Practice Test: IB Business And Management- Business Organisation & Environment #1.9

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    ___________ is the growing trend towards worldwide markets in products, capital and labour, unrestricted by barriers

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Practice Test: IB Business And Management- Business Organisation & Environment #1.9 - Quiz

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  • 2. 

    _______:  A physical limit placed on the imports of certain products

    Explanation
    A quota refers to a physical limit placed on the imports of certain products. This means that there is a restriction on the quantity or value of goods that can be imported into a country. Quotas are often used as a trade policy tool to protect domestic industries or manage trade imbalances. They can help control the supply of imported goods and protect domestic producers from foreign competition.

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  • 3. 

    NAFTA is an example of a ______________

    Explanation
    NAFTA, which stands for the North American Free Trade Agreement, is an example of a free trade area. This agreement was established between the United States, Canada, and Mexico to promote trade and eliminate barriers such as tariffs and quotas. By creating a free trade area, NAFTA aimed to stimulate economic growth, increase market access, and enhance cooperation among the member countries.

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  • 4. 

    _______ international trade, is international trade that is allowed to take place without restrictions such as 'protectionist' tariffs and quotas

    Explanation
    Free international trade refers to international trade that is allowed to take place without any restrictions such as protectionist tariffs and quotas. This means that countries can freely engage in trade with each other, without any barriers or limitations imposed by governments. Free trade promotes economic growth, allows for the exchange of goods and services, and encourages specialization and efficiency in production. It also fosters competition and innovation, benefiting both consumers and producers.

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  • 5. 

    _______: A tax imposed on an imported product

    Explanation
    A tariff is a tax that is imposed on imported products. It is a form of trade barrier that is used by governments to protect domestic industries and raise revenue. Tariffs are typically levied on goods that are brought into a country from abroad, and the amount of the tax is usually based on the value of the imported product. By imposing tariffs, governments can make imported goods more expensive, which can help to promote domestic production and reduce competition from foreign companies.

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  • 6. 

    Cultural exports have lead to increased globalization.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Cultural exports, such as music, movies, and literature, have played a significant role in promoting increased globalization. These exports allow for the spread of ideas, values, and traditions across borders, leading to a greater interconnectedness between different cultures and societies. As people around the world consume and engage with cultural products from different countries, it fosters a sense of shared experiences and understanding, ultimately contributing to the process of globalization.

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  • 7. 

    Trade liberalization has been a key driver of globalization.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Trade liberalization refers to the removal or reduction of barriers to trade, such as tariffs and quotas, allowing for the free flow of goods and services between countries. Globalization, on the other hand, refers to the increasing interconnectedness and interdependence of countries through the exchange of goods, services, information, and ideas. Trade liberalization has played a significant role in promoting globalization by facilitating the expansion of international trade and encouraging economic integration among nations. Therefore, the statement that trade liberalization has been a key driver of globalization is true.

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  • 8. 

    NAFTA is an example of a free trade area.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    NAFTA, which stands for the North American Free Trade Agreement, is indeed an example of a free trade area. It is a trade agreement between the United States, Canada, and Mexico, aimed at eliminating trade barriers and promoting economic cooperation among the member countries. Under NAFTA, tariffs on various goods and services are reduced or eliminated, allowing for the free flow of trade between the participating nations. This agreement has had a significant impact on the economies of the member countries, facilitating increased trade and investment opportunities.

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  • 9. 

    The sales revenue of large multinational corporations often exceeds the GDP of many countries.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Large multinational corporations have a significant global presence and operate in multiple countries. Due to their extensive operations and large customer base, their sales revenue can be enormous. In comparison, the GDP (Gross Domestic Product) of many countries represents the total value of goods and services produced within that country's borders. Therefore, it is plausible that the sales revenue of these corporations can surpass the GDP of smaller countries.

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  • 10. 

    A free trade area  is when a group of countries have removed tariffs and quotas between themselves, while retaining the right to set tariffs/quotas towards non-members.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    A free trade area refers to a group of countries that have eliminated tariffs and quotas among themselves, allowing for the free flow of goods and services. However, these countries still have the authority to impose tariffs and quotas on non-members. Therefore, the given statement is true as it accurately describes the concept of a free trade area.

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  • 11. 

