Question 1

A common purpose of many companies' facilities in foreign trade zones is ________.

Accepted Answer

Facilities in foreign trade zones are often used for final product assembly to take advantage of duty deferral or reduction benefits.

Question 2

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

Accepted Answer

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Question 3

Describe each instrument that governments use to promote trade.

Accepted Answer

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Question 4

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

Accepted Answer

The major purpose of foreign trade zones is actually to promote international business and trade by reducing or eliminating certain restrictions, such as tariffs and customs duties. This allows businesses to store, process, and manufacture goods in the FTZ without the same financial burden as they would face outside of the zone.

Question 5

Which of the following statements is true of export financing?

Accepted Answer

Governments may promote exports by offering loan guarantees, which reduce the risk for lenders and make it easier and more affordable for exporters to obtain financing. Option A is incorrect as small businesses may initially struggle financially when starting to export. Option B is incorrect as the Ex-Im Bank only finances the export activities of U.S. companies. Option C is incorrect as governments usually offer loans to exporters with below-market interest rates to encourage exports.

Question 6

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

Accepted Answer

Unwanted cultural influence can be perceived as a threat to national identity and can lead to the government's decision to restrict the import of goods that are deemed to be culturally harmful. For example, some nations may ban the import of movies or TV shows that they believe promote values that are not in line with their own cultural norms.

Question 7

The main cultural motive behind government intervention in trade includes protection of domestic jobs.

Accepted Answer

Protection of domestic jobs is an economic motive, not a cultural one. Cultural motives typically involve preserving national identity and values.

Question 8

A designated geographic region in which merchandise is allowed to pass with lower customs duties and/or fewer custom procedures is called a(n)________.

Accepted Answer

A designated geographic region in which merchandise is allowed to pass with lower customs duties and/or fewer custom procedures is called a foreign trade zone. Free trade area refers to a region where a group of countries agree to reduce or eliminate trade barriers between themselves, while a single market is a type of trade bloc that allows the free movement of goods, services, and people within its member countries. Open border refers to a situation where there are no restrictions on the movement of people or goods between two countries.

Question 9

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?

Accepted Answer

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Question 10

Which of the following is a method of restricting trade?

Accepted Answer

Local content requirements specify that a certain percentage of imported goods must be produced locally, effectively limiting the amount of foreign goods that can be imported. This is a method of restricting trade. Export financing, subsidies, and foreign trade zones are methods of promoting trade.

Question 11

Describe the main political motives behind government intervention in trade.

Accepted Answer

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Question 12

Financial assistance given to domestic producers in the form of cash payments is an example of a(n)________.

Accepted Answer

Financial assistance in the form of cash payments is known as subsidy. This is given by the government to domestic producers to make their products more competitive in the market or to help them in case of losses.

Question 13

Transit tariffs have been almost entirely eliminated worldwide through international trade agreements.

Accepted Answer

Transit tariffs are fees charged on goods that pass through a country on their way to another country. These tariffs have been largely eliminated through international trade agreements such as the World Trade Organization's General Agreement on Tariffs and Trade (GATT).

Question 14

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?

Accepted Answer

The Export-Import Bank is a United States government agency that provides financing and insurance to facilitate exports and imports of goods and services. This includes offering insurance on foreign accounts receivable for companies selling goods abroad.

Question 15

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

Accepted Answer

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Question 16

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

Accepted Answer

As small businesses often do not have access to large amounts of capital, financing from government agencies can provide the necessary resources for them to start exporting and expand their business. This may include loans, grants, or other types of financial assistance to cover costs associated with exporting such as marketing, travel, and product development. Therefore, receiving financing from government agencies can be crucial to the success of small businesses just beginning to export.

Question 17

Which of the following statements is true of foreign trade zone?

Accepted Answer

Foreign trade zones allow international companies to store goods without paying taxes until they are shipped to other countries, making D the correct option. Option A is incorrect because fewer procedures lead to lower taxes instead of higher taxes. Option B is incorrect because foreign trade zones create job opportunities. Option C is incorrect because one of the benefits of foreign trade zones is that they waive import duties on goods stored within them.

Question 18

Government trade promotion agencies ________.

Accepted Answer

Government trade promotion agencies advertise in other countries to promote the nation's exports. This is typically done through marketing efforts such as trade shows, advertising campaigns, and delegations to foreign countries to showcase national goods and services. The goal is to increase the country's export sales, which benefits both local businesses and the overall economy. The other options listed are not typical functions of these agencies.

Question 19

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

Accepted Answer

Governments use export financing to provide financial assistance to businesses, especially small and medium-sized ones, to promote exports by increasing their competitiveness in foreign markets. Embargoes, tariffs, and administrative delays, on the other hand, restrict trade and make it less attractive for businesses to export.

Question 20

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

Accepted Answer

The protection of infant industries can lead to higher prices for consumers, less efficient use of resources, and less competition, which can ultimately harm the economy in the long run. Additionally, it can create an unhealthy dependence on government support and hinder innovation and growth in the industry.

Quiz 6: Political Economy of Trade