Question 1

Which organization determines procedures for the settlement of international trade disputes?

Accepted Answer

A)   World Bank
B)   World Trade Organization
C)   International Monetary Organization
D)   International Bank for Reconstruction and Development
E)   The League of Nations

Question 2

The simple model of competition among political parties long used by political scientists tends to lead to the practical solution of selecting the

Accepted Answer

A)   optimal tariff.
B)   prohibitive tariff.
C)   zero (free-trade)  tariff.
D)   the tariff rate favored by the median voter.
E)   the tariff rate supported by exporters.

Question 3

It has been claimed that foreign governments have attempted to influence votes in the U.S. that would promote policies of protectionism within the U.S. On the surface this appears to be totally illogical and counter intuitive, as this would presumably lessen the possibilities of foreigners' exports to the U.S.

Accepted Answer

This would make sense only if the form o...

Question 4

Judging by the changes in the height of tariff rates in major trading countries, the world has been experiencing a great

Accepted Answer

A)   trade liberalization.
B)   surge of protectionism.
C)   lack of progress in the trade-policy area.
D)   move towards regional integration.
E)   shift from export subsidies to specific tariffs.

Question 5

The General Agreement on Tariffs and Trade and the World Trade Organization have resulted in

Accepted Answer

A)   the establishment of universal trade adjustment assistance policies.
B)   the establishment of the European Union.
C)   the reciprocal trade clause.
D)   reductions in trade barriers via multilateral negotiations.
E)   the total protection of all intellectual property rights.

Question 6

An issue never confronted effectively by GATT, but considered an important issue for WTO is that of

Accepted Answer

A)   the promotion of freer World trade.
B)   the promotion of freer World commodity trade.
C)   the promotion of freer World services trade.
D)   the lowering of tariff rates.
E)   the liberalization of trade.

Question 7

Countervailing duties are intended to neutralize any unfair advantage that foreign exporters might gain because of foreign

Accepted Answer

A)   tariffs.
B)   subsidies.
C)   quotas.
D)   Local-Content legislation.
E)   comparative advantage.

Question 8

The political wisdom of choosing a tariff acceptable to the median U.S. voter is

Accepted Answer

A)   a good example of the principle of the second best.
B)   a good example of the way in which actual tariff policies are determined.
C)   a good example of the principle of political negotiation.
D)   not evident in actual tariff determination.
E)   usually evident in actual tariff determination. D

Question 9

In recent cases, the U.S. placed quotas or protectionist tariffs on imported steel and imported microchips. In both cases the damage to "downstream" industries was obvious to all and relatively easy to quantify and demonstrate. Assuming that the U.S. lawmakers are not plain dumb, why did they enact these protectionist policies?

Accepted Answer

The system by which these protectionist ...

Question 10

The prohibitive tariff is a tariff that

Accepted Answer

A)   is so high that it eliminates imports.
B)   is so high that it causes undue harm to trade-partner economies.
C)   is so high that it causes undue harm to import competing sectors.
D)   is so low that the government prohibits its use since it would lose an important revenue source.
E)   is so low that it causes domestic producers to leave the industry.

Question 11

The opportunity to exploit economies of scale is one of the gains to be made from removing tariffs and other trade distortions. These gains will be found by a decrease in

Accepted Answer

A)   world prices of imports.
B)   the consumption distortion loss triangle.
C)   the production distortion loss triangle.
D)   international labor mobility.
E)   excessive entry and inefficient business practices.

Question 12

Assume that Boeing (U.S.) and Airbus (European Union) both wish to enter the Hungarian market with the next new generation airliner. They both have identical cost and demand conditions (as indicated in the graph above).
-Refer to above figure. What is the revenue gain or loss for Europe as a whole (including taxpayers)?

Accepted Answer

A gain of $12 Million.

