Chapter 11

Question 1

What is the primary concern associated with dumping?
a) Decreased demand for exports
b) Harm to producers in the importing country
c) Increase in trade barriers
d) Overvaluation of exports

Answer 1

B

Question 2

What defines dumping in the context of international trade?
a) Selling exports at a price higher than the global market value
b) Selling exports at a price lower than the global market value
c) Selling exports at a price equal to the global market value
d) Selling exports at a price determined by the importing country

Answer 2

B

Question 3

How do subsidies occur
a) Government increase the cost of exports
b) Government decrease the competitiveness of domestic producers
c) Government encourage fair market competition
d) Government provides financial assistance to benefit exporters

Answer 3

D

Question 4

What is the purpose of countervailing duties in combating dumping?
a) To encourage dumping practices
b) To offset the effects of subsidies
c) To decrease import tariffs
d) To promote free trade agreements

Answer 4

B

Question 5

What is the primary goal of a firm engaged in predatory dumping?
a) To promote fair competition in the foreign market
b) To establish a long-term presence in the foreign market
c) To temporarily lower prices to drive competitors out of business
d) To maintain stable prices in the export market

Answer 5

C

Question 6

How does predatory dumping affect the exporting firm’s market power?
a) It diminishes the exporting firm’s market share
b) It increases the exporting firm’s reliance on foreign competition
c) It consolidates the exporting firm’s monopoly power
d) It encourages collaboration with other exporting firms

Answer 6

C

Question 7

What characterizes persistent dumping in international trade?
a) Selling exports at a price lower than the global market value
b) Charging higher prices in the home market compared to the export market
c) Offering subsidies to foreign competitors
d) Engaging in temporary price reductions to eliminate competition

Answer 7

B

Question 8

When does persistent dumping become feasible for a firm?
a) When it has a monopoly position in both the home and export markets
b) When it faces more competition in foreign markets and less monopoly power
c) When it can export products at lower costs than domestic production
d) When it receives government subsidies to maintain low prices

Answer 8

B

Question 9

What condition must be met for persistent dumping to occur?
a) Buyers in the export market must be willing to pay higher prices
b) Buyers in the home market must have limited purchasing power
c) Buyers in the home country cannot avoid high prices by exporting them back
d) Buyers in the export market must face high competition from domestic producers

Answer 9

C

Question 10

What characterizes cyclical dumping in international trade?
a) Selling exports at a price lower than the global market value
b) Lowering prices during a recession due to decreased demand
c) Offering subsidies to foreign competitors
d) Engaging in predatory pricing strategies

Answer 10

B

Question 11

When does cyclical dumping typically occur?
a) During periods of economic growth
b) During periods of recession or economic downturn
c) When demand for exports exceeds supply
d) When there are trade barriers in place

Answer 11

B

Question 12

What is the primary reason for lower prices during cyclical dumping?
a) Increased demand for exported products
b) Reduced production costs in the exporting country
c) Decreased demand for exported products in the exporter’s market
d) Government intervention to stabilize prices

Answer 12

C

Question 13

How do lower prices during cyclical dumping impact the export market?
a) They lead to increased profits for exporters
b) They result in higher tariffs imposed by importing countries
c) They stimulate demand in the export market
d) They have no significant impact on the export market

Answer 13

C

Question 14

What characterizes seasonal dumping in international trade?
a) Selling exports at a price lower than the global market value during specific times of the year
b) Lowering prices during economic recessions to stimulate demand
c) Offering subsidies to foreign competitors to gain market share
d) Engaging in predatory pricing strategies to eliminate competition

Answer 14

A

Question 15

What is the primary purpose of seasonal dumping?
a) To stabilize prices in the export market
b) To sell off excess inventories of a product
c) To establish a monopoly in the exporting country
d) To maximize profits through uniform pricing strategies

Answer 15

B

Question 16

What effect does a subsidy imposed by a large exporter have on the domestic price of the subsidized product?
a) It increases the domestic price by the full size of the subsidy
b) It decreases the domestic price by the full size of the subsidy
c) It has no effect on the domestic price
d) It fluctuates depending on market demand

Answer 16

C

Question 17

What effect does a subsidy imposed by a large exporter have on the domestic price of the subsidized product?
a) It increases the domestic price by the full size of the subsidy
b) It decreases the domestic price by the full size of the subsidy
c) It has no effect on the domestic price
d) It fluctuates depending on market demand

Answer 17

C

Question 18

How does the subsidy imposed by a large exporter affect the price of the imported product in the importing country?
a) It has no effect on the price of the imported product
b) It causes the price of the imported product to rise
c) It causes the price of the imported product to fall
d) It leads to fluctuations in the price of the imported product

