73) 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
74) Restrictions on the convertibility of a currency into other currencies are referred to as
________.
A) administrative delays
B) currency crisis
C) local content requirements
D) currency controls
75) The ________ altered the U.S. trade policy from a stance of free trade to one of
protectionism in the 1930s.
A) Norris-LaGuardia Act
B) Smoot-Hawley Act
C) Wheeler-Lea Act
D) Taft-Hartley Act
76) When a company exports a product at a price that is lower than the price normally charged in
its domestic market or lower than the cost of production, it is said to be ________.
A) dumping
B) ringfencing
C) hoarding
D) cost-shifting
77) In which of the following ways did the Uruguay Round of Negotiations modify the original
General Agreement on Tariffs and Trade (GATT) treaty?
A) It helped standardize intellectual property rules around the world.
B) It called on developing and least-developed economies to cut agricultural tariffs significantly.
C) It relaxed the additional tariffs imposed on companies charged with dumping.
D) It increased barriers to trade in all developed, developing and least-developed nations.
78) The Uruguay Round of Negotiations created the TRIPS Agreement to ________.
A) help standardize the intellectual property rules around the world
B) increase the exposure of national agricultural sectors to market forces
C) drastically reduce tariffs and nontariff barriers in agricultural trade
D) include international trade in services for the first time
79) One of the main goals of the World Trade Organization is to ________.
A) encourage dumping among trading nations
B) restrict the free flow of trade
C) provide favorable terms of trade to a few selected countries
D) settle trade disputes among its members
80) A requirement that all WTO members extend the same favorable terms of trade to all
members that they extend to any single member is called ________.
A) normal trade relations
B) antidumping duties
C) local content requirements
D) countervailing duties
81) A country that believes an imported product is being sold in its market for a price lower than
the cost of production for the product may impose a(n) ________ in retaliation.
A) countervailing duty
B) ad valorem tariff
C) antidumping duty
D) compound tariff
82) An additional tariff placed on an imported product that a nation believes is receiving an
unfair subsidy is called a(n) ________.
A) countervailing duty
B) ad valorem tariff
C) antidumping duty
D) compound tariff
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.
83) 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
84) 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
85) 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
86) 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
87) The belief that Freeland’s emerging industries need protection from international competition
during their development phase is an example of ________.
A) a local content requirement
B) a normal trade relation
C) the infant industry argument
D) the political motive of Freeland
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.
88) 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
89) 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
90) 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
91) Konesia has created a hybrid form of trade restriction-a lower tariff rate for a certain quantity
of imports and a higher rate for quantities that exceed the quota. This is an example of a(n)
________.
A) compound tariff
B) export quota
C) ad valorem tariff
D) tariff-quota
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.
92) 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
93) 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
94) 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
95) Explain why governments impose restrictions on free trade.
96) Describe the main political motives behind government intervention in trade.
97) Describe each instrument that governments use to promote trade.
98) Define subsidies. What are their disadvantages? In what ways do the protection of infant
industries produce similar drawbacks?
99) Describe the purpose of a foreign trade zone. How is it used to promote trade?
100) Discuss the benefits and drawbacks of strategic trade policy. How are the drawbacks of
subsidies similar to the drawbacks of strategic trade policy?
101) Describe the role of special government agencies in promoting exports and imports.
102) 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?
103) Describe the different types of tariffs and provide an example of each.
104) Explain how tariffs protect domestic producers, and describe how a foreign trade zone
might offset the effects of tariffs.
105) What are voluntary export restraints and how are they used?
106) Describe the three categories of tariffs, and explain how the Smoot–Hawley Act of 1930
influenced tariffs in the United States.
107) What is meant by dumping? Describe the various roles of the World Trade Organization,
including when a country is accused of dumping.
108) Write a short note on the World Trade Organization and its influence on the environment.