Chapter 6

Question 1

Instruments of Trade Policy

Answer 1

• Tariffs (specific and ad valorem)
• Subsidies
• Import Quotas
• voluntary export restraints
• export tariff
• export ban
• local content requirements
• administrative trade policies
• Anti-dumping policies

Question 2

Specific Tariffs

Answer 2

Tariff levied as a fixed charge for each unit of good imported.

Question 3

Ad Valorem

Answer 3

Tariff levied as a proportion of the value of an imported good.

Question 4

Tariff Rate Quota

Answer 4

Under a tariff rate quota, a lower tariff rate is applied to imports within the quota than those over the quota.

Question 5

Voluntary Export Restraint (VER)

Answer 5

quota on trade imposed by the exporting country, typically at the request of the importing country’s government.

Question 6

Quota Rent

Answer 6

The extra profit that producers make when supply is artificially limited by an import quota.

Question 7

Local Content Requirements (LCR)

Answer 7

requirement that some specific fraction of a good be produced domestically

Question 8

Administrative Policies

Answer 8

bureaucratic rules designed to make it difficult for imports to enter a country

Question 9

Anti-Dumping Policies

Answer 9

Dumping is defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their ‘fair’ market value.

designed to punish foreign firms that engage in dumping, also called countervailing duties

Question 10

Multilateral and Bilateral Trade Agreements

Answer 10

reciprocal trade agreements between 2 or more partners.