Complete Test Bank Political Forces That Affect Global Trade

Module 05 Political Forces That Affect Global Trade

1) Only in communist countries do governments own the factors of production.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 2 Medium
Bloom's : Understand
Learning Objective : 05-01 Describe the goals of nationalizing and privatizing business.
Topic : Nationalization and Privatization of Business

You might assume that governments own the factors of production only in countries with centralized economies and one-party communist or socialist orientations, such as North Korea, Cuba, Vietnam, and China, but nearly every country, regardless of political philosophy, has some government-owned businesses.

2) When the U.S. military contracts out security details in war zones, it is engaged in privatization.

⊚ true
⊚ false

Yes, when any government contracts out government work to the private sector, it is engaged in privatization.

3) A government nationalizes a firm when it shifts the ownership from public to private.

⊚ true
⊚ false

When governments nationalize private firms, taking them from private to public ownership, some of the reasons are to extract more money from the firms, if the government suspects they are concealing profits; to increase profitability, if the government believes it can run the firms more efficiently and make more money; to follow an economic or political ideology; to save jobs by propping up dying industries; to control an earlier investment in a firm; and to enact political goals.

4) Recently, many governments, including the U.S. government, have contracted out certain services to private companies.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 05-01 Describe the goals of nationalizing and privatizing business.
Topic : Nationalization and Privatization of Business

Recently, in arrangements similar to privatization, governments have contracted out to the private sector the provision of services they have provided in the past. For example, Thailand has at least one private company operating the passenger trains of its state-owned railroad. The U.S. federal government regularly contracts out military support functions such as cooking and laundry, even on the battlefront.

5) The British prime minister, David Cameron, led the privatization movement.

⊚ true
⊚ false

Margaret Thatcher led Britain’s most recent privatization movement.

6) Unfair international competition for a company can be minimized through the enaction of national laws.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 2 Medium
Bloom's : Understand
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Topic : Government Policies Affecting Trade

Unfair international competition is minimized through national laws, negotiations between governments, and the efforts of institutions such as the World Trade Organization.

7) Terrorists avoid kidnapping because the repercussions can be harmful to their movement.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Topic : Government Policies Affecting Trade
Bloom's : Remember
Difficulty : 1 Easy

Terrorists actually use kidnapping frequently, and ransom can be a significant funding source for them.

8) Policy continuity and government stability are more important to a business than the type of political system.

⊚ true
⊚ false

This is the case: Business wants predictability and stability. So, theoretically, a stable dictatorship would be preferable to an unstable democracy.

9) When people are kidnapped for ransom, all governments agree that the right response is to pay the ransom, get the hostages released, and then retaliate.

⊚ true
⊚ false

Many governments claim not to pay ransoms as well. Everyone agrees that long-term, doing so is counterproductive because paying ransom rewards the kidnappers, reinforces their actions, and funds terrorism. Yet we know that victims of kidnapping for ransom do get released.

10) Piracy is a form of cybercrime.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

Piracy, which is a hijacking that includes kidnapping on the seas, has shown fluctuations in recent years but remains a significant source of concern.

11) Unpredictable government actions create many business opportunities.

⊚ true
⊚ false

Unpredictable government actions are a form of instability and reduce the likelihood of business success.

12) Country risks are often political in nature and include wars and coups.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Topic : Government Policies Affecting Trade
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 05-03 Describe the role of country risk assessment in international business.

They take the form of coups, wars, and revolutions.

13) The national defense argument for trade restrictions is based on the development level of the country.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 2 Medium
Learning Objective : 05-04 Explain the political motivations for government intervention in trade and the major types of government trade restrictions.
Topic : Trade Restrictions
Bloom's : Understand

The level of development is not important with regard to trade restrictions. A nation would protect its own industry, even though foreign nations could be more advanced in the sector.

14) U.S. ocean shipping companies are benefiting from U.S. government subsidies.

⊚ true
⊚ false

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-04 Explain the political motivations for government intervention in trade and the major types of government trade restrictions.
Topic : Trade Restrictions
Bloom's : Remember
Difficulty : 1 Easy

U.S. ocean shipping companies benefit from U.S. government subsidies. This is an example of the national defense argument for trade restrictions, subsidies being an indirect trade restriction.

15) Sanctions are a trade restriction that is effective in forcing change.

⊚ true
⊚ false

Sanctions tend to be ineffective. Think Cuba, but perhaps the goal there is not change, but rather, to make a political statement or to punish.

16) Fair competition is a strong rationale for trade barriers.

