Question

If the policies supporting the sugar industry in the United States were discontinued, U.S. producers would

Multiple Choice

• have to become more efficient.

• need to increase sales.

• see competition drop.

• see profits rise.

• be prohibited from selling in foreign markets.

The tariffs and floor price in the U.S. sugar industry

Multiple Choice

• protect U.S. producers at the expense of U.S. consumers.

• essentially prevent U.S. producers from selling overseas.

• have been established in recent years as a protest against rising sugar prices in foreign markets.

• protect U.S. consumers at the expense of U.S. producers.

• allow prices to rise to a certain point before limits kick in.

Which is characteristic of a situation in which there is free trade?

Multiple Choice

• Nations specialize in the manufacture of products they produce most efficiently.

• Countries import products they can produce efficiently.

• Consumers have less choice.

• Nations impose high import tariffs.

• Countries implement high quotas on imports.

If the Trans Pacific Trade Agreement is enacted, we would expect __________.

Multiple Choice

• prices to rise in member countries

• tariff and nontariff barriers between member nations to fall

• an increase in trade quotas between member nations

• market access in member countries to fall

• trade to be diverted between member nations

U.S. agriculture has a comparative advantage in agriculture and so stands to be a big beneficiary if the TPP is enacted. Which statement below is true of the theory of comparative advantage?

Multiple Choice

• The focus in the theory of comparative advantage is on exchange rates.

• Potential world production is greater with unrestricted free trade than it is with restricted trade.

• The theory of comparative advantage views trade as a zero-sum game.

• The theory of comparative advantage is superseded by the theory of absolute advantage.

• Free trade is unequivocally dismissed under the theory of comparative advantage.

Answer 1

If the policies supporting the sugar industry in the United States were discontinued, U.S. producers would

•have to become more efficient.

Reason: When government support to sugar industries is discontinued, US domestic producers need to be more efficient in order to face foreign competition, from which they were earlier being protected by the government.

The tariffs and floor price in the U.S. sugar industry

•protect U.S. producers at the expense of U.S. consumers.

Reason: This is done by increasing market prices of domestic as well as imported sugar, thereby benefitting domestic producers and exploiting domestic consumers of sugar.

Which is characteristic of a situation in which there is free trade?

•Nations specialize in the manufacture of products they produce most efficiently.

Reason: In case of free trade, countries are able to produce goods in which they are most efficient or have comparative advantage and export it to other countries and benefit from it.

If the Trans Pacific Trade Agreement is enacted, we would expect __________.

•tariff and nontariff barriers between member nations to fall

Reason: The TPP was a trade agreement between member countries to reduce all types of tariff and non-tariff barriers on industrial and agricultural goods among each other.

U.S. agriculture has a comparative advantage in agriculture and so stands to be a big beneficiary if the TPP is enacted. Which statement below is true of the theory of comparative advantage?

•Potential world production is greater with unrestricted free trade than it is with restricted trade.

Reason: This would occur because countries would specialize in production of those goods it has comparative advantage and export them to increase welfare