Question 1

Game theory refers to:&#10;A)a method of choosing the optimal strategy in conflict situations&#10;B)the granting of a subsidy to correct a domestic distortion&#10;C)the theory of tariff protection&#10;D)none of the above

Accepted Answer

Game theory is a method used to analyze decision-making and strategy in situations where two or more individuals or groups are in conflict. It uses mathematical models to determine the best course of action in these situations. Therefore, choice A, "a method of choosing the optimal strategy in conflict situations," is the correct answer. Choices B and C are incorrect as they refer to different economic concepts.

Question 2

The temporary sale of a commodity at below cost or at a lower price abroad in order to drive foreign producers out of business is called:&#10;A)predatory dumping&#10;B)sporadic dumping&#10;C)continuous dumping&#10;D)voluntary export restraints

Accepted Answer

Predatory dumping is the practice of selling a product at below cost or at a lower price in a foreign market in order to drive foreign competitors out of business, and then raising prices once the competitors have been eliminated. This can be seen as unfair competition and is often subject to investigation by trade authorities.

Question 3

Industrial policy refers to:&#10;A)an activist policy by the government of an industrial country to stimulate the development of an industry&#10;B)the granting of a subsidy to a domestic industry to stimulate the development of an industry&#10;C)the granting of a subsidy to a domestic industry to counter a foreign subsidy&#10;D)all of the above

Accepted Answer

Industrial policy encompasses all of the above options. It refers to the various measures taken by the government to support the growth of the domestic industry. These measures can include subsidies, tax incentives, trade barriers and other forms of intervention to promote the development of industries deemed essential for the country's economy. Such policies are typically implemented to counter the effects of foreign subsidies, protect infant industries or to boost the competitiveness of the domestic sector.

Question 4

An import quota:&#10;A)increases the domestic price of the imported commodity&#10;B)reduces domestic consumption&#10;C)increases domestic production&#10;D)all of the above

Accepted Answer

An import quota limits the amount of a particular good that can be imported into a country. This leads to an increase in the domestic price of the imported commodity (A), which makes it more expensive for consumers to purchase. As a result, domestic consumption of the imported good will decrease (B). Additionally, the reduced competition from imports may increase the incentive for domestic producers to produce the same good, leading to an increase in domestic production (C). Therefore, all three choices (A), (B), and (C) are correct.

Question 5

Adjustment to any shift in the domestic demand or supply of an importable commodity occurs:&#10;A)in domestic price with an import quota&#10;B)in the quantity of imports with a tariff&#10;C)through the market mechanism with an import tariff but not with an import quota&#10;D)all of the above

Accepted Answer

- With an import quota, the domestic price adjusts to the shift in demand or supply, as the quantity imported is fixed by the quota. 
- With a tariff, the quantity of imports adjusts to the shift in demand or supply, as the tariff increases the cost of imports and reduces their quantity demanded. 
- Both import quota and tariff can lead to adjustments through the market mechanism, although the mechanism may be different (price adjustment for the quota, quantity adjustment for the tariff). Therefore, all the options are correct.

Question 6

Which of the following is true with respect to the infant-industry argument for protection:&#10;A)it refers to temporary protection to establish a domestic industry&#10;B)to be valid,the return to the grown-up industry must be sufficiently high also to repay for the higher prices paid by domestic consumers of the commodity during&#10;The infancy period&#10;C)is inferior to an equivalent production subsidy to the infant industry&#10;D)all of the above

Accepted Answer

The infant-industry argument proposes temporary protection to establish a domestic industry. To make this protection valid, the return to the industry once it matures must be high enough to repay for the higher prices paid by domestic consumers during the infancy period. Additionally, the infant-industry argument is inferior to an equivalent production subsidy to the infant industry. Therefore, all of the options are correct.

Question 7

A fallacious argument for protection is:&#10;A)the infant industry argument&#10;B)protection for national defense&#10;C)the scientific tariff&#10;D)to correct domestic distortions

Accepted Answer

The scientific tariff is considered a fallacious argument for protection because it suggests that tariffs can be precisely adjusted to protect domestic industries without causing negative economic consequences, which is often not the case.

Question 8

Which of the following is false with respect to strategic trade policy?&#10;A)it postulates that a nation can gain by an activist trade policy&#10;B)it is practiced to some extent by most industrial nations&#10;C)it can easily be carried out&#10;D)all of the above

Accepted Answer

The answer of Which of the following is false with...

Question 9

On which of the following principles does GATT rest?&#10;A)nondiscrimination&#10;B)elimination of nontariff barriers&#10;C)consultation among nations in solving trade disputes&#10;D)all of the above

Accepted Answer

GATT rests on all of the above principles, including nondiscrimination, elimination of nontariff barriers, and consultation among nations in solving trade disputes.

Question 10

An increase in the demand of the imported commodity subject to a given import quota:&#10;A)reduces the domestic quantity demanded of the commodity&#10;B)increases the domestic production of the commodity&#10;C)reduces the domestic price of the commodity&#10;D)reduces the producers' surplus

Accepted Answer

An increase in the demand for an imported commodity subject to a given import quota can lead to an increase in domestic production of the commodity. This is because the quota limits the amount of the commodity that can be imported, so increased demand may be partially met by higher domestic production if the quota is already being fully utilized.

Question 11

An international cartel refers to:&#10;A)dumping&#10;B)an organization of exporters&#10;C)an international commodity agreement&#10;D)voluntary export restraints

Accepted Answer

The answer of An international cartel refers to:&#10;A)dumping&#10;B)an organization of...

Question 12

The type of dumping which would justify antidumping measures by the country subject to the dumping is:&#10;A)predatory dumping&#10;B)sporadic dumping&#10;C)continuous dumping&#10;D)all of the above

Accepted Answer

The answer of The type of dumping which would justify...

Question 13

Which of the following was not negotiated under the Uruguay Round?&#10;A)reduction of tariffs on industrial goods&#10;B)replacement of quotas with tariffs&#10;C)reduction of subsidies on industrial products and on agricultural exports&#10;D)liberalization in trade in most services

Accepted Answer

The answer of Which of the following was not negotiated...

Question 14

The most-favored-nation principle refers to:&#10;A)extension to all trade partners of any reciprocal tariff reduction negotiated by the U.S.with any of its trade partners&#10;B)multilateral trade negotiation&#10;C)the General Agreement on Tariffs and Trade&#10;D)the International Trade Organization

Accepted Answer

The answer of The most-favored-nation principle refers to:&#10;A)extension to all...

Question 15

Trade protection in the United States is usually provided to:&#10;A)low-wage workers&#10;B)well-organized industries with large employment&#10;C)industries producing consumer products&#10;D)all of the above

Accepted Answer

The answer of Trade protection in the United States is...

Deck 9: Nontariff Trade Barriers and the New Protectionism