⊚ true
⊚ false

Fair competition argues that import duties should be used to bring the imported item up to the cost of the domestic one. It eliminates any “unfair” advantage a foreign competitor might have gained through superior technology, lower taxes, lower raw material costs, or lower labor costs. This barrier eliminates the competition's comparative advantage.

17) Retaliatory trade restrictions are not made for dumping because price competition is protected by the WTO.

⊚ true
⊚ false

Dumping is a frequent explanation of trade barriers, especially when the dumping is perceived to be harmful to local industry.

18) Subsidies are implemented by the government to a domestic firm as a way to encourage exports or protect the firm from imports.

⊚ true
⊚ false

Another cause of retaliation is subsidies a government makes to a domestic firm, either to encourage exports or to help protect the firm from imports.

19) Voluntary export restraints are imposed by the importing nation to avoid violating WTO rules.

⊚ true
⊚ false

Voluntary export restraints (VERs) are imposed by the exporting nation. For example, in the 1980s and early 1990s, Japan imposed VERs on its auto industry exports to the United States.

20) A quota is an example of a qualitative nontariff barrier.

⊚ true
⊚ false

Quotas are a form of quantitative not qualitative nontariff barrier.

21) Democratic nations that follow free-trade capitalism sometimes nationalize businesses, such as

A) the U.S. bailout during the 2009 financial crisis, when the U.S. government took control of several large U.S. corporations.
B) Canada's purchase of Hershey.
C) The French purchase of Totale.
D) the move from New York to Russia of a major sports team owned by a Russian.

This temporary exertion of power to control was essentially nationalization designed to meet the economic and political goals of saving jobs provided by the companies and supporting their recovery from the crisis.

22) Examples of expropriation without compensation involve the following governments:

A) the Unite States confiscated Iranian property in the United States and Cuba confiscated property during the Cuban revolution of the 1950s, and Zimbabwe confiscated land owned by white Zimbabwean citizens.
B) China with Hong Kong and Japan with the Kuril Islands.
C) the United Kingdom with the Falklands.
D) Canada with northern Maine.

The United States, Cuba, and Zimbabwe have expropriated without compensation. Exploration of the political differences in the examples can be interesting.

23) This country engaged in many privatizations in the aftermath of the 2008‒2009 financial crisis.

A) Greece
B) Germany
C) the United Kingdom
D) Portugal

Greece engaged in many privatizations in the aftermath of the 2008–2009 financial crisis, including airports and telecom companies.

24) When governments nationalize a firm, they don't seek to

A) extract more money from the firm.
B) increase the firm's profitability.
C) preserve jobs.
D) sell the firm to foreign investors.

Selling the firm to foreign investors would be a privatization. The other alternatives are all motivations for nationalization, as is ideology.

25) When a government transfers the assets of a company from the public sector to the private sector, it is an example of

A) privatization.
B) isolationism.
C) expansionism.
D) nationalization.

Privatization moves assets from the public sector into the private, either permanently, through sale, or temporarily, through contract. It does not constrain the ability to hire.

26) Nationalization and privatization are implemented by

A) big business.
B) the government.
C) international affiliates.
D) consumers.

Nationalization takes a privately held entity public, whereas privatization takes a publicly-held entity private. These activities are implemented by the government.

27) The governments of some countries may decide they want to extract more money from businesses. What measure might they take to achieve this?

A) They would nationalize businesses.
B) They would enact isolationism.
C) They would privatize businesses.
D) They would enact expansionism.

28) Governments nationalize private firms in order to

A) extract money from the firms when the firms are suspected of concealing profits.
B) decrease exports to balance the balance of payments.
C) learn about business development experientially.
D) assist firms in making greater profits to boost the economy.

One motivation for nationalization is to make sure the profits of the firms benefit the nation's citizens.

29) One motivation for government privatization is to

A) have the businesses run more efficiently.
B) punish corporate conglomerates.
C) explore alternative revenues.
D) exert increased government control.

Governments sometimes privatize or sell their businesses, usually in order to see them run more efficiently, to reduce the government’s size or the extent of its bureaucracy, or to raise money.

30) Government stability has to do with

A) policies that are permanent or change gradually.
B) democratic processes and free elections.
C) a commitment to military strength.
D) leadership that listens to citizens and responds to their needs.

Government stability can be found in all sorts of governments and has to do with policies that are permanent or slowly changing, so that businesses can predict their environments. A government that has achieved stability has the ability to maintain itself in power and hold to predictable fiscal, monetary, and political policies that are not subject to sudden, radical changes.

31) Governments provide stability by

A) protecting business from unfair competition and from attacks and theft.
B) pursuing open market values.
C) fostering competition and enforcing nontariff barriers.
D) supporting imports.

