1. Study Questions #1. Ch 5.
Which of the following are the major nontariff trade barriers? Check all that apply.
Points:
1 / 1
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Explanation:
With the decline in import tariffs in the past two decades, nontariff trade barriers have gained in importance as a measure of protection. Nontariff trade barriers include the following practices:
| A. | Import quotas |
| B. | Orderly marketing agreements |
| C. | Domestic content requirements |
| D. | Subsidies |
| E. | Antidumping regulations |
| F. | Discriminatory government procurement practices |
| G. | Social regulations |
| H. | Sea transport and freight restrictions |
See section: “Domestic Content Requirements.”
2. Study Questions #2. Ch 5.
Evaluate the following statement.
True or False: A quota’s revenue effect generally accrues to domestic importers or foreign exporters, whereas the tariff’s revenue tends to be captured by the government.
Points:
1 / 1
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Explanation:
Quotas have many of the same economic effects as tariffs but they tend to be more restrictive. A quota’s revenue effect generally accrues to domestic importers or foreign exporters, depending on the degree of market power they possess. If government desired to capture the revenue effect, it could auction import quota licenses to the highest bidder in a competitive market. See section: “Trade and Welfare Effects.”
3. Study Questions #3. Ch 5.
Which of the following are major methods used to subsidize producers? Check all that apply.
Points:
1 / 1
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Explanation:
Subsidies include domestic production subsidies and export subsidies. Methods used to subsidize producers include tax concessions, low interest rate loans, and loan guarantees, as well as outright cash disbursements and insurance arrangements. See section: “Subsidies.”
4. Study Questions #4. Ch 5.
What is meant by voluntary export restraints?
Points:
1 / 1
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Explanation:
Voluntary export restraints are market sharing agreements negotiated by producing and consuming countries. Because voluntary export quotas are typically administered from the supply side of the market, the foreign exporter tends to capture the largest share of the quota revenue. Voluntary export restraints tend to be more costly than tariffs. See section: “Export Quotas.”
5. Study Questions #5. Ch 5.
Complete the following statement explaining whether U.S. antidumping laws should be stated in terms of average total production costs or average variable costs.
While antidumping laws are defined in terms of![]()
average total cost , it is rational for firms to export their product for losses, provided that prices![]()
exceed marginal cost.
Points:
1 / 1
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Explanation:
Under current rules, dumping can occur when a foreign producer sells goods at less than fair value. Fair value is equated with average total cost plus an 8% allowance for profit. However many economists argue that antidumping laws that use average total cost as a yardstick to determine fair value are unfair. Economic theory suggests that under competitive conditions, firms price their goods at average variable costs that are below average total costs. Therefore, the antidumping laws punish firms that are simply behaving in a manner typical of competitive markets. Moreover, the law is unfair because U.S. firms selling at home are not subject to the same rules. See section: “Should Average Variable Cost Be the Yardstick for Defining Dumping?”
6. Study Questions #6. Ch 5.
Which is the more restrictive trade barrier (assuming equivalence)?
Points:
1 / 1
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Explanation:
Since import quotas directly limit the number of goods that can enter the home nation, they tend to be more restrictive than import tariffs, which may be circumvented by foreign producers absorbing the tariff as a lower selling price. During periods of rising domestic demand, quotas hold down imports more effectively than tariffs. See section: “Quotas versus Tariffs.”
