Chapter 6 International Business Wild

A common purpose of many companies' facilities in foreign trade zones is final product assembly.

t

A compound 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.

t

A voluntary export restraint (VER) refers to a quota that a nation imposes on its exports, usually at the request of another nation.

t

Industries considered essential to national security often receive government-sponsored protection.

t

Protecting infant industries can cause domestic companies to become complacent toward innovation.

t

A countervailing duty is an additional tariff placed on an imported product that a nation believes is receiving an unfair subsidy.

t

When a product has both industrial and military applications, they are said to have ________. cultural imperialism a free trade designation an unfair trade advantage dual uses

dual uses

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) to increase the total amount of a good's production cost

a

A country may impose export quotas to protect its domestic producers from international competition.

f

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.

f

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) embargo B) tariff-quota C) tariff D) voluntary export restraint

b

Taken together, small businesses account for ________ percent of all transactions handled by the Export-Import Bank. A) less than 20 B) over 80 C) approximately 50 D) 100

b

Suppose imports entering a nation under a quota limit of 8,500 tons of rice are charged a tariff of 15 percent, but subsequent imports of rice that do not make it under this quota limit are charged a tariff of 68 percent. This is an example of a(n) ________. A) import subsidy B) price factor C) GATT-enforced regulation D) tariff-quota

d

Tariff-quotas are used extensively in the trade of ________. A) manufactured goods B) services C) textiles D) agricultural products

d

Scenario: Not-So-Free Freeland Freeland is a semi-closed economy whose government believes in protecting national identity and becoming a self-sustaining country. 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. Freeland's protection of its national identity is an example of which of the following? Political motive Economic motive Cultural motive Systematic motive

Cultural motive

Scenario: Badland Joins the World Badland, 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 where local businesses and industries are not destroyed. The government may want to impose an import quota for which of the following reasons? Maintain adequate supplies of a product in the home market Force the companies of other nations to compete against one another Restrict the supply of a product on world markets Maintain exports of a product at target levels

Force the companies of other nations to compete against one another

Scenario: Not-So-Free Freeland Freeland is a semi-closed economy whose government believes in protecting national identity and becoming a self-sustaining country. 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. The belief that Freeland's emerging industries need protection from international competition during their development phase is an example of which of the following? The national security argument The emerging embargo argument The infant industry argument The import subsidy argument

The infant industry argument

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(n) ________ tariff. A) transit B) domestic C) export D) import

a

A tariff levied by the government of a country that is exporting a product is called a(n)________. A) export tariff B) ad valorem tariff C) compound tariff D) specific tariff

a

A(n) ________ tariff is levied as a specific fee for each unit of an imported product. A) specific B) compound C) ad valorem D) specialized

a

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 duty C) dumping duty D) compounded tariff

a

Businesses can obtain financing from the Export-Import Bank through all the following EXCEPT the ________. A) marketing assistance program B) city/state program C) working capital guarantee program D) credit information services program

a

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

a

The most common tariff used today is the ________ tariff. A) import B) transit C) compound D) export

a

Which of the following adds to the cost of an imported product by levying an additional tax upon it? A) Tariffs B) Quotas C) Local content requirements D) Embargoes

a

Which of the following government agencies provides insurance services to exporters and other companies investing abroad? A) Overseas Private Investment Corporation B) Federal Deposit Insurance Corporation C) World Trade Organization D) Organization of Petroleum Exporting Countries

a

Which of the following industries is typically protected for national security reasons? A) Agriculture B) Textile C) Cosmetics D) Housing

a

Which of the following is NOT a problem associated with the infant industry argument? A) It can cause domestic companies to become overly innovative. B) Once protection of an industry is given, it can be politically difficult to eliminate. C) Protection can do more economic harm than good. D) Governments might have difficulty identifying the industries worth protecting.

a

Which of the following is NOT an example of an instrument that government uses to promote trade? A) Tariffs B) Subsidies C) Export financing D) Foreign trade zones

a

Which of the following is an example of an economic motive for nations' attempts to influence international trade? A) Pursue strategic trade policy B) Protect jobs C) Respond to "unfair" trade D) Preserve national security

a

Which of these countries are seen as a threat to national cultures around the world? A) United States B) India C) Russia D) France

a

Scenario: Badland Joins the World Badland, 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 where local businesses and industries are not destroyed. If Badland chooses to levy tariffs as a percentage of the stated price of an imported product, this would be an example of a(n) ________.

