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1 | |
The national defense argument for protection is more likely to be valid when |
| | A) | the industry is characterized by significant economies of scale. |
| | B) | the intention is to maintain the protection for an indefinite period of time. |
| | C) | the industry in question provides invaluable materials during times of war. |
| | D) | none of the above. |
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2 | |
Industrialized countries tend to rely __________ on trade taxes for government revenue; developing countries tend to be __________ in this regard. |
| | A) | heavily; similar |
| | B) | heavily; dissimilar |
| | C) | not very heavily; similar |
| | D) | not very heavily; dissimilar |
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3 | |
Which of the following is a reason (are reasons) why the use of tariffs may not increase aggregate employment? |
| | A) | trading partners may retaliate |
| | B) | the imposing country's exchange rate may depreciate, leading to an increase in exports |
| | C) | tariffs may lower the incomes of trading partners |
| | D) | all of the above |
| | E) | a and c only |
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4 | |
Imposing a tariff might not improve a country's terms of trade if |
| | A) | trading partners retaliate. |
| | B) | the imposing country's currency appreciates. |
| | C) | the tariffs cause lower incomes among trading partners. |
| | D) | all of the above. |
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5 | |
Which of the following is an assumption of Krugman's duopoly model? |
| | A) | there exist substantial transportation costs |
| | B) | economies of scale are present |
| | C) | each firm in the industry takes the actions of other firms into account when deciding on price and output. |
| | D) | all of the above |
| | E) | b and c only |
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6 | |
Assuming no retaliation, a tariff may be beneficial to the home country if it allows __________ to occur. |
| | A) | economies of scale or increased expenditure on research and development (R&D) |
| | B) | import subsidies |
| | C) | dominant strategies |
| | D) | none of the above; tariffs are in general harmful to a country's welfare |
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7 | |
Predatory dumping occurs when a country |
| | A) | sells a product at a higher price in a foreign market than it does in its domestic market. |
| | B) | sells defective units of its products in a foreign market, while keeping the properly-made units for its home market. |
| | C) | temporarily sells a product at a lower price in a foreign market than it does in its domestic market. |
| | D) | sells a product at a lower price in a foreign market than it does in its domestic market in order to drive out producers in the foreign market. |
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8 | |
Use the following payoff matrix to answer Questions 8 and 9. This payoff matrix shows profits that would be earned by the home firm and by the foreign firm in four possible situations, given that the home country government is providing a subsidy to the home firm for producing. | Foreign Firm
| | Home Firm
| | Produces
| Does not produce
| | Produces
| -$80 $80 | $0 $600 | | Does not produce
| $500 $0 | $0 $0 |
If the foreign firm chooses to produce, it will earn profits of __________ if the home firm produces, and __________ if the home firm does not produce. |
| | A) | $80; $0 |
| | B) | $0; $0 |
| | C) | $80; $600 |
| | D) | $-80; $500 |
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9 | |
According to the payoff matrix above, |
| | A) | the home firm will not produce, but the foreign firm will. |
| | B) | the home firm will produce, but the foreign firm will not. |
| | C) | neither firm will produce. |
| | D) | both firms will produce. |
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10 | |
Since 1980, there have been an average of around __________ antidumping cases each year. In most years, this number is __________ the number of countervailing duties cases. |
| | A) | 100; greater than |
| | B) | 100; less than |
| | C) | 40; greater than |
| | D) | 40; less than |
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