Deck 6: Business-Government Trade Relations

Question 1

The infant industry argument states that a country's emerging industries need protection from international competition during their development phase until they become sufficiently competitive internationally.

Answer 1

True

Question 2

Legitimate national security reasons for intervention can be difficult to argue against, particularly when they have the support of most of a country's people.

Answer 2

True

Question 3

The theory of comparative advantage states that the country having a comparative advantage in the production of a certain good will produce that good when barriers to trade do not exist.

Answer 3

True

Question 4

Governments may intervene in markets to protect both imports and exports in industries deemed essential to national security.

Question 5

Protecting jobs, preserving national security, responding to other nations' unfair trade practices, and gaining influence over other nations are all political motives behind government intervention in trade.

Question 6

Because of the efforts of supranational organizations such as the World Trade Organization, nations around the world have completely eliminated barriers to trade.

Question 7

The pattern of imports and exports that would result in the absence of trade barriers is called free trade.

Question 8

If one government thinks another nation is not playing fairly, it will often threaten to play unfair unless certain concessions are agreed.

Question 9

Supporters of strategic trade policy believe that government intervention can help companies take advantage of economies of scale and be the first movers in their industries.

Question 10

When products have both military and industrial applications, they are designated dual-use products.

Question 11

Agriculture is typically protected for national security reasons.

Question 12

The infant industry argument says government financial support is not necessary for small, promising companies because they find it is easy to obtain funding in capital markets.

Question 13

Protecting infant industries can cause domestic companies to become complacent toward innovation.

Question 14

Protection of domestic industries in Japan has caused a two-tier economy to emerge.

Question 15

The most common economic reason for nations' attempts to influence international trade is preserving national security.

Question 16

Given that agriculture involves very little technology and sophistication, exposing agribusiness to market forces is a recipe for failure.

Question 17

The main disadvantage of protection from import competition is the added cost of continuing to produce a good or service that could be supplied more efficiently by an international supplier.

Question 18

The infant industry argument makes it easy to distinguish between industries that are worth protecting and those that are not.

Question 19

A primary reason why the United States maintains its embargo on Cuba is the potential to influence internal politics.

Question 20

Industries considered essential to national security often receive government-sponsored protection.

Question 21

Creation of foreign trade zones caused development of companies called maquiladoras along the border inside Mexico.

Question 22

South Korean global conglomerates are known as guanxi.

Question 23

A tariff levied by the government of a country that a product is passing through on its way to its final destination is called an import tariff.

Question 24

While producers that receive tariff protection can gain a price advantage initially, in the long run protection can keep them from increasing efficiency.

Question 25

The main cultural motives behind government intervention in trade include protecting jobs and preserving national security.

Question 26

Nations often restrict trade in goods and services to achieve cultural objectives, the most common being protection of national identity.

Question 27

Governments not only promote trade by encouraging exports but can also encourage imports that the nation does not or cannot produce.

Question 28

Receiving financing from government agencies is often crucial to the success of small businesses just beginning to export.

Question 29

A common purpose of many companies' facilities in foreign trade zones is final product assembly.

Question 30

Through the World Trade Organization, exporters and those companies investing abroad can insure against loss of assets in a nation.

Question 31

Supporters of strategic trade policy argue that it results in decreased national income.

Question 32

Financial assistance to domestic producers in the form of cash payments, low-interest loans, tax breaks, and product price supports are all types of antidumping duties.

Question 33

French law bans foreign-language words from virtually all business and government communications, radio, TV broadcasts, public announcements, and advertising messages.

Question 34

Unwanted cultural influence in a nation can cause governments to block imports that it believes are harmful.

Question 35

A compound tariff is levied on an imported product and calculated partly as a percentage of its stated price, and partly as a specific fee for each unit.

Question 36

Taken together, small businesses account for over 80 percent of all transactions handled by the Export-Import Bank.

Question 37

The beauty of strategic trade policy is that it has no drawbacks; everybody is a winner.

Question 38

More than any other nation, the United States is seen as a threat to national cultures around the world.

Question 39

The World Trade Organization usually settles arguments involving subsidies quickly and easily.

Question 40

Transit tariffs have been almost eliminated worldwide through trade agreements.

Question 41

Tariffs tend to exact a cost on countries as a whole because they lessen citizens' gains from trade.

Question 42

The three main goals of the World Trade Organization are to help the free flow of trade, to help negotiate further opening of markets, and to settle trade disputes between its members.

Question 43

An embargo is the most restrictive nontariff barrier available and is typically applied to accomplish political goals.

Question 44

The General Agreement on Tariffs and Trade (GATT) was a treaty designed to promote free trade by reducing tariffs and nontariff barriers to international trade, and which has since been absorbed into the World Trade Organization (WTO).

Question 45

A voluntary export restraint (VER) refers to a quota that a nation imposes on its exports, usually at the request of another nation.

Question 46

When a company exports a product at a price higher than the price normally charged in its domestic market, it is said to be dumping.

Question 47

The two main reasons countries levy tariffs are to protect domestic producers and to generate revenue.

Question 48

A restriction on the amount of a good that can enter or leave a nation during a certain period of time is called a tariff.

Question 49

When one World Trade Organization member files a complaint against another, decisions are to be rendered in less than one year nine months if the case is urgent and 15 months if the case is appealed.