Protecting businesses from unfair competition and protecting their property rights also contribute to a stable environment.

32) The practice of terrorism contributes to

A) an unstable environment that is detrimental to business.
B) an increase in business opportunities.
C) the warning signals on global values clashes.
D) religious and political stability.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

Terrorism is generally unfavorable to business because it increases instability and chaos.

33) Government protection of economic activities is

A) an historical function of government.
B) a recent responsibility of government.
C) a socialist characteristic.
D) stronger in democracies.

In addition to fostering a stable, predictable context for business, governments, whatever their ideology, have historically functioned to protect the economic activities of their citizens—including farming, mining, manufacturing, and the delivery of services—within their area of control.

34) A government that holds to predictable fiscal, monetary, and political policies is considered

A) global.
B) unstable.
C) domestic.
D) stable.

A government that has achieved stability has the ability to maintain itself in power and hold to predictable fiscal, monetary, and political policies that are not subject to sudden, radical changes.

35) A government protects its citizens when they are abroad in what way?

A) A powerful country can send in the marines to protect citizens.
B) A government can assert the rights of its citizens and that its laws follow its citizens, no matter where they are (extraterritoriality).
C) Politicians can influence how a foreign country's rules are applied to its own nationals.
D) Government embassies can provide information and emergency assistance, monitor and where appropriate, make protests.

How can a government protect its citizens when they are abroad? Governments maintain embassies in foreign capitals and consulates in larger cities to represent their interests and offer protection to their citizens who are abroad.

36) Government stability is a characteristic of a government that

A) makes sudden radical policy changes.
B) readily shifts alliances to maintain power.
C) maintains predictability in fiscal, monetary, and political policies.
D) maintains authoritarian rule over an extended period of time.

Government stability is characteristic of a government that stays in power and makes predictable changes in fiscal, monetary, and political policies, not radical shifts.

37) Keenan worked in his company’s international office in Indonesia for many years. During his time there, political unrest caused many U.S. citizens, like Keenan, to have questions. What do governments put in place to represent their citizens in situations like this?

A) legislatures
B) justices
C) embassies
D) acquisitions

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Topic : Government Policies Affecting Trade

38) A government that makes radical changes to existing policies is demonstrating

A) democracy.
B) instability.
C) communism.
D) stability.

Instability occurs when a government cannot maintain itself in power or makes sudden, unpredictable, or radical policy changes.

39) ”Express kidnapping” targets

A) expatriates.
B) legislators.
C) home country nationals.
D) domestic affiliates.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

A new type of kidnapping, sometimes referred to as “express kidnapping,” that seems relatively safer and quicker than the traditional approach, targets expatriates and other international business travelers.

40) Among the cybercrimes that most often target businesses are

A) hacking and data espionage.
B) check kiting.
C) prospecting and phishing.
D) accessing unauthorized accounts.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

Cybercrime most often involves hacking and data espionage.

41) The sectors most frequently attacked by cybercriminals include

A) defense, energy and utilities, and finance.
B) retail.
C) oil and gas.
D) the auto industry.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

Businesses in defense, financial services, and energy and utilities were frequent targets of cybercriminals.

42) The cybercrime context is described as

A) fluid, so the learning process is ongoing, because cyber criminals are bright and quick.
B) relatively static, so a firewall can be effective for a good six months in this environment.
C) rapidly evolving, so that cybercrime will soon be eliminated.
D) increasingly competitive, with switchovers between security personnel and criminals.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

The cybercrime environment is a fluid one, populated by quick learners, so defenses have to be continuously upgraded and updated. It’s not enough to build a firewall; the process is constant. The layers of defense include the host, the actual physical layer (buildings, servers), the human, the application, the data, and then the network. Each of these layers must be monitored all along the supply chain all the time.

43) The cost of cybercrime to the perpetrator is

A) exceedingly high, so as to be a deterrent.
B) almost nonexistent, because few criminals are apprehended.
C) difficult to determine, because security issues prohibit publication of trials.
D) negligible, because few laws have been updated to include cybercrime.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

To reduce cybercrime, legal systems around the world have made the cost of being apprehended and convicted increasingly high. Within the organization, both technical and behavioral strategies contribute to reducing cybercrime.

44) Businesses that conduct country risk assessment do so

A) as part of their legal profile.
B) to protect their assets, including people and property.
C) to satisfy their top management teams.
D) because, much as with executive salaries, there is a herd mentality.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Remember
Difficulty : 1 Easy
Learning Objective : 05-03 Describe the role of country risk assessment in international business.
Topic : Risks Associated with Global Capital Markets

Country risk assessment (CRA) is an assessment of a country’s economic situation and politics to determine how much risk to employees, property, and investment exists for the firm doing business there.

