Test Bank & Solution Manual for International Economics;Theory & Policy 12E by Krugman & Obstfeld by AllAcademicsCampus

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International Economics: Theory and Policy 12th Edition Paul Krugman Maurice Obstfeld Marc Melitz 2023

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International Economics: Theory and Policy, Global Edition 12th Edition by Paul Krugman, Maurice Obstfeld & Marc Melitz.

ISBN-10 1292409711 ISBN-13 978-1292409719

Test bank for International Economics: Theory and Policy, Global Edition 12th Edition by Paul Krugman, Maurice Obstfeld & Marc Melitz

ISBN-10 1292409711 ISBN-13 978-1292409719

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TABLE OF CONTENTS Chapter: 1. Introduction

PART 1: INTERNATIONAL TRADE THEORY Chapter: 2. Word Trade: An Overview Chapter: 3. Labor Productivity and Comparative Advantage: The Ricardian Model Chapter: 4. Specific Factors and Income Distribution Chapter: 5. Resources and Trade: The Heckscher-Ohlin Model Chapter: 6. The Standard Trade Model Chapter: 7. External Economies of Scale and the International Location of Production Chapter: 8. Firms in the Global Economy: Export and Foreign Sourcing Decisions and Multinational Enterprises

PART 2: INTERNATIONAL TRADE POLICY Chapter: 9. The Instruments of Trade Policy Chapter: 10. The Political Economy of Trade Policy Chapter: 11. Trade Policy in Developing Countries Chapter: 12. Controversies in Trade Policy

PART 3: EXCHANGE RATES AND OPEN-ECONOMY MACROECONOMICS Chapter: 13. National Income Accounting and the Balance of Payments Chapter: 14. Exchange Rates and the Foreign Exchange Market: An Asset Approach Chapter: 15. Money, Interest Rates, and Exchange Rates Chapter: 16. Price Levels and the Exchange Rate in the Long Run Chapter: 17. Output and the Exchange Rate in the Short Run Chapter: 18. Fixed Exchange Rates and Foreign Exchange Intervention

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PART 4: INTERNATIONAL MACROECONOMIC POLICY Chapter: 19. International Monetary Systems: A Historical Overview Chapter: 20. Financial Globalization: Opportunity and Crisis Chapter: 21. Optimum Currency Areas and the Euro Chapter: 22. Developing Countries: Growth, Crisis, and Reform

International Economics: Theory and Policy, 12e, Global edition (Krugman) Chapter 1 Introduction 1.1

What Is International Economics About?

1) Historians of economic thought often describe ________ written by ________ and published in ________ as the first real exposition of an economic model. A) "Of the Balance of Trade"; David Hume; 1776 B) "Wealth of Nations"; David Hume; 1758 C) "Wealth of Nations"; Adam Smith; 1758 D) "Wealth of Nations"; Adam Smith; 1776 E) "Of the Balance of Trade"; David Hume; 1758 Answer: E Difficulty: Easy AACSB: Application of knowledge 2) From 1960 to 2019 A) the U.S. economy roughly tripled in size. B) U.S. imports roughly tripled in size. C) the share of U.S. trade in the global economy roughly tripled in size compared with the economy as a whole. D) U.S. imports roughly tripled as compared to U.S. exports. E) U.S. exports roughly tripled in size. Answer: C Difficulty: Easy AACSB: Application of knowledge 3) From 1960 to 2019, both U.S. imports and exports have increased, ________ have grown more, leading to a large excess of ________. A) imports; imports over exports B) exports; exports over imports C) imports; exports over imports D) exports; imports over exports Answer: A Difficulty: Easy AACSB: Application of knowledge 4) The facts that U.S. imports and exports plunged in 2009 during the global economic crisis and in 2020 during the Covid-19 pandemic demonstrated the close links between A) world trade and the overall state of the world economy. B) crisis and unemployment. C) the pandemic and shortage of goods and services. D) the business cycle and trade policies. Answer: A Difficulty: Easy AACSB: Application of knowledge 1 Copyright © 2023 Pearson Education, Ltd.

