Deck 6: Political Economy of Trade

Question 1

Which of the following statements is true of local content requirements?

A) It is a strategy mainly used by developed nations.
B) This strategy enforces companies to locate their manufacturing facilities in their home countries.
C) Local content requirements hurt domestic producers through their effect on prices.
D) It forces companies from other countries to employ local resources in their production processes.

Answer 1

D

Question 2

Which of the following do products designated as dual use require before exports can take place?

A) currency controls
B) countervailing duties
C) special government approval
D) local content requirements

Answer 2

C

Question 3

Free trade ________.

A) is another term for managed trade
B) implies that the national government exerts minimal influence on the exporting and importing decisions of private firms
C) proposes that national governments should directly help domestic firms by providing export subsidies and tax breaks
D) suggests that the national government should actively intervene to ensure that domestic firms' exports receive an equitable share of foreign markets and that imports are controlled to minimize losses of domestic jobs and market share in specific industries

Answer 3

B

Question 4

Scenario: Not-So-Free Freeland
Freeland is a semi-closed economy whose government believes in protecting national identity and building a self-sustained economy. The government's priority is to protect local jobs and provide opportunities to Freeland's emerging industries to flourish without the threat of external competition.
Which of the following motives is least likely attributed to Freeland's restriction on free trade?

A) political motives
B) economic motives
C) social motives
D) cultural motives

Question 5

Scenario: Not-So-Free Freeland
Freeland is a semi-closed economy whose government believes in protecting national identity and building a self-sustained economy. The government's priority is to protect local jobs and provide opportunities to Freeland's emerging industries to flourish without the threat of external competition.
Which of the following motives illustrates Freeland's efforts to protect local jobs?

A) political motive
B) economic motive
C) cultural motive
D) social motive

Question 6

Which of the following statements is true about cultural influences?

A) Culture and trade are independent of each other.
B) Unwanted cultural influence in a nation can cause governments to block imports that it believes are harmful.
C) The cultures of countries are independent of the effects of exposure to the people and products of other cultures.
D) The culture of the United States is readily adapted into the local culture of countries all over the world.

Question 7

The purpose of ________ is to force companies from other nations to use local resources in their production processes,particularly labor.

A) administrative delays
B) currency controls
C) local content requirements
D) voluntary export restraints

Question 8

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

Question 9

Scenario: Not-So-Free Freeland
Freeland is a semi-closed economy whose government believes in protecting national identity and building a self-sustained economy. The government's priority is to protect local jobs and provide opportunities to Freeland's emerging industries to flourish without the threat of external competition.
Freeland's protection of its national identity is an example of a(n)________.

A) political motive
B) economic motive
C) cultural motive
D) social motive

Question 10

________ refers to the unwanted cultural influence in a nation that can cause great distress and lead governments to block imports it believes to be harmful.

A) Cultural imperialism
B) Cultural protectionism
C) Dumping
D) Capitalism

Question 11

________ can occur when a firm sells its goods in a foreign market at a price below what it charges in its home market.

A) Predatory pricing
B) Dumping
C) Foreign trade duties
D) Subsidies

Question 12

The protection of infant industries by a nation's government can cause domestic companies to become complacent toward innovation.

Question 13

Which of the following is an example of a dual use product?

A) a blowdryer
B) a GPS navigation device
C) a food processor
D) a vacuum cleaner

Question 14

Which of the following countries is seen as a threat to national cultures around the world?

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

Question 15

Scenario: Not-So-Free Freeland
Freeland is a semi-closed economy whose government believes in protecting national identity and building a self-sustained economy. The government's priority is to protect local jobs and provide opportunities to Freeland's emerging industries to flourish without the threat of external competition.
Freeland's efforts to provide opportunities to its emerging industries is an example of its ________.

A) political motive
B) economic motive
C) cultural motive
D) social motive

Question 16

A(n)________ is calculated to offset the advantage an exporter receives from a subsidy.

A) compound tariff
B) export promotion
C) countervailing duty
D) substitution tariff

Question 17

The most common economic reasons for nations' attempts to influence international trade are the protection of young industries from competition and the promotion of a strategic trade policy.

Question 18

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

A) promotion of strategic trade policies
B) protection of jobs
C) protection of national identity
D) protection of young industries from competition

Question 19

Which of the following is true of government interventions in a country's trade practices?

A) Lower restrictions should be placed on products coming from countries where a government has a large sphere of political influence.
B) A major political motive behind government intervention in trade is the protection of infant industries.
C) Government interventions help companies take advantage of economies of scale and be the first movers in their industries.
D) Governments intervene to protect only imports, as the protection of exports is handled by private agencies.

Question 20

Managers should understand the effect of trade protectionism because ________.

