Question :
101) Suppose Canada implements new border procedures that require goods : 1384536
101) Suppose Canada implements new border procedures that require goods arriving from Country X to be held for 60 days in a bonded warehouse. This new policy is ________ and is likely to ________.
A) a voluntary export restriction; reduce imports from Country X
B) an example of trade diversion; increase imports from Country X
C) a non-tariff barrier; reduce imports from Country X
D) a non-tariff barrier; drive down the price of imports from Country X
E) an example of an anti-dumping measure; reduce exports from Country X
102) The main difference between a tariff and an “equivalent” voluntary export restriction (VER) is that
A) a tariff allows the government of the importing country to appropriate the extra market value of the imported good, but with a VER the extra market value accrues to the good’s foreign producers.
B) a tariff allows the extra market value of the good to accrue to the supplier, but a VER allows the extra market value to be appropriated by the government of the importing country.
C) a tariff restricts free trade between two countries and a VER does not.
D) a tariff keeps the price in the importing country higher than it would otherwise be; a VER does not.
E) a tariff allows the importing country to protect wages and other factor incomes in the affected industry, while a VER does not.
103) Which of the following actions (all of which affect international trade) would be taken by a private firm as opposed to a national government?
A) dumping
B) tariff
C) countervailing duty
D) quota
E) import duty
104) Mercosur is
A) a new trade agreement between the countries of Mexico, Canada, and Cuba.
B) a customs union between Argentina, Brazil, Paraguay, and Uruguay.
C) the first president of the World Trade Organization (WTO).
D) the location of the last GATT round of negotiations.
E) the location of the WTO headquarters.
105) An agreement among a group of countries to eliminate trade barriers among themselves, to present a common trading front to the rest of the world in terms of common barriers to trade, and to permit free movement of factors of production among member countries is called a
A) confederation.
B) common market.
C) customs union.
D) free-trade area.
E) reciprocity association.
106) An agreement among a group of countries that allows for tariff-free trade among the members but leaves each member free to levy its own tariffs on imports from other countries is called a
A) confederation.
B) common market.
C) customs union.
D) free-trade area.
E) reciprocity association.
107) The concept of “trade creation” refers to
A) the opening up of new trading routes.
B) inefficient trade that follows the establishment of a free-trade area.
C) trade based on comparative advantage that typically follows the reduction of trade barriers.
D) increased exports and reduced imports as a result of a high-tariff policy.
E) regional trade agreements.
108) The concept of “trade diversion” refers to
A) the main benefit of creating a free-trade area.
B) the replacement of a low-cost foreign supplier with a high-cost one based on membership in a trade agreement.
C) trade that is shifted between members of a customs union.
D) something that is predicted by theory, but has never been observed in practice.
E) an increase in economic efficiency that comes with a newly established trading relationship.
109) Suppose Canada has a 20% tariff on the import of carpets, and Canada currently imports this product from India at a with-tariff price of $22. The with-tariff price of identical carpets from the United States is $24. Now suppose a free-trade agreement with the U.S. eliminates the tariff and so the no-tariff price from the U.S. is $20. Canada now purchases carpets from the U.S. This is an example of
A) dumping.
B) trade diversion.
C) a countervailing duty.
D) trade creation.
E) specialization.
110) Suppose Canada has a 20% tariff on the import of carpets, and Canada currently imports this product from India at a with-tariff price of $22. The with-tariff price of identical carpets from the United States is $24. Now suppose a free-trade agreement with the U.S. eliminates the tariff and so the no-tariff price from the U.S. is $20. Canada now purchases carpets from the U.S. Is Canada made better off from this trade diversion?
A) No, because it would still be cheaper for individual consumers to buy carpets from India.
B) Canada is not better or worse off. The gain in consumer surplus in Canada is identical to the loss in tariff revenue to the Canadian government.
C) Yes, because Canadian consumers are paying less for carpets and consumer surplus has increased.
D) No, because before the agreement Canada was buying from India at a lower (pre-tariff) price and collecting tariff revenue.
E) Yes, because Canada has diverted trade toward the United States.
