Unit 5: Protectionism and Trading Environment - Practice Quiz

1 What does globalization primarily involve?

2 Which development has strongly supported globalization?

3 Which is a common benefit of globalization for consumers?

4 Which issue is commonly identified as a challenge of globalization?

5 What is outsourcing in an international business context?

6 What is foreign direct investment (FDI)?

7 Which condition generally attracts foreign investors?

8 What is political risk in foreign investment?

9 Why is reliable infrastructure important for foreign trade?

10 Which factor directly affects the price of one country's currency in terms of another?

11 Why might a government restrict imports?

12 What is an export subsidy?

13 Which organization provides a global framework for trade rules among member countries?

14 What does a trade agreement usually seek to do?

15 What is nationalization?

16 What is a tariff?

17 What is an import quota?

18 Which is an example of a non-tariff barrier?

19 What is the usual immediate effect of a tariff on imported goods?

20 Which trade barrier completely prohibits the import or export of a particular product?

21 A smartphone producer sources components from six countries and assembles them in a seventh country. Which globalization trend does this arrangement best illustrate?

22 A global clothing company faces criticism because its overseas supplier uses unsafe working conditions. Which globalization challenge is most directly involved?

23 A country becomes heavily dependent on imported semiconductors. A disruption abroad then stops production in several domestic industries. What does this situation demonstrate?

24 An online education company begins selling courses internationally without establishing physical offices abroad. Which development most directly supports this form of globalization?

25 Two countries gain from trade, but workers in one country's import-competing industry lose their jobs. Which policy best addresses this challenge while preserving most trade benefits?

26 A manufacturer is comparing two countries for a new factory. Country X has lower wages but frequently changes regulations, while Country Y has stable rules and reliable courts. Why might the manufacturer choose Country Y?

27 A foreign investor expects to earn profits in local currency but worries that the currency will depreciate before profits are converted. Which environmental factor is the main concern?

28 A company wants access to a foreign market but considers direct investment too risky because of political instability. Which entry method generally requires a lower capital commitment?

29 A country permits foreign ownership but requires investors to obtain approvals from several agencies with unclear procedures. What is the most likely effect on foreign direct investment?

30 A business chooses a joint venture with a local firm because consumer preferences and distribution practices differ greatly from its home market. What is the main expected advantage?

31 A government offers tax holidays to foreign firms that build factories in economically weak regions. What is the government's primary objective?

32 A government requires a foreign automobile producer to purchase 40% of its components from domestic suppliers. Which policy is being applied?

33 A government provides low-interest loans to domestic exporters. What is the most likely immediate effect in foreign markets?

34 A country restricts foreign investment in its defense industry while allowing it in tourism and retail. Which justification most directly supports this policy?

35 A government imposes temporary safeguards after a sudden surge of imports seriously harms domestic producers. How do safeguards differ from anti-dumping duties?

36 An imported machine has a customs value of $20,000 and faces an ad valorem tariff of 15%. What is its tariff-inclusive cost before other charges?

37 A country permits only 50,000 tonnes of sugar to be imported each year, regardless of its foreign price. Which trade barrier is this?

38 Imported food must pass health inspections that are also applied to equivalent domestic food. Under what condition is this requirement least likely to be considered disguised protectionism?

39 A tariff raises the domestic price of imported steel. Which domestic group is most likely to experience a direct cost disadvantage?

40 A government replaces an import quota with a tariff that initially produces the same domestic price. What is one likely advantage of the tariff for the government?

41 Country A's gross exports rise by 20%, but the domestic value added embodied in those exports rises by only 5%. Which development most plausibly explains the divergence?

42 A multinational redesigns its supply chain from a single globally efficient network into several regional networks with duplicated suppliers. Demand and technology remain unchanged. What is the most likely economic trade-off?

43 Two countries remove tariffs on digitally delivered services, yet cross-border supply declines after one country requires all personal data to be stored and processed domestically. This outcome best illustrates that:

44 A small economy participates heavily in global value chains by importing components, assembling products, and re-exporting them. A worldwide increase in tariffs on intermediate goods is likely to harm this economy disproportionately because:

45 A country wants monetary-policy autonomy and a fixed exchange rate while capital is internationally mobile. Under the monetary-policy trilemma, which policy change is required to make the other two objectives jointly sustainable?

46 A foreign project has a positive net present value when profits are translated at expected market exchange rates. However, the host government is likely to prohibit dividend remittances for five years. Which risk is most directly understated by the original valuation?

47 A firm can make an irreversible investment now or wait one year for uncertainty about a host country's licensing regime to be resolved. Conventional NPV is slightly positive. Which factor most strongly supports waiting?

48 A producer serves a foreign market through exports. The host country then imposes a durable tariff on the final product but not on production inputs. Holding other conditions constant, which response becomes relatively more attractive?

49 Country X has a bilateral investment treaty with Country Y containing investor protection and binding arbitration provisions. For an investor from Y, the treaty most directly reduces which uncertainty?

50 A multinational compares two otherwise identical host countries. Country A has lower corporate taxes but unpredictable retroactive regulation; Country B has higher taxes but stable, transparent rules. Why might Country B still attract the investment?

51 In a third-country market, one domestic firm and one foreign firm compete as Cournot duopolists and earn positive rents. Under the classic strategic-trade model, an export subsidy may increase domestic welfare only if:

52 Which condition is necessary for an infant-industry tariff to have a credible economic rationale rather than merely protect an inefficient producer?

53 A host government requires a foreign-owned automobile plant to purchase at least 60% of its inputs from domestic suppliers as a condition of operation. The measure is best classified as:

54 Country A subsidizes exports of steel to Country B. Under standard trade-remedy principles, Country B cannot justify a countervailing duty merely by proving that the subsidy exists; it must also establish:

55 A government screens a foreign acquisition of a domestic semiconductor company because the target supplies military systems. Which policy rationale is most directly involved?

56 A final good has a free-trade price of $100 and uses an imported input worth $60. The country imposes a 20% nominal tariff on the final good and a 10% tariff on the input. What is the effective rate of protection for domestic value added?

57 A small importing country replaces a binding import quota with a tariff that initially produces the same domestic price and import quantity. If quota licenses had previously been given free to foreign exporters, what is the immediate distributional change?

58 An import quota and a tariff are calibrated to yield the same imports under current demand. Domestic demand then unexpectedly increases while world supply remains perfectly elastic. Compared with the tariff, the unchanged quota will generally cause:

59 A country applies low tariffs to raw cocoa, higher tariffs to cocoa paste, and the highest tariffs to chocolate. What is the most likely effect of this tariff escalation on foreign suppliers?

60 Country A bans fruit from Country B after detecting a pest, but permits identical fruit from countries with the same pest prevalence and equivalent control systems. Which feature most strongly suggests that the measure is disguised protectionism rather than a defensible sanitary measure?