45) The trend for firms in regard to country risk assessment (CRA) is to

A) avoid it as an added cost in competitive markets.
B) concentrate much more on CRA in making decisions about foreign activities.
C) use CRA in obviously dangerous locations, but only in those situations, to control costs.
D) hire consultants to reduce CRA insurance costs.

The trend is to use CRA more intensively.

46) What is the role of the home country in risk assessment?

A) It has no role. What matters is the country in which the business is conducted.
B) It is a significant consideration.
C) It is used initially, but then more micro issues become the focus of CRA.
D) Country risk does not involve political considerations at all.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 2 Medium
Bloom's : Remember
Learning Objective : 05-03 Describe the role of country risk assessment in international business.
Topic : Risks Associated with Global Capital Markets

The home country of the parent company is thought to play a significant role in CRA. What is the local attitude toward the home country? Do political issues arise that may lead to sanctions by the home country government?

47) Country risk assessment is a measure of the

A) threat of nationalization.
B) threat of losing an investment or not being paid.
C) kidnapping rate.
D) rate of unfunded exposures.

The threat of losing an investment or not being paid is the focus of CRA. The threat of nationalization is only a small part of that. Besides, most nationalizations include compensation.

48) A corporation would implement a country risk assessment in order to

A) estimate the risk to business employees, property, and investment.
B) predict risk of marketing errors, given cultural variables.
C) predict responses of citizens to new product lines.
D) analyze the impact of diversity in a country's workforce.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Difficulty : 2 Medium
Bloom's : Understand
Learning Objective : 05-03 Describe the role of country risk assessment in international business.
Topic : Risks Associated with Global Capital Markets

CRA focuses on the risk a business takes within the country of losing workers, property, and assets.

49) A business would obtain KRE insurance to cover losses associated with

A) kidnapping situations associated with a foreign involvement.
B) unpredictable international real estate investments.
C) manufacturing operations that do not meet host country standards.
D) higher tariffs when exporting to developing countries.

The next issue is how the firms and individual employees who face overseas threats protect themselves. The threats that target individuals are insurable, and many firms do insure against them. This insurance, called KRE (kidnap, ransom, and extortion), generates well over $500 million in premiums each year and covers the ransom, the fees of specialist negotiators, the salary of the hostage, and counseling for the victim and family.

50) One reason a government chooses to restrict trade would be to

A) to eliminate domestic jobs.
B) foster relations with other nations.
C) to indicate an isolationist stance.
D) protect domestic infant industries.

Why do governments restrict trade? The main reasons are to promote the national defense, to impose sanctions on other countries, to protect domestic infant industries, to create or preserve domestic jobs, to ensure fair competition, and to retaliate for the trade restrictions or unfair practices of other governments.

51) Dumping is defined as

A) selling a product abroad for less than its production cost or cost in the home market.
B) selling a product abroad tax-free and with an extended warrantee.
C) exporting a product to a third country without correct documentation.
D) selling a product at its domestic market value.

We can define dumping in three ways: it consists of selling a product abroad for less than the cost of production, less than the price in the home market, or less than the price to third-party countries.

52) How has the United States responded to the activity of dumping?

A) It only enacted antidumping measures in 2006.
B) It enacted antidumping measures for its exporting companies as early as 1856.
C) It became the first country to prohibit dumping into its own market in 1916.
D) It welcomes dumping activity to boost tariffs.

The United States became the first country to prohibit the dumping of foreign goods into its own market in 1916. There is no U.S. law prohibiting U.S. firms from dumping their goods abroad, however.

53) Social dumping occurs when an exporting country

A) imposes an export tax on domestic businesses that export, to compensate for the opportunity cost to the domestic market.
B) creates unfair competition based on lower costs because the exporting country provides little social support system to the worker.
C) targets markets that consist of specific vulnerable groups in the importing country.
D) exports goods that are not sellable in the domestic environment due to hazards and safety issues.

Social dumping occurs when producers have lower wage rates, lower social costs such as unemployment taxes and environmental regulations to support the general welfare, poor worker benefits, and poor working conditions, all of which undermine social support systems.

54) A country that can sell its products at a lower cost because it has lower standards for emissions from manufacturing facilities is making use of

A) predatory dumping.
B) social dumping.
C) subsidy dumping.
D) environmental dumping.

A manufacturer may also lower its export price to force the importing nation’s domestic producers out of business, expecting to raise prices once that objective has been accomplished. This is called predatory dumping. Social dumping occurs when producers have lower wage rates, lower social costs such as unemployment taxes and environmental regulations to support the general welfare, poor worker benefits, and poor working conditions, all of which undermine social support systems. And environmental dumping occurs when an exporter can sell at lower costs due to the country’s lax environmental standards.

