Question 1

Economists would tend to accept which of the following arguments in favour of tariffs?

Accepted Answer

A)   Tariffs are needed to limit imports and reduce the capital flow from the country.
B)   Tariffs will stimulate the domestic economy.
C)   Tariffs are needed to avoid exporting jobs.
D)   Temporary tariff protection in some situations may help to generate an eventual comparative advantage in that product.
E)   Tariffs help to reduce inflation by reducing the price of domestic products.F) C) and E)
G) A) and B)

Question 2

The concept of "trade creation" refers to

Accepted Answer

A)   increased exports and reduced imports as a result of a high- tariff policy.
B)   trade based on comparative advantage that typically follows the reduction of trade barriers.
C)   inefficient trade that follows the establishment of a free- trade area.
D)   regional trade agreements.
E)   the opening up of new trading routes.F) B) and E)
G) A) and D)

Question 3

The diagram below shows the domestic demand and supply curves for cotton towels in Canada. The prevailing world price of cotton towels is PW. Assume that all cotton towels are identical.  FIGURE 34- 3
-Refer to Figure 34- 3. If the Canadian government imposes a quota on imported cotton towels of the amount (Q3 - Q2) , then foreign producers' revenues from their sales in Canada will be equal to the area

Accepted Answer

A)   B + C + D.
B)   C + H.
C)   G + H + I.
D)   H.
E)   B + C + D + G + H + I.F) C) and E)
G) B) and D)

Question 4

According to the principle of "national treatment" in the North American Free Trade Agreement, member countries

Accepted Answer

A)   can establish new laws as they wish, as long as these laws apply equally to domestic and foreign- owned firms.
B)   can establish specific subsidies to favour their own national firms over international firms, as long as it applies only to domestic operations.
C)   must submit any new laws being considered to a cross- border judicial panel before the laws are enacted.
D)   cannot establish new laws which harm the domestic environment.
E)   have complete autonomy over their own laws and the way in which they are applied to any firm, domestic or foreign, operating on their soil.F) B) and E)
G) A) and B)

Question 5

Suppose the Canadian government began subsidizing wheat farmers by paying them $25 per bushel of wheat produced. According to existing international trade agreements, other countries would be allowed to react to this subsidy by imposing a

Accepted Answer

A)   quota.
B)   non- tariff barrier.
C)   trade diversion.
D)   countervailing duty.
E)   VER.F) C) and D)
G) All of the above

Question 6

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical.  FIGURE 34- 2
-Refer to Figure 34- 2. If Canada imposes a tariff of $t per pair of jeans, the deadweight loss to the Canadian economy is represented by the area

Accepted Answer

A)   D + E + F + G + H.
B)   A + B + C.
C)   E + H.
D)   E + F + G + H.
E)   B + C.F) All of the above
G) C) and D)

Question 7

Continued tariff protection for industries that have already attained all potential economies of scale and possibilities for learning by doing is likely to

Accepted Answer

A)   increase employment in the protected industries.
B)   reduce average real income for the country's residents.
C)   decrease prices to consumers of the products produced in the protected industries.
D)   redistribute income away from the factors used in the protected industries.
E)   both A and B are correct.F) C) and D)
G) B) and C)

Question 8

Consider the following statement: "Canadians on average are worse off when some manufacturing jobs migrate from Canada to low- wage countries in Central America." This statement is because _ .

Accepted Answer

A)   incorrect; the permanent gains to consumers from lower prices outweigh the temporary losses to the displaced manufacturing workers
B)   incorrect; there are no Canadians made worse off by such an event
C)   incorrect; low- wage countries do not produce manufactured goods
D)   correct; the loss of manufacturing jobs leads to permanent income losses in Canada
E)   correct; Canadian firms cannot compete with production in low- wage countriesF) All of the above
G) A) and B)

Question 9

Continued tariff protection for industries that have already attained all the possible economies of scale will likely

Accepted Answer

A)   redistribute income away from the factors used in the protected industries.
B)   increase prices to consumers of the products produced in the protected industries.
C)   reduce employment in the protected industries.
D)   reduce the stream of tariff revenue to the government.
E)   result in lower domestic prices for the products they produce.F) B) and D)
G) C) and D)

Question 10

The final round of GATT talks, called the Uruguay Round, established GATT's successor, known as the

Accepted Answer

A)   European Union (EU) .
B)   North American Free Trade Agreement (NAFT
A)  .
C)   Second General Agreement on Trade and Tariffs (GATT 2) .
D)   United Nations Council for Free and Fair Trade (UNCFFT) .
E)   World Trade Organization (WTO) .F) C) and E)
G) None of the above

