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International Business, 5e (Wild/Wild/Han)
Chapter 6 Business-Government Trade Relations
1) The theory of comparative advantage states that the country having a comparative advantage
in the production of a certain good will produce that good when barriers to trade do not exist.
Answer: TRUE
Diff: 2 Page Ref: 170
Topic: AACSB: Analytic Skills
Objective: Chapter 6-LO1
2) Because of the efforts of supranational organizations such as the World Trade Organization,
nations around the world have completely eliminated barriers to trade.
Answer: FALSE
3) The pattern of imports and exports that would result in the absence of trade barriers is called
free trade.
Answer: TRUE
4) Protecting jobs, preserving national security, responding to other nations' unfair trade
practices, and gaining influence over other nations are all political motives behind government
intervention in trade.
Answer: TRUE
Topic: AACSB: Reflective Thinking
5) Industries considered essential to national security often receive government-sponsored

protection.
Answer: TRUE
6) Governments may intervene in markets to protect both imports and exports in industries
deemed essential to national security.
Answer: TRUE
1
Copyright © 2010 Pearson Education, Inc. Publishing as Prentice Hall
7) Legitimate national security reasons for intervention can be difficult to argue against,
particularly when they have the support of most of a country's people.
Answer: TRUE
8) 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.
Answer: TRUE
9) Agriculture is typically protected for national security reasons.

Answer: TRUE
10) Given that agriculture involves very little technology and sophistication, exposing
agribusiness to market forces is a recipe for failure.
Answer: FALSE
Topic: AACSB: Use of IT
11) When products have both military and industrial applications, they are designated dual-use
products.
Answer: TRUE
12) If one government thinks another nation is not playing fairly, it will often threaten to play
unfair unless certain concessions are agreed.
Answer: TRUE
Topic: AACSB: Ethical Reasoning
13) A primary reason why the United States maintains its embargo on Cuba is the potential to
influence internal politics.
Answer: TRUE
2
14) The most common economic reason for nations' attempts to influence international trade is
preserving national security.
Answer: FALSE
15) The infant industry argument states that a country's emerging industries need protection from
international competition during their development phase until they become sufficiently
competitive internationally.
Answer: TRUE
16) Protecting infant industries can cause domestic companies to become complacent toward
innovation.
Answer: TRUE
Topic: AACSB: Use of IT; Reflective Thinking
17) The infant industry argument makes it easy to distinguish between industries that are worth
protecting and those that are not.
Answer: FALSE
18) Protection of domestic industries in Japan has caused a two-tier economy to emerge.
Answer: TRUE
19) The infant industry argument says government financial support is not necessary for small,
promising companies because they find it is easy to obtain funding in capital markets.
Answer: FALSE
20) Supporters of strategic trade policy believe that government intervention can help companies
take advantage of economies of scale and be the first movers in their industries.
Answer: TRUE
3
21) Supporters of strategic trade policy argue that it results in decreased national income.
Answer: FALSE
22) South Korean global conglomerates are known as guanxi.

