Question 1

Rent seeking is one reason why countries choose to

Accepted Answer

Rent seeking refers to the act of using one's resources to obtain economic gain without creating new wealth. One way to engage in rent seeking is to lobby for government protection such as tariffs, which restrict trade and create artificial scarcity, allowing domestic producers to charge higher prices. Thus, countries may choose to restrict trade in order to benefit particular industries and individuals engaged in rent seeking.

Question 2

The infant- industry argument is based on the idea of

Accepted Answer

The infant-industry argument is based on the idea that new industries in a country need protection in order to develop their production capacity and acquire the necessary skills and technology to become globally competitive. This is achieved through a learning-by-doing process that allows them to reduce their production costs and improve their quality over time. Therefore, the government should provide them with temporary tariffs or subsidies to protect them from foreign competition until they can stand on their own.

Question 3

Of the groups listed below, which is most likely to lobby for protection?

Accepted Answer

Workers in the import industry are most likely to lobby for protection to safeguard their jobs from foreign competition, which can lead to job losses if imports are cheaper or of higher quality than domestically produced goods.

Question 4

Offshore outsourcing occurs when a firm in Canada

Accepted Answer

Offshore outsourcing refers to the practice of a company hiring a third-party company or individuals located in another country to perform tasks or provide services that could have been performed in-house or sourced locally. Therefore, buying finished goods, components, or services from other firms in other countries is the best answer.

Question 5

Usually the removal of trade barriers affecting a particular good benefits _______ people domestically, each of whom gains a _______.

Accepted Answer

The removal of trade barriers typically benefits many people domestically, as consumers generally gain access to goods at lower prices. However, each of these consumers might only gain a little in terms of the price reduction or increased choice, as the benefits are spread across a large number of individuals.

Question 6

Which of the following is an explanation for the existence of trade restrictions?

Accepted Answer

Tariffs can generate revenue for the government, while rent seeking can lead to the establishment of trade restrictions for the benefit of specific industries or groups.

Question 7

Usually the imposition of trade barriers affecting a particular good benefits _______ people domestically, each of whom gains a _______.

Accepted Answer

Trade barriers, such as tariffs or quotas, typically benefit a small number of domestic producers by protecting them from foreign competition, allowing them to charge higher prices. This results in significant gains for those few producers, while the broader economy and consumers may face higher prices and less choice.

Question 8

In industrial countries, there is more reliance on _______, as opposed to _______ for government revenue.

Accepted Answer

In industrial countries, taxes are typically the largest source of government revenue. Tariffs and import quotas are forms of protectionism, used to restrict imports and protect domestic industries, but they are not the primary source of government revenue. Therefore, the correct answer is E, tax collection; tariffs.

Question 9

Choose the statement that is incorrect.

Accepted Answer

Wage differences can play a role in international trade, but they are not the sole or primary driver. Other factors such as availability of resources or a country's comparative advantage can also play a role.

Question 10

Two reasons that explain why international trade in 2018 remained restricted is that restricted international trade

Accepted Answer

Restricted international trade benefits domestic producers of import-competing goods and services because it limits foreign competition. This can generate tariff revenue in developing countries, which can be used to support domestic industries and create jobs. However, it can also penalize developing countries that lack the resources to compete on an equal footing with developed countries, and can lead to higher prices for consumers in both developed and developing countries.

Question 11

Choose the statement that is incorrect.

Accepted Answer

The statement that the costs from offshore outsourcing outweigh the gains is not necessarily true. While there may be costs to certain individuals or industries, overall gains can still be achieved through increased efficiency and lower costs for consumers.

Question 12

The gains from free trade are enjoyed by a _______number of people and the costs of free trade are imposed on a _______ number of people.

Accepted Answer

The gains from free trade are spread out among a large number of individuals and businesses who benefit from increased economic efficiency, lower prices, and expanded markets. On the other hand, the costs of free trade tend to be concentrated on specific industries, workers, and communities that may face increased competition or displacement. Therefore, a large number of people benefit from free trade, while a smaller group may incur costs.

Question 13

When a firm implements offshore outsourcing, consumers in Canada _______, workers in Canada in the industry that is being outsourced _______ and workers in the foreign country in the industry that is being outsourced _______.

