Question 1

Canada wishes to import no more than 100 million tons of sugar from Brazil in any given year. What type of import restriction should it impose?

Accepted Answer

An import quota is a restriction on the quantity of a good that can be imported. In this case, Canada wishes to limit the amount of sugar it imports from Brazil to no more than 100 million tons in any given year. So, imposing an import quota would be the appropriate choice. An import duty is a tax imposed on imported goods, but it does not limit the quantity of imports. An embargo is a complete ban on imports, which is not necessary in this case. Export duty is a tax imposed on exported goods, which is not relevant either as Canada is the importer, not the exporter.

Question 2

If a country raises its import quota for cars, what is the desired effect of this change?

Accepted Answer

By raising the import quota for cars, the desired effect is to increase the amount of car imports allowed into the country. This is done to provide consumers with more choices and access to a wider variety of cars.

Question 3

Suppose that Peru increases tariffs on food products imported from Mexico. What is the desired effect of this tariff?

Accepted Answer

By increasing tariffs on food products imported from Mexico, Peru aims to make these products more expensive for consumers, making them less attractive and reducing their demand. This will likely lead to a decrease in imports from Mexico, hence reducing competition for local producers and potentially boosting domestic industries. Therefore, the desired effect of this tariff is to increase the price of imports and decrease their amount.

Question 4

What is the term for a limit on the amount of a particular good that may be brought into a country during a given period of time?

Accepted Answer

An import quota is a limit on the amount of a particular good that may be brought into a country during a given period of time. An import duty is a tax on imported goods, a trade embargo is a complete ban on trade with a particular country, and an import tariff is a tax on imported goods that is often used to protect domestic industries.

Question 5

Canada imposes a duty on Scotch whisky to generate income for the Canadian government. What is the term for this type of tariff?

Accepted Answer

A revenue tariff is a type of tariff that is imposed on imported goods primarily to generate revenue for the government rather than to protect domestic industries or restrict trade. In this case, the duty imposed on Scotch whisky is intended to generate income for the Canadian government, making it a revenue tariff. Protective tariffs are designed to protect domestic industries from foreign competition, while restrictive tariffs are meant to restrict the flow of imports into a country. Income tariffs are not a commonly used term in the context of international trade.

Question 6

During a stormy meeting of wearable technology firms, several company presidents said that without tariff cushions, many of them would go broke. They represent a new industry where companies need protection until they grow to a size that will allow them to be competitive. As a result, these companies would like to see which of the following?

Accepted Answer

The company presidents are asking for tariff cushions, which implies that they want protection from foreign competition. This can only be achieved through an increase in import tariffs. Therefore, the best choice is B.

Question 7

Canadian automakers are concerned about the availability of so many foreign cars to Canadian consumers, which they fear could cause loss of jobs in the Canadian auto industry. To address the situation, they encourage Parliament to do which of the following?

Accepted Answer

Increasing import tariffs would make foreign cars more expensive for Canadian consumers, potentially making them more likely to buy Canadian-made cars instead. This would help to support Canadian jobs in the auto industry. Increasing export quotas or import quotas would not necessarily address the issue of foreign cars being available to Canadian consumers, and decreasing import tariffs could make it even easier for consumers to choose foreign cars over Canadian-made ones.

Question 8

When Canada levies a tax on textiles from India, this tax is a type of which of the following?

Accepted Answer

A tax on textiles from India levied by Canada is a type of tariff, which is a tax on imported goods.

Question 9

Germany wants to retaliate against India for trade restrictions that limited the number of German cars that could be brought into India. Which of the following policy decisions would Germany utilize to accomplish this goal?

Accepted Answer

Germany would adjust import tariffs on cars from India from 5% to 20% to retaliate against India's trade restrictions. This would make it more expensive for Indian car manufacturers to sell cars in Germany and potentially decrease demand for Indian cars, thereby impacting India's economy. Option A would not accomplish Germany's goal as it would allow more cars from India to enter the German market. Option B would be too extreme and may not be a feasible option for Germany. Option C would not be a retaliatory measure and would not necessarily impact India's economy.

