Question 1

Economists believe the most persuasive argument for protectionism is to

Accepted Answer

Economists believe that protecting infant industries is the most persuasive argument for protectionism. This argument states that temporary protection in the form of tariffs, subsidies, or quotas can help domestic industries grow and become competitive in the global market. The idea is that without protection, these industries may not be able to survive with established foreign competition, and the potential benefits they may bring to the domestic economy would be lost. However, this argument is often debated and criticized, as protectionism can also create negative consequences such as higher prices for consumers, inefficiency, and retaliation from foreign countries.

Question 2

The World Trade Organization (WTO)promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.All of the following are reasons for these anti-globalization protests except

Accepted Answer

The correct answer is D because the loss of intellectual property due to foreign trade and investment is generally a concern of content creators and industries, not a typical focus of anti-globalization protests. These protests are more often concerned with issues like economic inequality, cultural erosion, and the impact of globalization on local economies and environments, as outlined in options A, B, and C.

Question 3

a.Distinguish between a tariff and a quota.
b.In what ways are tariffs and quotas similar?
c.In what ways are tariffs and quotas different?
d.Why might a foreign producer prefer a quota rather than a tariff?

Accepted Answer

The answer of a.Distinguish between a tariff and a quota.
b.In...

Question 4

Dumping refers to

Accepted Answer

Dumping refers to the practice of selling a product for a price below its cost of production in a foreign market, which can harm domestic competitors and sometimes violates international trade agreements.

Question 5

Figure 7-5 
-Refer to Figure 7-5.Fenwick currently both produces and imports pistachios.The government of Fenwick decides to restrict international trade in pistachios by imposing a quota that allows imports of only 5 million pounds each year.Figure 9-9 shows the estimated demand and supply curves for pistachios in Fenwick and the results of imposing the quota.Answer questions a-j using the figure.
a.If there is no quota what is the domestic price of pistachios and what is the quantity of pistachios demanded by consumers?
b.If there is no quota how many pounds of pistachios would domestic producers supply and what quantity would be imported?
c.If there is no quota what is the dollar value of consumer surplus?
d.If there is no quota what is the dollar value of producer surplus received by producers in Fenwick?
e.If there is no quota what is the revenue received by foreign producers who supply pistachios to Fenwick?
f.With a quota in place what is the price that consumers of Fenwick must now pay and what is the quantity demanded?
g.With a quota in place what is the dollar value of consumer surplus? Are consumers better off?
h.With a quota in place what is the dollar value of producer surplus received by producers in Fenwick? Are domestic producers better off?
i.Calculate the revenue to foreign producers who are granted permission to sell in Fenwick after the imposition of the quota.
j.Calculate the deadweight loss as a result of the quota.

Accepted Answer

The answer of Figure 7-5 
-Refer to Figure 7-5.Fenwick currently...

Question 6

In general,the costs tariffs and quotas impose on consumers are

Accepted Answer

Tariffs and quotas can significantly increase the cost of imported goods, leading to higher prices for consumers. While these costs can add up to a large total amount due to the collective impact on all consumers, the additional cost per individual consumer is often relatively small, spread out over many purchases and individuals.

Question 7

Many economists ________ protectionism because it ________ consumers and ________ jobs in domestic industries that use protected products.

Accepted Answer

The sentence presents a negative view of protectionism and its effects. Economists are being criticized because protectionism causes losses to consumers and eliminates jobs in non-protected industries.

Question 8

One reason for the success that firms have in getting the government to erect and maintain barriers to foreign competition is members of Congress who engage in logrolling,where members in districts with protected industries

Accepted Answer

Logrolling is the practice of exchanging political or legislative support for mutually beneficial aims, often resulting in a reciprocal exchange of votes. In this case, members of Congress from districts with protected industries are likely to support tariffs in exchange for support on other issues from other members of Congress. This helps to maintain protectionist policies that restrict foreign competition. Options B, C, and D are not accurate descriptions of the logrolling process or the way in which protectionist policies are maintained.

Question 9

Figure 7-4 
-Refer to Figure 7-4.Suppose the U.S.government imposes a $0.25 per pound tariff on rice imports.Figure 9-8 shows the demand and supply curves for rice and the impact of this tariff.Use the figure to answer questions a-i.
a.Following the imposition of the tariff,what is the price that domestic consumers must now pay and what is the quantity purchased?
b.Calculate the value of consumer surplus with the tariff in place.
c.What is the quantity supplied by domestic rice growers with the tariff in place?
d.Calculate the value of producer surplus received by U.S.rice growers with the tariff in place.
e.What is the quantity of rice imported with the tariff in place?
f.What is the amount of tariff revenue collected by the government?
g.The tariff has reduced consumer surplus.Calculate the loss in consumer surplus due to the tariff.
h.What portion of the consumer surplus loss is redistributed to domestic producers? To the government?
i.Calculate the deadweight loss due to the tariff.

