Question 1

Minimizing Trade Barriers (Scenario)
National Appliance Corporation (NAC) needs to build a new manufacturing facility to meet the increasing demand for professional-grade appliances. NAC managers are considering building the facility in Mexico but are hesitant because of the high tariffs involved. Another possible location for the facility is India; however, the country also imposes high tariffs. Wherever NAC builds a plant, parts will need to be imported from other nations.
-Given the high trade barriers in Mexico, the management of NAC is most likely to consider ________ to be an inappropriate entry strategy.

Accepted Answer

A)  exporting 
B)  FDI 
C)  joint ventures 
D)  licensing

Question 2

Which of the following statements is TRUE about protection of an infant industry?

Accepted Answer

A)  Governments can impose temporary trade barriers on foreign imports to ensure that young firms gain a large share of the domestic market. 
B)  Such protection is easy to remove. 
C)  Protected companies become more efficient and produce products with lower prices. 
D)  Protecting infant industries rarely allows countries to develop a modern industrial sector.

Question 3

Minimizing Trade Barriers (Scenario)
National Appliance Corporation (NAC) needs to build a new manufacturing facility to meet the increasing demand for professional-grade appliances. NAC managers are considering building the facility in Mexico but are hesitant because of the high tariffs involved. Another possible location for the facility is India; however, the country also imposes high tariffs. Wherever NAC builds a plant, parts will need to be imported from other nations.
-Which of the following must NAC ensure in order to reduce exposure to trade barriers?

Accepted Answer

A)  reduced production 
B)  strong emphasis on quality 
C)  accurate product classification 
D)  obtaining patents for inventions

Question 4

What is the primary ethical concern regarding the import of products from poor countries?

Accepted Answer

A)  Higher tariffs hurt poor nations more than developed nations. 
B)  Nations lacking economic freedom cannot afford to export. 
C)  Emerging nations use government intervention to protect domestic industries. 
D)  Lack of subsidies adversely affects poor countries.

Question 5

Currency controls can help conserve especially valuable currency or reduce the risk of capital flight.

Accepted Answer

A) True 
 B)False

Question 6

Governments sometimes retaliate against subsidies by imposing ________, tariffs on products imported into a country to offset subsidies given to producers or exporters in the exporting country.

Accepted Answer

A)  local content requirements 
B)  investment incentives 
C)  countervailing duties 
D)  antidumping duties

Question 7

Firms use foreign trade zones to ________.

Accepted Answer

A)  consolidate market monopolies 
B)  assemble foreign dutiable materials and components into finished products, which are then re-exported 
C)  create employment opportunities for the local people 
D)  meet quota demands established by the government

Question 8

Governments impose offensive barriers to ________.

Accepted Answer

A)  protect domestic industries 
B)  promote national security 
C)  pursue strategic or public policy objectives such as increasing employment 
D)  safeguard the interests of special interest groups

Question 9

________ refers to a tax imposed on imported products, effectively increasing the cost of acquisition for the customer.

Accepted Answer

A)  Quota 
B)  Tariff 
C)  Embargo 
D)  Subsidy

Question 10

What is a foreign trade zone (FTZ)? In a short essay, explain how FTZs are utilized by firms.

Accepted Answer

The answer of What is a foreign trade zone (FTZ)?...

Question 11

Which of the following is an example of nontariff trade barrier?

Accepted Answer

A)  Gayle Inc. is a U.S.-based retailer that imports cosmetic products manufactured in Thailand. These products pass through U.S. customs and are subject to a 5 percent import duty. 
B)  The U.S. imports chocolates manufactured in Belgium that cost $65 a box with taxes. 
C)  The U.S. Department of Commerce announced that white sugar imports will be limited to 7,500 million tons. 
D)  Spices imported from India to the U.S. for sale in the domestic market are subject to a 10 percent import duty.

Question 12

Which of the following entry strategies do most firms use in the absence of high tariffs?

Accepted Answer

A)  FDI 
B)  licensing 
C)  joint ventures 
D)  exporting

Question 13

Briefly describe the five levels of economic integration.

Accepted Answer

The answer of Briefly describe the five levels of economic...

Question 14

Tariffs are taxes that will increase the price to consumers.

Accepted Answer

A) True 
 B)False

Question 15

If high tariffs are present, managers may consider other strategies, such as FDI, licensing, and joint ventures that allow the firm to operate directly in the target market, avoiding import barriers.

Accepted Answer

A) True 
 B)False

Question 16

Regional integration greatly increases the scale of the marketplace for firms inside the economic bloc.

Accepted Answer

A) True 
 B)False

Question 17

A nontariff trade barrier is a government policy, regulation, or procedure that impedes trade through means other than explicit tariffs.

Accepted Answer

A) True 
 B)False

Question 18

Maquiladoras refer to export-assembly plants in northern Mexico along the U.S. border that produce components and typically finished products destined for the United States on a tariff-free basis.

Accepted Answer

A) True 
 B)False

Question 19

NAFTA is a treaty entered into by Canada, Mexico, and the United States.

Accepted Answer

A) True 
 B)False

Question 20

A ________ is an area within a country that receives imported goods for assembly or other processing and subsequent re-export.

Accepted Answer

A)  single market 
B)  trade bloc 
C)  foreign trade zone 
D)  common market

Exam 7: Government Intervention and Regional Economic Integration

Which of the following statements is TRUE about protection of an infant industry?

What is the primary ethical concern regarding the import of products from poor countries?

Currency controls can help conserve especially valuable currency or reduce the risk of capital flight.

Governments sometimes retaliate against subsidies by imposing ________, tariffs on products imported into a country to offset subsidies given to producers or exporters in the exporting country.

Firms use foreign trade zones to ________.

Governments impose offensive barriers to ________.

________ refers to a tax imposed on imported products, effectively increasing the cost of acquisition for the customer.

What is a foreign trade zone (FTZ)? In a short essay, explain how FTZs are utilized by firms.

Which of the following is an example of nontariff trade barrier?

Which of the following entry strategies do most firms use in the absence of high tariffs?

Briefly describe the five levels of economic integration.

Tariffs are taxes that will increase the price to consumers.

If high tariffs are present, managers may consider other strategies, such as FDI, licensing, and joint ventures that allow the firm to operate directly in the target market, avoiding import barriers.

Regional integration greatly increases the scale of the marketplace for firms inside the economic bloc.

A nontariff trade barrier is a government policy, regulation, or procedure that impedes trade through means other than explicit tariffs.

Maquiladoras refer to export-assembly plants in northern Mexico along the U.S. border that produce components and typically finished products destined for the United States on a tariff-free basis.

NAFTA is a treaty entered into by Canada, Mexico, and the United States.

A ________ is an area within a country that receives imported goods for assembly or other processing and subsequent re-export.