Steel producers in the United States observe that foreign sales of U.S. steel has drastically declined due to stringent trade policies adopted by the foreign governments and unfair treatment of U.S. steel exports in foreign countries. The lobbying efforts of such loss making U.S. steel manufacturers induces the domestic government to restrict the entry of imported steel and help stimulate the sales of domestically produced steel. Which of the following is most similar to the example mentioned above?
a. A tariff imposed by the government to stimulate domestic production of a high-technology good with positive spillover effects
b. A tariff imposed by the government on the import of cotton textiles because it is an infant industry in the domestic country
c. An import tariff applied against a foreign monopoly supplying the domestic market
d. Taxes imposed by the government on an import competing industry that generates a negative production externality
e. Reciprocal tariffs introduced by the government of Mexico on tobacco imports from Brazil in retaliation to unfair treatment of Mexican tobacco exports to the latter
Question 2
If discussing trade, it is ____ which matters, rather than ____. absolute advantage; comparative advantage
a. absolute advantage; comparative advantage
b. comparative advantage; absolute advantage
c. resource cost; comparative advantage
d. the total amount of the good producible; comparative advantage
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