Question 1

By the 1990s, China had departed from a capitalistic economy and shifted to a Soviet-type economy encompassing small-scale, labor-intensive industry.

Accepted Answer

The statement is incorrect. In the 1990s, China began implementing economic reforms that shifted the country towards a market-oriented economy, moving away from the Soviet-style planned economy.

Question 2

A cartel tends to be most successful in maximizing the profits of its members when there is a large number of producers in the cartel and these producers' cost and demand conditions greatly differ from each other.

Accepted Answer

A cartel tends to be most successful in maximizing the profits of its members when there are only a limited number of producers in the cartel and these producers' cost and demand conditions are similar to each other, allowing them to coordinate on price and output levels.

Question 3

A multilateral contract stipulates the maximum price at which importing nations will purchase guaranteed quantities from producing nations and the minimum price at which producing nations will sell guaranteed amounts to importing nations.

Accepted Answer

A multilateral contract as described refers to a commodity agreement or price band mechanism, not the general definition of a multilateral contract. A multilateral contract typically involves three or more parties with obligations or rights, not specifically about price guarantees for import/export quantities.

Question 4

The "newly industrializing countries" of East Asia have emphasized the implementation of import-substitution policies to insulate their industries from international competition.

Accepted Answer

The given graph does not provide relevant information to support the statement about import-substitution policies in East Asia. Therefore, the answer is false.

Question 5

Import-substitution policies are supported by the fact that many developing countries have small domestic markets and thus their producers enjoy the benefits of diseconomies of small-scale production.

Accepted Answer

Import-substitution policies are typically implemented to encourage domestic production and reduce dependency on imports, not because of the benefits of diseconomies of scale, but rather to try to overcome them by expanding domestic industries.

Question 6

Under the Generalized System of Preferences program, the major industrial countries agree to temporarily reduce tariffs on designated imports from other industrial countries.

Accepted Answer

The Generalized System of Preferences (GSP) program is designed to promote economic growth in the developing world by providing preferential duty-free entry for up to 4,800 products from 129 designated beneficiary countries and territories, not between industrial countries.

Question 7

Most of China's manufactured exports have constituted labor-intensive goods.

Accepted Answer

According to the information provided, the statement is true.

Question 8

Developing countries have often felt that it is easier to protect their manufacturers, via import-substitution policies, against foreign competitors than to force industrial nations to reduce trade restrictions on products exported by developing countries.

Accepted Answer

The statement suggests that developing countries prioritize protecting their own manufacturers rather than pushing for reduced trade restrictions on their own exports.

Question 9

In recent decades, the East Asian "newly industrializing countries" have pursued export-led growth (outward orientation) as an industrialization strategy.

Accepted Answer

The global market for tin has been affected by the industrialization strategies of the East Asian "newly industrializing countries" which have pursued export-led growth as a strategy in recent decades.

Question 10

As a profit-maximizing cartel, OPEC would produce a greater output and charge a lower price than what would occur in a competitive market.

Accepted Answer

The answer of As a profit-maximizing cartel, OPEC would produce...

Question 11

It is widely agreed that import-substitution policies have been a main contributor to above-average growth rates in developing countries.

Accepted Answer

Import-substitution policies, which aim to replace foreign imports with domestic production, have not consistently led to above-average growth rates in developing countries. In many cases, these policies have led to inefficiency, a lack of competitiveness, and economic stagnation.

Question 12

Export-led growth industrialization suffers a major problem: it depends on the willingness and ability of foreign nations to absorb the goods exported by the country pursuing such a policy.

Accepted Answer

This is a correct statement regarding the potential problem with export-led growth industrialization.

Question 13

When cartel members agree to restrict output to increase the price of their product, a single member of the cartel has an economic incentive to violate the agreement by increasing its output in order to increase profits.

Accepted Answer

This is known as the "cheating problem" in a cartel. While all members benefit from higher prices, each member has an incentive to cheat by producing more and capturing a larger share of the market. However, if all members cheat, it defeats the purpose of the cartel and the price will collapse.

Question 14

In its transition toward capitalism, by the 1990s China permitted free enterprise as well as democracy for its people.

Accepted Answer

This statement is not accurate. While China did permit some market-oriented reforms in the 1990s, it did not implement full democracy and remains a one-party state.

Question 15

A multilateral contract specifies the maximum price at which exporting countries agree to sell a product and the minimum price at which importing countries agree to buy a product.

Accepted Answer

The answer of A multilateral contract specifies the maximum price...

Question 16

During the late 1980s and early 1990s, China dismantled much of its centrally-planned economy and permitted free enterprise to replace it.

Accepted Answer

The graph shows that China's production and exports of tin increased significantly after the country adopted market-oriented economic policies in the late 1980s and early 1990s. This suggests that China dismantled much of its centrally-planned economy and permitted free enterprise to replace it.

Question 17

Rather than conduct massive stabilization operations, buffer stock officials will periodically revise target prices should they move out of line with long-term price trends.

Accepted Answer

The statement accurately describes the approach of buffer stock officials.

Question 18

In 1999 the United States revoked the normal-trade-relations (most-favored-nation) status it provided China in retaliation for China's suppression of human rights.

Accepted Answer

In 1999, the United States did not revoke China's normal-trade-relations status; instead, it continued to renew it annually despite concerns over human rights issues in China.

Question 19

The purpose of a cartel is to support prices higher than would occur under more competitive conditions, thus increasing the profits of cartel members.

Accepted Answer

Cartels aim to control and manipulate the market to inflate prices and increase profits for their members.

Question 20

The so-called Four Tigers include Australia, South Korea, Taiwan, and Hong Kong.

Accepted Answer

The term Four Tigers refers to South Korea, Taiwan, Hong Kong, and Singapore, not Australia.

Quiz 7: Trade Policies for the Developing Nations