Unit 5: Protectionism and Trading Environment - Practice Quiz

1 What does globalization generally involve?

2 Which development has most directly accelerated modern globalization?

3 Which is a common challenge associated with globalization?

4 A global supply chain is best described as:

5 What is foreign direct investment (FDI)?

6 Which factor generally makes a country more attractive to foreign investors?

7 What is political risk in international business?

8 Why are exchange rates important to foreign trade?

9 Why might a government restrict imports?

10 What is an export subsidy?

11 Which government action can encourage foreign investment?

12 What does nationalization mean?

13 What is a tariff?

14 What is the usual effect of an import tariff on the domestic price of an imported product?

15 A tariff calculated as a percentage of a product's value is called:

16 A specific tariff is based primarily on:

17 What is an import quota?

18 Which measure is a non-tariff barrier?

19 What is a local content requirement?

20 A voluntary export restraint normally limits:

21 A multinational manufacturer adopts a "China+1" strategy by retaining production in China while opening another plant in Vietnam. What is the primary strategic objective?

22 An online platform can serve customers globally, but each country applies different data-localization rules. Which globalization challenge does this best illustrate?

23 A country's currency appreciates significantly while competitors' currencies remain stable. What is the most likely short-run effect on its manufactured exports?

24 A firm exports the same product through several regional trade blocs, each with different rules of origin. What is the firm's main operational challenge?

25 A company plans a factory in a country with strong demand but a history of expropriating foreign assets. Which measure most directly manages this risk?

26 A host country permits foreign ownership but restricts converting local profits into foreign currency. Which investment concern is most directly affected?

27 A foreign retailer wants immediate access to an established local brand and distribution network. Which entry mode best fits this objective?

28 A country strengthens contract enforcement and makes court decisions more predictable. How is this most likely to affect foreign investors?

29 A government requires foreign automobile producers to source 40% of component value locally. What is the most direct intended effect?

30 A government pays domestic wheat exporters $20 for every tonne sold abroad. This policy is best classified as what?

31 A government reviews a foreign acquisition of its national electricity grid because of security concerns. Which policy objective is most relevant?

32 A country offers a five-year tax holiday to foreign investors but frequently changes business regulations without notice. What should a firm do when assessing the location?

33 An importer brings in machinery valued at $40,000, subject to a 15% ad valorem tariff. How much tariff is payable?

34 A country charges $3 per kilogram on imported cheese regardless of its price. What type of tariff is this?

35 A finished product has a world price of $100 and uses imported inputs worth $50. A 20% tariff applies to the product and a 10% tariff applies to the inputs. What is the effective rate of protection?

36 Under a tariff-rate quota, 10,000 tonnes of sugar face a 5% tariff, while imports above that amount face a 40% tariff. What happens to the 10,001st tonne?

37 A binding import quota raises the domestic price above the world price. Who receives the resulting quota rent when import licenses are auctioned competitively by the government?

38 A country requires scientific evidence that imported fruit is free from a known pest, applying the same rule to domestic fruit. How is this measure best interpreted?

39 Country A persuades foreign carmakers to limit exports voluntarily instead of imposing a formal quota. Who is most likely to capture the higher-price benefits created by the restriction?

40 A country introduces a unique product-testing requirement with a high fixed certification cost. Why might this disproportionately discourage small foreign exporters?

41 A country's gross manufactured exports increase by 20%, while the domestic value-added share of those exports falls from 70% to 50%. Which interpretation is most defensible?

42 Country X supplies a specialized component to Country Y, which embeds it in machinery exported to Country Z. Direct X–Z trade is negligible. Which measure best predicts Z's vulnerability to a production shock in X?

43 A country imposes data-localization rules requiring every digital service provider to maintain domestic servers and complete a separate security audit. Which globalization effect is most likely?

44 Which observation provides the strongest evidence of structural reshoring rather than a temporary response to recession or exchange-rate movements?

45 A home-country currency depreciates sharply against the dollar. Both its exports and imported intermediate inputs are invoiced in dollars under sticky contracts. What is the most plausible short-run effect on a domestic exporter?

46 Under the proximity-concentration framework, which combination most strongly favors tariff-jumping horizontal FDI over exporting?

47 A nondiscriminatory environmental regulation substantially reduces a foreign investor's asset value. Which fact most strongly weighs against classifying it as indirect expropriation?

48 An irreversible foreign investment has a positive conventional net present value, but regulatory uncertainty may be resolved next year. Why might immediate investment still be suboptimal?

49 In a third-country duopoly, a government considers subsidizing its domestic exporter to shift profits from a foreign rival. When is the strategic-trade rationale most credible?

50 A government requires foreign vehicle producers to source 60% of component value domestically. Which welfare assessment is most appropriate?

51 A third-country manufacturer uses controlled technology from Country A to produce advanced chips entirely outside A. Country A nevertheless restricts sales of those chips to Country B. Which instrument best explains this reach?

52 Several jurisdictions compete to attract a factory that would probably locate in the region without subsidies. Which policy design best limits transfers to an inframarginal investor?

53 A finished product has a world price of $100 and uses an imported input worth $60. The tariff is 20% on the finished product and 10% on the input. Assuming no other inputs, what is the effective rate of protection?

54 A tariff-rate quota applies a 10% tariff to the first 10,000 units and a 50% tariff thereafter. The world price is $100, the quota is fully used, and additional imports occur. Ignoring transport costs, what price governs the marginal imported unit?

55 For a large importing country with no domestic distortion and no foreign retaliation, the conventional optimal-tariff result is approximately . What does represent?

56 An importing country applies tariffs of 2% on raw cocoa, 10% on cocoa paste, and 25% on chocolate. What is the most likely structural effect on cocoa-exporting developing economies?

57 A binding import quota and a tariff restrict imports to the same quantity and generate the same domestic price. Under which allocation method will the quota most closely replicate the tariff's government revenue?

58 Two countries pursue equally stringent product-safety objectives but use different testing procedures. Firms face large fixed costs from duplicate testing. Which arrangement most directly lowers trade costs while preserving regulatory autonomy?

59 An authority finds that an exporter charges less abroad than in its home market and that the importing industry is experiencing declining profits. Which additional issue is essential before imposing a defensible antidumping duty?

60 A free trade agreement offers a 4% tariff preference, but proving origin costs an exporter 5% of the shipment's value. What behavior is economically rational, assuming no other benefits?