Answer: FALSE
23) The beauty of strategic trade policy is that it has no drawbacks; everybody is a winner.
Answer: FALSE
24) Nations often restrict trade in goods and services to achieve cultural objectives, the most
common being protection of national identity.
Answer: TRUE
Topic: AACSB: Multicultural and Diversity
25) The main cultural motives behind government intervention in trade include protecting jobs
and preserving national security.
Answer: FALSE
26) Unwanted cultural influence in a nation can cause governments to block imports that it
believes are harmful.
Answer: TRUE
27) More than any other nation, the United States is seen as a threat to national cultures around
the world.
Answer: TRUE
4
28) French law bans foreign-language words from virtually all business and government
communications, radio, TV broadcasts, public announcements, and advertising messages.
Answer: TRUE
29) Financial assistance to domestic producers in the form of cash payments, low-interest loans,
tax breaks, and product price supports are all types of antidumping duties.
Answer: FALSE
30) The World Trade Organization usually settles arguments involving subsidies quickly and
easily.
Answer: FALSE
31) Through the World Trade Organization, exporters and those companies investing abroad can
insure against loss of assets in a nation.
Answer: FALSE
32) Taken together, small businesses account for over 80 percent of all transactions handled by
the Export-Import Bank.
Answer: TRUE
33) Receiving financing from government agencies is often crucial to the success of small
businesses just beginning to export.
Answer: TRUE
34) A common purpose of many companies' facilities in foreign trade zones is final product
assembly.
Answer: TRUE
5
35) Creation of foreign trade zones caused development of companies called maquiladoras along
the border inside Mexico.
Answer: TRUE
36) Governments not only promote trade by encouraging exports but can also encourage imports
that the nation does not or cannot produce.
Answer: TRUE
37) 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.
Answer: FALSE
38) Transit tariffs have been almost eliminated worldwide through trade agreements.
Answer: TRUE
39) 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.
Answer: TRUE
40) While producers that receive tariff protection can gain a price advantage initially, in the long
run protection can keep them from increasing efficiency.
Answer: TRUE
41) The two main reasons countries levy tariffs are to protect domestic producers and to generate
revenue.
Answer: TRUE
6
42) Tariffs tend to exact a cost on countries as a whole because they lessen citizens' gains from
trade.
Answer: TRUE
43) A restriction on the amount of a good that can enter or leave a nation during a certain period
of time is called a tariff.
Answer: FALSE
44) A government may impose import quotas to force companies from other nations to compete
against one another for the limited amount of imports allowed.
Answer: TRUE
45) A country may impose export quotas to protect its domestic producers from international
competition.
Answer: FALSE
46) A voluntary export restraint (VER) refers to a quota that a nation imposes on its exports,
usually at the request of another nation.
Answer: TRUE
47) Export quotas hurt consumers in importing nations because of reduced selection and perhaps
higher prices.
Answer: TRUE
48) A voluntary export restraint (VER) is the most restrictive nontariff trade barrier available and
is typically applied to accomplish military goals.
Answer: FALSE
7
49) An embargo is the most restrictive nontariff barrier available and is typically applied to
accomplish political goals.
Answer: TRUE
50) The purpose of local content requirements is to force companies from other nations to
employ local resources in their production processes.
Answer: TRUE
51) Restricting the convertibility of one currency into others is called administrative delay.
Answer: FALSE
52) The General Agreement on Tariffs and Trade (GATT) was a treaty designed to promote free
trade by reducing tariffs and nontariff barriers to international trade, and which has since been
absorbed into the World Trade Organization (WTO).
Answer: TRUE
53) The three main goals of the World Trade Organization are to help the free flow of trade, to
help negotiate further opening of markets, and to settle trade disputes between its members.
Answer: TRUE
54) When one World Trade Organization member files a complaint against another, decisions are
to be rendered in less than one year nine months if the case is urgent and 15 months if the case is
appealed.
Answer: TRUE
55) 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.
Answer: FALSE
8
56) 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.
Answer: FALSE
57) A countervailing duty is an additional tariff placed on an imported product that a nation
believes is receiving an unfair subsidy.
Answer: TRUE
58) 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
Answer: C
Diff: 2 Page Ref: 170-174
59) Which of the following is NOT a reason why governments impose restrictions on free trade?
A) Cultural reasons
B) Genealogical reasons
C) Political reasons
D) Economic reasons
Answer: B
Topic: AACSB: Ethical Reasoning; Multicultural and Diversity
60) The pattern of imports and exports that occurs in the absence of trade barriers is called
________.
A) an embargo
B) protectionism
C) the infant industry argument
D) free trade
Answer: D
9
61) Which of the following is a political motive behind government intervention in trade?
A) Promote a strategic trade policy
B) Gain influence over other nations
C) Protect national identity
D) Protect young industries from competition
Answer: B
Topic: AACSB: Ethical Reasoning; Multicultural and Diversity
62) Which of the following is NOT a political motive behind government intervention in trade?
A) Respond to other nation's unfair trade practices
B) Preserve national security
C) Protect jobs
Answer: D
63) 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.
Answer: D
64) Which of the following industries is typically protected for national security reasons?
A) Agriculture
B) Textile
C) Cosmetics
D) Housing
Answer: A
10
65) 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
Answer: B
66) All of the following are true EXCEPT ________.

