Question 1

A formal arrangement between two or more countries to reduce or eliminate tariffs is known as a(n)________.
A)quota arrangement
B)free trade agreement
C)memorandum of association
D)memorandum of understanding

Accepted Answer

A free trade agreement is a formal arrangement between two or more countries to reduce or eliminate tariffs, allowing for more free and open trade between the participating countries. Quota arrangements involve setting limits on the amount of goods that can be imported/exported, while memorandums of association and understanding are more general agreements between parties that may not necessarily involve trade specifically.

Question 2

Which of the following is a method used by some manufacturers to avoid paying high tariffs?
A)assemble products in the target market
B)produce a large number of less expensive items in the target market
C)employ highly skilled workers in the export location regardless of the cost
D)ship products to fewer international locations

Accepted Answer

Assembling products in the target market is a common method used by manufacturers to avoid high tariffs. By assembling the products in the target market, the manufacturer can avoid the tariff assessed on the final product and instead pay the lower tariff assessed on the parts or components.

Question 3

Tariffs rarely vary with the form of an imported product.

Accepted Answer

Tariffs can vary significantly depending on the form of an imported product, as different forms may fall under different tariff classifications and rates.

Question 4

Given the high trade barriers in Mexico, the management of NAC is most likely to consider ________ to be an inappropriate entry strategy.
A)exporting
B)FDI
C)joint ventures
D)licensing

Accepted Answer

Exporting would not be a practical entry strategy for NAC due to the high trade barriers in Mexico. The high tariffs and restrictions on imports would likely make exporting cost-prohibitive and limit the appeal of this option. FDI, joint ventures, and licensing may offer more viable alternatives for NAC to enter the Mexican market.

Question 5

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

Accepted Answer

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

Question 6

One approach for reducing exposure to trade barriers is to have exported products classified in the appropriate harmonized product code.

Accepted Answer

By correctly classifying products in the harmonized system, exporters can ensure that they are meeting the specific requirements of the importing country and reducing the risk of encountering trade barriers.

Question 7

Tariffs and most nontariff trade barriers apply to FDI, whereas investment barriers apply to exporting.

Accepted Answer

Tariffs and most nontariff trade barriers apply to exporting, whereas investment barriers apply to FDI.

Question 8

Which of the following must NAC ensure in order to reduce exposure to trade barriers?
A)reduced production
B)strong emphasis on quality
C)accurate product classification
D)obtaining patents for inventions

Accepted Answer

Accurate product classification is essential for reducing exposure to trade barriers as it ensures compliance with trade regulations and standards. Reduced production and obtaining patents may not necessarily have an impact on trade barriers, while a strong emphasis on quality is important but not a guarantee for reducing trade barriers.

Question 9

In a short essay, explain how the GATT changed international trade.

Accepted Answer

The answer of In a short essay, explain how the...

Question 10

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

Accepted Answer

Foreign trade zones are areas in the United States where foreign goods can be brought in without paying customs duties. Firms can use these zones to assemble foreign dutiable materials and components into finished products, which can then be re-exported without paying duties. This can be beneficial for firms looking to minimize costs and streamline their production process.

Question 11

Which of the following entry strategies do most firms use in the absence of high tariffs?
A)FDI
B)licensing
C)joint ventures
D)exporting

Accepted Answer

In the absence of high tariffs, most firms prefer exporting as an entry strategy because it involves lower capital investment and allows the firm to test the market without committing large resources. Additionally, exporting can also allow the firm to learn about the market and develop relationships with local distributors or partners before considering other entry strategies like FDI or joint ventures. Licensing may also be an option, but it involves giving up some control over the product or technology being licensed.

Question 12

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

Accepted Answer

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

Question 13

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

Accepted Answer

High tariffs make it difficult for firms to export to a target market, so they may consider other strategies such as FDI, licensing, and joint ventures to operate directly in the market and circumvent import barriers.

Question 14

Singapore and South Korea used export-led development to achieve high growth from the 1970s onward.

Accepted Answer

Singapore and South Korea both utilized export-led development strategies to achieve high economic growth from the 1970s onward.

Question 15

The WTO was created in order to reduce tariffs through continuous negotiations among member nations.

Accepted Answer

The answer of The WTO was created in order to...

Question 16

The GATT created a forum for resolving trade disputes.

Accepted Answer

The General Agreement on Tariffs and Trade (GATT) did create a forum for resolving trade disputes, known as the GATT dispute settlement system.

Question 17

Which of the following would be most important for NAC managers to consider while taking a decision in favor of building a facility in Mexico or India?
A)Has NAC engaged in dumping in the past?
B)How would appliance parts and finished products be categorized when passing through customs?
C)Is employee empowerment culturally favored in Mexico and India?
D)What entry strategies are available in both countries which would allow NAC to minimize import barriers?

Accepted Answer

The most important factor for NAC managers to consider while deciding to build a facility in Mexico or India would be the entry strategies available in both countries that would allow NAC to minimize import barriers. This would help NAC to reduce costs and increase profits. The other factors, such as past dumping activities, product categorization, and employee empowerment, may also be important but they are not as crucial as entry strategies.

Question 18

Obtaining economic development incentives from host-or home-country governments increases the cost of trade and investment barriers.

Accepted Answer

Economic development incentives are typically designed to lower the costs associated with trade and investment, such as tax breaks, grants, or subsidies, rather than increase them.

Question 19

A ________ is an area within a country that receives imported goods for assembly or other processing and subsequent re-export.
A)single market
B)trade bloc
C)foreign trade zone
D)common market

Accepted Answer

A foreign trade zone is a designated area within a country that is legally outside of that country's customs territory. Imported goods can be brought into the zone without being subject to tariffs or other import restrictions. The goods can then be processed, assembled, or manufactured before being re-exported, often without being subject to any additional taxes or duties. This can make it more cost-effective for companies to conduct international trade by reducing some of the barriers and costs associated with import-export processes.

Question 20

The global recession and financial crisis that began in 2008 arose largely from inadequate regulation and insufficient enforcement of current regulations in the banking and finance sectors.

Accepted Answer

This is the widely accepted view among economists and experts that the global recession and financial crisis of 2008 was caused by inadequate regulation and enforcement in the banking and finance sectors.

Quiz 7: Government Intervention and Regional Economic Integration

A formal arrangement between two or more countries to reduce or eliminate tariffs is known as a(n) ________.

Which of the following is a method used by some manufacturers to avoid paying high tariffs?

Tariffs rarely vary with the form of an imported product.

Given the high trade barriers in Mexico, the management of NAC is most likely to consider ________ to be an inappropriate entry strategy.

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

One approach for reducing exposure to trade barriers is to have exported products classified in the appropriate harmonized product code.

Tariffs and most nontariff trade barriers apply to FDI, whereas investment barriers apply to exporting.

Which of the following must NAC ensure in order to reduce exposure to trade barriers?

In a short essay, explain how the GATT changed international trade.

Firms use foreign trade zones to ________.

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