Question 1

In 2003, the WTO ruled that U.S. tariffs on ________ were unfair and allowed retaliatory tariffs on U.S. products.

Accepted Answer

In 2003, the WTO ruled that U.S. tariffs on steel imported from the EU were unfair and allowed retaliatory tariffs on U.S. products.

Question 2

The Smoot-Hawley tariff set off an international trade war in the

Accepted Answer

The Smoot-Hawley tariff was passed in 1930 and raised tariffs on over 20,000 imported goods, leading to retaliation by other countries and ultimately worsening the Great Depression. This resulted in an international trade war in the 1930s.

Question 3

Which of the following can be considered a free-trade zone?

Accepted Answer

The European Union (EU) is a free-trade zone, where member states have eliminated tariffs and non-tariff barriers on trade between themselves. The other options listed do not fit the definition of a free-trade zone. GATT is an international agreement that seeks to reduce trade barriers, but it does not create a free-trade zone. The designation of "English-speaking nations" or "industrialized OECD nations" does not necessarily imply that there are no trade barriers between them.

Question 4

It costs a television manufacturer $1,000 to produce a plasma television. This manufacturer sells these televisions abroad for $750. This is an example of

Accepted Answer

This situation is an example of dumping, where a company sells a product in a foreign market at a lower price than what it charges in its home market, often with the intention of driving competitors out of that market. The lower price is possible due to the manufacturer's ability to sell at a loss in the short term or due to government subsidies.

Question 5

Related to the Economics in Practice on page 663: Trade ________ comparative advantage of countries and ________ the efficiency of firms.

Accepted Answer

Trade exploits the comparative advantage of countries by allowing them to specialize in the production of goods and services they can produce most efficiently. This specialization and exchange improve the overall efficiency of firms by enabling them to focus on their strengths and benefit from economies of scale.

Question 6

Economic integration

Accepted Answer

Economic integration refers to the process where multiple countries come together to form a closer economic relationship, usually through free trade agreements. This can include reducing trade barriers such as tariffs and quotas, allowing for the free flow of goods and services, and potentially even coordinating economic policies. Therefore, option A is the correct answer as it explains the definition of economic integration. Option B refers to a specific outcome of economic integration, while option C and D are not accurate descriptions of economic integration.

Question 7

Related to the Economics in Practice on page 664: When a country lifts a quota, imports to that country generally ________ and the price of the affected product in that country generally ________.

Accepted Answer

When a quota is lifted, it means that the limit on how much of a product can be imported into a particular country is removed. As a result, the supply of the affected product in that country will increase, leading to a decreased price. This increased supply will also lead to an increase in imports, which is why the correct option is B (increase; falls).

Question 8

GATT is the international agreement signed by the United States and ________ other countries in 1947 to promote the liberalization of foreign trade.

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) was signed by the United States and 21 other countries in 1947. It aimed to reduce trade barriers and increase international trade.

Question 9

Which of the following statements is true?

Accepted Answer

Imposing a quota on chocolate imports from Switzerland would limit the amount of Swiss chocolate that can be sold in the United States, therefore reducing supply and increasing the price. Imposing a tariff on Swiss chocolate imports could also increase the price of Swiss chocolate in the United States, but it would not necessarily affect the price in Switzerland. A "voluntary export restraint" imposed by Switzerland would mean that they are voluntarily limiting the amount of chocolate they export to the United States, which could lead to a decrease in supply and therefore an increase in price in the United States. However, this option was not mentioned in the answer choices.

Question 10

Over time, the general movement in the United States has been toward

Accepted Answer

The United States has generally been moving towards relatively more free trade, as evidenced by trade agreements such as the North American Free Trade Agreement (NAFTA) and the Trans-Pacific Partnership (TPP). While there have been periods of protectionist policies (such as in the 1920s and 1930s), the overall trend has been towards increased trade liberalization.

Question 11

The idea of the U.S.-Canadian Free-Trade Agreement that removed all barriers to trade including tariffs and quotas between the United States and Canada by 1998 was to

Accepted Answer

The U.S.-Canadian Free-Trade Agreement aimed to increase the amount of trade between the two countries by eliminating barriers such as tariffs and quotas. This would lead to an increase in both the amount of U.S. goods exported to Canada and the amount of Canadian goods imported by the United States, resulting in a mutually beneficial trade relationship. A and B are incorrect because the agreement aimed to decrease prices and increase trade, not increase prices. D is incorrect because the goal was to increase trade in both directions, not reduce imports from Canada.

Question 12

Germany placed a limit on the amount of beer that can be imported into Germany. This is an example of

Accepted Answer

The limit placed on the amount of beer that can be imported into Germany is known as a quota. This restricts the amount of beer that can be imported from other countries, helping to protect the domestic beer market. It is different from a tariff, which is a tax on imported goods, and an export subsidy, which is a payment made by a government to a company for exporting goods. Dumping refers to the practice of selling goods at a lower price than what they would typically sell for in their home market in order to gain a competitive advantage in another market.

Question 13

Which of the following is false?

Accepted Answer

Tariffs on imports generate government revenue regardless of whether the domestic price is larger than the world price plus the tariff. Therefore, statements A, B, and D are true.

Question 14

In 1991, what group of countries began the process of forming the largest free-trade zone in the world?

Accepted Answer

The answer of In 1991, what group of countries began...

Question 15

Government payments made to ________ firms in order to encourage ________ are called subsidies.

Accepted Answer

The question is asking for a type of government payment made in order to encourage a certain economic activity. The options have two parts: the type of firm and the economic activity. Among the choices listed, only option D fits both criteria, as domestic firms would receive payments to encourage exports. Options A, B, and C do not make sense as subsidies for foreign firms in order to encourage immigration or imports would not benefit the domestic economy.

Question 16

________ involves a country selling its exports at a price lower than its cost of production.

Accepted Answer

Dumping involves a country selling its exports at a price lower than its cost of production, in order to gain a competitive advantage over other countries in the market. This can harm domestic industries and create trade disputes.

Question 17

A tax on imports is a(n)

Accepted Answer

A tax on imports is known as a tariff. An import quota limits the quantity of goods imported, a voluntary import restriction is a quota agreed upon by exporting and importing countries, and a quality barrier is a regulation that requires products to meet certain standards before they can be imported.

Question 18

If a nation has most-favored-nation status conferred on it, then exports from that country

Accepted Answer

If a country has most-favored-nation status, its exports will be taxed at the lowest negotiated tariff rates, which gives them a competitive advantage in the markets of the importing country. This status does not affect the pricing, safety regulations, or cost of the exported products.

Question 19

________ U.S. president(s) who has/have held office since GATT was signed has argued for free-trade policies, yet each one has used his powers to protect various sectors of the economy.

Accepted Answer

Every U.S. President who has held office since GATT was signed has argued for free-trade policies, yet each one has used his powers to protect various sectors of the economy.

Question 20

If the United States increases the tariff on imported salmon, this will

Accepted Answer

If the United States increases the tariff on imported salmon, it will make it more expensive for companies to import salmon. This will lead to a reduction in the amount of salmon imported into the United States. To meet the demand for salmon, domestic producers will increase their production, leading to an increase in the production of salmon in the United States. Therefore, the best choice is (C).

Quiz 33: International Trade, Comparative Advantage, and Protectionism