Question 10

Suppose that India changes the tariff on all imports from 40% to 10%. What is the desired effect of this change?

Accepted Answer

This change in the tariff is intended to decrease the price of imports and increase the amount of imports. With the lower tariff rate, foreign producers will be able to sell their products in India at a lower cost, making them more affordable and attractive to Indian consumers. As a result, the quantity of imported goods demanded within India is likely to increase.

Question 11

If the value of the Canadian dollar increases substantially relative to other currencies, what is the likely result?

Accepted Answer

When the value of the Canadian dollar increases, Canadian goods become more expensive for foreign buyers, leading to a decrease in exports. Conversely, foreign goods become cheaper for Canadians, leading to an increase in imports.

Question 12

When Canada levies a tax on coffee from Ecuador, what type of tax is involved?

Accepted Answer

When Canada levies a tax on coffee from Ecuador, it is a tariff. A tariff is a tax on imported goods.

Question 13

Suppose France increased the tariff on wine imported from Spain, and in retaliation Spain decreased the quota on perfumes France can export to Spain. What might one expect to be the result?

Accepted Answer

When France increases the tariff on wine imported from Spain, the price of Spanish wine in France will increase, and French consumers will likely turn to domestic wine or find alternatives. In retaliation, Spain could decrease the quota on perfumes France can export to Spain, causing the number of French perfumes imported to decrease. This could lead to higher prices for French perfumes in Spain.

Question 14

Which of the following is another name for an import duty?

Accepted Answer

An import duty is also known as a tariff.

Question 15

If Canada were to increase the tariff for steel by 50%, what would be the desired effect of this change?

Accepted Answer

Increasing the tariff for steel by 50% would make it more expensive for importers to bring steel into Canada, which would likely result in a decrease in the amount of steel imports. Additionally, making steel imports more expensive may also increase the price of steel imports. Therefore, the desired effect of this change would be both a decrease in the amount of steel imports and an increase in the price of steel imports.

Question 16

The United States bans Cuban cigars and other Cuban products from entering the United States because of political difficulties. What is this action called?

Accepted Answer

This action is called an embargo, which is a political and economic sanction that prohibits trade and commerce with a particular country or group of countries. In this case, the embargo prohibits the importation of Cuban goods into the United States.

Question 17

If Brazil lowers its import quota for oil from Saudi Arabia, what is the desired effect of this change?

Accepted Answer

Lowering the import quota implies that Brazil will be reducing the amount of oil it imports from Saudi Arabia. Thus, the desired effect is to decrease oil imports from Saudi Arabia.

Question 18

The Canadian Department of Finance likely raised tariffs on Chinese solar-product manufacturers in an effort to do which of the following?

Accepted Answer

The Canadian Department of Finance likely raised tariffs on Chinese solar-product manufacturers in an effort to give Canadian solar-product manufacturers an opportunity to gain market share. This is a protectionist measure to support domestic industry by making imports more expensive and less competitive, thereby providing an advantage for local producers.

Question 19

Suppose Canada would like to decrease the amount of lumber brought into the country from other countries. What trade policy should Canada enact to accomplish this goal?

Accepted Answer

By increasing tariffs on lumber imports, it would make it more expensive for businesses to import lumber from other countries, making Canadian lumber more competitive and desirable. This would incentivize businesses to purchase lumber from within Canada instead.

Question 20

Suppose Russia would like to increase the amount of luxury goods brought into the country from other countries. What trade policy should Russia enact to accomplish this goal?

Accepted Answer

Decreasing tariffs on luxury good imports would make them cheaper for Russian consumers, increasing the demand for these goods and incentivizing foreign producers to export more luxury goods to Russia. This would ultimately lead to an increase in the amount of luxury goods brought into the country. Increasing tariffs or lowering quotas would have the opposite effect, making luxury goods more expensive and reducing their availability in the Russian market. Devaluing the currency also would not necessarily lead to an increase in luxury imports, as it could also make all imports more expensive for Russian consumers.

Quiz 3: Exploring Global Business