55) Which type of subsidies are currently the focus of the World Trade Organization?

A) agricultural
B) health care
C) industrial
D) educational

Most of the agricultural subsidies in developed countries go to a small percentage of recipients, usually large enterprises. The subsidies enable them to undersell unsubsidized, small farmers in developing economies on the world commodities markets. These agricultural subsidies are the current focus of the WTO, and talks about them have been making very slow progress.

56) Henson Electronics Corp. decided to lower its export price in order to force the domestic producers in the importing nationsout of business. Once these competitors are gone, Henson Electronics plans to raise its prices. What is this an example of?

A) social dumping
B) subsidies
C) predatory dumping
D) greenfield investments

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Bloom's : Apply
Difficulty : 2 Medium
Learning Objective : 05-04 Explain the political motivations for government intervention in trade and the major types of government trade restrictions.
Topic : Trade Restrictions

57) Countervailing duties are put in place to

A) balance trade agreements.
B) offset the effects of a subsidy.
C) encourage dumping efforts.
D) avoid import tariffs.

Competitors in importing nations frequently ask their governments to impose countervailing duties to offset the effects of a subsidy.

58) The primary reason tariffs are put in place is to

A) raise government revenue at the cost of importers.
B) raise the price of imports, to protect domestic goods.
C) punish countries over political issues.
D) encourage foreign consumption.

Tariffs are primarily used to raise the cost of imported goods.

59) The Smoot-Hawley Tariff Act was the result of lobbying efforts by which group?

A) farmers
B) manufacturers
C) service providers
D) military groups

A classic example of the harm tariffs can cause is the Smoot-Hawley Tariff Act in the United States. In the late 1920s, declining economic fortunes led U.S. farmers and producers to lobby Congress for tariff protection.

60) At Kaiser Manufacturing, the company pays import duties that are a stated percentage of the invoice value of the product. Which type of tariff does this company pay?

A) countervailing
B) specific
C) compound
D) ad valorem

There are three types of tariffs or import duties: ad valorem, specific, and compound. An ad valorem duty is stated as a percentage of the invoice value of the product.

61) Peterson Soft Drink Corp. imports fruit flavors for use in its products. The company pays $0.86 per pound on every shipment. Which type of tariff does the company pay?

A) ad valorem
B) specific
C) compound
D) countervailing

A specific duty is a fixed sum of money charged for a specified physical unit of the product. A company importing dynamite in cartridges or sticks suitable for blasting pays $0.37 per pound, regardless of the shipment’s invoice value.

62) Tariffs on some products no longer serve their original purpose of protecting domestic producers but they are still levied by the government. What are these types of tariffs called?

A) nuisance
B) nontariff
C) countervailing
D) variable

Tariffs assessed at very low rates are sometimes referred to as nuisance tariffs because importers are still required to go through the frequently lengthy process of paying them, even though their low levels may no longer serve the original intention, such as protecting domestic producers.

63) A variable levy exists when a country

A) creates a tariff that requires a percentage of the entire invoice value be paid on imports.
B) allows one importer to pay a lower tariff than another importer for the same type of goods or services.
C) removes expected tariffs based on supply and demand for a good or service.
D) guarantees that the market price of an import will be the same as that of domestically produced goods.

A variable levy guarantees that the market price of the import will be the same as that of domestically produced goods; the European Union has used this levy for imported grains.

64) Quotas are a quantitative barrier that set

A) limits, established by the importer.
B) goals, established by the exporter.
C) specific quantities of imports or exports, based on price.
D) expectations on domestic and foreign sales.

One type of quantitative nontariff barrier is the quota, which sets numerical limits for specific kinds of goods that a country will permit to be imported during a specified period.

65) Some producers of goods use transshipping as a way to

A) reduce shipping costs.
B) avoid import administration.
C) evade allocated quotas.
D) evade local manufacture requirements.

Some producers have used transshipping to evade allocated quotas. In such cases, the finished goods are first shipped to a country with either an unfilled or no quota, where the goods are labeled as products of that country, and then shipped to the quota-imposing nation.

66) The U.S. government assigns specific amounts of sugar imports that can come from 40 nations. What type of quota does this represent?

A) allocated
B) absolute
C) primary
D) variable

Quotas are generally global; that is, the total amount is fixed without regard to source. They may also be allocated, in which case the government of the importing nation assigns quantities to specific countries. The United States allocates quotas for specific tonnages of sugar to 40 nations, for example.