Question 13

The difficulty of ascertaining the right second-best trade policy to follow

Accepted Answer

A)   reinforces support for the third-best policy approach.
B)   reinforces support for increasing research capabilities of government agencies.
C)   reinforces support for abandoning trade policy as an option.
D)   reinforces support for free-trade options.
E)   reinforced support for the domestic market failure argument.

Question 14

It may be demonstrated that any protectionist policy, which effectively shifts real resources to import competing industries or sectors will harm export industries or sectors. This may, for example, happen by the strengthening U.S. dollar in the foreign exchange market. Would you propose therefore that export industries lobby against protectionism in International Trade Commission proceedings? What of consumer advocates? Discuss the pros and the problems of such a suggestion.

Accepted Answer

Actually this is an interesting idea. It...

Question 15

The U.S. producer Boeing, and the European Airbus are contemplating the next generation mid-sized fuel efficient generation of air carrier. If both produce their respective models, then each would lose $50 million (because the world market is just not large enough to enable either to capture potential scale economies if they had to share the world market). If neither produce, then each one's net gain would of course be zero. If either one produces while the other does not, then the producer will gain $500 million.
(a) What is the correct strategy for either company?
(b) What is the correct strategy for a government seeking to maximize national economic welfare?
(c) If a national government decides to subsidize its aircraft producer, how high should be the subsidy?

Accepted Answer

(a) enter the market first. Then the oth...

Question 16

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Accepted Answer

A)   1 is equal to P2 (the world price)  plus a tariff, then the social loss from the tariff is equal to 
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Question 17

In 1980 the United States announced an embargo on grain exports to the Soviet Union in response to the Soviet invasion of Afghanistan. This embargo was mainly resisted by

Accepted Answer

A)   U.S. grain consumers of bread.
B)   U.S. grain producers.
C)   foreign grain producers.
D)   U.S. communists.
E)   economists concerned with U.S. terms of trade.

Question 18

The General Agreement on Tariffs and Trade and the World Trade Organization have resulted in

Accepted Answer

A)   termination of export subsidies applied to manufactured goods.
B)   termination of import tariffs applied to manufactures.
C)   termination of import tariffs applied to agricultural commodities.
D)   termination of international theft of copyrights.
E)   a number of rounds of multilateral trade agreements.

Question 19

Under U.S. commercial policy, the escape clause results in

Accepted Answer

A)   temporary quotas granted to firms injured by import competition.
B)   tariffs that offset export subsidies granted to foreign producers.
C)   a refusal of the U.S. to extradite anyone who escaped political oppression.
D)   tax advantages extended to minority-owned exporting firms.
E)   tariff advantages extended to certain Caribbean countries in the U.S. market.

Question 20

The fact that trade policy often imposes harm on large numbers of people, and benefits only a few may be explained by

Accepted Answer

A)   the lack of political involvement of the public.
B)   the power of advertisement.
C)   the problem of collective action.
D)   the basic impossibility of the democratic system to reach a fair solution.
E)   a cycle of political corruption. C

Exam 10: The Political Economy of Trade Policy

Which organization determines procedures for the settlement of international trade disputes?

Correct Answer
verified

The simple model of competition among political parties long used by political scientists tends to lead to the practical solution of selecting the

Correct Answer
verified

Correct Answer
verified
This would make sense only if the form o...
View Answer

Judging by the changes in the height of tariff rates in major trading countries, the world has been experiencing a great

Correct Answer
verified

The General Agreement on Tariffs and Trade and the World Trade Organization have resulted in

Correct Answer
verified

An issue never confronted effectively by GATT, but considered an important issue for WTO is that of

Correct Answer
verified

Countervailing duties are intended to neutralize any unfair advantage that foreign exporters might gain because of foreign

Correct Answer
verified

The political wisdom of choosing a tariff acceptable to the median U.S. voter is

Correct Answer
verified
D

Correct Answer
verified
The system by which these protectionist ...
View Answer

The prohibitive tariff is a tariff that

Correct Answer
verified

The opportunity to exploit economies of scale is one of the gains to be made from removing tariffs and other trade distortions. These gains will be found by a decrease in

Correct Answer
verified

Correct Answer
verified
A gain of $12 Million.

