
a. Specific tariff
b. Ad valorem tariff
c. Import quota
d. Subsidy
39. Free trade
a. Describes the range of policy instruments that governments use to intervene
in international trade
b. Is a government payment to a domestic producer
c. Reduces the overall efficiency of the world economy.
d. Refers to a situation in which a government does not attempt to restrict
what its citizens can buy from or sell to another country

40. Which of the following observations pertaining to government subsidies is

incorrect?
a. They mainly benefit domestic producers, whose international competitiveness
is increased
b. They must be paid for, typically by taxing individuals and corporations
c. Whether they generate national benefits that exceed their national costs is
debatable
d. They help foreign producers gain a competitive advantage over
domestic producers
41. The U.S. government using the threat of punitive trade sanctions to try to get the
Chinese government to enforce its intellectual property laws is an example of
government intervention based on
a. Human rights protection
b. Retaliation
c. Consumer protection
d. National security
42. If a government grants preferential trade terms to a country it wants to build
strong relations with, the government is employing a policy
a. To protect national security
b. To further foreign policy objectives
c. Of retaliation
d. Of human rights protection
43. Which of the following statements concerning a voluntary export restraint is not
true?
a. It is a variant of the import quota
b. It raises the domestic price of an imported good
c. In most cases, it benefits consumers.
d. It benefits domestic producers by limiting import competition
44. Which of the following 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. Dumping
b. Export restraint
c. Ad valorem
d. Local content requirement