Controversies in Trade Policy Quiz

The existence of positive externalities due to the impossibility of full appropriability

• supports the conclusions of the Heckscher-Ohlin model.

• rejects the usefulness of government protectionism.

• supports the concept that the government should support only high-tech industries.

• provides support for government protectionism.

• supports arguments for free trade.

The United States

• does not provide more support for R&D as compared to other forms of investment.

• provides support for R&D by imposing high tariffs on R&D intensive products.

• provides support for R&D by providing direct subsidies for such activities.

• provides support for R&D through tax legislation.

• provides support for R&D through grant incentives.

The Brander-Spencer model identified market failure in certain industries due to

• unfair competition.

• wildcat destructive competition.

• environmental negative externalities associated with pollution.

• limited competition.

• lack of excess returns.

In the Brander-Spencer model the subsidy raises profits by more than the subsidy because of

• the "multiplier" effect of government expenditures.

• the military-industrial complex.

• the forward and backward linkage effects of certain industries.

• the deterrent effect of the subsidy on foreign competition.

• the economies of scale once the company enters the market.

Criticisms of the Brander-Spencer model include all EXCEPT which of the following?

• the problem of insufficient information

• the problem of likely foreign retaliation

• the problem of harm to interests of consumers

• the problem of adverse effects of trade policy politics

• the problem of simultaneously causing harm to other industries

Japan's protection of its semiconductor (RAM) producers is today seen as an object lesson in

• how strategic planning may backfire and cause a large waste of resources.

• how externalities may be successfully exploited by protectionist policies.

• how excess returns may be successfully exploited by protectionist policies.

• how government intervention may create a meaningful comparative advantage.

• how monopolies can outlast government intervention.

The Heckscher-Ohlin, factor-proportions model lends support to the argument that

• trade tends to worsen the conditions of unskilled labor in rich countries.

• trade tends to worsen the conditions of owners of capital in rich countries.

• trade tends to worsen the conditions of workers in poor countries.

• trade tends to worsen the conditions of workers in rich countries.

• trade tends to worsen the conditions of highly skilled workers in rich countries.

If firms in an industry are generating knowledge that other firms can use without paying for it, this industry is characterized by

• social costs that exceed private costs.

• social benefits that exceed private benefits.

• social costs that exceed social benefits.

• private benefits that exceed social benefits.

• social benefits that undermine private benefits.

It is argued that high-tech industries typically generate new technologies but cannot fully appropriate the commercial benefits associated with their inventions or discoveries. If this is true then in order to maximize a country's real income, the government should

• tax the high-tech firms.

• subsidize the high-tech firms.

• protect the high-tech firms.

• outsource high-tech production.

• discourage high-tech investments.

In effect, the U.S. does subsidize high-tech firms by subsidizing R&D. This is done through

• the budget of the Department of Education.

• systematic protection through the levying of tariffs.

• systematic protection through the establishment of NTBs.

• relatively accelerated "depreciation" of R&D investment in the Federal tax codes.

• subsidies for high-tech firms.