All Free Economics MCQs with Answers

• A. lower tariff rates on goods from nations with normal trade relation status
• B. lower tariff rates on goods from nations with most favored nation status
• C. low or zero tariffs on goods from certain developing countries
• D. identical tariff rates in products from all countries of the world

Explanation: The United States applies different tariff rates through normal or most-favored-nation rates and preferential schemes for some developing…

• A. tariff-rate quotas applied to imported goods
• B. production and export controls
• C. buffer stocks
• D. multilateral contracts

Explanation: International commodity agreements have used production or export controls, buffer stocks and multilateral contracts to reduce price…

• A. international commodity agreements program
• B. multilateral contract program
• C. generalized system of preferences program
• D. export-led growth program

Explanation: The Generalized System of Preferences allows industrial countries to grant developing countries unilateral, non-reciprocal tariff…

• A. be a manufactured goods
• B. be a primary product
• C. have high price elasticity of supply
• D. have a low price elasticity of demand

Explanation: An export cartel is more effective when foreign buyers cannot easily reduce their purchases after a price increase, meaning demand is…

• A. normal trade relation status
• B. most favored nation status
• C. offshore assembly provisions
• D. Generalized System of Preferences

Explanation: The Generalized System of Preferences gives selected developing countries lower tariff rates than those applied to other countries.

• A. export promotion
• B. import promotion
• C. international commodity agreements
• D. multilateral contracts

Explanation: Export promotion encourages production for world markets and uses comparative advantage as a guide to allocating resources.

• A. international dumping
• B. countervailing duties
• C. Strategic trade policy
• D. export promotion policy

Explanation: Strategic trade policy uses government intervention, such as targeted subsidies or protection, to help domestic firms obtain economic…

• A. eliminate all tariffs between countries
• B. increase all tariffs between countries
• C. maintain a nondiscriminatory structure of tariffs
• D. maintain a discriminatory structure of tariffs

Explanation: Most-favored-nation treatment requires a country to apply the same trade terms, especially tariff rates, to all member countries rather…

• A. increase consumer surplus in the importing country
• B. decrease producer surplus in the importing country
• C. impose a price floor on foreign prices in the importing country
• D. impose a price ceiling on foreign price in the importing country

Explanation: An antidumping tariff prevents foreign firms from selling below the permitted benchmark price in the importing country, functioning like a…

• A. predatory dumping represents the most common form of dumping by U.S firms
• B. U.S firms can obtain protection from foreign dumping, even though this protection tends to harm overall U.S welfare
• C. dumping can never be a profit-maximizing strategy for U.S firms to pursue
• D. U.S firms rarely if ever, engage in distress dumping or persistent dumping

Explanation: U.S. firms can seek antidumping protection even though the resulting higher prices and reduced competition may lower overall U.S. welfare.

• A. generalized system of preference
• B. countervailing duty
• C. domestic content
• D. safeguards

Explanation: Safeguards, also called escape-clause protection, temporarily shield domestic producers from fairly traded imports that cause serious…

• A. are abolished by the World Trade Organization
• B. result in decreases in consumer surplus for domestic households
• C. are imposed by industrial countries but not developing countries
• D. result in lower-priced goods for domestic consumers

Explanation: Antidumping duties raise the domestic price of imported goods, reducing consumers' purchasing power and consumer surplus.

• A. it reduces the sovereignty of member countries
• B. favors free trade over the quality of the environment
• C. it has no way to solve trade disputes among member countries
• D. it is a puppet of multinational corporations

Explanation: The WTO has a formal dispute-settlement system, so saying it has no way to resolve trade disputes is the exception.

• A. decrease the level of national security
• B. provide benefits to some particular industry
• C. provide benefits to the entire nation
• D. not yield welfare losses for the nation

Explanation: Protectionist arguments often present restricted trade as benefiting the entire nation through jobs, national security, or strategic…

• A. the WTO
• B. the GATT
• C. the IMF
• D. the World Bank

Explanation: The General Agreement on Tariffs and Trade, or GATT, was established in 1947 to reduce trade barriers and promote liberalization.

• A. Nontariff barriers (NTBs) and tariffs have increased in relative importance
• B. NTBs and tariffs have decreased in relative importance
• C. NTBs have increased and tariffs have decreased in relative importance
• D. NTBs have decreased and tariffs have increased in relative importance

Explanation: Postwar tariff reductions made tariffs relatively less important, while non-tariff barriers such as quotas, standards, and licensing…

• A. U.S grains consumers and producers of bread
• B. U.S farmers and grains companies
• C. Grain Producers in foreign countries
• D. Grain consumers in foreign countries

Explanation: A grain embargo harms domestic farmers and grain-exporting companies by restricting their foreign market and reducing sales opportunities.

• A. are prohibited by the World Trade Organization
• B. affect international trade but not international financial flows
• C. involve restrictions on imports, but not exports
• D. involve restrictions in imports exports and or financial flows

Explanation: Economic sanctions are broad restrictions used to influence another country and may target imports, exports, investment, banking, or other…

• A. have tariff rates equal to zero suggesting a free trade policy for the United States
• B. have lower tariff rates than the rates that apply to any other country sending goods to the United States
• C. have tariff rates that are identical to the rates that apply to other countries to which the U.S grants most-favored nation treatment
• D. have lower tariff rates than the rates that apply to other countries to which the U.S grants most favored nation treatment

Explanation: Most-favored-nation treatment means China receives the same normal tariff schedule as other countries granted that status, not a uniquely…

• A. World Bank
• B. International Trade Commission
• C. Department of justice
• D. World Trade Organization

Explanation: The World Trade Organization establishes and administers the principal multilateral rules governing international trade and helps settle…