5) The United States is less dependent on trade than most other countries because A) the United States is a relatively large country with diverse resources. B) the United States is a "Superpower." C) the military power of the United States makes it less dependent on anything. D) the United States invests in many other countries. E) many countries invest in the United States. Answer: A Difficulty: Easy AACSB: Application of knowledge 6) Theories of international economics from the 18th and 19th centuries are A) not relevant to current policy analysis. B) only of moderate relevance in today's modern international economy. C) highly relevant in today's modern international economy. D) the only theories that are actually relevant to modern international economy. E) not well understood by modern mathematically oriented theorists. Answer: C Difficulty: Easy AACSB: Application of knowledge 7) International economics ________ use the same fundamental methods of analysis as other branches of economics, because ________. A) does not; the level of complexity of international issues is unique B) does not; the interactions associated with international economic relations is highly mathematical C) does not; international economics takes a different perspective on economic issues D) does; international economists must reach an agreement with other economists on every economic issue E) does; the motives and behavior of individuals are the same in international trade as they are in domestic transactions Answer: E Difficulty: Easy AACSB: Application of knowledge 8) Because the Constitution forbids restraints on interstate trade A) the U.S. may not impose tariffs on imports from NAFTA countries. B) the U.S. may not affect the international value of the $ U.S. C) the U.S. may not put restraints on foreign investments in California if it involves a financial intermediary in New York State. D) the U.S. may not impose export duties. E) the U.S. may not disrupt commerce between Florida and Hawaii. Answer: E Difficulty: Easy AACSB: Application of knowledge

9) An important insight of international economics is that when countries sell goods and services to each other, A) the exchange is almost always mutually beneficial. B) one country always benefits at the expense of the other. C) it only benefits the low wage country. D) it only benefits the high wage country. E) it is almost never beneficial to both countries. Answer: A Difficulty: Easy AACSB: Application of knowledge 10) "Trade is generally harmful if there are large disparities between countries in wages." A) This is generally true. B) This is generally false. C) Trade theory has nothing to say about this issue. D) This is true if the trade partner ignores child labor laws. E) This is true if the trade partner uses prison labor. Answer: B Difficulty: Easy AACSB: Application of knowledge 11) If there are large disparities in wage levels between countries, then A) trade is likely to be harmful to both countries. B) trade is likely to be harmful to the country with the high wages. C) trade is likely to be harmful to the country with the low wages. D) trade is likely to be harmful to neither country. E) trade is likely to have no effect on either country. Answer: D Difficulty: Easy AACSB: Application of knowledge 12) If there are large disparities in productivity between countries, then A) trade is likely to be harmful to neither country. B) trade is likely to be harmful to the country with the high wages. C) trade is likely to be harmful to the country with the low wages. D) trade is likely to be harmful to both countries. E) trade is likely to have no effect on either country. Answer: A Difficulty: Easy AACSB: Application of knowledge

13) Which of the following statements is TRUE? A) Trade is mutually beneficial when countries exchange goods and services. B) Trade is harmful if large disparities exist between countries in productivity. C) Trade is harmful if large disparities exist between countries in wages. D) Trading with less-advanced, lower-wage countries will drag down a country's standard of living. Answer: A Difficulty: Easy AACSB: Application of knowledge 14) The benefits of international trade are derived from trade in A) tangible goods only. B) intangible goods only. C) goods but not services. D) services but not goods. E) anything of value. Answer: E Difficulty: Easy AACSB: Application of knowledge 15) Which of the following statements is NOT TRUE? A) International trade will have no effects on income distribution. B) International trade may hurt particular groups within nations. C) International trade can adversely impact owners of resources that are specific to industries that compete with imports. D) International trade can alter the distribution of income between broad groups, such as workers and the owners of capital. Answer: A Difficulty: Moderate AACSB: Application of knowledge 16) Who sells what to whom A) has been a major preoccupation of international economics. B) is not a valid concern of international economics. C) is not considered important for government foreign trade policy since such decisions are made in the private competitive market. D) is determined by political rather than economic factors. E) is less important than international economic theory. Answer: A Difficulty: Easy AACSB: Application of knowledge

