Question

1. Developing countries often argue that their

a. export prices and revenues are very stable.

b. efforts to industrialize are discouraged.

c. efforts to industrialize are encouraged.

d. terms of trade have improved over time.

2. Economists note that instability of the prices of primary products (tin, coffee, copper) is mainly caused by

a. low price elasticity of demand and low price elasticity of supply.

b. high price elasticity of demand and high price elasticity of supply.

c. low price elasticity of demand and high price elasticity of supply.

d. high price elasticity of demand and low price elasticity of supply.

3. Import substitution emphasizes decreasing reliance on international trade by

a. adopting free-trade policies.

b. developing import-competing industries.

c. reducing import tariffs on labor-intensive goods.

d. subsidizing efficient exporting industries

4. Developing countries often argue that advanced countries protect their farmers with

a. low import tariffs and high export subsidies.

b. low import tariffs and low export subsidies.

c. high import tariffs and high export subsidies.

d. high import tariffs and low export subsidies.

Answer 1

1) Developing countries often argue that b) their efforts to industrialize are discouraged because of already industrialized nations that provide competition to their domestic industries and drive them out of business due to lower cost of production and innovation.

2) Primary products have both low price elasticity of demand and supply. Thus, any shock to demand and Supply side causes instability in prices of such products. Thus, correct option is a).

3) Import substitution emphasize on reducing imports by developing the import competing industries so that the production of imported good can be reduced and reliance on imports is reduced. Thus, correct option is b).

4. Developing countries argue that developed countries protect their farmers using low import tariffs and high export subsidies. The low import tariffs gives the idea that free trade policies are adopted and at the same time, high export subsidies increase the domestic production and their farmers are able to sell at prices lower than the developing countries. Thus, correct option is a).