Quiz Chapter 6 1. One of the objectives of export tariffs is to: A. improve the efficiency of utilization of resources. B. curb the competition offered by foreign firms to domestic firms. C. reduce exports from a sector, often for political reasons. D. maintain a positive trade deficit. 2. _____ take many forms including cash grants, low-interest loans, tax breaks, and government equity participation in domestic firms. A. Ad valorem tariffs B. Subsidies C. Quota rents D. Specific tariffs 3.
The Multi-Fiber Agreement (MFA) of 1974 fixed upper limits on exports of textiles from all major exporting countries to all major importing countries. The MFA is an example of: A. voluntary export restraint. B. local content requirement. C. subsidy. D. specific tariff. 4. At times, countries contend that it is necessary to protect industries such as those related to defense—aerospace, advanced electronics, and semiconductors—because these industries are important for: A. retaining innovation.
B. national entrepreneurial spirit. C. national security. D. diplomatic reasons. 5. Why is retaliation by government intervention a risky strategy? A. It may liberalize trade and bring with it resulting economic gains. B. A country that is being pressured may respond by raising trade barriers of its own. C. It may expose certain industries that are important for national security to foreign competition. D. It allows firms to sell goods in foreign market at below their fair market value. 6.
China did not join the WTO until 2001, so historically the decision of whether to grant MFN status to China was a real one. The decision was made more difficult by the perception that China had a(n) _____. A. unskilled and unemployable population B. high-cost labor structure C. poor human rights record D. large population 7. With the development of the _____ and _____, the economic arguments for government intervention have undergone a renaissance in recent years. A. technology; WTO B. free trade; democratic governments
C. new trade theory; strategic trade policy D. democratic governments; anti-globalization movement 8. A government should use subsidies to support promising firms that are active in newly emerging industries, according to the _____ argument. A. strategic trade policy B. infant industry C. absolute advantage D. product life-cycle 9. To try and establish Airbus as a global competitor against Boeing, the governments of Britain, France, Germany, and Spain: A. threatened 100% tariffs on the import of Boeing aircraft.
B. drafted legislations that required 25% of Boeing's aircraft by value to be manufactured in Europe. C. imposed import quotas on American-manufactured Boeing aircraft. D. pooled in subsidies worth $15 billion. 10. According to Paul Krugman, a country that attempts to use strategic trade policy to establish a domestic firm in a dominant position in a global industry will probably: A. dominate the industry. B. move away from protectionism. C. provoke retaliation. D. incur huge financial debts.