Accepted Answer

The answer of Figure 7-4 
-Refer to Figure 7-4.Suppose the...

Question 10

In 1930,the U.S.government attempted to help domestic firms that were harmed by the Great Depression by passing the Smoot-Hawley Tariff.In response to this tariff,other countries ________ and international trade ________.

Accepted Answer

In response to the Smoot-Hawley Tariff, other countries raised their tariffs, which led to a decrease in international trade and contributed to the worsening of the Great Depression.

Question 11

Eliminating trade barriers does all of the following except

Accepted Answer

Eliminating trade barriers generally leads to increased economic efficiency and lower domestic prices, as domestic producers face competition from foreign producers. However, it does not necessarily lead to a lower average standard of living in a country. In fact, increased trade can lead to higher levels of income and greater access to goods and services for consumers.

Question 12

Your roommate Hansen argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States.Hansen

Accepted Answer

Hansen's argument is based on the assumption that lower wages in foreign countries give them a competitive advantage over American producers. However, free trade can still benefit the United States by increasing economic efficiency and promoting specialization in certain industries. This can lead to an overall increase in living standards, even if certain industries may face challenges. Therefore, Hansen's argument is incorrect.

Question 13

All but one of the following statements is used to justify protectionism.Which statement is not used to justify protectionism?

Accepted Answer

The statement that free trade leads to higher prices for imported goods is actually used to justify protectionism, as protectionists argue that domestic industries should be protected from foreign competition in order to maintain lower prices for consumers. The other three statements are commonly used to justify protectionism. B argues that free trade leads to job losses as companies move production overseas, C argues that countries should not be reliant on other countries for critical goods such as military equipment, and D argues that protectionism is necessary to support new and emerging industries until they become more productive.

Question 14

Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.This statement describes the ________ argument for protectionism.

Accepted Answer

The statement describes the infant industry argument for protectionism, which argues that new domestic industries need temporary protection from international competition to mature and become successful. During this period, domestic producers can gain experience, lower their unit costs, and become more competitive in international markets. Once they have achieved economies of scale and can compete successfully in the international market, the temporary protection can be removed.

Question 15

In the United States during the Great Depression,tariffs were ________ than they were following World War II,and ________ than they are today.

Accepted Answer

During the Great Depression, the United States implemented high tariffs, such as the Smoot-Hawley Tariff, which were higher than the tariffs following World War II and higher than today's tariffs.

Question 16

In 1995,the General Agreement on Tariffs and Trade (GATT),which was established in 1948,was replaced by the World Trade Organization (WTO).Why did members of the GATT push for the establishment of the WTO?

Accepted Answer

The GATT primarily focused on trade in goods, and there was a need to create an organization that could also cover trade in services and intellectual property, leading to the establishment of the WTO.

Question 17

The Smoot-Hawley Tariff

Accepted Answer

The Smoot-Hawley Tariff, passed in 1930, increased average tariff rates by over 50 percent in the United States, making it more difficult for other countries to sell their goods in the U.S. and further worsening the Great Depression. It was not passed after World War II, the Civil War, or upon a recommendation from GATT.

Question 18

Which of the following describes the national security argument for protectionism?

Accepted Answer

The national security argument for protectionism states that some goods should be insulated from foreign competition to ensure an adequate supply of these goods in the event of an international conflict. This is because in times of war, a country may not be able to rely on other countries for certain goods, which could affect their ability to defend themselves.

Question 19

Protectionism is the use of ________ to protect domestic firms from foreign competition.

Accepted Answer

Trade barriers like tariffs, quotas, and subsidies are commonly used by governments to protect domestic firms from competition with foreign firms. Military force and cheap labor are not typically used as protectionist measures, and dumping refers to the practice of selling goods in a foreign market at a price lower than the cost of production, which is considered unfair trade practice.

Question 20

It is difficult to determine if foreign companies are selling their products for prices below their costs of production because

Accepted Answer

The answer of It is difficult to determine if foreign...

Quiz 7: Comparative Advantage and the Gains From International Trade

Economists believe the most persuasive argument for protectionism is to

The World Trade Organization (WTO) promotes foreign trade and investment,or globalization.In recent years opposition to globalization has led to violent protests at meetings of the WTO.All of the following are reasons for these anti-globalization protests except

a.Distinguish between a tariff and a quota. b.In what ways are tariffs and quotas similar? c.In what ways are tariffs and quotas different? d.Why might a foreign producer prefer a quota rather than a tariff?