67) In some countries, when an import of a product reaches the government-specified amount, then no further imports of that product are allowed for the year. What type of quota does this represent?

A) tariff-rate
B) variable
C) absolute
D) allocated

If the quota is absolute, once the specified amount has been imported, further importation for the rest of the period (usually a year) is prohibited.

68) Unlike quotas, voluntary export restraints (VERs) are imposed by

A) the importing country's government.
B) the exporting country's government.
C) either the importing or exporting country's government.
D) the importing company.

Although quotas are applied by the importing country, VERs are applied by the exporting country.

69) Examples of orderly marketing arrangements are

A) voluntary export restraints.
B) greenfield investments.
C) variable levies.
D) absolute quotas.

Orderly marketing arrangements have been greatly reduced by the WTO, and they are a kind of VER.

70) What is one of the major groupings of nonquantitative nontariff barriers?

A) ad valorem dutiesies
B) customs
C) quotas
D) VERs

NTBs can be classified into three major groupings: direct government participation in trade, customs and other administrative procedures, and standards.

71) The most common form of direct government participation in trade is

A) the subsidy.
B) shipping on national vessels.
C) import duties.
D) export quotas.

The government gives subsidies to domestic producers, especially in the agricultural sector.

72) Customs procedures in many countries often

A) are transparent and fair.
B) discriminate against imports or favor exports.
C) are online and impersonal.
D) aid importers and exporters in estimating their total costs.

Customs (a general term for duties paid on imports) and administrative barriers cover a large variety of government policies and procedures that either discriminate against imports or favor exports. For example, in some nations, a product being imported may be subject to different rates of duty depending on the port of entry, and an arbitrary determination of the customs value.

73) The Food and Drug Administration in the United States works to protect citizens from harmful products and companies must meet the regulations it sets. Which classification of nonquantitative nontariff barrier does this represent?

A) customs
B) direct participation
C) VER
D) standards

NTBs can be classified into three major groupings: direct government participation in trade, customs and other administrative procedures, and standards. Governmental and private standards to protect the health and safety of a nation’s citizens are both certainly desirable, but exporting firms are plagued by many standards that are complex and discriminatory.

74) How do barriers to trade affect the citizens of a country?

A) They are a political issue, but don't affect the cost of imports except marginally.
B) They cost consumers billions of dollars per year.
C) They save jobs in unprotected industries at $231,289 per job per year.
D) They affect corporations but not citizens directly.

Trade restraints cost consumers everywhere tens of billions of dollars per year, while they benefit a small number of companies in the protected sectors of the economy.

75) The national defense argument for trade restrictions has been used in the United States by the Trump administration for imposing tariffs on

A) subway cars.
B) uniforms.
C) steel.
D) ethanol.

In 2018, the Trump administration invoked national security as a basis for imposing tariffs on selected products such as steel, aluminum, automobiles, and auto parts.

76) An argument against using sanctions to punish an offending nation is that

A) sanctions seldom achieve their goal of forcing change in the offending country.
B) sanctions are relatively harmful to the citizens of the offending country.
C) sanctions are not condoned by the U.N.
D) sanctions decrease the cost of doing business.

Sanctions seldom achieve their goal of forcing change in the targeted country; they also tend to produce collateral economic damage in the nations applying them, in addition to the harm caused in the sanctioned nation.

77) Counterarguments to the "protect domestic jobs from cheap foreign labor" argument include that

A) the labor rate is not all of the labor cost.
B) wage rates are incidental.
C) cheap foreign labor is a natural occurrence.
D) comparative advantage recognizes cheap labor as a competitive right.

Hourly labor rates are not the full story, and productivity is what really matters.

78) Tariff barriers may be used to

A) protect domestic industry from foreign, lower-cost producers.
B) reduce the need for foreign workers.
C) increase government revenues.
D) protect borders from gray market goods.

Tariff barriers raise the selling prices on imported goods, which reduces competition for domestic goods.

79) Timmerson Corp. was frustrated to learn that it would have to pay the same import duty on shipments worth $100 as it did for shipments costing $2,000. What does the government have in place that creates this situation for Timmerson Corp.?

A) an official price
B) an embargo
C) an ad valorem duty
D) an absolute quota

Some governments set official prices or use variable levies to correct this deficiency. An official price guarantees that a certain minimum import duty will be paid regardless of the actual invoice price.

80) How does a variable levy affect domestic producers?

A) It prevents an imported good from being priced lower than the domestic good.
B) It lowers the cost of an imported good compared to the cost of the domestic good.
C) It raises the cost to develop a domestic good compared to the cost of developing an imported good.
D) It eliminates any competition from imported goods.