A) a major drawback of protection is the added cost of continuing to produce a good or service
that could be supplied more efficiently by an international supplier
B) agriculture is typically protected for national security reasons
C) once a policy of protection is adopted, it may remain in place longer than needed
D) none of the above
Answer: D
67) 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
Answer: C
68) 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
Answer: D
11
69) Which of the following is 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
Answer: A
70) 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
Answer: B
71) 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
Answer: B
72) 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.
Answer: A
12
73) 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
Answer: D
74) ________ 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
Answer: B
75) The term "chaebol" refers to ________.

A) Japanese multinational powerhouses
B) South Korean global conglomerates
C) Vietnamese free trade policies
D) Chinese personal relationships
Answer: B
76) 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
Answer: C
13
77) Unwanted cultural influence in a nation is referred to as ________.
A) cultural protectionism
B) cultural imperialism
C) cultural capitalism
D) cultural dumping
Answer: B
78) Which of these countries are seen as a threat to national cultures around the world?
A) United States
B) India
C) Russia
D) France
Answer: A
79) French law bans foreign-language words from virtually ________.

A) all business and government communications
B) radio and TV broadcasts
C) public announcements
D) All of the above
Answer: D
80) Which of the following is NOT an instrument that government uses to promote trade?
A) Tariffs
B) Subsidies
C) Export financing
D) Foreign trade zones
Answer: A
14
81) Which of the following is a common instrument used by government to promote trade?
A) Tariffs
B) Subsidies
C) Quotas
D) Local content requirements
Answer: B
82) All of the following are methods of restricting trade EXCEPT ________.
A) tariff
B) quota
C) local content requirement
D) subsidy
Answer: D
83) Which of the following is a method of restricting trade?

A) Export financing
B) Local content requirements
C) Subsidy
D) Foreign trade zones
Answer: B
tax breaks, or product price supports is called a(n) ________.
A) ad valorem tariff
B) embargo
C) subsidy
D) export tariff
Answer: C
85) 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
Answer: B
15
86) When a government guarantees it will repay the loan of a company if the company should
default on repayment, it is called a(n) ________.
A) subsidy
B) loan guarantee
C) infant industry protection
D) loan repayment clause
Answer: B
87) 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
Answer: A
88) The ________ 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
Answer: C
89) 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
Answer: B
16
90) Through the Overseas Private Investment Corporation, companies that invest abroad can
insure against loss due to ________.
A) war, revolution, and insurrection
B) expropriation by a host-nation government
C) currency inconvertibility
D) all of the above
Answer: D
91) 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
Answer: A
92) 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
Answer: D
93) A common purpose of many companies' facilities in foreign trade zones is ________.
A) final product assembly
B) acquisition of raw materials
C) creation of value for government
D) to increase the total amount of a good's production cost
Answer: A
17
94) Which of the following is NOT true about maquiladoras?
A) They export goods worth billions of dollars each year.
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.
Answer: D
95) 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) slap voluntary export restraints on companies that fail to export adequately
Answer: D
96) Which of these 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
Answer: A
97) 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
Answer: A
18
98) Tariffs can be classified into all of the following categories EXCEPT ________.
A) transit
B) duty
C) export
D) import
Answer: B
99) 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) domestic
C) export
D) import
Answer: A
100) For which of the following reasons do countries levy tariffs?