Question 11

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical.  FIGURE 34- 2
-Refer to Figure 34- 2. In the presence of free international trade, Canada's production will be at the quantity:

Accepted Answer

A)   Q1
B)   Q2
C)   Q3
D)   Q4
E)   Q5F) B) and C)
G) B) and E)

Question 12

An example of the "infant industry" argument for trade protection is that

Accepted Answer

A)   tariffs should not be imposed on countries that have democratic governments.
B)   imports of certain products should be limited in the interests of national defense.
C)   "strategic" trade policy is helpful when other countries are also being strategic.
D)   all tariffs should be eliminated in order to maximize the gains from trade.
E)   in the presence of unexploited scale economies, tariff protection may permit a country to develop future comparative advantage in certain products.F) A) and E)
G) C) and D)

Question 13

Any policy designed to benefit domestic industries at the expense of foreign export industries is called

Accepted Answer

A)   commercialization.
B)   cartelization.
C)   predatory practice.
D)   protection.
E)   monopolization.F) B) and E)
G) None of the above

Question 14

If Canada, a small country in global markets, imposes a 15 percent tariff on a specific commodity, it will cause

Accepted Answer

A)   a reduction in tariff revenue collected by the Canadian government.
B)   a decrease in the price consumers pay for the commodity in Canada.
C)   a reduction in the consumption of the commodity in Canada.
D)   an increase in the quantity imported of the commodity.
E)   an upward shift in the commodity's demand curve.F) A) and B)
G) D) and E)

Question 15

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market. Assume that all bicycles are identical.  FIGURE 34- 4
-Refer to Figure 34- 4. Assume there is free trade in bicycles. If the world price of bicycles is $500, domestic consumption is at a price of _ _.

Accepted Answer

A)   40 000; $500
B)   50 000; $300
C)   40 000; $400
D)   30 000; $300
E)   30 000; $500F) A) and D)
G) A) and C)

Question 16

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical.  FIGURE 34- 2
-Refer to Figure 34- 2. If Canada imposes a tariff of $t per pair of jeans, Canadian jean producers' revenues will increase by the area equal to

Accepted Answer

A)   D + E + I.
B)   A + B + F + J.
C)   F + G.
D)   E + F + G + H.
E)   F + G + H.F) C) and D)
G) B) and C)

Question 17

Refer to Figure 34- 1. Suppose that P0 is the world price. If Canada imposes a tariff causing the price of refrigerators in Canada to rise from P0 to P1, the consequence would be that

Accepted Answer

A)   domestic production will increase from Q1 to Q3 and domestic consumption will fall from Q5 to Q3.
B)   domestic production will exceed domestic consumption.
C)   domestic production will increase from Q1 to Q2 and domestic consumption will fall from Q5 to Q4.
D)   both domestic production and domestic consumption would increase by equal amounts.
E)   both domestic production and domestic consumption would decrease by equal amounts.F) A) and E)
G) B) and D)

Question 18

An agreement among a group of countries to eliminate trade barriers among themselves, to present a common trading front to the rest of the world in terms of common barriers to trade, and to permit free movement of factors of production among member countries is called a

Accepted Answer

A)   common market.
B)   reciprocity association.
C)   free- trade area.
D)   confederation.
E)   customs union.F) D) and E)
G) A) and B)

Question 19

Suppose five countries in Central America agree that products are to be freely traded across their borders, they will share a common set of import duties, and that the flow of people will continue to be restricted. This is an example of a

Accepted Answer

A)   trade association.
B)   common market.
C)   political union.
D)   free- trade area.
E)   customs union.F) A) and D)
G) A) and C)

Question 20

If a country is exporting more goods and services than it is importing, we should consider this to be "beneficial" only in the sense that it

Accepted Answer

A)   increases the standard of living through a larger national income.
B)   means that an economy is earning more than it is spending.
C)   represents an accumulation of assets for the domestic economy that can be used in the future to finance consumption.
D)   allows a country to add to its foreign- exchange reserves above the level needed to cope with fluctuations in private payments.
E)   is a necessary condition to enable a country to take full advantage of scale economies.F) A) and B)
G) A) and C)

Exam 34: Trade Policy

The final round of GATT talks, called the Uruguay Round, established GATT's successor, known as the

Correct Answer
verified

According to the principle of "national treatment" in the North American Free Trade Agreement, member countries

Correct Answer
verified

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical. FIGURE 34- 2 -Refer to Figure 34- 2. In the presence of free international trade, Canada's production will be at the quantity:

Correct Answer
verified

Consider the following statement: "Canadians on average are worse off when some manufacturing jobs migrate from Canada to low- wage countries in Central America." This statement is because _ .