Accepted Answer

When a firm implements offshore outsourcing, consumers in Canada gain due to potentially lower prices or better value for products and services. Workers in Canada in the industry that is being outsourced lose because of job displacement or reduced wages due to competition. Workers in the foreign country in the industry that is being outsourced gain from new job opportunities and economic growth.

Question 14

The effects of offshoring from opening up call centres in India are similar to the effects from

Accepted Answer

Offshoring call centres to India is an example of a company taking advantage of free trade and globalization by accessing lower labor costs. It is not an example of voluntary export restraints, import quotas, tariffs, or export subsidies which are government-imposed policies to restrict or encourage international trade.

Question 15

Choose the statement that is incorrect.

Accepted Answer

Protection does not always save jobs at a low cost. Protecting industries through tariffs or subsidies can lead to higher prices for consumers and may not actually save jobs in the long term if the protected industries cannot compete globally. Additionally, protection measures may lead to retaliatory actions from trading partners, which can hurt other industries and overall trade relations.

Question 16

One reason that international trade is restricted is that

Accepted Answer

International trade may be restricted due to the political pressure from certain interest groups that stand to lose from increased competition from foreign industries. Although the overall benefits of free trade may outweigh the individual losses, the affected groups (e.g. domestic producers and labor unions) may lobby their governments to implement protectionist measures to safeguard their interests. These protectionist measures, such as tariffs and quotas, can lead to higher prices for consumers and reduced economic efficiency, but the individual gain to the protected parties may be large enough to outweigh these costs. Therefore, the decision to restrict trade often involves a trade-off between the overall benefits of free trade and the individual costs of protectionism.

Question 17

When considering rent seeking, which of the following is true?

Accepted Answer

Rent seeking is the use of resources to obtain economic gain from others without reciprocating any benefits to society. In the case of free trade, those who benefit from protectionist policies will have an incentive to lobby the government to maintain those policies, even if it is not in the best interest of society as a whole. Therefore, the anti-free trade group is more likely to engage in rent-seeking behavior and lobby the government to maintain tariffs or other protectionist measures. The pro-free trade group is more likely to argue that such measures are harmful to society and therefore less likely to engage in rent-seeking behavior.

Question 18

Offshoring occurs when a firm in Canada

Accepted Answer

Offshoring involves a firm relocating or outsourcing its business processes or production to another country. This can include hiring foreign labor and producing in other countries (A) as well as buying finished goods, components, or services from firms in other countries (B). Both activities are aimed at reducing costs or accessing specific capabilities not available domestically.

Question 19

In developing countries, there is more reliance on _______ as opposed to _______ for government revenue.

Accepted Answer

Developing countries generally rely on tariffs as a source of revenue rather than tax collection because of limited administrative capacity and a large informal sector. Import quotas are not commonly used as a source of revenue in developing countries.

Quiz 15: International Trade Policy

Rent seeking is one reason why countries choose to

The infant- industry argument is based on the idea of

Of the groups listed below, which is most likely to lobby for protection?

Offshore outsourcing occurs when a firm in Canada

Usually the removal of trade barriers affecting a particular good benefits _ people domestically, each of whom gains a _.

Which of the following is an explanation for the existence of trade restrictions?

Usually the imposition of trade barriers affecting a particular good benefits _ people domestically, each of whom gains a _.

In industrial countries, there is more reliance on _, as opposed to _ for government revenue.

Choose the statement that is incorrect.

Two reasons that explain why international trade in 2018 remained restricted is that restricted international trade

Choose the statement that is incorrect.

The gains from free trade are enjoyed by a _number of people and the costs of free trade are imposed on a _ number of people.

When a firm implements offshore outsourcing, consumers in Canada ___, workers in Canada in the industry that is being outsourced _ and workers in the foreign country in the industry that is being outsourced _____.

The effects of offshoring from opening up call centres in India are similar to the effects from

Choose the statement that is incorrect.

One reason that international trade is restricted is that

When considering rent seeking, which of the following is true?

Offshoring occurs when a firm in Canada

In developing countries, there is more reliance on _ as opposed to _ for government revenue.