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CHAPTER 5

NONTARIFF TRADE BARRIERS

MULTIPLE-CHOICE QUESTIONS

1. THE IMPOSITION OF A TARIFF ON IMPORTED STEEL FOR THE HOME COUNTRY RESULTS IN: a. Improving terms of trade and rising volume of trade b. Higher steel prices and falling steel consumption c. Lower profits for domestic steel companies d. Higher unemployment for domestic steel workers

2. Which of the following refers to a market-sharing pact negotiated by trading partners to moderate the intensity of international competition? a. Orderly marketing agreement b. Local content requirements c. Import quota d. Trigger price mechanism

3. Suppose the United States and Japan enter into a voluntary export agreement in which Japan imposes an export quota on its automakers. The largest share of the export quota’s “revenue effect” would tend to be captured by: a. The U.S. government b. Japanese automakers c. American auto consumers d. American autoworkers

4. Suppose the government grants a subsidy to domestic producers of an import-competing good. The subsidy tends to result in deadweight losses for the domestic economy in the form of the: a. Consumption effect b. Redistribution effect c. Revenue effect d. Protective effect

5. Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic subsidies. This is because, unlike domestic subsidies, import tariffs and quotas: a. Permit less efficient home production b. Distort choices for domestic consumers c. Result in higher tax rates for domestic residents d. Redistribute revenue from domestic producers to consumers

6. Suppose the government grants a subsidy to its export firms that permits them to charge lower prices on goods sold abroad. The export revenue of