International Business: The Challenges of Globalization, 7e (Wild)
Chapter 6 Business-Government Trade Relations
1) The pattern of imports and exports that would result in lesser trade barriers is called free trade.
2) Industries considered essential to national security often receive government-sponsored
protection.
3) 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.
4) The automobile industry is typically protected for national security reasons.
5) Products that are of use in both industrial and military applications are designated as dual-use
products.
6) The most common economic reason for nations attempts to influence international trade is
preserving national security.
7) The protection of infant industries by a nation’s government can cause domestic companies to
become complacent toward innovation.
8) The protection of infant industries by a nation’s government can cause more economic harm
than good.
9) The main cultural motive behind government intervention in trade includes protection of
domestic jobs.
10) Unwanted cultural influence in a nation can cause governments to block imports that it
believes are harmful.
11) Receiving financing from government agencies is often crucial to the success of small
businesses just beginning to export.
12) The major purpose of foreign trade zones is to implement barriers to trade and commerce.
13) Customs duties decrease the total amount of a good’s production cost.
14) An import tariff is levied by the government of a country that a product is passing through on
its way to its final destination.
15) Transit tariffs have been almost entirely eliminated worldwide through international trade
agreements.
16) 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.
17) Tariffs are a source of government revenue mostly among developing nations.
18) Tariffs tend to exact a cost on countries as a whole because they lessen citizens’ gains from
trade.
19) Consumers are benefitted when a government imposes import quotas on products.
20) A voluntary export restraint refers to a quota that a nation imposes on its exports, usually at
the request of another nation.
21) An embargo is the most restrictive nontariff trade barrier available.
22) Restrictions on the convertibility of one currency into others is called administrative delays.
23) When one World Trade Organization member files a complaint against another, decisions are
to be rendered in less than one year.
24) When a company exports a product at a price higher than the price normally charged in its
domestic market, it is said to be dumping.
25) The World Trade Organization can punish a country in which a company accused of
dumping is based.
26) The pattern of imports and exports that occurs in the absence of trade barriers is called
________.
A) vertical integration
B) autarky
C) protectionism
D) free trade
27) Which of the following is a political motive behind a government’s intervention in trade?
A) promoting a strategic trade policy
B) gaining influence over other nations
C) protecting a country from unwanted cultural influence
D) protecting young industries from competition
28) Which of the following is true of government interventions in a country’s trade practices?
A) A major economic motive behind government intervention in trade is the protection of jobs.
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.
29) Which of the following industries is typically protected for national security reasons?
A) agriculture
B) textile
C) automobile
D) housing
30) Which of the following is prompting farmers in many developed nations to discover new
ways to manage risk and increase agricultural efficiency?
A) enforcement of trade embargoes and tariffs
B) exposure of agribusiness to market forces
C) provision of extensive government subsidies
D) designation of agricultural products as dual use products
31) 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
32) 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
33) Which of the following best describes the infant industry argument?
A) It states that small businesses that have just started to export are financially stable and seldom
require financing from government agencies.
B) It states that protecting a country’s emerging industries from international competition will
enhance domestic companies’ incentives to obtain knowledge to be competitive.
C) It states that a country’s emerging industries need protection from international competition
during their development until they become sufficiently competitive.
D) It states that domestic companies that are provided protection from international competition
become more competitive and less reliant on protection.
34) ________ 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
35) According to the ________ argument, as an industry grows and matures, it gains the
knowledge it needs to become more innovative, efficient, and competitive.
A) maturing industry
B) infant industry
C) standardized product
D) developing economy
36) Which of the following is true regarding the protection of infant industries from international
competition?
A) It is difficult for governments to identify the industries worth protecting.
B) Protection of infant industries helps domestic companies become innovative.
C) Protection from competition leads to improved quality and lower prices.
D) Protection leads to more economic good than harm.
37) Which of the following is a result of the protection of domestic companies from international
competition?
A) Consumers need to pay lesser for products.
B) There are increased incentives to cut production costs and improve quality.
C) Companies become more reliant on protection.
D) Protection increases a company’s incentives to obtain the knowledge it needs to become more
competitive.
38) 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
39) 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
world.
40) 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
41) Which of the following is an instrument that governments use to promote trade?
A) embargoes
B) tariffs
C) export financing
D) administrative delays
42) Financial assistance given to domestic producers in the form of cash payments is an example
of a(n) ________.
A) ad valorem tariff
B) quota
C) subsidy
D) export tariff
43) A designated geographic region in which merchandise is allowed to pass with lower customs
duties and/or fewer custom procedures is called a(n) ________.
A) foreign trade zone
B) free trade area
C) single market
D) open border
44) Which of the following is a method of restricting trade?
A) export financing
B) local content requirements
C) subsidy
D) foreign trade zones
45) 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.
46) 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
47) Which of the following statements is true of foreign trade zone?
A) It is an area through which merchandise is allowed to pass with fewer procedures but higher
taxes.
B) These areas provide very limited employment opportunities.
C) Goods imported into these zones require import licenses and are subject to import duties.
D) International companies can store goods in these zones without incurring taxes, before
shipping them to other countries.
48) A common purpose of many companies’ facilities in foreign trade zones is ________.
A) final product assembly
B) acquisition of raw materials
C) product design
D) product manufacturing
49) 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
50) 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
51) A tariff levied by the government of a country that is selling goods abroad is called a(n)
________.
A) export tariff
B) ad valorem tariff
C) compound tariff
D) specific tariff
52) 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.
53) A tariff levied by the government of a country that a product is passing through on its way to
a final destination is called a ________ tariff.
A) transit
B) compound
C) export
D) specific
54) The most common tariffs used today are the ________ tariffs.
A) import
B) transit
C) inverted
D) export
55) A(n) ________ tariff is levied as a percentage of the stated price of an imported product.
A) specific
B) compound
C) ad valorem
D) transit
56) A(n) ________ tariff is levied as a particular fee for each unit of an imported product.
A) specific
B) compound
C) ad valorem
D) transit
57) A(n) ________ 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.
A) specific
B) compound
C) ad valorem
D) transit
58) 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.
59) Using tariffs to generate government revenue is most common among ________.
A) developed countries
B) developing countries
C) western nations
D) First World nations
60) 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) ________.
A) administrative delay
B) local content requirement
C) quota
D) tariff
61) 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.
62) 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
63) 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
64) A lower tariff rate for a certain quantity of imports and a higher rate for quantities that
exceed the quota is called a(n) ________.
A) export quota
B) tariff-quota
C) ad valorem tariff
D) voluntary export restraint
65) Tariff-quotas are used extensively in the trade of ________.
A) manufactured goods
B) services
C) textiles
D) agricultural products
66) Rice imports to a nation under a quota limit of 8,500 tons are charged a tariff of 15 percent.
Imports of rice above the quota limit are charged a tariff of 60 percent. This is an example of a(n)
________.
A) export quota
B) voluntary export restraint
C) ad valorem tariff
D) tariff-quota
67) Country A implements a ban on trade in two products with Country B. This is an example of
a(n) ________.
A) embargo
B) tariff-quota
C) tariff
D) voluntary export restraint
68) A(n) ________ is the most restrictive nontariff trade barrier and is typically applied to
accomplish political goals.
A) tariff-quota
B) subsidy
C) embargo
D) voluntary export restraint
69) Which of the following statements is true of embargoes?
A) An embargo may be placed on one or a few goods or may completely ban trade in all goods.
B) An embargo is the least restrictive nontariff barrier available.
C) An embargo is usually employed for economic reasons.
D) Embargoes are used frequently today because they are easy to implement.
70) 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
71) 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.
72) 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