Question 50

A government may impose import quotas to force companies from other nations to compete against one another for the limited amount of imports allowed.

Question 51

A voluntary export restraint (VER) is the most restrictive nontariff trade barrier available and is typically applied to accomplish military goals.

Question 52

Export quotas hurt consumers in importing nations because of reduced selection and perhaps higher prices.

Question 53

A country may impose export quotas to protect its domestic producers from international competition.

Question 54

Although dumping is an act by a company, not a country, the World Trade Organization punishes the country where the company doing the dumping is based.

Question 55

Governments impose trade barriers for all of the following reasons EXCEPT ________.

A) to protect national security
B) to gain influence over other nations
C) to respond to other nation's fair trade practices
D) to protect jobs

Question 56

Which of the following is NOT a reason why governments impose restrictions on free trade?

A) Cultural reasons
B) Genealogical reasons
C) Political reasons
D) Economic reasons

Question 57

Restricting the convertibility of one currency into others is called administrative delay.

Question 58

A countervailing duty is an additional tariff placed on an imported product that a nation believes is receiving an unfair subsidy.

Question 59

The pattern of imports and exports that occurs in the absence of trade barriers is called ________.

A) an embargo
B) protectionism
C) the infant industry argument
D) free trade

Question 60

The purpose of local content requirements is to force companies from other nations to employ local resources in their production processes.

Question 61

The ________ argument says that a country's emerging industries need protection from international competition during their development.

A) national security
B) infant industry
C) strategic trade policy
D) GATT treaty

Question 62

Which of the following is a political motive behind government intervention in trade?

A) Promote a strategic trade policy
B) Gain influence over other nations
C) Protect national identity
D) Protect young industries from competition

Question 63

Which of the following is NOT true?

A) Governments intervene in markets to ensure access to a domestic supply of certain items in the event that war could restrict their availability.
B) Industries considered essential to national security often receive government-sponsored protection.
C) Governments may intervene to protect both imports and exports.
D) It is difficult to make the case to protect industries for the purpose of preserving national security.

Question 64

Each of the following can be the result of protection from international competition EXCEPT ________.

A) consumers often end up paying more for products
B) there are fewer incentives to cut production costs or improve quality
C) companies become more reliant on protection
D) strategic trade policy dictates trading patterns

Question 65

Which of the following is NOT a political motive behind government intervention in trade?

A) Respond to other nation's unfair trade practices
B) Preserve national security
C) Protect jobs
D) Protect young industries from competition

Question 66

French law bans foreign-language words from virtually ________.

A) all business and government communications
B) radio and TV broadcasts
C) public announcements
D) All of the above

Question 67

Unwanted cultural influence in a nation is referred to as ________.

A) cultural protectionism
B) cultural imperialism
C) cultural capitalism
D) cultural dumping

Question 68

Which of the following is causing farmers to increase their efficiencies in many developed nations?

A) Protection under national security guidelines
B) Exposing agribusiness to market forces
C) Providing extensive government subsidies
D) Labeling agricultural products as dual-use

Question 69

Which of the following industries is typically protected for national security reasons?

A) Agriculture
B) Textile
C) Cosmetics
D) Housing

Question 70

The term "chaebol" refers to ________.

A) Japanese multinational powerhouses
B) South Korean global conglomerates
C) Vietnamese free trade policies
D) Chinese personal relationships

Question 71

All of the following are true EXCEPT ________.

A) a major drawback of protection is the added cost of continuing to produce a good or service that could be supplied more efficiently by an international supplier
B) agriculture is typically protected for national security reasons
C) once a policy of protection is adopted, it may remain in place longer than needed
D) none of the above

Question 72

Products designated as dual use require ________ before export can take place.

A) multi-language translation documents
B) better consumer-use instructions
C) special government approval
D) World Trade Organization clearance

Question 73

Which of these is the main cultural motive behind government intervention in trade?

A) Promote a strategic trade policy
B) Protect jobs
C) Protect national identity
D) Protect young industries from competition

Question 74

When a product has both industrial and military applications, they are said to have ________.

A) cultural imperialism
B) a free trade designation
C) an unfair trade advantage
D) dual uses

Question 75

Which of the following is NOT a problem associated with the infant industry argument?

A) It can cause domestic companies to become overly innovative.
B) Once protection of an industry is given, it can be politically difficult to eliminate.
C) Protection can do more economic harm than good.
D) Governments might have difficulty identifying the industries worth protecting.

Question 76

Which of these countries are seen as a threat to national cultures around the world?

A) United States
B) India
C) Russia
D) France

Question 77

Which of the following is an economic motive for nations' attempts to influence international trade?

A) Pursue strategic trade policy
B) Protect jobs
C) Respond to "unfair" trade
D) Preserve national security

Question 78

Which of the following is NOT an instrument that government uses to promote trade?

A) Tariffs
B) Subsidies
C) Export financing
D) Foreign trade zones

Question 79

The notion that as an industry grows and matures it gains the knowledge it needs to become more innovative, efficient, and competitive is known as the ________.

A) maturing industry argument
B) infant industry argument
C) entrant industry argument
D) extant industry argument

Question 80

________ believe that government intervention can help companies take advantage of economies of scale and be the first movers in their industries.

A) Opponents of globalization
B) New trade theorists
C) Critics of strategic trade policy
D) Cultural imperialists