Question 1

Which of the following trade policy tools makes it mandatory for its importers who want to buy a foreign good to apply for an exchange permit?
A) Tariff
B) Import quota
C) Blocked currency
D) Government approval
E) Export levy

Accepted Answer

Government approval requires that importers who want to buy a foreign good must apply for an exchange permit, that is, permission to exchange an amount of local currency for foreign currency.

Question 2

In order to effectively secure foreign exchange, which of the following is most likely to be used by countries experiencing severe shortages of foreign exchange?
A) Privatization
B) Government approval
C) Spot pricing
D) Voluntary export restriction
E) Monopoly

Accepted Answer

Government approval to secure foreign exchange is often used by countries experiencing severe shortages of foreign exchange.

Question 3

In the context of monetary barriers, blockage is ideally accomplished when:
A) a country refuses to allow an importer to exchange its national currency for the country's currency.
B) two countries enter into a voluntary agreement to determine the value of their currencies.
C) a country applies a specific unit or dollar limit to a particular type of good.
D) money dealers limit the rate at which foreign currencies are exchanged.
E) the government of a country imposes a mandatory tax on goods entering at its borders.

Accepted Answer

In the context of monetary barriers, blockage is accomplished by refusing to allow an importer to exchange its national currency for the sellers' currency. In effect, blockage cuts off all importing or all importing above a certain level.

Question 4

An agreement signed willingly between the importing country and the exporting country for a restriction on the volume of exports is called a:
A) monetary barrier.
B) tariff restraint.
C) voluntary export restraint.
D) special interests' privilege.
E) balance-of-payments statement.

Accepted Answer

Similar to quotas are the voluntary export restraints (VERs) or orderly market agreements (OMAs). Common in textiles, clothing, steel, agriculture, and automobiles, the VER is an agreement between the importing country and the exporting country for a restriction on the volume of exports.

Question 5

Which of the following statements is true of tariffs?
A) They strengthen balance-of-payments positions.
B) They strengthen supply-and-demand patterns.
C) They increase special interests' privileges.
D) They strengthen international relations.
E) They promote competition.

Accepted Answer

In general, tariffs increase inflationary pressures, special interests' privileges, government control and political considerations in economic matters, and the number of tariffs.

Question 6

Which of the following types of nontariff barriers strictly falls under the category of specific limitations on trade?
A) Import credit discriminations
B) Export subsidies
C) Voluntary export restraints
D) Embargoes
E) Packaging, labeling, or marking standards

Accepted Answer

Quotas, embargoes, import licensing requirements, minimum import price limits, and proportional restrictions of foreign to domestic goods are the nontariff trade barriers that are classified under specific limitations on trade.

Question 7

The United States and other countries require some products (automobiles in particular) to contain a percentage of "local content" to gain admission to their markets. This is an example of the stringent usage of _____ to restrict trade.
A) exchange permits
B) embargoes
C) blocked currencies
D) standards
E) antidumping penalties

Accepted Answer

Nontariff barriers of the standards category include standards to protect health, safety, and product quality. The standards are sometimes used in an unduly stringent or discriminating way to restrict trade.

Question 8

An exchange permit can stipulate the:
A) quantity of goods that can be exchanged for a particular sum of foreign currency.
B) number of parties that can be involved in an exchange transaction.
C) amount to be exchanged that must be deposited in a local bank for a set period.
D) quality standards of the goods involved in an exchange.
E) number of times one party can avail exchange permits.

Accepted Answer

An exchange permit can stipulate that the amount to be exchanged must be deposited in a local bank for a set period prior to the transfer of goods.

Question 9

One country refuses to sell goods to its neighboring country based on the belief that the neighboring country harbors radicals and terrorists. In this case, the refusal is most accurately referred to as a(n):
A) antidumping penalty.
B) embargo.
C) monetary barrier.
D) orderly market agreement.
E) voluntary export restraint.

Accepted Answer

In this case, the refusal is most accurately referred to as an embargo. An embargo is a refusal to sell to a specific country.

Question 10

In the context of nontariff barriers, antidumping practices fall under the category of:
A) specific limitations on trade.
B) customs and administrative entry procedures.
C) standards.
D) governmental participation in trade.
E) charges on imports.

Accepted Answer

Administrative fees, valuation systems, antidumping practices, tariff classifications, and documentation requirements are collectively classified as customs and administrative entry procedures, which is a subtype of nontariff barriers.

Question 11

_____ is a nontariff barrier that was specifically designed to prevent foreign producers from using predatory pricing to take control of U.S. markets.
A) Quota
B) Embargo
C) Blocked currency
D) Antidumping law
E) Exchange permit

Accepted Answer

Antidumping laws were designed to prevent foreign producers from "predatory pricing," a practice whereby a foreign producer intentionally sells its products in the United States for less than the cost of production to undermine the competition and take control of the market.

Question 12

Tall Pine Plywood Company has just received a notice that a shipment of plywood (2 metric tons) has been rejected by the customs administration of the recipient country because the knotholes commonly found on a plywood sheet are too large. Which of the following categories of nontariff barriers primarily uses such quality issues as a trade barrier?
A) Quotas
B) Licenses
C) Embargoes
D) Boycotts
E) Standards

Accepted Answer

Standards are sometimes used in an unduly stringent or discriminating way to restrict trade, but the sheer volume of regulations in this category is a problem in itself. Nontariff barriers of this category include standards to protect health, safety, and product quality. As the customs administration of the recipient country has used the quality of goods imported as a reason for restricting trade, it has used standards as a nontariff barrier.