ad valorem tariff

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) specialized

b

Tariffs can be classified into all of the following categories EXCEPT ________. A) transit B) direct C) export D) import

b

The ________ argument says that a country's emerging industries need protection from international competition during their development. A) national security B) infant industry C) strategic trade policy D) GATT treaty

b

The notion that as an industry grows and matures it gains the knowledge it needs to become more innovative, efficient, and competitive is known as the ________. A) maturing industry argument B) infant industry argument C) entrant industry argument D) extant industry argument

b

The term chaebol refers to ________. A) Japanese multinational powerhouses B) South Korean global conglomerates C) Vietnamese free trade policies D) Chinese personal relationships

b

Unwanted cultural influence in a nation is referred to as ________. A) cultural protectionism B) cultural imperialism C) cultural capitalism D) cultural dumping

b

Using tariffs to generate government revenue is most common among ________. A) developed countries B) less-developed countries C) advanced economies D) communist nations

b

When a government guarantees it will repay the loan of a company if the company should default on repayment, this is an example of a(n) ________. A) subsidy B) loan guarantee C) infant industry protection D) loan repayment clause

b

Which of the following is NOT true of governments? A) They often promote exports by helping companies finance their export activities. B) They may promote imports through the use of subsidies. C) They can promote exports by offering loans with below-market interest rates. D) They may promote exports by offering loan guarantees.

b

Which of the following is a method of restricting trade? A) Export financing B) Local content requirements C) Subsidy D) Foreign trade zones

b

Which of the following is an example of a common instrument used by government to promote trade? A) Tariffs B) Subsidies C) Quotas D) Local content requirements

b

Which of the following is an example of a political motive behind government intervention in trade? A) Promote a strategic trade policy B) Gain influence over other nations C) Protect against unwanted cultural influence D) Protect young industries from competition

b

Which of the following is causing farmers to increase their efficiencies in many developed nations? A) Protection under national security guidelines B) Exposing agribusiness to market forces C) Providing extensive government subsidies D) Labeling agricultural products as dual-use

b

________ believe that government intervention can help companies take advantage of economies of scale and be the first movers in their industries. A) Opponents of globalization B) New trade theorists C) Critics of strategic trade policy D) Cultural imperialists

b

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) export subsidy B) local content requirement C) quota D) tariff

c

A(n) ________ tariff is levied as a percentage of the stated price of an imported product. A) specific B) compound C) ad valorem D) specialized

c

All of the following statements are true of local content requirements EXCEPT ________. A) many developing countries use local content requirements as a strategy to boost industrialization B) companies can circumvent local content requirements by locating production facilities in nations that impose the restrictions C) local content requirements hurt domestic producers through their effect on prices D) local content requirements force companies from other countries to employ local resources in their production process

c

Financial assistance to domestic producers in the form of cash payments is an example of a(n) ________. A) ad valorem tariff B) embargo C) subsidy D) export tariff

c

Governments impose trade barriers for all of the following reasons EXCEPT ________. A) to protect national security B) to gain influence over other nations C) to respond to other nation's fair trade practices D) to protect jobs

c

If a country stipulates that a specified amount of a good or service be supplied by producers in the domestic market, this restriction device is an example of a(n) ________. A) administrative delay B) currency control C) local content requirement D) voluntary export restraint

c

Products designated as dual use require ________ before export can take place. A) multi-language translation documents B) better consumer-use instructions C) special government approval D) World Trade Organization clearance

c

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) restructuring B) local bureaucracy C) administrative delays D) global strategy failures

c

Restrictions on the convertibility of a currency into other currencies are referred to as ________. A) administrative delays B) local bureaucracy C) currency controls D) convertibility delays

c

Which of the following finances the export activities of companies in the United States and offers insurance on foreign accounts receivable? A) Ex-Ante Bank B) Ex-CEO Bank C) Export-Import Bank D) In-Out Bank

c

Which of the following is NOT a way in which the Uruguay Round of Negotiations modified the original General Agreement on Tariffs and Trade (GATT) treaty? A) It clearly defined intellectual property rights. B) It established the World Trade Organization to regulate trade between nations. C) It drastically reduced tariffs and nontariff barriers in telecommunications. D) It included international trade in services for the first time.

c

Which of the following statements is NOT true? A) Tariffs are a source of government revenue. B) Tariffs protect domestic producers. C) Tariffs lower the effective prices of imports. D) Tariffs can can keep producers from increasing efficiency.

c

Which of these is the main cultural motive behind government intervention in trade? A) Promote a strategic trade policy B) Protect jobs C) Protect national identity D) Protect young industries from competition

c

Excelsior's Limited Excelsior's Limited, a maker of health and beauty aids, is expanding its presence in several countries around the world. Excelsior's president has been surprised at some of the responses the company has received from other countries. 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) ________. administrative delay currency control subsidy tariff

currency control

A designated geographic region in which merchandise is allowed to pass through with lower custom duties and/or fewer customs procedures is called a(n) ________. A) chaebol zone B) special subsidy zone C) international customs zone D) foreign trade zone

d

All of the following are methods of restricting trade EXCEPT ________. A) tariff B) quota C) local content requirement D) subsidy

d

All of the following are true of quotas EXCEPT ________. A) they may be used to protect domestic producers by placing a limit on the amount of goods allowed to enter the country B) they help domestic producers maintain their market shares and prices C) domestic producers benefit from them because their market is protected D) they cause the prices of intermediate goods to decrease