A variable levy guarantees that the market price of the import will be the same as that of domestically produced goods; the European Union has used this levy for imported grains.

81) Trade barriers create costs that are paid ultimately by the

A) government erecting the barrier.
B) consumer.
C) country exporting the goods.
D) exporter.

The costs of trade barriers are ultimately paid by the consumer.

82) The national defense argument for trade restrictions suggests that

A) some industries, even if they are not competitive, may need protection from imports.
B) the military is an area that can be exempted from import restrictions.
C) national defense requires no trade restrictions.
D) exporters of material would do well to monitor trade restrictions and permissions.

The national defense argument for trade restrictions suggests that certain industries need protection from imports because these industries are vital to security and must be kept operating, even though they are not competitive with foreign suppliers.

83) Until just a few years ago, the United States levied a 54-cents-a-gallon import duty on foreign produced ethanol. Which of the reasons for restricting trade does this represent?

A) impose sanctions
B) protect an infant industry
C) ensure fair competition
D) provide for national defense

Until 2012, the United States levied a protective 54-cents-a-gallon import duty on foreign-produced ethanol, including imports from low-cost producer Brazil, in order to give “our infant industries a greater chance to grow.”

84) One of the problems associated with the “cheap foreign labor” argument for restricting trade is that

A) wages don’t account for all production costs.
B) foreign competition will achieve an unfair advantage.
C) inflicting economic damage might have reverse affects.
D) the national defense must be kept at maximum levels.

Protectionists who use the “cheap foreign labor” argument usually compare low foreign wage rates to those paid in their home country. The first problem with this argument is that wages don’t account for all production costs, or even for all labor costs, so a comparison based on relative hourly wages alone would be misleading.

85) An example of retaliatory trade restrictions is

A) the U.S. response to the EU ban of hormone-treated beef.
B) the EU restraint on Microsoft for bundling its product.
C) the Japanese refusal to allow U.S. military equipment in Japan.
D) China's tightening control of the export of rare earths.

The beef wars in the late 1980s are an example of retaliatory trade restrictions.

86) Social dumping occurs when exporting producers

A) have lower wage rates, social costs, and environmental regulations.
B) allow for free migration, thereby exporting poverty.
C) allow the import of environmentally sensitive waste.
D) take knowing advantage of a social class system.

Social dumping is when producers have lower wage rates, social costs, and environmental regulations, and thus, can be more competitive.

87) The main goal of tariffs is to

A) increase the selling price of imported goods, thereby reducing competition for domestic producers.
B) raise revenues for the importing government.
C) reduce earnings for the exporting government, thereby creating a trade war.
D) penalize importers for not buying domestic goods.

The main goal of tariff barriers is to increase the price of imported goods. Some small governments may also use tariffs to raise revenues, but this is a small part of the picture.

88) A specific duty is a

A) fixed sum charged for a specified number of units of the product.
B) stated percentage of the invoice of the product.
C) duty established for a given, articulated reason.
D) rate charged in excess of a compound duty.

A specific duty is a fixed sum per number of units of the product.

89) Tariffs often are set to

A) encourage local input.
B) decrease the import costs.
C) stimulate imports.
D) decrease consumer costs.

Tariffs are sometimes set to encourage local input. For example, the finished product ready for sale to the consumer may have a 70 percent import duty. However, if it is imported in bulk so that it must be packaged in the importing nation, the duty level may be only 30 percent to encourage some local production.

90) Some nontariff barriers are difficult to discourage because

A) they consist of government subsidies and standards.
B) their development has been supported by local politicians.
C) they build on nationalism and patriotism.
D) they are established by consumers.

Nonquantitative nontariff barriers are difficult to discourage because they consist of subsidies and standards that may reflect national culture and values.

91) Jameson Electronics Corp. has $25,000 worth of holiday lights inventory that will soon become obsolete due to the seasonal nature of the product. The company decides to sell the inventory at a lower cost in its international market without changing pricing in its domestic market. What type of action is the company taking?

A) dumping
B) VER
C) quota
D) sanctions

A manufacturer may dump products to sell excess production without disrupting prices in its domestic market, as a response to cyclical or seasonal factors (during an economic downturn or at the end of a fashion season, for example), or as a way to increase market share.

92) Agricultural trade restrictions are typically found

A) in most countries.
B) only in centralized economies.
C) only in developing economies.
D) exclusively in free market economies.

Almost all countries protect agricultural products, in part because the agricultural sector has political power and influences politicians.

93) Japan restricts the number of automobiles its manufacturers can export to the United States each year. What is this an example of?

