FIS Spring Econ Exam Practice Questions

Over the short term, which of the following is not an advantage to free trade?

• Greater choice of products for consumers and lower prices

• Higher wages for domestic workers and greater employment

• Greater competition and more efficiency in production

• Benefits for producers arising from the ability to sell in other market

When a country liberalises its foreign trade (reduces trade protection), it may create unemployment in:

• all industries of the economy

• industries that compete with imports

• industries that produce for export

• industries that produce only for the domestic economy

A quota on imports is:

• a legal limit on the quantity of imports

• a tax on imports

• a subsidy on imports

• a combination of tax and legal limit on imports

Dumping involves:

• selling a good abroad at a price that is higher than the cost of producing it.

• selling a good abroad at a price that is lower than the cost of producing it.

• selling goods abroad for which there is no market in the domestic economy.

• importing goods from other countries that no one else wants.

Infant industries should be granted trade protection on the grounds that:

• firms that face competition should be protected.

• new small firms are unable to compete fairly with large established firms.

• they ensure supplies of needed products to the domestic economy.

• they can be used to overcome a trade deficit.

When a tariff is imposed on a good:

• domestic producers lose.

• domestic consumers lose.

• foreign producers gain.

• domestic workers lose

Administrative barriers refer to measures that:

• are a type of trade protection

• can be used as hidden protection

• may consist of health, safety or environmental standards

• all of the above

A group of countries that agree to reduce or eliminate trade barriers but each can have its own trade policy toward other countries have established a:

• monetary union

• free trade area

• customs union

• common market

A group of countries that allow free movement of labour and capital within the group have a:

• customs union

• free trade area

• common market

• preferential trade agreement

Which of the following is not an argument against trade protection?

• in most cases, consumers lose

• trade protections reduce efficiency

• foreign producers are worse off

• trade protection reduces government revenue