Question : 11) Which of the following describes the infant industry argument : 1244936

11) Which of the following describes the infant industry argument for protectionism?

A) An industry must be protected in its early stages of development so that firms can compete with government-subsidized foreign competition.

B) Some strategic industries must be protected to ensure adequate supplies of resources needed for national defense in emergencies.

C) Domestic producers in high-wage countries must be protected from foreign producers in low-wage countries to produce a level playing field.

D) Domestic producers require time to gain experience and lower their unit costs; this will allow these producers to compete successfully in international markets.

12) The process of countries becoming more open to foreign trade and investment is known as

A) autarky.

B) foreign exchange.

C) globalization.

D) protectionism.

13) Economists believe the most persuasive argument for protectionism is to protect infant industries. But the argument has a drawback. What is this drawback?

A) Governments always make the level of protection for infant industries too high.

B) Governments are usually too impatient and do not allow protection to remain in place long enough to allow industries to be competitive in international markets.

C) Governments usually use tariffs, rather than quotas, to protect infant industries in order to collect tariff revenue. (Quotas do not result in government revenue).

D) Protection lessens the need for firms to become productive enough to compete with foreign firms; this often results in infant industries never “growing up.”

14) Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries. This protectionism will cause the greatest harm to

A) Canadian manufacturers.

B) the Canadian government.

C) manufacturers who export to Canada.

D) Canadian consumers.

15) Suppose that American firms claim that protectionism in Canada is on the rise as the Canadian government attempts to protect its infant industries with a “Buy Canadian” provision. This policy, similar to the original “Buy American” provision in the 2009 U.S. stimulus bill, is likely to cause

A) exporting countries to retaliate by placing trade barriers on Canadian imports.

B) Canadian manufacturers to become more efficient.

C) Canadian companies to pay lower prices for protected products.

D) most countries to reduce their own trade barriers to be able to better compete with Canadian imports at home.

16) The selling of a product for a price below its cost of production is called

A) fair competition.

B) dumping.

C) unfair competition.

D) operating at a loss.

17) Imposing tariffs in cases of dumping

A) is allowed under the WTO agreement.

B) is not allowed under the WTO agreement.

C) is not addressed by the WTO agreement.

D) has never occurred, even though it is allowed under the WTO agreement.

18) Measuring the impact of a quota or tariff on the U.S. economy is an example of ________. Stating that a quota or tariff should be eliminated is an example of ________.

A) statistical analysis; economic analysis

B) positive analysis; normative analysis

C) econometric analysis; protectionism

D) trade analysis; an opinion

19) One reason for the success that firms have in getting the government to erect barriers to foreign competition is that jobs lost to foreign competition are easy to identify but jobs created by foreign trade are often hard to identify. Which of the following is a second reason?

A) The costs that tariffs and quotas impose on consumers are large in total but relatively small per person.

B) People who benefit from foreign trade tend not to vote in elections; people who are harmed by foreign trade are much more likely to vote.

C) Firms that benefit from trade barriers have more money to lobby government officials to support the barriers than do firms that are harmed by trade barriers.

D) The benefits from free trade are less than the costs.

Article Summary

Roberto Azevedo, director-general of the World Trade Organization (WTO), reported that global trade growth estimates will be lowered for 2013 and 2014 because of increasing global protectionism. The current protectionism is based primarily in regulations rather than the more common tariffs and subsidies. Since 2008, almost 700 new trade restrictions have materialized – over 150 of those in 2012 alone – with Russia being singled out as one of the primary offenders.

Source: Kiran Moodley, “WTO warns of trade slowdown due to protectionism,” CNBC,September 6, 2013.

20) Refer to the Article Summary. The protectionism being granted to Russian firms will cause the greatest harm to

A) Russian manufacturers.

B) the Russian government.

C) manufacturers who export to Russia.

D) Russian consumers.