17) The insight that patterns of trade are primarily determined by international differences in labor productivity was first proposed by A) David Ricardo. B) David Hume. C) Adam Smith. D) Eli Heckscher. E) Lerner and Samuelson. Answer: A Difficulty: Easy AACSB: Application of knowledge 18) International economists cannot discuss the effects of international trade or recommend changes in government policies toward trade with any confidence unless they know A) their theory is the best available. B) their theory is internally consistent. C) their theory passes the "reasonable person" legal criteria. D) their theory is good enough to explain the international trade that is actually observed. E) their theory accounts for China's unique position in international trade. Answer: D Difficulty: Easy AACSB: Application of knowledge 19) Which of the following is NOT a major concern of international economic theory? A) protectionism B) the balance of payments C) exchange rate determination D) bilateral trade relations with China E) the international capital market Answer: D Difficulty: Easy AACSB: Application of knowledge 20) Which of the following does NOT belong? A) NAFTA B) Uruguay Round C) World Trade Organization D) non-tariff barriers E) major free trade agreements of the 1990s Answer: D Difficulty: Easy AACSB: Application of knowledge

21) In 1998 an economic and financial crisis in South Korea caused it to experience A) a surplus in their balance of payments. B) a deficit in their balance of payments. C) a balanced balance of payments. D) an unbalanced balance of payments. E) a lull in international trade. Answer: A Difficulty: Easy AACSB: Application of knowledge 22) In 1998, countries that ran large trade surpluses include A) China and South Korea. B) U.S. and Japan. C) China and U.S. D) U.S. and South Korea. Answer: A Difficulty: Easy AACSB: Application of knowledge 23) After World War II, the United States has pursued a broad policy of A) strengthening "Fortress America" protectionism. B) removing barriers to international trade. C) isolating Iran and other members of the "axis of evil." D) protecting the U.S. from the economic impact of oil producers. E) restricting trade of manufactured goods. Answer: B Difficulty: Easy AACSB: Application of knowledge 24) Cost-benefit analysis of international trade A) is basically useless. B) is empirically intractable. C) focuses attention primarily on conflicts of interest within nations. D) focuses attention on conflicts of interest between nations. E) never leads to government intervention in international trade. Answer: C Difficulty: Moderate AACSB: Application of knowledge

25) An improvement in a country's balance of payments means a decrease in its balance of payments deficit, or an increase in its surplus. In fact, we know that a surplus in a balance of payments A) is always beneficial. B) is usually beneficial. C) is never harmful. D) is sometimes harmful. E) is always harmful. Answer: D Difficulty: Moderate AACSB: Application of knowledge 26) The GATT is A) an international agreement. B) an international U.N. agency. C) an international IMF agency. D) a U.S. government agency. E) a collection of tariffs. Answer: A Difficulty: Easy AACSB: Application of knowledge 27) The balance of payments has become a central issue for the United States because A) when the balance of payments is not balanced, society is unbalanced. B) the U.S. economy cannot grow when the balance of payments is in deficit. C) the U.S. has run huge trade deficits in every year since 1982. D) the U.S. never experienced a surplus in its balance of payments. E) the U.S. once ran a large trade surplus of about $40 billion. Answer: C Difficulty: Easy AACSB: Application of knowledge 28) In September 2010, the finance minister of ________ declared that the world was "in the midst of an international currency war" because of rapid appreciation in the value of the country's currency, the ________. A) England; pound sterling B) Germany; euro C) Japan; yen D) China; renminbi E) Brazil; Real Answer: E Difficulty: Easy AACSB: Application of knowledge

