Question 1

A restriction on the amount of a good that can enter or leave a country during a certain period of time is called a(n) ________.

Accepted Answer

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

Question 2

All of the following are true of quotas EXCEPT ________.

Accepted Answer

The statement "prices of intermediate goods always decrease" is not true of quotas. In fact, quotas can lead to higher prices for both imported and domestically produced goods.

Question 3

A ban on trade in one or more products with a particular country is called a(n) ________.

Accepted Answer

An embargo is a government-imposed ban on trade in one or more products with a particular country. Tariff-quota, tariff, and voluntary export restraint are all different trade barriers, but they do not necessarily involve a ban on trade with a particular country.

Question 4

Purposely understaffing customs offices to cause time delays, requiring special licenses that take a long time to obtain, and requiring air carriers to land at inconvenient airports are all examples of ________.

Accepted Answer

These are examples of administrative delays, which are non-tariff barriers used to slow down or complicate the import process through bureaucratic procedures.

Question 5

Which of the following is NOT a reason why countries impose export quotas?

Accepted Answer

Export quotas are typically imposed to achieve a variety of economic and political objectives, such as protecting domestic industries, conserving natural resources, and ensuring stable prices. However, the goal of forcing the companies of other nations to compete against each other is not a common rationale for export quotas.

Question 6

Which of the following is a reason why governments impose import quotas?

Accepted Answer

The answer of Which of the following is a reason...

Question 7

A ________ 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.

Accepted Answer

The described tariff is a compound tariff, which combines both a percentage of the product's price and a specific fee per unit. A specific tariff would only be a fixed fee per unit, while an ad valorem tariff would only be a percentage of the product's price. There is no such thing as a specialized tariff.

Question 8

A quota that a nation imposes on its exports, usually at the request of another nation, is called a(n) ________.

Accepted Answer

A voluntary export restraint is a quota that a nation imposes on its exports at the request of another nation, usually to avoid the imposition of more stringent trade barriers, such as tariffs, by the importing nation.

Question 9

A(n) ________ tariff is levied as a percentage of the stated price of an imported product.

Accepted Answer

An ad valorem tariff is a type of tariff that is levied as a percentage of the stated price of an imported product. This means that the amount of the tariff varies depending on the value of the imported product. Specific tariffs, on the other hand, are levied as a fixed amount per unit of the imported product, while compound tariffs are a combination of both ad valorem and specific tariffs. Specialized tariffs are not a commonly used term in trade policy.

Question 10

Which of the following is NOT a true statement about embargoes?

Accepted Answer

The statement that embargoes are used frequently today because they are easy to implement is not true. In fact, embargoes are relatively rare and used only when there are political or national security reasons for doing so. They can also be difficult to enforce and can have negative economic consequences for both the exporting and importing countries.

Question 11

Which of the following statements is NOT true?

Accepted Answer

Tariffs generally raise the effective prices of imports by making them more expensive than domestic products. Therefore, statement C is not true.

Question 12

All of the following statements are true of local content requirements EXCEPT ________.

Accepted Answer

Local content requirements typically benefit domestic producers by mandating the use of locally sourced materials, components, or labor in production processes. Option C is not true because local content requirements do not hurt domestic producers; rather, they protect them from competition by foreign producers who may have cost advantages due to lower wages, currency fluctuations or other factors. However, local content requirements may lead to higher prices for consumers, who have to pay more for goods and services that are subject to the restrictions.

Question 13

Suppose imports entering a nation under a quota limit of 8,500 tons of rice are charged a tariff of 15 percent, but subsequent imports of rice that do not make it under this quota limit are charged a tariff of 68 percent. This is an example of a(n) ________.

Accepted Answer

This is an example of a tariff-quota, which is a trade policy instrument that combines a tariff and a quota limit. The tariff is lower for imports that fall under the quota limit, while imports exceeding the quota limit face a higher tariff. This type of policy is often used by governments to protect domestic producers while still allowing for some level of trade.

Question 14

If a country stipulates that a specified amount of a good or service be supplied by producers in the domestic market, we call this restriction device a(n) ________.

Accepted Answer

A local content requirement is a trade barrier that mandates a particular percentage of components, material, or labor be sourced locally while manufacturing a good. The goal of local content requirements is to promote local industries and provide jobs to local workers, but it effectively limits international competition in the market.

Question 15

Using tariffs to generate government revenue is most common among ________.

Accepted Answer

Tariffs are often used by less-developed countries as a means of generating government revenue. This is because these countries typically have less diverse economies and are more dependent on exports, making it difficult for them to collect significant amounts of revenue through other means such as income or sales taxes. Developed countries tend to rely more on income and sales taxes, while emerging markets may use tariffs both for revenue and to protect domestic industries. Communist nations often heavily regulate foreign trade and may use tariffs primarily as a means of controlling imports.

Question 16

Tariff-quotas are used extensively in the trade of ________.

Accepted Answer

Tariff-quotas are often used to regulate the trade of agricultural products. They allow a certain amount of a product to be imported at a lower tariff rate, but if the quota is exceeded, a higher tariff rate applies. This helps to protect domestic agricultural producers and manage the balance of trade in these products.

Question 17

The most common tariff used today is the ________ tariff.

Accepted Answer

The most commonly used tariff today is the import tariff, which is a tax levied on imported goods. This is because many countries use import tariffs as a tool to protect their domestic industries from foreign competition and to generate revenue for the government. Transit tariffs are imposed on goods passing through a country, while government tariffs are used to regulate trade for national security or public health reasons. Export tariffs are levied on goods leaving a country and are used to discourage exports and keep domestic prices low.

Question 18

Countries might impose a(n) ________ in response to the threat of an import quota or total ban on a product by an importing nation.

Accepted Answer

A voluntary export restraint is a self-imposed limitation by an exporting country on the volume of its exports of a particular product, often to avoid more severe trade restrictions like quotas or bans from the importing country.

Question 19

A(n) ________ tariff is levied as a specific fee for each unit of an imported product.

Accepted Answer

A specific tariff is a fixed amount of tax per unit of imported goods. It is not based on the value of the product but on its physical quantity.

Question 20

A lower tariff rate for a certain quantity of imports and a higher rate for quantities that exceed the quota is called a(n) ________.

Accepted Answer

A tariff-quota is a trade policy that sets a lower tariff rate for a specified quantity of imports and a higher tariff rate for imports that exceed the quota. This is used by countries to protect their domestic industries while still allowing access to specific amounts of goods from other countries.

Quiz 6: Business-Government Trade Relations