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  • 1/34 Questions

    Direct foreign investment throughout the world is an increasingly important and common method of conducting global business.  

    • True
    • False
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Chapter 8 Quiz Mgmt - Quiz
About This Quiz

MGMT Quiz Ch. 8 Chuck Williams in correspondence with BA 3305 TTU

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  • 2. 

    Cooperative contracts are an agreement in which a foreign business owner pays a company a fee for the right to conduct business in his/her country.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Cooperative contracts are indeed an agreement where a foreign business owner pays a company a fee in order to conduct business in their country. This allows the foreign business owner to benefit from the local company's resources, network, and expertise, while also complying with the regulations and requirements of the host country. It is a mutually beneficial arrangement that enables foreign businesses to enter new markets and expand their operations internationally.

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  • 3. 

    The World Trade Organization (WTO) is the successor of the GATT.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The World Trade Organization (WTO) is indeed the successor of the GATT (General Agreement on Tariffs and Trade). GATT was established in 1947 as an international treaty to promote international trade by reducing tariffs and other barriers. In 1995, GATT was replaced by the WTO, which expanded its scope to include services, intellectual property, and dispute settlement mechanisms. The WTO is responsible for regulating and facilitating international trade among its member countries, making it the correct answer.

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  • 4. 

    Global joint ventures are the most common strategic alliance.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Global joint ventures are indeed the most common form of strategic alliance. This is because joint ventures allow companies to combine their resources, expertise, and market knowledge to enter new markets and expand their operations globally. Joint ventures also provide a way for companies to share risks and costs, while also benefiting from each other's strengths. Therefore, it can be concluded that global joint ventures are the most common type of strategic alliance.

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  • 5. 

    GATT made it more difficult and more costly for consumers in all countries to buy foreign products. 

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The given statement is false. GATT, or the General Agreement on Tariffs and Trade, aimed to reduce trade barriers and facilitate international trade. It did not make it more difficult or costly for consumers to buy foreign products. Instead, GATT sought to promote free trade and create a more open global market, benefiting consumers by providing them with access to a wider range of products at competitive prices.

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  • 6. 

    Tariffs are a/an ____________ tax on ____________ goods.

    • Indirect, imported

    • Direct, imported

    • Indirect, exported

    • Direct, exported

    Correct Answer
    A. Direct, imported
    Explanation
    Tariffs are a direct tax on imported goods. Tariffs are imposed by governments as a way to increase the price of imported goods and protect domestic industries. They are directly applied to the imported goods themselves, making them more expensive for consumers. This helps to promote domestic production and reduce competition from foreign goods.

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  • 7. 

    Government subsidies are defined as 

    • Gov’t loans, grants, and tax deferments given to domestic companies to protect them from foreign competition

    • A classification assigned to imported products by gov’t officials that affects the size of the tariff and imposition of import quotas

    • A standard ostensibly established to protect the health/safety of citizens, but in reality is often used to restrict imports

    • Voluntarily imposed limits on the number or volume of exports. The diff. bw quotas and voluntary export restraints is that the exporting country rather than the importing country imposes the limit.

    • Specific limits imposed by the importing country on the number or volume of imported products

    Correct Answer
    A. Gov’t loans, grants, and tax deferments given to domestic companies to protect them from foreign competition
    Explanation
    Government subsidies are financial assistance provided by the government to domestic companies in the form of loans, grants, and tax deferments. These subsidies are given with the intention of protecting domestic companies from foreign competition. By providing financial support, the government aims to enable domestic companies to compete effectively in the market and maintain their competitiveness against foreign rivals. This support can help domestic companies lower their costs, invest in research and development, and improve their overall competitiveness in the global market.

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  • 8. 

    All of the following are disadvantages to exporting, except:

    • Transportation costs

    • Subjection to tariff and non-tariff barriers

    • Global communication

    • Distribution issues

    Correct Answer
    A. Global communication
    Explanation
    Global communication is not a disadvantage to exporting because it allows businesses to easily communicate with customers and partners in different countries, facilitating international trade. On the other hand, transportation costs, subjection to tariff and non-tariff barriers, and distribution issues can all pose challenges and disadvantages to exporting.

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  • 9. 

    The phase model of globalization is when companies make the transition from a _____________ company to a ____________ company in ______________ stages.