29) The study of exchange rate determination is a relatively new part of international economics, since A) for much of the past century, exchange rates were fixed by government action. B) the calculations required for this were not possible before modern computers became available. C) economic theory developed by David Hume demonstrated that real exchange rates remain fixed over time. D) dynamic overshooting asset pricing models are a recent theoretical development. E) the exchange rate never fluctuates. Answer: A Difficulty: Easy AACSB: Application of knowledge 30) A fundamental problem in international economics is how to produce A) a perfect degree of monetary harmony. B) an acceptable degree of harmony among the international trade policies of different countries. C) a world government that can harmonize trade and monetary policies. D) a counter-cyclical monetary policy so that all countries will not be adversely affected by a financial crisis in one country. E) a worldwide form of currency. Answer: B Difficulty: Easy AACSB: Application of knowledge 31) For almost 70 years international trade policies have been governed A) by the World Trade Organization. B) by the International Monetary Fund. C) by the World Bank. D) by an international treaty known as the General Agreement on Tariffs and Trade (GATT). E) by the North American Free Trade Agreement (NAFTA). Answer: D Difficulty: Easy AACSB: Application of knowledge 32) International capital markets experience a kind of risk not faced in domestic capital markets, namely A) "economic meltdown" risk. B) Flood and hurricane crisis risk. C) the risk of unexpected downgrading of assets by Standard and Poor. D) the risk of currency fluctuations. E) the risk of political upheaval. Answer: D Difficulty: Moderate AACSB: Application of knowledge

21) Over the 2018-2019 period, the Trump administration's new tariffs on some specific goods led to A) higher prices for imported goods and a substantial annual cost increase for U.S. households. B) lower prices for imported goods and a substantial annual cost decrease for U.S. households. C) higher prices for imported goods and a substantial annual cost decrease for U.S. households. D) lower prices for imported goods and a substantial annual cost increase for U.S. households. Answer: A Difficulty: Easy AACSB: Application of knowledge 22) In response to the Trump trade war, all of the U.S. major trading partners responded to the tariffs on their exports with A) tariffs of their own targeting U.S. exports. B) import quota on U.S. goods. C) trade embargo on U.S. goods. D) export subsidies on their exports to the U.S. Answer: A Difficulty: Easy AACSB: Application of knowledge 23) Comparing consumer loss and producer gain, the Trump trade war A) generated an overall efficiency loss. B) generated an overall efficiency gain. C) did not affect U.S. social welfare. D) made U.S. farmers better off and decreased the number of farm bankruptcies in 2019. Answer: A Difficulty: Easy AACSB: Application of knowledge 24) Under "chicken tax," a retaliation by U.S. President Johnson's administration against a tariff on U.S. chicken exports imposed by Western Europe in the early 1960s, the U.S. imposed A) a 25 percent tariff on imports of light commercial truck vehicles. B) a 25 percent tariff on imports of chicken from Europe. C) a 25 percent tariff on imports of agricultural products from Europe. D) a 25 percent tariff on imports of heavy commercial truck vehicles. Answer: A Difficulty: Easy AACSB: Application of knowledge

25) The tariff known as "chicken tax" ended up hurting the US producers including A) Ford. B) Volkswagen. C) Isuzu. D) Mazda. E) Mercedes-Benz. Answer: A Difficulty: Easy AACSB: Application of knowledge 26) Which of the following statements is NOT true? A) The Japanese truck producers responded to the chicken tax by stopping exports to the United States. B) The Japanese truck producers responded to the chicken tax by opening production facilities in the United States. C) Subaru built the light commercial trucks in the United States. D) Subaru bolted two plastic seats to the open bed of its pickup truck exported to the U.S. to be classified as a passenger vehicle to avoid the tariff. Answer: A Difficulty: Easy AACSB: Application of knowledge 27) To get around the 25 percent tariff on light commercial truck vehicles, Ford A) converted commercial vans produced in Europe into passenger vehicles prior to shipping to the U.S. B) lobbied to lower the tariff to 2.5 percent. C) removed the rear seats, rear windows, seat belts prior to shipping to the U.S. D) stopped producing light commercial trucks outside the U.S. border. Answer: A Difficulty: Easy AACSB: Application of knowledge 28) The two deadweight triangles are the Consumption distortion and Production distortion losses. It is easy to understand why the Consumption distortion constitutes a loss for society. After all, it raises the prices of goods to consumers, and even causes some consumers to drop out of the market altogether. It seems paradoxical that the Production distortion is considered an equivalent burden on society. After all, in this case, profits increase, and additional production (with its associated employment) comes on line. This would seem to be an offset rather than an addition to the burden or loss borne by society. Explain why the Production distortion is indeed a loss to society, and what is wrong with the logic that leads to the apparent paradox. Answer: The Production Distortion represents an inefficient shift of society's resources to produce a good, which it could not sell profitably at world prices. Since (with full employment assumed) these resources were formerly used to produce export goods, which could compete profitably, the net result is a loss in real income to the country. Difficulty: Moderate AACSB: Application of knowledge 17 Copyright © 2023 Pearson Education, Ltd.

