International Economics MCQs and Notes

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📊 International Economics
Q. Compared to an import quota, an equivalent tariff may provide a less certain amount of protection for home producers since:
  • (A) A tariff has no deadweight loss in terms of production and consumption
  • (B) Foreign firms may absorb the tariff by offering exports at lower prices
  • (C) Tariffs are effective only if home demand is perfectly elastic
  • (D) Quotas do not result in increases in the price of the imported good
💬 Discuss
✅ Correct Answer: (D) Quotas do not result in increases in the price of the imported good
📊 International Economics
Q. Domestic content legislation applied to autos would tend to:
  • (A) Support wage levels of American autoworkers
  • (B) Lower auto prices for American autoworkers
  • (C) Encourage American automakers to locate production overseas
  • (D) Increase profits of American auto companies
💬 Discuss
✅ Correct Answer: (C) Encourage American automakers to locate production overseas
📊 International Economics
Q. The imposition of a domestic content requirement by the United States would cause consumer surplus for Americans to:
  • (A) Rise
  • (B) Fall
  • (C) Remain unchanged
  • (D) None of the above
💬 Discuss
✅ Correct Answer: (B) Fall
📊 International Economics
Q. Which trade restriction stipulates the percentage of a product’s total value that must be produced domestically in order for that product to be sold domestically?
  • (A) Import quota
  • (B) Orderly marketing agreement
  • (C) Local content requirement
  • (D) Government procurement policy
💬 Discuss
✅ Correct Answer: (C) Local content requirement
📊 International Economics
Q. Because export subsidies tend to result in domestic exporters charging lower prices on their goods sold overseas, the home country’s:
  • (A) Export revenues will decrease
  • (B) Export revenues will rise
  • (C) Terms of trade will worsen
  • (D) Terms of trade will improve
💬 Discuss
✅ Correct Answer: (C) Terms of trade will worsen
📊 International Economics
Q. Suppose the government grants a subsidy to its export firms that permits them to charge lower prices on goods sold abroad. The export revenue of these firms would rise if the foreign demand is:
  • (A) Elastic in response to the price reduction
  • (B) Inelastic in response to the price reduction
  • (C) Unit elastic in response to the price reduction
  • (D) None of the above
💬 Discuss
✅ Correct Answer: (A) Elastic in response to the price reduction
📊 International Economics
Q. Tariffs and quotas on imports tend to involve larger sacrifices in national welfare than would occur under domestic subsidies. This is because, unlike domestic subsidies, import tariffs and quotas:
  • (A) Permit less efficient home production
  • (B) Distort choices for domestic consumers
  • (C) Result in higher tax rates for domestic residents
  • (D) Redistribute revenue from domestic producers to consumers
💬 Discuss
✅ Correct Answer: (B) Distort choices for domestic consumers
📊 International Economics
Q. Suppose the government grants a subsidy to domestic producers of an import-competing good. The subsidy tends to result in deadweight losses for the domestic economy in the form of the:
  • (A) Consumption effect
  • (B) Redistribution effect
  • (C) Revenue effect
  • (D) Protective effect
💬 Discuss
✅ Correct Answer: (D) Protective effect
📊 International Economics
Q. The movement to free international trade is most likely to generate short-term unemployment in which industries?
  • (A) Industries in which there are neither imports nor exports
  • (B) Import-competing industries
  • (C) Industries that sell to domestic and foreign buyers
  • (D) Industries that sell to only foreign buyers
💬 Discuss
✅ Correct Answer: (B) Import-competing industries
📊 International Economics
Q. A sudden shift from import tariffs to free trade may induce short-term unemployment in:
  • (A) Import-competing industries
  • (B) Industries that are only exporters
  • (C) Industries that sell domestically as well as export
  • (D) Industries that neither import nor export
💬 Discuss
✅ Correct Answer: (A) Import-competing industries

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