A) trade protectionism may limit the number of people permitted to practice a specific profession
B) trade protectionism requires the payment of high insurance rates to transport goods internationally
C) trade protectionism may prevent companies' enactment of merger and acquisition agreements
D) trade protectionism may make it difficult for a company to buy what it needs from foreign suppliers

Question 21

Explain why job protection is a political motive for governments to restrict free trade.Why might a government interested in job protection insist on local content requirements for international firms doing business in that country?

Question 22

A(n)________ is a geographic area where imported or exported goods receive preferential tariff treatment.

A) free trade zone
B) foreign trade zone
C) fair trade zone
D) economic incentive zone

Question 23

The protection of infant industries by a nation's government can cause more economic harm than good.

Question 24

Country X protects its domestic manufacturers from foreign competition by using a variety of nontariff barriers.Which of the following is not one of those nontariff barriers?

A) foreign trade zones
B) product standards
C) regulatory controls
D) local purchase requirements

Question 25

Which of the following would most likely be used as a subsidy to entice firms to locate or expand facilities in a particular community?

A) quotas
B) an embargo
C) a granting of corporate citizenship status
D) reduced utility rates

Question 26

Which of the following is a method of restricting trade?

A) export financing
B) local content requirements
C) subsidy
D) foreign trade zones

Question 27

Describe the role of special government agencies in promoting exports and imports.

Question 28

Which of the following is an instrument that governments use to promote trade?

A) embargoes
B) tariffs
C) export financing
D) administrative delays

Question 29

The Export-Import Bank of the United States provides financing for U.S.exports through direct loans and loan guarantees.

Question 30

Government trade promotion agencies ________.

A) enable imports at discounts
B) set up foreign trade zones across the country
C) advertise in other countries to promote the nation's exports
D) place voluntary export restraints on companies that fail to export adequately

Question 31

Describe the main political motives behind government intervention in trade.

Question 32

Which of the following statements is true of export financing?

A) Small businesses that have just started to export are financially stable and seldom require financing from government agencies.
B) The Ex-Im Bank finances the export activities of companies all over the world.
C) Governments usually offer loans to exporters with above-market interest rates.
D) Governments may promote exports by offering loan guarantees.

Question 33

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

Question 34

Describe each instrument that governments use to promote trade.

Question 35

Tariffs are taxes placed on goods being imported into a country.A tariff can act as a barrier to trade by increasing the cost of the imported goods to the consumers.

Question 36

What is meant by dumping? Describe the various roles of the World Trade Organization,including when a country is accused of dumping.

Question 37

The major purpose of foreign trade zones is to implement barriers to trade and commerce.

Question 38

Which of the following financial companies in the United States is involved in activities of selling of goods abroad,and offers insurance on foreign accounts receivable?

A) National Cooperative Bank
B) Overseas Private Investment Corporation
C) Export-Import Bank
D) Inter-American Development Bank

Question 39

A foreign trade zone is primarily used by governments to ________.

A) protect currency rates
B) enforce tariffs and duties
C) monitor foreign investments
D) spur economic development

Question 40

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

Question 41

A(n)________ is an absolute ban on the exporting and importing of goods to a particular destination.

A) voluntary export restraint
B) embargo
C) ad valorem tariff
D) tariff rate quota

Question 42

Which of the following statements is true of tariffs?

A) Tariffs increase an imported product's appeal to buyers.
B) Transit tariffs are the most widely-levied tariffs.
C) Ad valorem tariffs are levied as a specific fee for each unit of an imported product.
D) Export tariffs are used by countries when they believe an export's price is lower than it should be.

Question 43

A ________ is a numerical limit on the quantity of a good that may be imported into a country during some time period.

A) quota
B) numerical export control
C) voluntary export restraint
D) regulatory control

Question 44

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

A) embargo
B) ad valorem tariff
C) compound tariff
D) voluntary export restraint

Question 45

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

A) specific
B) compound
C) ad valorem
D) transit

Question 46

A(n)________ tariff (or duty)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.

A) specific
B) compound
C) ad valorem
D) transit

Question 47

Which of the following statements is true of tariffs?

A) They are the major source of government revenue in developed nations.
B) They increase products' appeal to buyers.
C) They lower the effective prices of imports.
D) They protect domestic producers.

Question 48

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 ________.

A) local content requirements
B) import quotas
C) administrative delays
D) voluntary export restraints

Question 49

The U.S.government has decided to impose a tariff rate quota on sugar imports into the United States.Which of the following would benefit from this decision?

A) soft drink producers
B) domestic sugar producers
C) steel producers
D) consumers of sugar products

Question 50

The most common tariffs used today are the ________ tariffs.

A) import
B) transit
C) inverted
D) export

Question 51

A(n)________ imposes a low tariff rate on a limited amount of imports of a specified good,but imposes a prohibitively high tariff on the good above that limited amount.

A) tariff rate quota
B) numerical export control
C) voluntary export restraint
D) ad valorem tariff

Question 52

Which of the following is true of quotas?

A) They are the most common type of trade barrier.
B) They help domestic producers maintain their market shares and prices.
C) Their licenses are granted by governments to other nation companies on a five-year basis.
D) They lead to a decrease in the prices of intermediate goods.