Correct Answer
verified

Suppose five countries in Central America agree that products are to be freely traded across their borders, they will share a common set of import duties, and that the flow of people will continue to be restricted. This is an example of a

Correct Answer
verified

Suppose the Canadian government began subsidizing wheat farmers by paying them $25 per bushel of wheat produced. According to existing international trade agreements, other countries would be allowed to react to this subsidy by imposing a

Correct Answer
verified

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market. Assume that all bicycles are identical. FIGURE 34- 4 -Refer to Figure 34- 4. Assume there is free trade in bicycles. If the world price of bicycles is $500, domestic consumption is at a price of _ _.

Correct Answer
verified

Correct Answer
verified

If Canada, a small country in global markets, imposes a 15 percent tariff on a specific commodity, it will cause

Correct Answer
verified

Refer to Figure 34- 1. Suppose that P0 is the world price. If Canada imposes a tariff causing the price of refrigerators in Canada to rise from P0 to P1, the consequence would be that

Correct Answer
verified

An agreement among a group of countries to eliminate trade barriers among themselves, to present a common trading front to the rest of the world in terms of common barriers to trade, and to permit free movement of factors of production among member countries is called a

Correct Answer
verified

Continued tariff protection for industries that have already attained all the possible economies of scale will likely

Correct Answer
verified

Continued tariff protection for industries that have already attained all potential economies of scale and possibilities for learning by doing is likely to

Correct Answer
verified

Correct Answer
verified

The concept of "trade creation" refers to

Correct Answer
verified

An example of the "infant industry" argument for trade protection is that

Correct Answer
verified

Economists would tend to accept which of the following arguments in favour of tariffs?

Correct Answer
verified

Any policy designed to benefit domestic industries at the expense of foreign export industries is called

Correct Answer
verified

Correct Answer
verified

If a country is exporting more goods and services than it is importing, we should consider this to be "beneficial" only in the sense that it

Correct Answer
verified

Exam 34: Trade Policy

The final round of GATT talks, called the Uruguay Round, established GATT's successor, known as the

Correct AnswerverifiedShow Answer

According to the principle of "national treatment" in the North American Free Trade Agreement, member countries

Correct AnswerverifiedShow Answer

The diagram below shows the domestic demand and supply curves for denim jeans in Canada. The prevailing world price is PW. Assume that all jeans are identical. FIGURE 34- 2 -Refer to Figure 34- 2. In the presence of free international trade, Canada's production will be at the quantity:

Correct AnswerverifiedShow Answer

Consider the following statement: "Canadians on average are worse off when some manufacturing jobs migrate from Canada to low- wage countries in Central America." This statement is because _ .

Correct AnswerverifiedShow Answer

Suppose five countries in Central America agree that products are to be freely traded across their borders, they will share a common set of import duties, and that the flow of people will continue to be restricted. This is an example of a

Correct AnswerverifiedShow Answer

Suppose the Canadian government began subsidizing wheat farmers by paying them $25 per bushel of wheat produced. According to existing international trade agreements, other countries would be allowed to react to this subsidy by imposing a

Correct AnswerverifiedShow Answer

The diagram below shows supply and demand curves for bicycles in the domestic Canadian market. Assume that all bicycles are identical. FIGURE 34- 4 -Refer to Figure 34- 4. Assume there is free trade in bicycles. If the world price of bicycles is $500, domestic consumption is at a price of _ _.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If Canada, a small country in global markets, imposes a 15 percent tariff on a specific commodity, it will cause

Correct AnswerverifiedShow Answer

Refer to Figure 34- 1. Suppose that P0 is the world price. If Canada imposes a tariff causing the price of refrigerators in Canada to rise from P0 to P1, the consequence would be that

Correct AnswerverifiedShow Answer

An agreement among a group of countries to eliminate trade barriers among themselves, to present a common trading front to the rest of the world in terms of common barriers to trade, and to permit free movement of factors of production among member countries is called a

Correct AnswerverifiedShow Answer

Continued tariff protection for industries that have already attained all the possible economies of scale will likely

Correct AnswerverifiedShow Answer

Continued tariff protection for industries that have already attained all potential economies of scale and possibilities for learning by doing is likely to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The concept of "trade creation" refers to

Correct AnswerverifiedShow Answer

An example of the "infant industry" argument for trade protection is that

Correct AnswerverifiedShow Answer

Economists would tend to accept which of the following arguments in favour of tariffs?

Correct AnswerverifiedShow Answer

Any policy designed to benefit domestic industries at the expense of foreign export industries is called

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a country is exporting more goods and services than it is importing, we should consider this to be "beneficial" only in the sense that it

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified