Question 1

Trade barriers are forms of protection that shield some sector of the economy from foreign competition.

Accepted Answer

Trade barriers, such as tariffs, quotas, and import bans, are used by countries to protect domestic industries from foreign competition by making imported goods more expensive or limiting their quantity.

Question 2

Tariffs, quotas, and exports subsidies all increase domestic production.

Accepted Answer

Tariffs, quotas, and export subsidies are trade policies that can protect or promote domestic industries by making foreign goods more expensive or less available, thereby encouraging domestic production.

Question 3

A tariff is a tax on imports.

Accepted Answer

This statement is true. A tariff is a tax that a government places on specific imported goods, with the aim of discouraging imports and protecting local industries.

Question 4

A tariff on tires benefits domestic producers of tires.

Accepted Answer

A tariff on tires increases the price of imported tires, making domestic tires more competitively priced and potentially increasing sales for domestic producers.

Question 5

The average tariff on imports into the United States is less than 5 percent.

Accepted Answer

As of the latest data, the average tariff rate on imports into the United States is indeed less than 5 percent, reflecting the country's generally liberal trade policies and its participation in numerous free trade agreements.

Question 6

The case for free trade is based on the

Accepted Answer

The case for free trade is primarily based on the theory of comparative advantage, which suggests that countries should specialize in producing goods where they have a lower opportunity cost, leading to more efficient global production and trade benefits.

Question 7

The idea of the U.S.-Canadian Free-Trade Agreement that ________ barriers to trade including tariffs and quotas between the United States and Canada by 1998 was to increase the amount that the United States exports to Canada and the amount that the United States imports from Canada.

Accepted Answer

The U.S.-Canadian Free-Trade Agreement aimed to remove all barriers to trade, including tariffs and quotas, between the United States and Canada by 1998, facilitating increased trade between the two countries.

Question 8

A quota on sugar harms domestic producers of sugar.

Accepted Answer

A quota on sugar imports limits the amount of sugar that can be imported, which typically benefits domestic producers by reducing foreign competition, potentially allowing them to increase prices and market share.

Question 9

The free-trade agreement signed by Canada, Mexico, and the United States in 1992 is known as

Accepted Answer

NAFTA stands for the North American Free Trade Agreement, which was signed by Canada, Mexico, and the United States in 1992 to create a trilateral trade bloc in North America.

Question 10

Tariffs tend to increase the domestic price of the product.

Accepted Answer

Tariffs are taxes imposed on imported goods, which increase the cost of these goods. This leads to higher prices for consumers, as importers pass on the additional costs to buyers, making domestic products relatively more competitive in price.

Question 11

A quota is a tax on imports.

Accepted Answer

A quota is a limit on the quantity of goods that can be imported or exported, not a tax. Taxes on imports are known as tariffs.

Question 12

Economic ________ occurs when two or more nations join to form a free-trade zone.

Accepted Answer

Economic integration is the correct term for when two or more nations join together to form a free-trade zone, allowing for the easier movement of goods, services, and resources between them.

Question 13

Dumping refers to a country selling its exports at a price lower than its selling price at home.

Accepted Answer

The answer of Dumping refers to a country selling its...

Question 14

Quotas generate tariff revenues for the government.

Accepted Answer

Quotas restrict the quantity of goods that can be imported, rather than imposing a tax on them, so they do not generate tariff revenues for the government.

Question 15

An export subsidy raises the domestic price of the product.

Accepted Answer

An export subsidy encourages domestic producers to export more by providing financial support, reducing supply in the domestic market, and thus raising the domestic price.

Question 16

Related to the Economics in Practice on p. 666: When a country opens its markets to free trade, competition ________ and efficiency ________.

Accepted Answer

When a country opens its markets to free trade, competition increases because local companies must compete with foreign companies. This typically leads to improvements in efficiency as companies strive to reduce costs and improve quality to remain competitive.

Question 17

Related to the Economics in Practice on p. 667: When a country imposes a quota, imports to that country generally ________ and the price of the affected product in that country generally ________.

Accepted Answer

Quotas limit the quantity of goods that can be imported, which typically reduces the supply of the imported goods in the domestic market, leading to higher prices for those goods.

Question 18

In 1991, the European Union began the process of forming the

Accepted Answer

In 1991, the European Union (EU) initiated the creation of what would become the largest free-trade zone in the world, facilitating the movement of goods, services, people, and capital across member states' borders more freely.

Question 19

A quota is a restriction that allows women and minorities to import a certain percentage of imports.

Accepted Answer

A quota is a government-imposed trade restriction that limits the number or monetary value of goods that can be imported or exported during a specific time period; it is not specifically related to allowing women and minorities to import a certain percentage of imports.

Question 20

If a nation has ________ status conferred on it, then exports from that country are taxed at the lowest negotiated tariff rates.

Accepted Answer

Most-favored-nation (MFN) status is a level of treatment accorded by one state to another in international trade. The term means the country which is the recipient of this treatment must nominally receive equal trade advantages as the most favored nation by the country granting such treatment. This includes, but is not limited to, low tariffs or high import quotas.

Quiz 20: International Trade, Comparative Advantage, and Protectionism