    • Domestic, global, sequential

    • Global, domestic, non-sequential

    • Global, domestic, sequential

    • Domestic, global, non-sequential

    Correct Answer
    A. Domestic, global, sequential
    Explanation
    The phase model of globalization refers to the process in which companies transition from being primarily focused on domestic markets to expanding their operations globally. This transition typically occurs in sequential stages, meaning that companies gradually increase their global presence and activities over time. Therefore, the correct answer is "domestic, global, sequential."

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  • 10. 

    Global consistency is when a multinational company 

    • Has offices/plants in diff’t countries and uses the same rules, guidelines, policies, and procedures

    • Has offices/plants in diff’t countries and uses different rules, guidelines, policies, and procedures

    • Maintains its operating procedures to adapt to differences in foreign customers, gov’ts, and regulatory agencies

    • Modifies its operating procedures to adapt to differences in foreign customers, gov’ts, and regulatory agencies

    Correct Answer
    A. Has offices/plants in diff’t countries and uses the same rules, guidelines, policies, and procedures
    Explanation
    Global consistency refers to a multinational company having offices/plants in different countries and using the same rules, guidelines, policies, and procedures. This approach ensures that the company maintains a standardized and cohesive operating structure across all locations, regardless of the cultural or regulatory differences in each country. By implementing consistent practices, the company can streamline operations, enhance efficiency, and promote a unified brand image globally.

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  • 11. 

    Direct foreign investment is a method of investment in which a company ______________ a/an __________ business or ___________ an existing business in a foreign country. 

    • Builds, new, buys

    • Builds, old, sells

    • Grows, new, buys

    • Grows, old, sells

    • None of the above

    Correct Answer
    A. Builds, new, buys
    Explanation
    Direct foreign investment is a method of investment in which a company establishes a new business or acquires an existing business in a foreign country. This involves building a new business from scratch or buying an already established business in the foreign country. This allows the company to expand its operations and presence in the foreign market, taking advantage of new opportunities and potential growth.

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  • 12. 

    Customs classification is defined as: 

    • Gov’t loans, grants, and tax deferments given to domestic companies to protect them from foreign competition

    • A classification assigned to imported products by gov’t officials that affects the size of the tariff and imposition of import quotas

    • A standard ostensibly established to protect the health/safety of citizens, but in reality is often used to restrict imports

    • Voluntarily imposed limits on the number or volume of exports. The diff. bw quotas and voluntary export restraints is that the exporting country rather than the importing country imposes the limit.

    • Specific limits imposed by the importing country on the number or volume of imported products

    Correct Answer
    A. A classification assigned to imported products by gov’t officials that affects the size of the tariff and imposition of import quotas
    Explanation
    Customs classification refers to the process of assigning a classification to imported products by government officials. This classification has an impact on the size of the tariff and the imposition of import quotas. In other words, the assigned classification determines the amount of tax and restrictions placed on the imported goods. This helps regulate and control the flow of goods into a country, protecting domestic industries and ensuring fair competition.

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  • 13. 

    If multinational companies lean too much toward _____________, they run the risk of using management procedures poorly-suited to particular countries' markets, cultures, and employees. 

    • Local adaptation

    • Global consistency

    • Both a and b

    Correct Answer
    A. Global consistency
    Explanation
    If multinational companies lean too much toward global consistency, they run the risk of using management procedures that may not be suitable for specific countries' markets, cultures, and employees. This means that they may overlook the unique needs and preferences of local markets and fail to effectively engage with employees from different cultural backgrounds. It is important for companies to strike a balance between global consistency and local adaptation to ensure that their management practices align with the specific requirements of different countries.

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  • 14. 

    There are two types of cooperative contracts, these are:

    • Licensing, sharing

    • Sharing, explicit

    • Sharing, franchising

    • Franchising, explicit

    • Licensing, franchising

    Correct Answer
    A. Licensing, franchising
    Explanation
    The correct answer is licensing, franchising. Cooperative contracts refer to agreements between two or more parties to collaborate and work together. Licensing involves granting permission to another party to use certain intellectual property or rights, while franchising involves granting the right to operate a business using a well-established brand and business model. Therefore, licensing and franchising are both types of cooperative contracts. The other options mentioned in the question, such as sharing and explicit, do not accurately represent the types of cooperative contracts.

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  • 15. 

    Companies from many countries own businesses in the US, and US companies have made large direct foreign investments in countries throughout the world. However, it is unlawful for a US Company to have more investments in foreign markets than its domestic markets.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The statement is false because there is no law that prohibits a US company from having more investments in foreign markets than in its domestic market. In fact, many US companies have significant investments in foreign markets as part of their global expansion strategies.

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  • 16. 

    Trade Barriers are government imposed regulations that ______________ the cost and ___________ the _______________ of ____________ goods. 

    • Lower, increase, number, imported

    • Increase, diminish, quality, exported

    • Lower, diminish, quality, exported

    • Increase, restrict, number, imported

    Correct Answer
    A. Increase, restrict, number, imported
    Explanation
    Trade barriers are government imposed regulations that increase the cost and restrict the number of imported goods. These barriers can include tariffs, quotas, and regulations that make it more expensive or difficult for foreign goods to enter a country's market. By increasing the cost and restricting the number of imported goods, trade barriers aim to protect domestic industries and promote local production.

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  • 17. 

    Quotas are defined as:

    • Gov’t loans, grants, and tax deferments given to domestic companies to protect them from foreign competition

    • A classification assigned to imported products by gov’t officials that affects the size of the tariff and imposition of import quotas

    • A standard ostensibly established to protect the health/safety of citizens, but in reality is often used to restrict imports

    • Voluntarily imposed limits on the number or volume of exports. The diff. bw quotas and voluntary export restraints is that the exporting country rather than the importing country imposes the limit.

    • Specific limits imposed by the importing country on the number or volume of imported products

    Correct Answer
    A. Specific limits imposed by the importing country on the number or volume of imported products
    Explanation
    The correct answer is specific limits imposed by the importing country on the number or volume of imported products. This means that quotas are restrictions set by the importing country on the amount or quantity of goods that can be imported from other countries. This is done to control and regulate the flow of imports in order to protect domestic industries, maintain a balance of trade, or achieve other economic objectives. Quotas can be imposed on specific products or on a country's overall imports.

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  • 18. 

    Government import standards are defined as: 

    • Gov’t loans, grants, and tax deferments given to domestic companies to protect them from foreign competition

    • A classification assigned to imported products by gov’t officials that affects the size of the tariff and imposition of import quotas

    • A standard ostensibly established to protect the health/safety of citizens, but in reality is often used to restrict imports

    • Voluntarily imposed limits on the number or volume of exports. The diff. bw quotas and voluntary export restraints is that the exporting country rather than the importing country imposes the limit.

    • Specific limits imposed by the importing country on the number or volume of imported products

    Correct Answer
    A. A standard ostensibly established to protect the health/safety of citizens, but in reality is often used to restrict imports
    Explanation
    The correct answer suggests that government import standards are standards that are supposedly established to protect the health and safety of citizens. However, in reality, these standards are often used as a means to restrict imports. This implies that governments may use health and safety regulations as a guise to limit foreign competition and protect domestic industries.

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  • 19. 

    The four stages of "The Phase Model of Globalization" are: 

    • Importing, exporting, licensing, franchising

    • Exporting, cooperative contracts, strategic alliances, wholly owned affiliates

    • Importing, exporting, cooperative contracts, strategic alliances, wholly owned affiliates

    • Importing, exporting, licensing, franchising, strategic alliances

    Correct Answer
    A. Exporting, cooperative contracts, strategic alliances, wholly owned affiliates
    Explanation
    The correct answer is "exporting, cooperative contracts, strategic alliances, wholly owned affiliates". This answer aligns with the four stages of "The Phase Model of Globalization". In the first stage, exporting, companies begin by selling their products or services to foreign markets. In the second stage, cooperative contracts, companies establish agreements with foreign partners to collaborate on specific projects or ventures. In the third stage, strategic alliances, companies form partnerships with foreign firms to gain access to their resources and capabilities. Finally, in the fourth stage, wholly owned affiliates, companies establish their own subsidiaries or branches in foreign markets to have full control over their operations.

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  • 20. 

    A global new venture is characterized by skipping the phase model through three trends. These are: 

    • Sales, allies, affiliates

    • Sales, employees, financing

    • Sales, employees, property

    • Employees, financing, political support

    Correct Answer
    A. Sales, employees, financing
    Explanation
    A global new venture typically follows a specific progression in its growth and development. The three trends that characterize this progression are sales, employees, and financing. This means that the venture first focuses on generating sales and building a customer base, then hires employees to support the growing business operations, and finally secures financing to fund further expansion and development. This sequence of sales, employees, and financing is crucial for the success and sustainability of a global new venture.

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  • 21. 

    Local adaptations are when a multinational company

    • Has offices/plants in diff’t countries and uses the same rules, guidelines, policies, and procedures

    • Has offices/plants in diff’t countries and uses different rules, guidelines, policies, and procedures

    • Maintains its operating procedures to adapt to differences in foreign customers, gov’ts, and regulatory agencies

    • Modifies its operating procedures to adapt to differences in foreign customers, gov’ts, and regulatory agencies

    Correct Answer
    A. Modifies its operating procedures to adapt to differences in foreign customers, gov’ts, and regulatory agencies
    Explanation
    Local adaptations refer to the practice of modifying operating procedures to accommodate the variations in foreign customers, governments, and regulatory agencies. This means that a multinational company adjusts its rules, guidelines, policies, and procedures to adapt to the specific requirements and preferences of different countries where it has offices or plants. This flexibility allows the company to better serve its customers, comply with local regulations, and navigate the cultural and legal differences in various markets.

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  • 22. 

    An ideal global location for doing business is characterized by:

    • Low degree of global competition

    • High degree of global competition

    • Political certainty

    • A and c

    • None of the above

    Correct Answer
    A. A and c
    Explanation
    An ideal global location for doing business is characterized by a low degree of global competition and political certainty. A low degree of global competition means that there are fewer competitors in the market, allowing businesses to have a greater chance of success. Political certainty refers to a stable political environment with clear policies and regulations, which provides businesses with the confidence to invest and operate without the risk of sudden changes or disruptions. Both these factors contribute to a favorable business environment, making a location ideal for doing business.

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  • 23. 

    Non-tariff barriers are ___________ methods of ___________ the cost or ____________ the volume of __________ goods. 

    • Non-tax, decreasing, increasing, exported

    • Non-tax, increasing, reducing, exported

    • Non-tax, increasing, reducing, imported

    • Taxable, decreasing, increasing, exported

    • Taxable, increasing, reducing, imported

    Correct Answer
    A. Non-tax, increasing, reducing, imported
    Explanation
    Non-tariff barriers refer to methods that do not involve taxes but are used to increase the cost or decrease the volume of imported goods. This means that they are not directly related to taxes, but rather focus on other measures such as regulations, quotas, or licensing requirements. These non-tax barriers aim to make it more difficult or costly for imported goods to enter a country, thereby reducing their volume in the market.

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  • 24. 

    Voluntary export restraints are defined as: 

    • Gov’t loans, grants, and tax deferments given to domestic companies to protect them from foreign competition

    • A classification assigned to imported products by gov’t officials that affects the size of the tariff and imposition of import quotas

    • A standard ostensibly established to protect the health/safety of citizens, but in reality is often used to restrict imports

    • Voluntarily imposed limits on the number or volume of exports. The diff. bw quotas and voluntary export restraints is that the exporting country rather than the importing country imposes the limit.

    • Specific limits imposed by the importing country on the number or volume of imported products

    Correct Answer
    A. Voluntarily imposed limits on the number or volume of exports. The diff. bw quotas and voluntary export restraints is that the exporting country rather than the importing country imposes the limit.
    Explanation
    Voluntary export restraints refer to limits on the number or volume of exports that are voluntarily imposed by the exporting country. This is different from quotas, where the importing country imposes the limit. Voluntary export restraints are typically implemented to protect domestic industries from foreign competition.

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  • 25. 

    The Maastricht Treaty transferred _____ different economies in to the European Union, and converted their form of currency to the __________.

    • 11, Euro

    • 12, Euro

    • 13, Euro

    • 11, Euro Dollars

    • 12, Euro Dollars

    Correct Answer
    A. 12, Euro
    Explanation
    The Maastricht Treaty transferred 12 different economies into the European Union and converted their form of currency to the Euro.

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  • 26. 

    Global business is the ____________ and ___________ of good and services from _____________ countries.

    • Importing, exporting, similar

    • Buying, selling, similar

    • Importing, exporting, different

    • Buying, selling, different

    Correct Answer
    A. Buying, selling, different
    Explanation
    Global business involves the buying and selling of goods and services from different countries.

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  • 27. 

    Disadvantages to licensing include

    • They give up control over quality of product or service sold

    • They face a loss of control

    • Their partners can eventually become competitors

    • Success may be culture-bound

    • Both a and c

    Correct Answer
    A. Both a and c
    Explanation
    Both option A and C are correct because licensing can have disadvantages such as giving up control over the quality of the product or service sold, as well as the possibility that their partners can eventually become competitors.

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  • 28. 

    If companies focus too much on _________________, they run the risk of losing the cost efficiencies and productivity that result from using standardized rules and procedures throughout the world. 

    • Global consistency

    • Local adaptation

    • Both a and b

    Correct Answer
    A. Local adaptation
    Explanation
    If companies focus too much on local adaptation, they run the risk of losing the cost efficiencies and productivity that result from using standardized rules and procedures throughout the world. This means that companies need to strike a balance between adapting their strategies and operations to local markets and maintaining global consistency in order to maximize efficiency and productivity.

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  • 29. 

    Disadvantages of global joint ventures include all of the following, except:

    • Companies must share profits

    • Expense of building new operations or buying businesses can be high

    • Represents a merging of many cultures

    • With equal ownership, power struggles or lack of leadership may occur

    Correct Answer
    A. Expense of building new operations or buying businesses can be high
    Explanation
    Global joint ventures have several disadvantages, including the need to share profits, the potential for power struggles or lack of leadership in equal ownership situations, and the challenges of merging different cultures. However, the given answer states that the expense of building new operations or buying businesses can be high, which is not a disadvantage of global joint ventures.

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  • 30. 

    The General Agreement on Tariffs and Trade (GATT) is a ______________ trade agreement that ____________ and _____________ tariffs, ________________ government subsidies, and established protections for ______________ property. It features _______ countries. 

    • Free, increased, supported, restricted, domestic, 124

    • European, reduced, eliminated, limited, foreign, 125

    • Worldwide, reduced, eliminated, limited, intellectual, 125

    • Worldwide, reduced, eliminated, limited, intellectual, 124

    • Free, increased, supported, restricted, domestic, 125

    Correct Answer
    A. Worldwide, reduced, eliminated, limited, intellectual, 124
    Explanation
    The General Agreement on Tariffs and Trade (GATT) is a worldwide trade agreement that reduced tariffs, eliminated tariffs, limited government subsidies, and established protections for intellectual property. It features 124 countries.

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  • 31. 

    The regional trading zones include all of the following, except: 

    • WTO

    • Maastricht Treaty of Europe

    • NAFTA/CAFTA

    • ASEAN/APEC

    • GATT

    Correct Answer
    A. GATT
    Explanation
    The General Agreement on Tariffs and Trade (GATT) is not a regional trading zone, but rather an international treaty that aimed to reduce trade barriers and promote free trade among its member countries. It was replaced by the World Trade Organization (WTO) in 1995. The other options listed, including the Maastricht Treaty of Europe, NAFTA/CAFTA, and ASEAN/APEC, are all regional trading zones or agreements that promote economic integration and trade within specific regions.

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  • 32. 

    Disadvantages to franchising include:

    • They give up control over quality of product/service, face a loss of control

    • They face a loss of control/their partners become competitors

    • They face a loss of control/success may be culture-bound

    • They give up control over quality of product/service, their partners become competitors

    Correct Answer
    A. They face a loss of control/success may be culture-bound
    Explanation
    The correct answer is "they face a loss of control/success may be culture-bound". This means that franchising can result in a loss of control for the franchisor as they have to rely on their franchisees to uphold the quality of their product or service. Additionally, success in different cultures may vary, which can pose challenges for the franchisor in maintaining consistency and adapting to different cultural preferences.

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  • 33. 

    The United States belongs to which of the following regional trading zones?

    • WTO

    • WTO, NAFTA, CAFTA

    • WTO, NAFTA

    • NAFTA, CAFTA

    • WTO, NAFTA, CAFTA, ASEAN

    Correct Answer
    A. WTO, NAFTA, CAFTA
    Explanation
    The correct answer is WTO, NAFTA, CAFTA. The United States belongs to these regional trading zones because it is a member of the World Trade Organization (WTO), the North American Free Trade Agreement (NAFTA), and the Central American Free Trade Agreement (CAFTA). These trading zones promote economic cooperation and facilitate trade between member countries, allowing for the reduction or elimination of trade barriers such as tariffs and quotas.

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  • 34. 

    Non-tariff barriers include all of following except: 

    • Quotas

    • Voluntary export restraints

    • Government import standards and subsidies

    • Government export standards and subsidies

    • Customs classification

    Correct Answer
    A. Government export standards and subsidies
    Explanation
    Non-tariff barriers are trade barriers that do not involve the imposition of tariffs or taxes on imports or exports. They are usually implemented by governments to restrict trade and protect domestic industries. The options provided in the question are all examples of non-tariff barriers, except for government export standards and subsidies. Government export standards and subsidies are measures that governments use to support and promote their own exports, rather than restrict them. These measures can include quality standards, labeling requirements, and financial incentives provided to exporters.

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  • Current Version
  • Mar 14, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Mar 11, 2009
    Quiz Created by
    Trarnold

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