d

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) tariff-quota restraint C) independent tariff D) voluntary export restraint

d

Country A imposes a tariff on its exports at the request of another nation. This is an example of a(n) ________. A) embargo B) tariff-quota restraint C) independent tariff D) voluntary export restraint

d

Each of the following can be the result of protection from international competition EXCEPT ________. A) consumers often end up paying more for products B) there are fewer incentives to cut production costs or improve quality C) companies become more reliant on protection D) strategic trade policy dictates trading patterns

d

Government trade promotion agencies do all of the following EXCEPT ________. A) organize trips for trade officials and business people to visit other countries B) open trade offices in other countries C) advertise in other countries to promote the nation's exports D) place voluntary export restraints on companies that fail to export adequately

d

The ________ altered U.S. trade policy from a stance of free trade to one of protectionism. A) General Agreement on Trade and Tariffs B) Multi-Fibre Arrangement C) Normalized Trade Relations Act D) Smoot-Hawley Act

d

The pattern of imports and exports that occurs in the absence of trade barriers is called ________. A) an embargo B) protectionism C) infant industry D) free trade

d

When a product has both industrial and military applications, they are said to have ________. A) cultural imperialism B) a free trade designation C) an unfair trade advantage D) dual uses

d

Which of the following is NOT a true statement about 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 most restrictive nontariff barrier available. C) An embargo is usually employed for political reasons. D) Embargoes are used frequently today because they are easy to implement.

d

Which of the following is NOT an example of a political motive behind government intervention in trade? A) Respond to other nation's unfair trade practices B) Preserve national security C) Protect jobs D) Protect young industries from competition

d

Which of the following is NOT true about maquiladoras? A) They employ hundreds of thousands of people. B) They are foreign trade zones along Mexico's northern border. C) They import materials or parts from the United States without duties, perform some processing on them, and export them back to the United States. D) They have shown little success because of the immense amount of paperwork involved.

d

Which of the following is NOT true? A) Governments intervene in markets to ensure access to a domestic supply of certain items in the event that war could restrict their availability. B) Industries considered essential to national security often receive government-sponsored protection. C) Governments may intervene to protect both imports and exports. D) It is difficult to make the case to protect industries for the purpose of preserving national security.

d

A tariff levied by the government of a country that a product is passing through on its way to its final destination is called an import tariff.

f

Although dumping is an act by a company, not a country, the World Trade Organization punishes the country where the company doing the dumping is based.

f

Restricting the convertibility of one currency into others is called administrative delay.

f

Supporters of strategic trade policy argue that it results in decreased national income.

f

The main cultural motives behind government intervention in trade include protecting jobs and preserving national security.

f

The most common economic reason for nations' attempts to influence international trade is preserving national security.

f

Scenario: Excelsior's Limited Excelsior's Limited, a maker of health and beauty aids, is expanding its presence in several countries around the world. Excelsior's president has been surprised at some of the responses the company has received from other countries. Excelsior's Limited tried to sell its product in Canada, but it was told the product must be at least 40 percent locally made. This is an example of a(n) ________.

local content requirement

Not-So-Free Freeland Freeland is a semi-closed economy whose government believes in protecting national identity and becoming a self-sustaining country. 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. The Freeland government's effort to protect local jobs is an example of which of the following motives? Political Economic Cultural Systematic

political

If Badland wants to restrict unwanted trade, which of the following would be LEAST appropriate? Increase tariffs Impose a quota Reduce tariffs Impose a currency control

reduce tariffs

Scenario: Not-So-Free Freeland Freeland is a semi-closed economy whose government believes in protecting national identity and becoming a self-sustaining country. 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. Freeland's restriction of free trade could be attributed to each of the following EXCEPT ________. political motives economic motives cultural motives systematic motives

systematic motives

A government may impose import quotas to force companies from other nations to compete against one another for the limited amount of imports allowed.

t

A primary reason why the United States maintains its embargo on Cuba is the potential to influence internal politics.

t

Agriculture is typically protected for national security reasons.

t

Creation of foreign trade zones caused development of companies called maquiladoras along the border inside Mexico.

t

Export quotas hurt consumers in importing nations because of reduced selection and perhaps higher prices.

t

Governments may intervene in markets to protect both imports and exports in industries deemed essential to national security.

t

Nations often restrict trade in goods and services to achieve cultural objectives, the most common being protection of national identity.

t

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

t

Tariffs tend to exact a cost on countries as a whole because they lessen citizens' gains from trade.

t

The main disadvantage of protection from import competition is the added cost of continuing to produce a good or service that could be supplied more efficiently by an international supplier.

t

The pattern of imports and exports that would result in the absence of trade barriers is called free trade.

t

Transit tariffs have been almost eliminated worldwide through trade agreements.

t

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

t

When one World Trade Organization member files a complaint against another, decisions are to be rendered in less than one year.

t

When products have both military and industrial applications, they are designated dual-use products.

t