A) Protect domestic producers
B) Encourage trade
C) Generate foreign competition
D) All of the above
Answer: A
101) The most common tariff used today is the ________ tariff.
A) import
B) transit
C) government
D) export
Answer: A
102) 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
Answer: C
19
103) 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
Answer: A
104) A ________ 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
Answer: B
105) 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 cause inefficiency in production.
Answer: C
106) Using tariffs to generate government revenue is most common among ________.
A) developed countries
B) less-developed countries
C) emerging markets
D) communist nations
Answer: B
107) 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
Answer: C
20
108) Which of the following is a reason why governments impose import quotas?
A) Maintain an adequate supply of a product in the home market
B) Force the companies of other nations to compete against one another
C) Restrict the world supply of a product and thereby increase its price
D) All of the above
Answer: B
109) Which of the following is NOT a reason why countries impose export quotas?
A) Maintain an adequate supply of a product in the home market
C) Restrict the world supply of a product and thereby increase its price
D) All of the above
Answer: B
110) 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 may win because their market is protected
D) prices of intermediate goods always decrease
Answer: D
111) A quota that a nation imposes on its exports, usually at the request of another nation, is
called a(n) ________.
A) embargo
B) tariff-quota restraint
C) voluntary tariff
D) voluntary export restraint
Answer: D
21
112) 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) voluntary tariff
Answer: D
113) 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
Answer: B
114) Tariff-quotas are used extensively in the trade of ________.

A) manufactured goods
B) services
C) textiles
D) agricultural products
Answer: D
115) 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) arbitrary will of the government
C) GATT-enforced regulation
D) tariff-quota
Answer: D
22
116) A ban on trade in one or more products with a particular country is called a(n) ________.
A) embargo
B) tariff-quota
C) tariff
Answer: A
117) 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.
Answer: D
118) If a country stipulates that a specified amount of a good or service be supplied by producers
in the domestic market, we call this restriction device a(n) ________.
A) administrative delay
B) currency control
C) local content requirement
Answer: C
119) 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 processes
Answer: C
23
120) 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) time delays
B) local bureaucracy
C) administrative delays
D) global strategy failures
Answer: C
121) Restrictions on the convertibility of a currency into other currencies are called ________.
A) administrative delays
B) local bureaucracy
C) currency controls
D) convertibility delays
Answer: C
122) The ________ altered U.S. trade policy from a stance of free trade to one of protectionism.
A) General Agreement on Trade and Tariffs
B) Multifiber Agreement
C) Normalized Trade Relations Act
D) Smoot-Hawley Act
Answer: D
123) The Uruguay Round of Negotiations modified the original General Agreement on Tariffs
and Trade (GATT) treaty in all of the following ways EXCEPT ________.
A) clearly defined intellectual property rights
B) established the World Trade Organization to regulate trade between nations
C) drastically reduced tariffs and nontariff barriers in telecommunications
D) included international trade in services for the first time
Answer: C
24
124) 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
Answer: A
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.
125) Freeland's restriction of free trade could be attributed to ________.

A) political motives
B) economic motives
C) cultural motives
D) all of the above
Answer: D
126) Protecting the national identity of a country can be classified as a(n) ________.
A) political motive
B) economic motive
C) cultural motive
D) all of the above
Answer: C
127) The government's effort to protect local jobs describes which of the following motives?
A) Political
B) Economic
C) Cultural
D) All of the above
Answer: A
25
128) Freeland's efforts to provide opportunities to its emerging industries can be classified as
which of the following motives?
A) Political
B) Economic
C) Cultural
D) All of the above
Answer: B
129) Protection of its emerging industries without an external competitive threat is an example of
the ________ argument.
A) national security
B) embargo
C) infant industry
D) import subsidy
Answer: C
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.
130) If Badland wants to restrict unwanted trade, which of the following might be appropriate?
A) Tariff
B) Quota
C) Local content requirement
D) Currency control
E) All of the above
Answer: E
131) The government may want to impose an import quota for which of the following reasons?
A) Maintain adequate supplies of a product in the home market
C) Restrict supply on world markets
D) All of the above
Answer: B
26
132) If Badland chooses to levy tariffs as a percentage of the stated price of an imported product,
it would be called a(n) ________.
A) compound tariff
B) specific tariff
C) ad valorem tariff
D) tariff-quota
Answer: C
133) If Badland creates a hybrid form of trade restriction a lower tariff rate for the certain
quantity of imports and higher rate for quantities that exceed the quota it would be called a(n)
________.
A) compound tariff
B) specific tariff
C) ad valorem tariff
D) tariff-quota
Answer: D
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.
134) Excelsior's Limited tried to sell its product in Canada, but was told the product must be at
least 40 percent locally made. This is an example of a(n) ________.
B) local content requirement
C) local service requirement
D) discrimination against foreign production processes
Answer: B
27
135) When Excelsior's Limited tried to convert its earnings from one country, the government
stipulated that the company had to exchange its currency rate at a very unfavorable rate. This is
an example of a(n) ________.
B) currency control
C) subsidy
Answer: B
136) 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) an administrative delay
B) typical French bureaucracy
C) why it is so important to always use a trade intermediary when dealing with France
Answer: A
137) The pattern of imports and exports that occurs in the absence of trade barriers is called
________.
Answer: free trade
138) Industries considered essential to ________ often receive government-sponsored protection