A) voluntary export restraint
B) ad valorem tariff
C) absolute quota
D) sanction

The Japanese government established a VER to restrict the number of automobiles its manufacturers could export to the United States annually.

94) Government motivation for restricting trade includes

A) protecting jobs, promoting defense, imposing sanctions, and protecting infant industries.
B) increasing revenues through duties and tariffs.
C) a desire for isolationism as a political strength.
D) increasing domestic consumption and thereby domestic jobs.

Governments generally restrict trade to promote jobs and defense, to punish other nations (sanctions), and to protect infant industries.

95) Some countries impose both an ad valorem duty and a specific duty on a single import. What type of duty are these countries using?

A) compound
B) duplex
C) secondary
D) elite

A compound duty is a combination of an ad valorem duty and a specific duty.

96) When governments ________ companies, they take them from private to public ownership.

97) ________ is characteristic of a country that cannot maintain itself in power and makes sudden, unpredictable policy changes.

Instability occurs when a government cannot maintain itself in power or makes sudden, unpredictable, or radical policy changes.

98) With regard to cybercrime, ________ technology is now the most vulnerable area.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

Many smartphone users are relatively unaware of the vulnerabilities these devices carry with them.

99) One risk to business is ________, unlawful acts of violence to achieve a variety of objectives, including revolution and revenge.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

Terrorism is a primary risk in international business today.

100) A government that projects ________ has political policies that are predictable and are not subject to sudden, radical changes.

A government that has achieved stability has the ability to maintain itself in power and hold to predictable fiscal, monetary, and political policies that are not subject to sudden, radical changes.

101) ________ is hijacking that includes kidnapping on the seas.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

This is the standard definition of piracy.

102) Hacking, computer espionage, and domain-related offenses are examples of ________.

Question Details
AACSB : Reflective Thinking
Accessibility : Keyboard Navigation
Learning Objective : 05-02 Explain government protection and stability and their importance to business.
Bloom's : Remember
Difficulty : 1 Easy
Topic : Terrorism, Terrorist Activities, and Countermeasures

Cybercrime is a critical risk area in all businesses and has a global reach.

103) ________ is an assessment of a country's economic situation and politics to determine how much risk to employees, property, and investment exists for the firm doing business there.

104) The ________ argument for trade restrictions suggests that certain industries need protection from imports because these industries are vital to security and must be kept operating, even when they are not competitive.

105) Some argue that infant or ________ firms need protection from imports.

This approach suggests temporary protection, until the industry is competitive.

106) The ________ argument suggests duties that would bring imported goods up to the price level of goods in the domestic market.

This approach protects domestic producers, while eliminating the comparative advantage of foreign producers, so is economically inefficient.

107) Selling a product abroad for less than the cost of production, less than the price in the home market, or less than the price to third-party countries constitutes ________.

Dumping is often a cause for trade retaliation.

108) ________ can take the form of cash payments to the firm, government participation in ownership, low-cost loans to exporters and foreign buyers to encourage purchase, and preferential tax treatment.

Subsidies are common in all countries, especially around agriculture.

109) ________ are often imposed to offset the effects of a subsidy.

In the United States, countervailing duties are regularly imposed to equal the subsidy and thereby null its effect.

110) A percentage of the invoice value of the product is known as a(n) ________ duty.

An ad valorem duty is stated as a percentage of the invoice value of the product. Ad valorem is one of three types of tariffs (also specific and compound).

111) A ________ duty is a fixed sum charged on a physical unit of an imported good.

A specific duty is a fixed sum of money charged for a specified physical unit of the product. Specific duty is one of three types of tariffs (ad valorem and compound are the others).

112) A ________ duty is a combination of specific and ad valorem duties.

Compound duties are used to protect against inflation.

113) Quotas are a form of ________ barrier that sets limits on specific kinds of goods.

One type of quantitative nontariff barrier is the quota, which sets numerical limits for specific kinds of goods that a country will permit to be imported during a specified period.

114) ________ are export limits imposed by the exporting nation, rather than imposed by the importing nation.

Governments have negotiated voluntary export restraints (VERs), or export quotas, with other countries. These are a different kind of quantitative trade barrier, offered by the exporting country rather than imposed by the importing one. Examples are VERs on Japanese auto exports to the United States and Canadian lumber to the United States.

115) U.S. restriction on the origin of food used in the school lunch program is an example of a ________ NTB.

Many international trade specialists claim that the nonquantitative NTBs are the most significant NTB today.

116) Compare and contrast nationalization versus privatization.

117) Describe a country risk assessment and explain how the types of information a firm needs can vary and where firms can find the information they need to assess a country.

118) Describe arguments for restricting trade.

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