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International Trade

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Tutik Inayati
Quiz by Tutik Inayati, updated more than 1 year ago
Tutik Inayati
Created by Tutik Inayati over 4 years ago
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Question 1

Question
The existence of positive externalities due to the impossibility of full appropriability
Answer
  • supports the conclusions of the Heckscher-Ohlin model.
  • rejects the usefulness of government protectionism
  • supports the concept that the government should support only high-tech industries
  • provides support for government protectionism.
  • supports arguments for free trade

Question 2

Question
The United States....
Answer
  • does not provide more support for R&D as compared to other forms of investment
  • provides support for R&D by imposing high tariffs on R&D intensive products
  • provides support for R&D by providing direct subsidies for such activities.
  • provides support for R&D through tax legislation.
  • provides support for R&D through grant incentives.

Question 3

Question
The Brander-Spencer model identified market failure in certain industries due to
Answer
  • unfair competition.
  • wildcat destructive competition.
  • environmental negative externalities associated with pollution.
  • limited competition.
  • lack of excess returns.

Question 4

Question
In the Brander-Spencer model the subsidy raises profits by more than the subsidy because of
Answer
  • the "multiplier" effect of government expenditures.
  • the military-industrial complex.
  • the forward and backward linkage effects of certain industries.
  • the deterrent effect of the subsidy on foreign competition.
  • the economies of scale once the company enters the market.

Question 5

Question
Criticisms of the Brander-Spencer model include all EXCEPT which of the following?
Answer
  • the problem of insufficient information
  • the problem of likely foreign retaliation
  • the problem of harm to interests of consumers
  • the problem of adverse effects of trade policy politics
  • the problem of simultaneously causing harm to other industries

Question 6

Question
Japan's protection of its semiconductor (RAM) producers is today seen as an object lesson in
Answer
  • how strategic planning may backfire and cause a large waste of resources.
  • how externalities may be successfully exploited by protectionist policies.
  • how excess returns may be successfully exploited by protectionist policies.
  • how government intervention may create a meaningful comparative advantage.
  • how monopolies can outlast government intervention.

Question 7

Question
The Heckscher-Ohlin, factor-proportions model lends support to the argument that
Answer
  • trade tends to worsen the conditions of unskilled labor in rich countries.
  • trade tends to worsen the conditions of owners of capital in rich countries.
  • trade tends to worsen the conditions of workers in poor countries.
  • trade tends to worsen the conditions of workers in rich countries.
  • trade tends to worsen the conditions of highly skilled workers in rich countries.

Question 8

Question
If firms in an industry are generating knowledge that other firms can use without paying for it, this industry is characterized by
Answer
  • social costs that exceed private costs.
  • social benefits that exceed private benefits.
  • social costs that exceed social benefits.
  • private benefits that exceed social benefits.
  • social benefits that undermine private benefits.

Question 9

Question
It is argued that high-tech industries typically generate new technologies but cannot fully appropriate the commercial benefits associated with their inventions or discoveries. If this is true then in order to maximize a country's real income, the government should
Answer
  • tax the high-tech firms.
  • subsidize the high-tech firms.
  • protect the high-tech firms.
  • outsource high-tech production.
  • discourage high-tech investments.

Question 10

Question
In effect, the U.S. does subsidize high-tech firms by subsidizing R&D. This is done through
Answer
  • the budget of the Department of Education.
  • systematic protection through the levying of tariffs.
  • systematic protection through the establishment of NTBs.
  • relatively accelerated "depreciation" of R&D investment in the Federal tax codes.
  • subsidies for high-tech firms.

Question 11

Question
The best economic case one can make for an active industrial policy involves
Answer
  • the national security argument.
  • the technological spillover argument.
  • the environment preservation argument.
  • the high value added argument.
  • raising the national income.

Question 12

Question
Spencer and Brander's model highlights the existence of
Answer
  • aircraft industries.
  • excess returns present in highly competitive markets.
  • excess returns, or rents, available in non-competitive markets.
  • the futility of government bureaucrats' attempts to build an airplane.
  • natural advantages in foreign technology firms.

Question 13

Question
Spencer and Brander's model highlights the conventional assumption that
Answer
  • government involvement in business or in the economy tends to fail.
  • government subsidies tend to waste taxpayer's money.
  • government subsidies cannot create a successfully competing export.
  • government tends to distort when it displaces Adam Smith's Invisible Hand.
  • government subsidies can produce profits that exceed the subsidy's value.

Question 14

Question
The reason Airbus succeeded in the Brander Spencer example is that
Answer
  • Boeing made the first move in this strategic game.
  • Europeans tend to be better strategists than corn-fed Americans.
  • the Airbus actually was a better plane than the Boeing 747.
  • U.S. laws actually prohibit U.S. exporters from bribing foreign officials.
  • the subsidy removed the advantage that Boeing gained with their head start in production.

Question 15

Question
The reason Airbus succeeded in the Brander Spencer example is that
Answer
  • the European government made an explicit subsidy offer, but the U.S. government did not.
  • Airbus' prices were better when adjusted for quality and warranty services.
  • Boeing traditionally refused to undertake any exchange rate risk in its transactions.
  • the U.S. acted in accordance with its ideological reliance on market solutions, whereas the Europeans ignored market and technological factors.
  • the Airbus plane benefited from more advanced technology.