for political reasons.
Answer: national security
139) ________ is typically protected for national security reasons because a nation importing
food supplies could face starvation in times of war.
Answer: Agriculture
28
140) ________ has come under attack by other European nations as well as by countries outside
Europe for protecting its agricultural sector.
Answer: France
141) A product having both industrial and military applications is called a ________ product.
Answer: dual-use
142) According to the ________, a country's emerging industries need protection from
international competition during their development phase until they become significantly
competitive internationally.
Answer: infant industry argument
143) Protecting companies from international competition often results in consumers paying
________ for products because of less competition.
Answer: more
144) According to its supporters, ________ helped South Korea build its chaebol.
Answer: strategic trade polices
145) ________ is the unwanted cultural influence in a nation that can cause great distress and
cause governments to block imports it believes to be harmful.
Answer: Cultural imperialism
tax breaks, product price supports, or some other form is called a(n)________.
Answer: subsidy
29
147) A government guarantee that it will repay the loan of a company if the company should
default on repayment is called a(n) ________.
Answer: loan guarantee
148) The ________ finances the export activities of companies in the United States and offers
them reasonably priced insurance.
Answer: Export-Import Bank
149) Through the ________, companies investing abroad can insure against loss of assets due to
expropriation; currency inconvertibility; and war, revolution, and insurrection.
Answer: Overseas Private Investment Corporation (OPIC)
150) A designated geographic region in which merchandise is allowed to pass through with
lower customs duties and/or fewer custom procedures is called a(n) ________.
Answer: foreign trade zone
151) Foreign trade zones are often intended to increase ________ in a nation.
Answer: employment
152) Customs duties ________ the total amount of a good's production cost and increase the time
needed to get it to market.
Answer: increase
153) The ________ import materials or parts from the United States duty free, process them to
some extent in Mexico, and export them back to the United States with duties charged only on
the value added to the product in Mexico.
Answer: maquiladoras
30
154) A(n) ________ is a government tax levied on a product as it enters or leaves a country.
Answer: tariff
155) A tariff levied by the government of a country that is exporting a product is called a(n)
________.
Answer: export tariff
156) A(n) ________ tariff is a tariff levied by the government of a country that a product is
passing through on its way to its final destination.
Answer: transit
157) A tariff levied by the government in a country that is importing a product is called a(n)
________ tariff.
Answer: import
158) The most common type of tariff used by governments today is the ________ tariff.
Answer: import
159) A tariff levied as a percentage of the stated price of an imported product is called a(n)
________ tariff.
Answer: ad valorem
160) A tariff levied as a specific fee for each unit (measured by number, weight, etc.) of an
imported product is called a(n) ________ tariff.
Answer: specific
161) A tariff levied on an imported product and calculated partly as a percentage of its stated
price and partly as a specific fee for each unit is referred to as a(n) ________ tariff.
Answer: compound
31
162) 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) ________.
Answer: quota
163) Countries normally self impose a(n) ________ in response to the threat of an import tariff
or total ban on a product by an importing nation.
Answer: voluntary export restraint (VER)
164) A lower tariff rate for a certain quantity of imports and a higher rate for quantities that
exceed the quota is referred to as a(n) ________.
Answer: tariff-quota
165) ________ are trade barriers that are used extensively in the trade of agricultural products.
Answer: Tariff-quotas
166) A complete ban on trade (imports and exports) in one or more products with a particular
country is called a(n) ________.
Answer: embargo
167) An ________ is the most restrictive nontariff trade barrier and is typically applied to
accomplish political goals.
Answer: embargo
168) Laws stipulating that a specified amount of a good or service be supplied by producers in
the domestic market are called ________.
Answer: local content requirements
32
169) Regulatory controls or bureaucratic rules designed to impair the rapid flow of imports into a
country are called ________.
Answer: administrative delays
170) ________ can reduce imports by stipulating an exchange rate that is unfavorable to
potential importers.
Answer: Currency controls
171) The ________ was a treaty designed to promote free trade by reducing both tariffs and
nontariff barriers to international trade.
Answer: General Agreement on Tariffs and Trade (GATT)
172) The ________ is the international organization that regulates trade between nations.
Answer: World Trade Organization (WTO)
173) A key component of the World Trade Organization that was carried over from the General
Agreement on Tariffs and Trade (GATT) is the principle of non-discrimination called ________.
Answer: normal trade relations
174) When a company exports a product at a price lower than the price normally charged in its
domestic market, or lower than the cost of production, it is said to be ________.
Answer: dumping
175) A country that believes an imported product is being dumped on its market may impose
a(n) ________ in retaliation.
Answer: antidumping duty
33
176) A(n) ________ is an additional tariff placed on an imported product that a nation believes is
receiving an unfair subsidy.
Answer: countervailing duty
177) Explain why governments impose restrictions on free trade.

