MNGT 375 Chapter 7 Practice Exam
Questions with Verified Answers.
Governments intervene in international trade for political and economic reasons. Choices are abundant
when selecting from the "arsenal" of trade weapons, including tariffs, subsidies, import quotas,
voluntary export restraints (VERs), local content requirements (LCRs), administrative policies, and
antidumping duties. Nations usually adopt trade regulations to achieve stated national objectives, but
these regulations may have undesirable effects on many sectors of the economy, including higher prices
for consumers, overproduction of agricultural products, and the insulation of non-efficient producers.
Match the correct trade instrument with its corresponding example.
Instrument:
Specific tariff
Subsidies
Import quotas
Voluntary export restraints (VER)
Local content requirements
Administrative policies
Antidumping policies
Ad velorum tariff - CORRECT ANSWER Specific tariff - US levies a $1 tariff on imported watches
Subsidies - EU payments to European farmers
Import quotas - US restricts the number of imported video games
Voluntary export restraints (VER) - Peru restricts sugar exports by US request
Local content requirements - Specific % of good produced domestically
Administrative policies - US stops medicine imports unapproved by the FDA
Antidumping policies - EU imposes a special tariff on the offending foreign imports
Ad velorum tariff - US imposes 2.5% tariff
, Arguments for government intervention take two paths: political and economic. Political arguments for
intervention are concerned with protecting the interests of certain groups within a nation (usually
producers), often at the expense of other groups (usually consumers), or with achieving some political
objective that lies outside the sphere of economic considerations, e.g., protecting the environment or
human rights. Economic arguments are typically concerned with boosting the overall wealth of a nation
to the benefit of both producers and consumers.
Determine which of these elements is a political or economic argument for intervention. Roll over the
box for more details.
Protecting jobs
Gain First Mover Advantages
Protecting consumers
National security
Help domestic firms overcome barriers
Infant Industry Argument
Protecting the environment - CORRECT ANSWER Political Arguments for Intervention:
Protecting jobs
Protecting consumers
National security
Protecting the environment
(Protecting consumers from "dangerous products")
(Furthering the goals of foreign policy)
(Protecting human rights in export country)
Economic Arguments for Intervention:
Gain First Mover Advantages
Help domestic firms overcome barriers
Infant Industry Argument
True or False:
Questions with Verified Answers.
Governments intervene in international trade for political and economic reasons. Choices are abundant
when selecting from the "arsenal" of trade weapons, including tariffs, subsidies, import quotas,
voluntary export restraints (VERs), local content requirements (LCRs), administrative policies, and
antidumping duties. Nations usually adopt trade regulations to achieve stated national objectives, but
these regulations may have undesirable effects on many sectors of the economy, including higher prices
for consumers, overproduction of agricultural products, and the insulation of non-efficient producers.
Match the correct trade instrument with its corresponding example.
Instrument:
Specific tariff
Subsidies
Import quotas
Voluntary export restraints (VER)
Local content requirements
Administrative policies
Antidumping policies
Ad velorum tariff - CORRECT ANSWER Specific tariff - US levies a $1 tariff on imported watches
Subsidies - EU payments to European farmers
Import quotas - US restricts the number of imported video games
Voluntary export restraints (VER) - Peru restricts sugar exports by US request
Local content requirements - Specific % of good produced domestically
Administrative policies - US stops medicine imports unapproved by the FDA
Antidumping policies - EU imposes a special tariff on the offending foreign imports
Ad velorum tariff - US imposes 2.5% tariff
, Arguments for government intervention take two paths: political and economic. Political arguments for
intervention are concerned with protecting the interests of certain groups within a nation (usually
producers), often at the expense of other groups (usually consumers), or with achieving some political
objective that lies outside the sphere of economic considerations, e.g., protecting the environment or
human rights. Economic arguments are typically concerned with boosting the overall wealth of a nation
to the benefit of both producers and consumers.
Determine which of these elements is a political or economic argument for intervention. Roll over the
box for more details.
Protecting jobs
Gain First Mover Advantages
Protecting consumers
National security
Help domestic firms overcome barriers
Infant Industry Argument
Protecting the environment - CORRECT ANSWER Political Arguments for Intervention:
Protecting jobs
Protecting consumers
National security
Protecting the environment
(Protecting consumers from "dangerous products")
(Furthering the goals of foreign policy)
(Protecting human rights in export country)
Economic Arguments for Intervention:
Gain First Mover Advantages
Help domestic firms overcome barriers
Infant Industry Argument
True or False:
