1. Of the many arguments in favor of tariffs, the one that has enjoyed the most significant economic justification has been the:
A) Infant industry argument
B) Cheap foreign labor argument
C) Balance of payments argument
D) Domestic living standard argument
2. If the U.S. demand for Korean steel is price elastic, an export subsidy granted to Korean steel firms will increase Korea's export revenue.
A) True
B) False
3. When a tariff on imported inputs exceeds that on the finished good,
A) The nominal tariff rate would tend to understate it's protective effect
B) The nominal tariff rate on the finished product would tend to overstate its protective effect
C) It is impossible to determine the protective effect of a tariff
D) Tariff escalation occurs
4. According to the infant-industry argument, temporary tariff protection granted to an infant industry will help it become competitive in the world market; when international competitiveness is achieved, the tariff should be removed.
A) True
B) False
5. A firm that faces problems of falling sales and excess productive capacity might resort to international dumping if it:
A) Can charge higher prices in markets that are elastic to price changes
B) Earns revenues on foreign sales that at least cover variable costs
C) Can sell at that price where domestic and foreign demand elasticities equate
D) Is able to force foreign prices below marginal production costs