QUESTION According to Paul Krugman, a country that adopts a strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry will probably provoke retaliation. Indicate whether the statement is true or false. ANSWER TRUE Krugman argues that a strategic trade policy aimed at establishing domestic firms in a […]
QUESTION The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade and this justification challenges the rationale for unrestricted free trade. Indicate whether the statement is true or false. ANSWER TRUE The strategic trade policy arguments of the new trade theorists suggest an economic […]
QUESTION Import tariffs protect domestic producers against foreign competitors. Indicate whether the statement is true or false. ANSWER TRUE Domestic producers gain, because the tariff affords them some protection against foreign competitors by increasing the cost of imported foreign goods.
QUESTION Paul Krugman argues that although strategic trade policy looks unappealing in theory, in practice it is most likely to be workable. Indicate whether the statement is true or false. ANSWER FALSE In response to certain challenges to economic orthodoxy, a number of economists—including some of those responsible for the development of the new […]
QUESTION In recent decades, a fall in subsidies, quotas, and voluntary export restraints has been accompanied by a rise in tariff barriers. Indicate whether the statement is true or false. ANSWER FALSE A fall in tariff barriers in recent decades has been accompanied by a rise in nontariff barriers, such as subsidies, quotas, voluntary […]
QUESTION Free trade as a government policy was first officially embraced by Germany in 1846, when the Bundestag repealed the Corn Laws. Indicate whether the statement is true or false. ANSWER FALSE Free trade as a government policy was first officially embraced by Great Britain in 1846, when the British Parliament repealed the Corn […]
QUESTION Specific tariffs are levied as a proportion of the value of the imported good. Indicate whether the statement is true or false. ANSWER FALSE Specific tariffs are levied as a fixed charge for each unit of a good imported (e.g., $3 per barrel of oil). Ad valorem tariffs are levied as a proportion […]
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 According to Porter’s diamond, what are factor endowments? A. The position of a nation regarding the components of production necessary to compete in a given industry B. The presence or absence of related industries that are internationally competitive C. The conditions governing how companies are created, organized, and managed and the nature of domestic […]
QUESTION Which of the following is true of the four attributes that make Porter’s diamond? A. Absence of any single attribute does not impact effectiveness of the diamond. B. The effect of one attribute is contingent on the state of others. C. The diamond is not a mutually reinforcing system. D. Chance events, such as […]