29) Refer to above figure. In the absence of trade, what is the country's consumer surplus? Answer: $180 Difficulty: Easy AACSB: Application of knowledge 30) Refer to above figure. In the absence of trade, what is the country's producer surplus? Answer: $180 Difficulty: Easy AACSB: Application of knowledge 31) Refer to above figure. The loss of Consumer Surplus due to the tariff equals ________. Answer: $230 Difficulty: Easy AACSB: Application of knowledge 32) Refer to above figure. In the absence of a tariff and in the presence of trade, what is the country's consumer surplus? Answer: $550 Difficulty: Easy AACSB: Application of knowledge 33) Refer to above figure. Given a tariff of $3 per unit, what is the country's consumer surplus? Answer: $320 Difficulty: Easy AACSB: Application of knowledge 34) Refer to above figure. What is the amount of efficiency loss resulting from imposition of the tariff? Answer: $75 Difficulty: Easy AACSB: Application of knowledge

35) Refer to above figure. What is the amount of government revenue resulting from imposition of the tariff? Answer: $120 Difficulty: Easy AACSB: Application of knowledge 36) Discuss the winners and losers of the Trump trade war. Answer: Over the 2018-19 period, the Trump administration drastically increased tariffs targeted both at specific goods as well as specific trading partners. As a result, the higher prices for imported goods due to the new tariffs represented a substantial annual cost increase for U.S. households, for government services that imported those goods, for US firms that imported goods as capital investment. The tariffs also led to higher prices for U.S. produced goods that compete with the imported goods hit by the tariff. Although firms producing steel, aluminum, solar panels, and washing machines — as well as others producing products that completed directly with Chinese imports were winners from the trade war, but not enough to offset the loss to consumers and the U.S. economy. Furthermore, all of the United States' major trading partners responded to the tariffs on their exports with tariffs of their own targeting U.S. exports. In this case, U.S. farmers and ranchers were especially hard hit. Difficulty: Easy AACSB: Application of knowledge 37) What was the "chicken tax"? How did it end up hurting one of the "big three" U.S. producers who had intensively lobbied to maintain the tariff in the first place? Answer: The tariff known as chicken tax was a retaliation by U.S. President Lyndon Johnson's administration against a tariff on U.S. chicken exports imposed by Western Europe in the early 1960s. The U.S. then imposed a 25 percent tariff on imports of light commercial truck vehicles that affected German producers like Volkswagen and Japanese truck producers over the years. However, the latest company to be hit by the consequences of the tariff is Ford, one of those "big three" U.S. producers! Ford produces a small commercial van in Europe, and started selling these vehicles in the U.S. in 2009. To get around the 25 percent tariff, Ford installs rear windows, rear seats, and seat belts prior to shipping the vehicles to the U.S. to convert them into passenger vehicles, which are subject to the much lower 2.5 percent tariff. Upon arrival in Baltimore, Maryland, the rear seats are promptly removed and the rear windows replaced with metal panels–before delivery to the Ford dealers. The U.S. Supreme Court denied a petition to hear the case of Ford in 2020, and Ford paid a $196 million penalty to U.S. Customs. Difficulty: Easy AACSB: Application of knowledge

9.3

Other Instruments of Trade Policy

1) Beside tariffs, other instruments of trade policy include the following EXCEPT A) embargoes sanctions. B) export subsidies. C) import quotas. D) voluntary export restraints. E) local content requirements. Answer: A Difficulty: Easy AACSB: Application of knowledge 2) Payment to a firm or individual that ships a good abroad is called A) an export subsidy. B) an import quota. C) a tariff. D) a voluntary export restraint. Answer: A Difficulty: Easy AACSB: Application of knowledge 3) An export subsidy is A) a payment to a firm or individual that ships a good abroad. B) a fee that is charged to a country that ships goods to the U.S. C) a payment made to a foreign government in return for preferential trade treatment. D) illegal in the U.S. but is fairly common in the rest of the world. E) a limit on the quantity of a good or service that can be sold abroad. Answer: A Difficulty: Easy AACSB: Application of knowledge 4) An export subsidy ________ prices in the exporting country while ________ them in the importing country. A) raises; lowering B) lowers; raising C) raises; raising D) lowers; lowering Answer: A Difficulty: Easy AACSB: Application of knowledge