Question 53

Products manufactured in Brazil are transported through Mexico on their way to England.Mexico applies a tariff on the goods.What type of tariff is implemented by Mexico?

A) transit tariff
B) ad valorem tariff
C) export tariff
D) compound tariff

Question 54

A country imposes a tariff on goods that it sells abroad at the request of another nation.This is an example of a(n)________.

A) embargo
B) ad valorem tariff
C) compound tariff
D) voluntary export restraint

Question 55

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

A) specific
B) compound
C) ad valorem
D) transit

Question 56

________ make it more difficult for importers of nonessential goods to acquire foreign exchange.

A) Currency controls
B) Restricted access to distribution networks
C) Numerical export controls
D) Public-sector procurement policies

Question 57

Regulatory controls or bureaucratic rules designed to impair the rapid flow of imports into a country are called ________.

A) local content requirements
B) administrative delays
C) voluntary export restraints
D) import quotas

Question 58

Which of the following will add to the cost of an imported product by levying an additional tax upon it?

A) tariffs
B) quotas
C) local content requirements
D) embargoes

Question 59

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

A) developed countries
B) developing countries
C) western nations
D) First World nations

Question 60

Which of the following is an import tariff?

A) transit tariff
B) ad valorem tariff
C) sua sponte tariff
D) complex tariff

Question 61

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

Question 62

An embargo is the most restrictive nontariff trade barrier available.

Question 63

Tariffs tend to exact a cost on countries as a whole because they reduce consumer choices.

Question 64

Scenario: Excelsior's Limited
Excelsior's Limited, a manufacturer of health and beauty aids, is expanding its presence in several countries around the world. Excelsior's president is surprised at some of the responses the company is receiving from other countries.
France gave Excelsior's Limited permission to export its product as long as the company obtained a special license first.Excelsior has been waiting six months for the license and is wondering if it will ever arrive.Excelsior's Limited is experiencing a(n)________.

A) administrative delay
B) local content requirement
C) embargo
D) currency control

Question 65

Tariffs are a source of government revenue mostly among developing nations.

Question 66

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

Question 67

Restrictions on the convertibility of one currency into others is called currency controls.

Question 68

The automobile industry is typically protected for national security reasons.

Question 69

Consumers are benefitted when a government imposes import quotas on products.

Question 70

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

Question 71

Scenario: Konesia Joins the World
Konesia, a former totalitarian economy and pariah state, is taking steps toward a free market economy. The government wants to encourage trade but also wants to find a balance so that local businesses and industries are not harmed.
If Konesia chooses to levy tariffs as a percentage of the stated price of an imported product,this would be an example of a(n)________.

A) compound tariff
B) specific tariff
C) ad valorem tariff
D) tariff-quota

Question 72

Scenario: Konesia Joins the World
Konesia, a former totalitarian economy and pariah state, is taking steps toward a free market economy. The government wants to encourage trade but also wants to find a balance so that local businesses and industries are not harmed.
Which of the following is the most likely reason for Konesia's government to impose an import quota?

A) to maintain adequate supplies of a product in the home market
B) to maintain market shares and prices of domestic producers
C) to restrict the supply of a product to world markets
D) to maintain the exports of a product at target levels

Question 73

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

Question 74

Products that are of use in both industrial and military applications are designated as dual-use products.

Question 75

Scenario: Konesia Joins the World
Konesia, a former totalitarian economy and pariah state, is taking steps toward a free market economy. The government wants to encourage trade but also wants to find a balance so that local businesses and industries are not harmed.
Which of the following would be Konesia's least appropriate method to restrict unwanted trade?

A) introduce an administrative delay
B) impose a quota
C) reduce tariffs
D) impose a currency control

Question 76

Scenario: Excelsior's Limited
Excelsior's Limited, a manufacturer of health and beauty aids, is expanding its presence in several countries around the world. Excelsior's president is surprised at some of the responses the company is receiving from other countries.
Excelsior's Limited tried to sell its product in Canada,but was told that at least forty percent of the product must be manufactured in Canada.This is an example of a(n)________.

A) administrative delay
B) local content requirement
C) tariff
D) embargo

Question 77

________ can occur when a firm sells its goods in a foreign market at a price below what it charges in its home market.

A) Predatory pricing
B) Dumping
C) Foreign trade duties
D) Subsidies

Question 78

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

Question 79

Scenario: Excelsior's Limited
Excelsior's Limited, a manufacturer of health and beauty aids, is expanding its presence in several countries around the world. Excelsior's president is surprised at some of the responses the company is receiving from other countries.
When Excelsior's Limited tried to convert its earnings from one country,the government stipulated that the company had to exchange its currency at a very unfavorable rate.This is an example of a(n)________.

A) administrative delay
B) currency control
C) subsidy
D) tariff

Question 80

Customs duties decrease the total amount of a good's production cost.