QUESTION The Smoot-Hawley Act aimed to liberalize trade by eliminating tariffs, subsidies, and import quotas. Indicate whether the statement is true or false. ANSWER FALSE Aimed at avoiding rising unemployment by protecting domestic industries and diverting consumer demand away from foreign products, the Smoot-Hawley Act erected an enormous wall of tariff barriers. Almost every […]
QUESTION Government intervention in international trade can take the form of reducing restrictions on imports and encouraging foreign direct investment. Indicate whether the statement is true or false. ANSWER TRUE When governments intervene in international trade, they often do so by restricting imports of goods and services into their nation, while adopting policies that […]
QUESTION One of the reasons for the trend toward greater protectionism was that many countries found ways to get around GATT regulations. Indicate whether the statement is true or false. ANSWER TRUE During the 1980s and early 1990s, the world trading system erected by the GATT came under strain as pressures for greater protectionism […]
QUESTION Political arguments for government intervention are usually concerned with protecting consumer interests within the country. Indicate whether the statement is true or false. ANSWER FALSE Political arguments for intervention are concerned with protecting the interests of certain groups within a nation (normally producers), often at the expense of other groups (normally consumers), or […]
QUESTION Governments can protect consumers from unsafe products by issuing a limit or a ban on such products. Indicate whether the statement is true or false. ANSWER TRUE Many governments have long had regulations to protect consumers from unsafe products. The indirect effect of such regulations often is to limit or ban the importation […]
QUESTION Some countries argue that government intervention to protect certain domestic industries can compromise national security. Indicate whether the statement is true or false. ANSWER FALSE Countries sometimes argue that it is necessary to protect certain industries because they are important for national security.
QUESTION The Common Agricultural Policy (CAP) established by the European Union was designed to reduce prices of domestic produce and protect consumers from unfair premiums. Indicate whether the statement is true or false. ANSWER FALSE The CAP was designed to protect the jobs of Europe’s politically powerful farmers by restricting imports and guaranteeing prices. […]
QUESTION The main gains from subsidies accrue to importers, whose international competitiveness is increased as a result of these subsidies. Indicate whether the statement is true or false. ANSWER FALSE The main gains from subsidies accrue to domestic producers, whose international competitiveness is increased as a result.
QUESTION Porter argues that a nation’s firms gain competitive advantage if their domestic consumers are: A. sophisticated and demanding. B. price insensitive and trusting. C. accommodating and flexible. D. nationalistic and protective of their domestic industries. E. biased toward foreign products. ANSWER A
QUESTION Porter, in his diamond model, suggested that there is a strong association between which of the following and the creation and persistence of competitive advantage in an industry? A. Trade barriers B. Vigorous domestic rivalry C. Purchasing power parity D. The availability of a captive market E. First-mover advantages ANSWER B