5) In the exporting country, an export subsidy will A) help consumers and raise the overall economic welfare of the exporting country. B) hurt consumers but raise the overall economic welfare of the exporting country. C) hurt consumers and lower the overall economic welfare of the exporting country. D) help consumers but lower economic welfare of the exporting country. E) help consumers and have no effect on the economic welfare of the exporting country. Answer: C Difficulty: Easy AACSB: Application of knowledge 6) An export subsidy differs from a tariff in each of the following ways EXCEPT A) a tariff generates revenue. B) a tariff is applied to imports. C) a tariff results in an efficiency loss. D) a tariff is a tax. E) a tariff discourages imports. Answer: C Difficulty: Easy AACSB: Application of knowledge 7) The European Union's Common Agricultural Policy (CAP) is, in effect A) a tariff imposed on agricultural exports. B) a tariff imposed on agricultural imports. C) a subsidy that reduces the cost of agricultural exports. D) a subsidy that increases the cost of agricultural exports. E) a quota that limits production of agricultural goods by EU nations. Answer: C Difficulty: Easy AACSB: Application of knowledge 8) Which of the following statements is TRUE? A) When a government's export subsidies harm producers in other countries, WTO allows the impacted countries to impose countervailing duties against the subsidizing countries. B) When a government's export subsidies harm producers in other countries, WTO do not interfere and let the countries find solutions together. C) When a government's export subsidies harm producers in other countries, governments of the impacted countries can together impose trade sanctions against the subsidizing country. D) When a government's export subsidies harm producers in other countries, governments of the impacted countries can stop trading with the subsidizing country. Answer: A Difficulty: Easy AACSB: Application of knowledge

9) Which of the following statements is NOT true? A) In 2004, WTO ruled in favor of both United States and the European Union, allowing them to impose countervailing duties due to actionable export subsidies. B) In 2004, the United States filed a case with the WTO complaining that European-owned Airbus had received favorable loan agreements for the development of their new A380 and A350 jumbo jets. C) In 2004, The European Union filed a claim that Boeing received tax rebates and favorable contracting terms from the U.S. government. D) In 2004, the United States and the European Union both claimed to WTO that the assistance received by the airplane manufacturers Airbus and Boeing amounted to actionable export subsidies. Answer: A Difficulty: Easy AACSB: Application of knowledge 10) In 2019, the United States imposed tariffs on A) European wines and specialty food items. B) European whiskey. C) European nuts. D) European tobacco. Answer: A Difficulty: Easy AACSB: Application of knowledge 11) In 2019, the European Union retaliated with tariffs on A) U.S. whiskey, nuts, and tobacco. B) U.S. wines. C) U.S. specialty food items. D) U.S. chicken. Answer: A Difficulty: Easy AACSB: Application of knowledge 12) In 2021, the United States and the European Union A) finally agreed to end their 17-year trade dispute regarding the production subsidies received by Boeing and Airbus. B) still continued their 17-year trade dispute regarding the production subsidies received by Boeing and Airbus. C) filed new cases with WTO regarding the production subsidies received by Boeing and Airbus. D) disagreed to remove tariffs and address the favorable financial treatments received by Boeing and Airbus. Answer: A Difficulty: Easy AACSB: Application of knowledge

