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Trade Policy

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Question 1
Free
Multiple Choice

Any policy designed to benefit domestic industries at the expense of foreign export industries is called

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A

predatory practice.

B

monopolization.

C

commercialization.

D

cartelization.

E

protection.

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Question 2
Free
Multiple Choice

Suppose you are an economist advising the Canadian government as to whether to erect trade barriers for the protection of Canada's textile industry.You are likely to study the gains to be realized in this industry and weigh those against

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A

the effect on factor incomes of Canada's trading partners.

B

the lower factor prices that occur in competing domestic industries.

C

the cost in terms of higher prices to Canadian consumers.

D

the cost in terms of lower national income of Canada's trading partners.

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Question 3
Free
Multiple Choice

Does free trade improve the living standards of all residents of a country?

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A

Yes,definitely,because the gains from trade outweigh the losses in the import-competing industries.

B

Yes,because inefficient import-competing industries are replaced with efficient export industries.

C

Probably not - in principle,the net gains from trade could be divided such that every individual is better off,but in practice,some individuals are likely to be worse off.

D

No,because the benefits from free trade are only theoretical.

E

No,because the losses in the import-competing industries outweigh the gains from trade in the new export industries.

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Question 4
Free
Multiple Choice

Consider the government of a small economy that is opposed to free international trade.Of the following,which is the most valid argument for their opposition?

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A

to maximize national income

B

to protect against low-wage labour from abroad

C

to discourage imports and encourage exports

D

to diversify production in the domestic economy

E

to prevent domestic currency from going abroad

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Question 5
Free
Multiple Choice

Suppose a national government chooses to impose barriers to trade in an effort to promote a more diversified economy.This objective would be particularly important to,for example,an economy largely dependent on one or two agricultural products because

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A

that country's terms of trade will continue to deteriorate over time if it continues to specialize.

B

it will allow firms in the economy to exploit economies of scale in newly developed industries.

C

it will certainly maximize national income and raise average living standards.

D

it will increase net exports for the economy.

E

any volatility in the world prices of those commodities leads to great volatility in national income.

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Question 6
Multiple Choice

The main objective of protectionist trade policies is to

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A
create a level playing field.
B
raise average real wages in the economy.
C
raise government revenues through tariffs.
D
maximize world production.
E
shield local producers from foreign competition.
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Question 7
Multiple Choice

According to the infant-industry argument for trade protection,a new small industry

Choose correct answer/s
A
must be protected even if it will never have a comparative advantage.
B
must be protected permanently to provide for a diversified economy.
C
will need protection once it has exploited available economies of scale.
D
may need protection temporarily until it can exploit its economies of scale.
E
must be protected in order to provide a domestic supply of the product.
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Question 8
Multiple Choice

In the past few decades,an example of the infant-industry argument at work has been the

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A
Canadian forest-products industry.
B
Canadian agriculture industry.
C
Japanese agriculture industry.
D
European commercial aircraft industry.
E
U.S.automobile industry.
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Question 9
Multiple Choice

Economists would tend to accept which of the following arguments in favour of tariffs?

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A
Tariffs are needed to avoid exporting jobs.
B
Tariffs are needed to limit imports and reduce the capital flow from the country.
C
Tariffs help to reduce inflation by reducing the price of domestic products.
D
Temporary tariff protection in some situations may help to generate an eventual comparative advantage in that product.
E
Tariffs will stimulate the domestic economy.
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Question 10
Multiple Choice

An example of the "infant industry" argument for trade protection is that

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A
tariffs should be implemented in order to improve the terms of trade and thereby maximize the gains from trade.
B
tariffs should not be imposed on countries that have democratic governments.
C
in the presence of unexploited scale economies,tariff protection may permit a country to develop future comparative advantage in certain products.
D
imports of certain products should be limited in the interests of national defence.
E
"strategic" trade policy is helpful when other countries are also being strategic.
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Question 11
Multiple Choice

A business which contends that it needs temporary protection so that it can expand significantly and thereby reduce its costs so as to enable it to compete with foreign producers is using an argument known as the

Choose correct answer/s
A
infant-industry case for tariffs.
B
monopolistic competition case for tariffs.
C
strategic case for tariffs.
D
price fluctuations case for tariffs.
E
social advantages case for tariffs.
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Question 12
Multiple Choice

A common argument for the use of tariffs (for a large economy)when the objective is to maximize a country's national income is to

Choose correct answer/s
A
improve the country's terms of trade.
B
subject infant industries to the discipline of the market.
C
enjoy the advantages of diversification.
D
prevent learning-by-doing by potential trade partners.
E
increase the prices of domestic exports.
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Question 13
Multiple Choice

Many of the world's industrialized countries initially developed their industries with heavy tariff protection.In Canada's case,this was the basis for

Choose correct answer/s
A
the National Policy of 1876.
B
the National Energy Program of the 1980s.
C
reciprocity.
D
the NAFTA.
E
the Charlottetown Accord.
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Question 14
Multiple Choice

A country can impose a tariff to improve its own terms of trade if it

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A
constitutes a large fraction of the world demand for some commodity that it imports.
B
has a high level of industrial diversification.
C
has a significant trade surplus.
D
imports mostly primary products.
E
produces and exports a large fraction of the world's supply of some commodity.
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Question 15
Multiple Choice

A common,but invalid argument for using tariffs to maximize national income and raise domestic living standards is to

Choose correct answer/s
A
alter the terms of trade.
B
keep Canadian currency in Canada.
C
encourage learning by doing.
D
create a strategic trade advantage.
E
exploit economies of scale.
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Question 16
Multiple Choice

Continued tariff protection for industries that have already attained all potential economies of scale and possibilities for learning by doing is likely to

Choose correct answer/s
A
increase employment in the protected industries.
B
reduce average real income for the country's residents.
C
redistribute income away from the factors used in the protected industries.
D
decrease prices to consumers of the products produced in the protected industries.
E
both A and B are correct.
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Question 17
Multiple Choice

Continued tariff protection for industries that have already attained all potential economies of scale and opportunities for learning by doing is likely to

Choose correct answer/s
A
reduce employment in the protected industries.
B
reduce the stream of tariff revenue to the government.
C
redistribute income in favour of the factors used in the protected industries.
D
decrease prices to consumers of the products produced in the protected industries.
E
result in increased demand for imports.
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Question 18
Multiple Choice

Continued tariff protection for industries that have already attained all the possible economies of scale will likely

Choose correct answer/s
A
reduce employment in the protected industries.
B
reduce the stream of tariff revenue to the government.
C
redistribute income away from the factors used in the protected industries.
D
maintain high prices to consumers of the products produced in the protected industries.
E
result in lower domestic prices for the products they produce.
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Question 19
Multiple Choice

If wages in Mexico are lower than those in Canada,

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A
Canadian living standards can be raised by imposing tariffs on imports from Mexico.
B
Canadian consumers can benefit by purchasing some low-cost goods from Mexico.
C
Canada may have a comparative advantage in all products.
D
Mexico may have a comparative advantage in all products.
E
Mexico probably has an absolute advantage in all products due to its low labour costs.
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Question 20
Multiple Choice

Consider trade between country A and country B.If country A has wages that are substantially less than those in country B,

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A
country A will have an absolute advantage over country B.
B
country A will not have to subsidize its export industries.
C
country B will import from A but will not be able to export to country A.
D
country B will benefit by placing tariffs on imports from country A.
E
the pattern of comparative advantage will depend also on the relative productivities of labour in the two countries.
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