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Reading 16: Trading with the World - LOS c ~ Q1-5

Q1. Trade agreements like the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) that lower trade barriers are least likely to:

A)    increase competition worldwide.

B)    cause a recession in the United States.

C)    lead to economic growth.

Q2. Prior to the beginning of the baseball season, the United States government places a tariff on imported bubble gum. Assume for this example that this tariff has a significant impact on the supply of bubble gum. Which of the following statements about the impact of this tariff is least valid? The tariff:

A)   will protect the jobs of domestic bubble gum industry workers in the long run.

B)   will prohibit foreign firms from dumping bubble gum on the U.S. market at below cost.

C)   is not necessary to maintain the high wages of the U.S. bubble gum industry workers.

Q3. "Import quotas will create jobs, increasing the employment level of a nation." Economic analysis indicates that this statement is incorrect in:

A)   the long run only.

B)   the short run only.

C)   both the long and short run.

Q4. The anti-dumping argument in favor of trade restrictions is the argument that restrictions should be imposed to:

A)     discourage foreign firms from engaging in price competition.

B)     prevent foreign firms from selling their product below cost.

C)     prevent foreign firms from dumping unwanted products in domestic markets.

Q5. Which of the following is a reason why trade with low-wage countries does NOT depress wage rates in high-wage countries?

A)    When each country produces goods for which it has a comparative advantage, both countries benefit.

B)    High hourly wage rates mean high per unit labor costs.

C)    High-wage countries have an advantage in labor-intensive goods.

答案和详解如下:

Q1. Trade agreements like the North American Free Trade Agreement (NAFTA) and the General Agreement on Tariffs and Trade (GATT) that lower trade barriers are least likely to:

A)    increase competition worldwide.

B)    cause a recession in the United States.

C)    lead to economic growth.

Correct answer is B)         

The lowering of trade barriers is hoped to lead to economic growth opportunities and increased competition worldwide.

Q2. Prior to the beginning of the baseball season, the United States government places a tariff on imported bubble gum. Assume for this example that this tariff has a significant impact on the supply of bubble gum. Which of the following statements about the impact of this tariff is least valid? The tariff:

A)   will protect the jobs of domestic bubble gum industry workers in the long run.

B)   will prohibit foreign firms from dumping bubble gum on the U.S. market at below cost.

C)   is not necessary to maintain the high wages of the U.S. bubble gum industry workers.

Correct answer is A)

In the long run, trade restrictions do not protect the net number of jobs in the country. The number of jobs protected by import restrictions will be offset by jobs lost in the import/export industry. Import/export firms will be unable to sell the overpriced domestic products abroad or import and sell the lower priced restricted foreign-made product.

The other statements are at least partially valid. Some reasons for trade restrictions that have some or partial validity are: national defense argument, infant industries argument, and anti-dumping argument. The assertion that trade with low-wage countries depresses wage rates in high-wage countries stems from a misunderstanding of comparative advantage. When each country produces goods for which it has a comparative advantage, both countries will benefit. High-wage countries likely have a comparative advantage in high tech manufacturing and low wage countries will have an advantage in labor-intensive goods.

Q3. "Import quotas will create jobs, increasing the employment level of a nation." Economic analysis indicates that this statement is incorrect in:

A)   the long run only.

B)   the short run only.

C)   both the long and short run.

Correct answer is A)

The argument that trade restrictions protect jobs is of questionable validity. First, trade restrictions prevent trading partners from developing the purchasing power needed to buy import goods from the protected country, thus depressing the country's own export industry. Second, the higher price of the protected domestic goods dampens domestic purchasing power, taking sales away from other domestic products. Third, the jobs that would have been created in the import industry are never created.
The number of jobs protected by import restrictions will be offset by jobs lost in the import/export industry.

Q4. The anti-dumping argument in favor of trade restrictions is the argument that restrictions should be imposed to:

A)     discourage foreign firms from engaging in price competition.

B)     prevent foreign firms from selling their product below cost.

C)     prevent foreign firms from dumping unwanted products in domestic markets.

Correct answer is B)

The anti-dumping argument is that restrictions should be used to prohibit foreign firms from increasing market share by selling products below cost.

Q5. Which of the following is a reason why trade with low-wage countries does NOT depress wage rates in high-wage countries?

A)    When each country produces goods for which it has a comparative advantage, both countries benefit.

B)    High hourly wage rates mean high per unit labor costs.

C)    High-wage countries have an advantage in labor-intensive goods.

Correct answer is A)

When both countries produce the goods in which they have an advantage, total output and the availability of goods will increase.

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上一主题:Reading 16: Trading with the World - LOS a ~ Q6-10
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