The difficulty of ascertaining the right second-best trade policy to follow

Correct Answer
verified

Correct Answer
verified
Actually this is an interesting idea. It...
View Answer

Correct Answer
verified
(a) enter the market first. Then the oth...
View Answer

-Refer to the figure above, which shows domestic supply and demand. If P₁ is equal to P₂ (the world price) plus a tariff, then the social loss from the tariff is equal to

Correct Answer
verified

In 1980 the United States announced an embargo on grain exports to the Soviet Union in response to the Soviet invasion of Afghanistan. This embargo was mainly resisted by

Correct Answer
verified

The General Agreement on Tariffs and Trade and the World Trade Organization have resulted in

Correct Answer
verified

Under U.S. commercial policy, the escape clause results in

Correct Answer
verified

The fact that trade policy often imposes harm on large numbers of people, and benefits only a few may be explained by

Correct Answer
verified
C

Exam 10: The Political Economy of Trade Policy

Which organization determines procedures for the settlement of international trade disputes?

Correct AnswerverifiedShow Answer

The simple model of competition among political parties long used by political scientists tends to lead to the practical solution of selecting the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThis would make sense only if the form o...View AnswerShow Answer

Judging by the changes in the height of tariff rates in major trading countries, the world has been experiencing a great

Correct AnswerverifiedShow Answer

The General Agreement on Tariffs and Trade and the World Trade Organization have resulted in

Correct AnswerverifiedShow Answer

An issue never confronted effectively by GATT, but considered an important issue for WTO is that of

Correct AnswerverifiedShow Answer

Countervailing duties are intended to neutralize any unfair advantage that foreign exporters might gain because of foreign

Correct AnswerverifiedShow Answer

The political wisdom of choosing a tariff acceptable to the median U.S. voter is

Correct AnswerverifiedD

Correct AnswerverifiedThe system by which these protectionist ...View AnswerShow Answer

The prohibitive tariff is a tariff that

Correct AnswerverifiedShow Answer

The opportunity to exploit economies of scale is one of the gains to be made from removing tariffs and other trade distortions. These gains will be found by a decrease in

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA gain of $12 Million.

The difficulty of ascertaining the right second-best trade policy to follow

Correct AnswerverifiedShow Answer

Correct AnswerverifiedActually this is an interesting idea. It...View AnswerShow Answer

Correct Answerverified(a) enter the market first. Then the oth...View AnswerShow Answer

-Refer to the figure above, which shows domestic supply and demand. If P1 is equal to P2 (the world price) plus a tariff, then the social loss from the tariff is equal to

Correct AnswerverifiedShow Answer

In 1980 the United States announced an embargo on grain exports to the Soviet Union in response to the Soviet invasion of Afghanistan. This embargo was mainly resisted by

Correct AnswerverifiedShow Answer

The General Agreement on Tariffs and Trade and the World Trade Organization have resulted in

Correct AnswerverifiedShow Answer

Under U.S. commercial policy, the escape clause results in

Correct AnswerverifiedShow Answer

The fact that trade policy often imposes harm on large numbers of people, and benefits only a few may be explained by

Correct AnswerverifiedC

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This would make sense only if the form o...
View Answer

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D

Correct Answer
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The system by which these protectionist ...
View Answer

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Correct Answer
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Correct Answer
verified
A gain of $12 Million.

Correct Answer
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Correct Answer
verified
Actually this is an interesting idea. It...
View Answer

Correct Answer
verified
(a) enter the market first. Then the oth...
View Answer

-Refer to the figure above, which shows domestic supply and demand. If P₁ is equal to P₂ (the world price) plus a tariff, then the social loss from the tariff is equal to

Correct Answer
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Correct Answer
verified
C