Question 13

Exporting countries primarily agree to voluntary export restraints (VERs) to:
A) minimize exposure in the importing country.
B) reduce market competitiveness.
C) avoid stiffer quotas being set by the importing country.
D) take over local industries of the importing country.
E) avoid criminal prosecution.

Accepted Answer

A voluntary export restraint (VER) is called voluntary because the exporting country sets the limits; however, it is generally imposed under the threat of stiffer quotas and tariffs being set by the importing country if a VER is not established.

Question 14

The fundamental difference between quotas and import licenses as a means of controlling imports is that:
A) import licenses have greater flexibility over quotas.
B) quotas impose specific limitations on trade, and import licenses take care of standards.
C) quotas are imposed on export goods, and import licenses are imposed on import goods.
D) for quotas, the exporting country sets the limits, but licenses are issued by the importing country.
E) unlike licenses, quotas limit quantities on a case-by-case basis.

Accepted Answer

The fundamental difference between quotas and import licenses as a means of controlling imports is the greater flexibility of import licenses over quotas.

Question 15

Which of the following is a defining characteristic of a voluntary export restraint (VER)?
A) International regulatory bodies set export or import limits.
B) The importing country can levy heavier import tariffs to override the VERs.
C) The exporting country sets the limits on the quantity it will export.
D) It is a mandatory tax imposed by a government on goods entering at its borders.
E) It is an absolute restriction against the importation of certain goods.

Accepted Answer

A voluntary export restraint (VER) is called voluntary because the exporting country sets the limits on its exports.

Question 16

In general, tariffs restrict:
A) inflationary pressures.
B) special interests' privileges.
C) government control in economic matters.
D) the number of reciprocal tariffs.
E) manufacturers' supply sources.

Accepted Answer

In general, tariffs restrict manufacturers' supply sources, choices available to consumers, and competition.

Question 17

The marketing manager for Grand Products wants to export the company's range of beer products to a Gulf country. However, he discovers that there is a complete restriction on the import of any form of liquor into that country. This is an accurate example of a(n) _____.
A) orderly market agreement
B) quota
C) monetary barrier
D) voluntary export restraint
E) boycott

Accepted Answer

A government boycott is an absolute restriction against the purchase and importation of certain goods and/or services from other countries. As the Gulf country mentioned in the scenario has absolutely restricted the importation of any form of liquor, it has issued a government boycott against liquor.

Question 18

Which of the following is an example of a nontariff trade barrier?
A) Compound duties
B) Revenue tariffs
C) Fees for administrative and custom entry procedures
D) Specific duties
E) Taxes imposed by governments on goods entering at its borders

Accepted Answer

Valuation systems, antidumping practices, tariff classifications, fees, and documentation requirements are collectively classified as customs and administrative entry procedures, which represent a subtype of nontariff barriers.

Question 19

_____ is the practice whereby a foreign producer intentionally sells its products in the United States for less than the cost of production to undermine the competition and take control of the market.
A) Basing point pricing
B) Spot pricing
C) Defensive pricing
D) Counterpoint pricing
E) Predatory pricing

Accepted Answer

Antidumping laws were designed to prevent foreign producers from predatory pricing. Violators are assessed antidumping duties for selling below cost and/or countervailing duties to prevent the use of foreign government subsidies to undermine American industry. Many countries have similar laws, and they are allowed under WTO rules.

Question 20

A specific unit or dollar limit applied to a particular type of good is called a(n):
A) trade license.
B) quota.
C) asterisk bill.
D) predatory price.
E) exchange rate.

Accepted Answer

A quota is a specific unit or dollar limit applied to a particular type of good.

Quiz 2: The Dynamic Environment of International Trade

Which of the following trade policy tools makes it mandatory for its importers who want to buy a foreign good to apply for an exchange permit?

In order to effectively secure foreign exchange, which of the following is most likely to be used by countries experiencing severe shortages of foreign exchange?

In the context of monetary barriers, blockage is ideally accomplished when:

An agreement signed willingly between the importing country and the exporting country for a restriction on the volume of exports is called a:

Which of the following statements is true of tariffs?

Which of the following types of nontariff barriers strictly falls under the category of specific limitations on trade?

The United States and other countries require some products (automobiles in particular) to contain a percentage of "local content" to gain admission to their markets. This is an example of the stringent usage of _____ to restrict trade.

An exchange permit can stipulate the:

One country refuses to sell goods to its neighboring country based on the belief that the neighboring country harbors radicals and terrorists. In this case, the refusal is most accurately referred to as a(n) :

In the context of nontariff barriers, antidumping practices fall under the category of:

_____ is a nontariff barrier that was specifically designed to prevent foreign producers from using predatory pricing to take control of U.S. markets.

Exporting countries primarily agree to voluntary export restraints (VERs) to:

The fundamental difference between quotas and import licenses as a means of controlling imports is that:

Which of the following is a defining characteristic of a voluntary export restraint (VER) ?

In general, tariffs restrict:

The marketing manager for Grand Products wants to export the company's range of beer products to a Gulf country. However, he discovers that there is a complete restriction on the import of any form of liquor into that country. This is an accurate example of a(n) _____.

Which of the following is an example of a nontariff trade barrier?

_____ is the practice whereby a foreign producer intentionally sells its products in the United States for less than the cost of production to undermine the competition and take control of the market.

A specific unit or dollar limit applied to a particular type of good is called a(n) :