Unit 1- Part 2

I. TRUE/FALSE QUESTIONS.
1. The main cultural motives behind government intervention in trade include protecting jobs and
preserving national security. FALSE
2. Financial assistance to domestic producers in the form of cash payments, low-interest loans, tax
breaks, product price supports or some other form is called export financing. FALSE
3. Tariffs can be classified as export tariff, import tariff and domestic tariff. FALSE
4. A tariff levied by the government of a country that a product is passing through on its way to its
final destination is called ad valorem tariff. FALSE
5. 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. TRUE
6. To protect domestic producers and to generate revenues are the two main reasons why countries
levy tariffs. TRUE
7. Restriction on the amount of a good that can enter or leave a nation during a certain period of
time is called a tariff. FALSE
8. A reason why a country imposes export quotas is to protect its domestic producers from
international competition. FALSE
9. VERs refers to a quota that a nation imposes on its exports usually at the request of another nation. TRUE
10. A hybrid form of trade restriction is called voluntary export restraints. FALSE
11. The three main goals of the WTO are to help the free flow of trade, to help negotiate further
opening of markets and to provide insurance against social unrest to companies investing in a
member country. FALSE
12. 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. FALSE
II. MULTIPLE CHOICE QUESTIONS.
1. Which of these is the pattern of imports and exports that would result in the absence of trade
barriers?
a. Embargo b. Protectionism c. Infant industry argument d. Free trade
2. 4. Which of these is the main political motive behind government intervention in trade?
a. Promotion of a strategic trade policy b. Protecting jobs c. Protection of national
identity d. Protecting young industries from competition
3. Which of these is not a political motive, according to your text, behind government
intervention in trade?
a. Responding to other nation's unfair trade practices b. Preserving national security.
c. Protecting jobs d. Protecting young industries from competition
4. Which of these is not an instrument that government uses to promote trade?
a. Tariffs b. Subsidies c. Export financing d. Foreign Trade Zones
5. Which of these is common instrument used by government to promote trade?
a. Tariffs b. Subsidies c. Export financing a. export financing. c. Quotas
6. Financial assistance to domestic producers in the form of cash payments, low-interest loans,
tax breaks, or product price supports is called a (n) _______.
a. export financing b. embargo. C. subsidy. d. tariff
7. When a government guarantees that 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.
8. 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. b. subsidy. c. the WTO. d. foreign trade zone. e. Special government
agency
9. All of these are methods of restricting trade except ______. a. tariffs. b. quotas. c. local
content requirements. d. subsidy e. embargo
10. Which of these is a method of restricting trade?
a. Export financing b. Local content requirements c. Subsidy d. Foreign
trade zones
11. Which of these add to the cost of imported products because they levy an additional tax upon
them?
a. Tariffs b. Quotas c. Local content requirements d. Embargoes e. Administrative
delays
12. Tariffs are classified into all of these except ______. a. transit. b. domestic c. export
d. import.
13. A tariff levied by the government of a country that a product is passing though on its way to
a final destination is called a tariffs. a. transit b. domestic c. export d. import
14. Countries levy tariffs for which of these reasons?
a. To protect domestic producers b. To encourage trade c. To generate foreign competition
d. All of the above
15. 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.
16. A quota that a nation imposes on its exports, usually at the request of another nation, is referred
to as a (n) _________.
a. embargo. b. tariff-quota. c. tariff. d. voluntary export restraint
17. A ban on trade in one or more products with a particular country is called a (n) ______.
a. embargo b. tariff-quota c. tariff. d. voluntary export
restraint
18. A treaty that was designed to promote free trade by reducing both tariffs and non-tariff barriers
to international trade is called the a. WTO b. GATT. C. OPEC d. VER
19. A key component of the WTO that was carried over from GATT is called the _______.
a. the clear definition of intellectual property rights. b. GATS. c. TRIPS. d. normal trade
relations
20. Which of these is the main cultural motive behind government intervention in trade?
a. promotion of a strategic trade policy b. protecting jobs c. Protection of national identity
d. Protecting young industries from competition
21. A lower tariff rate for a certain quantity of imports and a higher rate for quantities that exceed
the quota is called _____.
a. embargo b. tariff-quota c. tariff. d. voluntary export
restraint

III. SHORT- ANSWER QUESTIONS

1. The pattern of imports and exports that would result in the absence of trade barriers is called
free trade
_____.
2. ______ advantages result because economies of scale limit the number of companies that an
industry can sustain. First-mover
3. Financial assistance to domestic producers in the form of cash payments, low-interest loans,
subsidy
tax breaks, product price supports, or some other form is called _______.
4. When a government guarantees that it will repay the loan of a company if the company should
default on repayment, it is called a ______.
loan guarantee
5. A designated geographic region in which merchandise is allowed to pass through with lower
customs duties and/or fewer customs procedures is called a (n) _______.foreign trade zone
tariff
6. A _________ is a government tax levied on a product as it enters or leaves a country.
7. A tariff levied by the government of a country that is exporting a product is called an ______. export tariff
transit
8. A _______ tariff is a tariff levied by the government of a country that a product is passing
through on its final destination.
9. A tariff levied by the government in a country that is importing a product is called an ______. import tariff
10. A tariff levied as a percentage of the stated price of an imported product is called ______ tariff. ad valorem
11. A tariff levied as a specific fee for each unit (measured by number, weight, etc.) of an imported
specific tariff
product is called _______.
12. 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) ______.
compound tariff
13. Restriction on the amount of a good that can enter or leave a country during a certain period
quota
of time is called a_______.
14. Countries normally self-impose a _______ VER in response to the threat of an import tariff or total
ban on a product by an importing nation.
15. A lower tariff rate for a certain quantity of imports and a higher rate for quantities that exceed
tariff-quota
the quota is referred to as a (n) ______.
16. A complete ban on trade (imports and exports) in one or more products with a particular
country is called an embargo
_______.
17. Laws stipulating that a specified amount of a good or service be supplied by producers in the
domestic market are called ________.
local content requirements
18. Regulatory controls or bureaucratic rules designed to impair the rapid flow of imports into a
administrative delays
country are _______.
19. ___________
Currency control can reduce imports by stipulating an exchange rate that is unfavorable to
potential importers.
WTO is the only international body dealing with rules of trade between nations.
20. The _______
21. A key component of the WTO that was carried over from the GATT is the principle of non-
discrimination called _______.
normal trade relations
22. When a company exports a product at a price lower than the price normally charged in its
dumping
domestic market, it is said to be _______.
23. _________ is an additional tariff placed on an imported product that a nation believes is
receiving an unfair subsidy. Countervailing duty