13) An import quota is A) a direct restriction on the quantity of some good that may be imported. B) a payment to a firm or individual that ships a good abroad. C) a fee that is charged to a country that imports goods from the U.S. D) a limit on the quantity of a good or service that can be sold abroad. Answer: A Difficulty: Easy AACSB: Application of knowledge 14) An import quota A) always raises the domestic price of the imported goods. B) always lowers the domestic price of the imported goods. C) has no impact on the domestic price of the imported goods. D) limits import without raising the domestic price of the imported goods. Answer: A Difficulty: Easy AACSB: Application of knowledge 15) An important difference between tariffs and quotas is that tariffs A) raise the price of the good. B) generate tax revenue for the government. C) stimulate international trade. D) help domestic producers. E) are paid by foreign producers. Answer: B Difficulty: Easy AACSB: Application of knowledge 16) An import quota is similar to a ________ in its effect on imports, EXCEPT that an import quota ________. A) tariff; does not generate revenue B) tariff; generates revenue C) subsidy; does not generate revenue D) subsidy; generates revenue E) tariff; does not result in an efficiency loss. Answer: A Difficulty: Easy AACSB: Application of knowledge

17) Import license holders are able to buy imports and resell them at a higher price in the domestic market. The profits received by the holders of import licenses are known as A) quota rents. B) import quota. C) license margin. D) opportunity cost. Answer: A Difficulty: Easy AACSB: Application of knowledge 18) The U.S. sugar quota A) restricts the imports of both raw sugar as well as refined sugar to the U.S. market. B) promotes imports of both raw sugar as well as refined sugar to the U.S. market. C) imposes fees on the imports of both raw sugar as well as refined sugar to the U.S. market. D) removes limits of the imports of both raw sugar as well as refined sugar to the U.S. market. Answer: A Difficulty: Easy AACSB: Application of knowledge 19) The U.S. sugar quota import restrictions A) raised the U.S. domestic price above the world price. B) lowered the U.S. domestic price above the world price. C) lowered U.S. sugar production and increased U.S. sugar consumption. D) benefited U.S. consumers. Answer: A Difficulty: Easy AACSB: Application of knowledge 20) The U.S. sugar quota A) generates government revenue. B) results in net welfare benefits to the U.S. economy. C) results in benefits to sugar producers that exceed the cost to consumers. D) results in costs to consumers that exceed the benefits to sugar producers. E) does not result in an efficiency loss. Answer: D Difficulty: Easy AACSB: Application of knowledge 21) A voluntary export restraint is A) a quota on trade imposed from the exporting country's side instead of the importer's. B) a quota on trade imposed from the importing country's side instead of the exporter's. C) generally imposed at the request of the exporter and agreed to by the importer to forestall other trade restrictions. D) an agreement to voluntarily remove all quotas imposed on trade between two countries. Answer: A Difficulty: Easy AACSB: Application of knowledge 24 Copyright © 2023 Pearson Education, Ltd.

22) Which of the following are examples of goods that have been subject to voluntary export restraints? A) Japanese cars and Chinese solar panels B) Belgian chocolates and French wines C) French wines and cheeses D) Japanese sushi and German cars E) Taiwanese electronics and Canadian barley Answer: A Difficulty: Easy AACSB: Application of knowledge 23) A local content requirement (also called rules of origin) A) is a regulation that requires some specified fraction of a final good to be produced domestically. B) provides no protection for domestic producers. C) produces government revenue and quota rents. D) places a strict limit on imports. Answer: A Difficulty: Easy AACSB: Application of knowledge 24) Local content requirements are A) common in free trade areas such as NAFTA-USMCA to address differences in each country's tariffs with trading partners outside the region. B) not common in the automotive sector. C) not common in free trade areas such as NAFTA-USMCA to address differences in each country's tariffs with trading partners outside the region. D) common to impose additional restrictions on vehicles assembled in Mexico intended for sale in the U.S. and vehicles assembled and sold in the U.S. Answer: A Difficulty: Easy AACSB: Application of knowledge 25) Which of the following statements is TRUE? A) The U.S. Buy American Act triggered similar protectionist clauses from other foreign governments. B) The U.S. Buy American Act saved costs for many U.S. government agencies' infrastructure projects. C) The U.S. Buy American Act lowered the cost to U.S. taxpayers. D) The U.S. Buy American Act allowed access to cheaper imported immediate goods. Answer: A Difficulty: Easy AACSB: Application of knowledge