178) Describe the main political motives behind government intervention in trade.
179) Explain the infant industry argument and several problems associated with it.
180) Outline the benefits and drawbacks of strategic trade policy.

181) Describe each instrument governments use to promote trade.

182) Explain the concept of subsidies and how they are used. What are their disadvantages?
183) Discuss the role of the Export-Import Bank of the United States in international trade.
184) Describe the role of special government agencies in promoting exports and imports.
185) Briefly describe each method governments use to restrict trade.

34
International Business The Challenges of Globalization Wild 5th Edition Test Bank
186) Describe the different types of tariffs and provide an example of each.
187) Who benefits from tariffs?

Topic: AACSB: Ethical Reasoning; Analytic Skills
188) Explain fully the reasons for import and export quotas.
189) What are voluntary export restraints and how are they used?
190) Describe how embargoes work and why they are seldom used today.
191) How do the nontariff barriers called local content requirements, administrative delays, and
currency controls affect trade?
Topic: AACSB: Ethical Reasoning; Reflective Thinking
192) Describe the importance of the Uruguay Round of Negotiations. Briefly explain the
agreements on services, intellectual property, and agricultural subsidies.
193) Explain what is meant by dumping and the role of the World Trade Organization when
charges of dumping are made.
194) Explain the role of the World Trade Organization in international trade. How is its role
different from that of its predecessor?
35
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5) Industries considered essential to national security often receive government-sponsored

9) Agriculture is typically protected for national security reasons.

22) South Korean global conglomerates are known as guanxi.

63) Which of the following is NOT true?

66) All of the following are true EXCEPT ________.

75) The term "chaebol" refers to ________.

79) French law bans foreign-language words from virtually ________.

83) Which of the following is a method of restricting trade?

85) Which of the following is NOT true of governments?

100) For which of the following reasons do countries levy tariffs?

105) Which of the following statements is NOT true?

110) All of the following are true of quotas EXCEPT ________.

114) Tariff-quotas are used extensively in the trade of ________.

117) Which of the following is NOT a true statement about embargoes?

Scenario: Not-So-Free Freeland

125) Freeland's restriction of free trade could be attributed to ________.

Scenario: Badland Joins the World

Scenario: Excelsior's Limited

138) Industries considered essential to ________ often receive government-sponsored protection

177) Explain why governments impose restrictions on free trade.

180) Outline the benefits and drawbacks of strategic trade policy.

181) Describe each instrument governments use to promote trade.

185) Briefly describe each method governments use to restrict trade.

187) Who benefits from tariffs?

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