Question 16

Question
The argument that strategic planning is not likely to be practical due to insufficient information means that
Answer
  • because of trade secrets, the government does not know true cost relationships in any given industry.
  • if the government had all the relevant information in a given industry then it could decide whether a subsidy would enhance the public's welfare.
  • even if the government had all the relevant information in a given industry, it still could not decide whether a subsidy would enhance the public's welfare.
  • due to recent cuts in the Department of the Census' sampling budgets, industry surveys are no longer reliable, so that there is no way to determine if a subsidy is in the public's interest.
  • the government would need to employ its intelligence agencies in order to gain a complete understanding of the market.

Question 17

Question
The invocation of beggar-thy-neighbor arguments with respect to industrial policies
Answer
  • strengthens the argument for subsidies.
  • makes sense if the international Keynesian multipliers exceed unity.
  • applies only to rich countries most of whose trade partners are very poor countries.
  • weakens the argument for subsidies.
  • does not apply to rich countries who can influence relative world prices.

Question 18

Question
When the WTO met in Seattle to initiate a further move towards free international trade, thousands of activists met
Answer
  • in order to promote the WTO's goals of "Trade-not Aid."
  • in order to laud the WTO policy orientation which would bust local monopolies and therefore help ordinary relatively poor consumers everywhere.
  • in order to laud the WTO policy of disallowing government sweetheart deals, which typically meant that corrupt governments subsidized their in-laws' conglomerates on the backs of poor taxpayers.
  • in order to support the WTO efforts of bringing about a universal shift of resources in poor countries to higher efficiency and productivity uses, which would raise the real incomes of everyone.
  • in order to protest WTO free trade policies that they believed hurt workers.

Question 19

Question
When one applies the Heckscher-Ohlin model of trade to the issue of trade-related income redistributions, one must conclude that North South trade, such as U.S.-Mexico trade
Answer
  • must help low skill workers on both sides of the border.
  • is likely to hurt high-skilled workers in the U.S.
  • is likely to hurt low-skilled workers in the U.S.
  • is likely to hurt low-skilled workers in Mexico.
  • is likely to help highly skilled workers in Mexico.

Question 20

Question
The evidence usually cited to prove that globalization hurts workers in developing countries
Answer
  • is inconclusive due to poor statistical design of the underlying samples.
  • is inconclusive due to the poorly funded Central Statistical Office of Mexico.
  • is inconclusive due to the ambiguous theoretical implications of the findings.
  • is conclusive.
  • does not take into account the Heckscher-Ohlin model.

Question 21

Question
The proposal that trade agreements should include a system which monitors worker conditions and make the results available to consumers in the rich importing country
Answer
  • is consistent with the Invisible Hand paradigm.
  • is consistent with the market failure approach.
  • is consistent with the Ricardian theory of comparative advantage.
  • is consistent with the scale economies approach to trade theory.
  • is consistent with the principles laid out by the WTO.

Question 22

Question
Labor standards in trade are typically opposed by most developing countries who believe that they will be used
Answer
  • to further neo-imperialist colonial exploitation.
  • to charge these countries with crimes against child-labor standards at the Hague.
  • as a protectionist tool by import-competing producers in industrial countries.
  • as a means of spreading U.S. Corporate Values and destroying local cultures.
  • to hinder investment in foreign-based multinational corporations.

Question 23

Question
The WTO seems at times to be interfering in domestic policy since
Answer
  • the line between domestic policies and de factor protectionism is often fuzzy.
  • it is a supra-national organization with the power to overturn governments.
  • it determines which nations may trade what with whom.
  • it punishes naughty nations.
  • it exempts the U.S. and other powerful member nations from many of its edicts.

Question 24

Question
In today's world markets, poor developing countries tend to rely primarily on exports of
Answer
  • agricultural products.
  • primary products.
  • mineral products.
  • manufactured products.
  • high-tech products.

Question 25

Question
In the second half of the 1990s a rapidly growing movement focused on the harm caused by international trade to
Answer
  • land owners in poor countries.
  • capital owners in rich industrialized countries.
  • land owners in rich industrialized countries.
  • production workers in both rich and poor countries.
  • terms of trade in developing countries.

Question 26

Question
The Ricardian model of comparative advantage lends support to the argument that
Answer
  • trade tends to worsen the conditions of unskilled labor in rich countries.
  • trade tends to worsen the conditions of owners of capital in rich countries.
  • trade tends to worsen the conditions of workers in poor countries.
  • trade tends to worsen the conditions of workers in rich countries.
  • trade is mutually beneficial to the countries that engage in it.

Question 27

Question
Most developing countries oppose including labor standards in trade agreements because
Answer
  • they believe this would involve a loss of their national sovereignty.
  • they believe this would limit their ability to export to rich markets.
  • they believe this would create an uneven playing field.
  • multinational corporations control them.
  • they do not want to improve wages for their workers.

Question 28

Question
When Japan's MITI (Ministry of International Trade and Industry) focused resources on the semiconductor industry, and in particular on Random Access Memory (RAM), it was viewed as a typically successful Japanese foray into a new dynamic strategic sector. The results, as viewed by the late 1990s
Answer
  • justified this view.
  • led to similar structuring of industrial policy in the U.S.
  • lent support to the Brander-Spencer model.
  • helped shift the focus of economists away from Japanese-style industrial policy.
  • propelled Japan into the leading country in high-tech manufacturing.

Question 29

Question
Low wages and poor working conditions in many U.S. trade partners
Answer
  • prove that the gains-from-trade arguments of the Ricardian model are false.
  • may be a fact of life, but economists don't care.
  • are facts emphasized by U.S. labor in its contract negotiations.
  • prove that the gains-from-trade arguments of the Ricardian model are true.
  • prove that international trade is exploitative.
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