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 According to Alexander Hamilton, governments must temporarily support new industries until they have grown strong enough to meet international competition. Indicate whether the statement is true or false. ANSWER TRUE The infant industry argument is by far the oldest economic argument for government intervention. Alexander Hamilton proposed it in 1792. According to this […]
QUESTION Dumping is variously defined as selling goods in a foreign market at below their costs of production, or as selling goods in a foreign market at below their “fair” market value. Indicate whether the statement is true or false. ANSWER TRUE Dumping is defined as selling goods in a foreign market at below […]
QUESTION Paul Krugman asserts that a strategic trade policy is almost certain to be captured by special-interest groups within the economy, who will distort it to their own needs. Indicate whether the statement is true or false. ANSWER TRUE A further reason for not embracing strategic trade policy, according to Krugman, is that such […]
QUESTION Both import quotas and voluntary export restraints (VERs) benefit domestic producers by limiting import competition. Indicate whether the statement is true or false. ANSWER TRUE As with tariffs and subsidies, both import quotas and VERs benefit domestic producers by limiting import competition.
QUESTION The Buy America Act specifies that government agencies must give preference to American products when putting contracts for equipment out for bid unless the foreign products have a significant advantage. Indicate whether the statement is true or false. ANSWER TRUE A little-known law in the United States, the Buy America Act, specifies that […]
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 Which of the following creates a barrier to subsequent entries in an industry dominated by first movers? A. The laissez-faire stance toward trade adopted by first movers B. Implementation of policies to maximize imports and minimize exports C. Specializing in the production of goods for which firms have an comparative advantage D. The ability […]
QUESTION By lowering production costs, subsidies help foreign competitors gain export markets. Indicate whether the statement is true or false. ANSWER FALSE By lowering production costs, subsidies help domestic producers in two ways: (1) competing against foreign imports and (2) gaining export markets.
