土豆妮

An anti-dumping restriction on trade:

A) keeps some highly sensitive products in the country.

B) protects infant industries.

C) prohibits foreign firms from selling products below cost to gain market share.

土豆妮

An anti-dumping restriction on trade:

A) keeps some highly sensitive products in the country.

B) protects infant industries.

C) prohibits foreign firms from selling products below cost to gain market share.

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Firms dump their goods at a price lower than cost in order to drive out the competition. Once this is complete, they will be able to raise prices to much higher levels in order to gain abnormal profits. Of course, once prices are increased, new competitors may arise.

土豆妮

Which of the items below is NOT a valid reason why nations adopt trade restrictions? To:

A) prohibit foreign firms from increasing market share by selling products below cost.

B) protect industries in which they have a comparative advantage.

C) protect industries that are highly sensitive to national security.

土豆妮

Which of the items below is NOT a valid reason why nations adopt trade restrictions? To:

A) prohibit foreign firms from increasing market share by selling products below cost.

B) protect industries in which they have a comparative advantage.

C) protect industries that are highly sensitive to national security.

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If a particular country enjoys a comparative advantage in a particular industry, no protection is needed.

土豆妮

Which of the following arguments for trade restrictions is least valid?

A) Trade restrictions create domestic jobs.

B) Some industries are highly sensitive to national security, and their products should therefore remain in the country.

C) Tariffs are used to prohibit foreign firms from selling products in the country at below cost in an attempt to gain market share.

土豆妮

Which of the following arguments for trade restrictions is least valid?

A) Trade restrictions create domestic jobs.

B) Some industries are highly sensitive to national security, and their products should therefore remain in the country.

C) Tariffs are used to prohibit foreign firms from selling products in the country at below cost in an attempt to gain market share.

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While the other explanations have some support among economists, the argument that trade restrictions create domestic jobs has very little support. Part of the popularity of trade restrictions stems from their ability to protect easily identifiable jobs and the high wage levels in these jobs. However, in the long run, trade restrictions cannot protect the net number of jobs in the country.

土豆妮

David Forsythe and Linda Novak are discussing the advantages and disadvantages of import restrictions. They state the following:

Forsythe: One of the groups that benefits from import restrictions is often the government that imposes them.

Novak: Import restrictions impose costs on specific groups, such as the country’s import industries, but these costs are more than offset by the benefits to other groups and to the economy as a whole.

With respect to these statements:

A) both are correct.

B) only one is correct.

C) both are incorrect.

土豆妮

David Forsythe and Linda Novak are discussing the advantages and disadvantages of import restrictions. They state the following:

Forsythe: One of the groups that benefits from import restrictions is often the government that imposes them.

Novak: Import restrictions impose costs on specific groups, such as the country’s import industries, but these costs are more than offset by the benefits to other groups and to the economy as a whole.

With respect to these statements:

A) both are correct.

B) only one is correct.

C) both are incorrect.

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Forsythe is correct. A primary reason why trade restrictions remain widespread is the revenue that governments receive from tariffs. Novak is incorrect. Trade restrictions benefit specific groups, such as workers in the protected industries, but those benefits are less than the costs imposed on consumers and other industries as a whole.

土豆妮

Which of the following reasons for a nation to adopt trade restrictions is the least valid? The:

A) job protection argument.

B) national defense argument.

C) anti-dumping argument.

土豆妮

Which of the following reasons for a nation to adopt trade restrictions is the least valid? The:

A) job protection argument.

B) national defense argument.

C) anti-dumping argument.

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The number of jobs protected by import restrictions will be offset by jobs lost in the import/export industries. In the long run, trade restrictions cannot protect the net number of jobs in a country.