Answer 18

C

Question 19

How do the losses to total surplus compare in the case of a large exporter imposing a subsidy compared to free trade?
a) The losses to total surplus are smaller in the case of a large exporter subsidy
b) The losses to total surplus are the same in both cases
c) The losses to total surplus are larger in the case of a large exporter subsidy
d) There are no losses to total surplus in the case of a large exporter subsidy

Answer 19

C

Question 20

Why is the subsidy in the large exporter case considered less beneficial compared to free trade and the small country case?
a) Because it increases domestic prices in the exporting country
b) Because it decreases domestic prices in the importing country
c) Because it limits the increase in producer surplus in the exporting country
d) Because it leads to a decrease in consumer surplus in the importing country

Answer 20

C

Question 21

What impact does the subsidy have on the importer price in the large exporter case?
a) It causes the importer price to increase due to higher demand
b) It results in a decrease in the importer price due to the subsidy-driven competition
c) It has no effect on the importer price as it only affects domestic producers
d) It leads to fluctuations in the importer price based on market demand

Answer 21

B

Question 22

How does the subsidy affect the increase in producer surplus (PS) in the exporting country in the large exporter case?
a) It leads to a significant increase in producer surplus due to higher export volumes
b) It limits the increase in producer surplus by reducing the price of the exported product
c) It has no impact on producer surplus as it primarily benefits consumers
d) It causes producer surplus to decrease due to increased competition from subsidized imports

Answer 22

D

Question 23

What is the overall impact of subsidies on surplus transfer between exporters and importers?
a) Subsidies tend to transfer surplus from importer to exporter
b) Subsidies tend to transfer surplus from exporter to importer
c) Subsidies have no effect on surplus transfer between exporter and importer
d) Surplus transfer depends on the specific subsidy policy implemented

Answer 23

B

Question 24

Who primarily gains from subsidies in terms of producers and consumers?
a) Exporter’s producers gain, while exporter’s consumers and government lose
b) Importer’s consumers gain, while importer’s producers lose
c) Both exporter’s producers and consumers gain, while importer’s consumers lose
d) Both importer’s consumers and producers gain, while exporter’s consumers lose

Answer 24

A,b

Question 25

How do subsidies affect prices in the importer’s market?
a) They cause prices to rise due to increased demand for subsidized goods
b) They lead to price stability in the importer’s market
c) They result in lower prices for consumers due to subsidized imports
d) They have no significant impact on prices in the importer’s market

Answer 25

C

Question 26

What is the potential outcome of providing subsidies to convert an imported product into an exported one?
a) Increased efficiency overall for the country providing the subsidies
b) Decreased efficiency overall for the country providing the subsidies
c) No impact on efficiency overall for the country providing the subsidies
d) Enhanced competitiveness in the global market for the country providing the subsidies

Answer 26

B

Question 27

An export subsidy can be good for a country if:
a. the subsidy allows the country’s only exporting firm to capture the entire world market.
b. the subsidy decreases the export price so that the export quantity increases.
c. the subsidy is offset by a countervailing duty.
d. the international market for the export product is highly competitive

Answer 27

A

Question 28

The impact on world welfare of an export subsidy and a countervailing duty (of the same size
as the subsidy) is:
a. zero.
b. negative due to overproduction.
c. negative due to under-consumption.
d. negative due to deadweight loss.

Answer 28

A

Question 29

Which of the following subsidies is prohibited under WTO rules?
a. Subsidies to research and development
b. Subsidies to assist disadvantaged regions within the exporting country
c. Subsidies to assist firms in meeting environmental regulations
d. Subsidies to encourage firms in a developed country to export more

Answer 29

D

Question 30

Which of the following statements about an export subsidy on a particular product is
accurate?
a. An export subsidy can switch the product from being exported to being imported.
b. An export subsidy reduces the amount available in the domestic market of the exporting
country and increase the amount imported by the foreign country.
c. An export subsidy increases the price paid by foreign buyers, relative to the price that
local consumers pay for the product.
d. An export subsidy increases the net national well-being of a large exporting country

Answer 30

B

Question 31

Which of the following is said to occur when a firm with market power uses price
discrimination between markets to increase its total profit?
a. Persistent dumping
b. Cyclical dumping
c. Predatory dumping
d. Seasonal dumping

Answer 31

A

Question 32

Which of the following is said to occur when a firm lowers its price in order to sell off excess
inventories of a product?
a. Persistent dumping
b. Cyclical dumping
c. Predatory dumping
d. Seasonal dumping

Answer 32

D