    Mercosur (Argentina, Brazil, Paraguay, Uruguay and Venezuela) is an example of a _____________

    Correct Answer
    Customs union
    Explanation
    Mercosur, consisting of Argentina, Brazil, Paraguay, Uruguay, and Venezuela, is an example of a customs union. A customs union is a form of economic integration where member countries agree to eliminate trade barriers, such as tariffs and quotas, between themselves and adopt a common external trade policy towards non-member countries. In the case of Mercosur, these countries have established a customs union to promote trade and economic cooperation among themselves, facilitating the movement of goods and services, and fostering regional integration.

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  • 12. 

    Quotas are a form of international protectionism.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Quotas refer to restrictions on the quantity of goods that can be imported into a country. They are often implemented as a means of protecting domestic industries from foreign competition. By limiting the amount of imports, quotas aim to safeguard local producers and promote domestic economic growth. This restriction on imports can be seen as a form of protectionism, as it prioritizes domestic industries over foreign competitors. Therefore, the statement "Quotas are a form of international protectionism" is true.

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  • 13. 

    Economic and monetary unions are an attempt to create the economic conditions that exist in just one country for all members; e.g. a common currency, a single interest rate and agreement on fiscal policy.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Economic and monetary unions aim to establish uniform economic conditions across member countries, including a shared currency, a single interest rate, and consensus on fiscal policy. This promotes economic integration and facilitates trade and investment among member nations.

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  • 14. 

    The euro-zone is an example of an economic and monetary union.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The euro-zone is indeed an example of an economic and monetary union. It consists of 19 member countries that have adopted the euro as their common currency and share a single monetary policy. This union allows for the free movement of goods, services, capital, and labor among its member states, promoting economic integration and stability. The euro-zone also has a central bank, the European Central Bank, which is responsible for managing monetary policy and ensuring price stability within the region.

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  • 15. 

    Mercosur is an example of a customs union

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Mercosur is indeed an example of a customs union. Mercosur, also known as the Southern Common Market, is a regional trade bloc in South America. It was established with the goal of promoting free trade and economic integration among its member countries, which include Argentina, Brazil, Paraguay, and Uruguay. As a customs union, Mercosur eliminates tariffs and trade barriers among its members, while also implementing a common external tariff on goods imported from outside the bloc. This fosters closer economic cooperation and facilitates the movement of goods and services within the region.

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  • 16. 

    In a common market, members do away with duties and other trade barriers. They allow companies to invest freely in each member's country.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    In a common market, members eliminate duties and trade barriers, which means that companies can freely invest in each member's country. This promotes economic integration and encourages cross-border trade and investment. Therefore, the statement is true.

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  • 17. 

    NAFTA is an example of a common market.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    NAFTA, which stands for the North American Free Trade Agreement, is not an example of a common market. A common market is a type of economic integration where member countries remove barriers to trade, allow the free movement of goods, services, capital, and labor, and also have a common external trade policy. While NAFTA did promote free trade among its member countries (United States, Canada, and Mexico), it did not establish the free movement of factors of production or a common external trade policy, which are key characteristics of a common market. Therefore, the correct answer is False.

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  • 18. 

    A customs union has all the benefits of a free trade area AND countries adopt a common set of trade restrictions with non-members.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    A customs union is a type of trade agreement where member countries eliminate tariffs and quotas on trade between themselves, creating a free trade area. In addition to the benefits of a free trade area, a customs union also requires member countries to adopt a common set of trade restrictions with non-members. This means that all member countries apply the same tariffs and quotas on imports from non-member countries. Therefore, the statement that a customs union has all the benefits of a free trade area and countries adopt a common set of trade restrictions with non-members is true.

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  • 19. 

    The EU is an example of a common market.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    The EU (European Union) is indeed an example of a common market. A common market refers to a group of countries that have eliminated trade barriers, such as tariffs and quotas, between them. In the EU, member countries have established a single market where goods, services, capital, and labor can move freely across borders. This means that there are no restrictions on trade and businesses can operate in any member country without facing trade barriers. Therefore, the statement "The EU is an example of a common market" is true.

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  • 20. 

    Multinationals can minimize their tax bills by operating in overseas countries.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Multinationals can minimize their tax bills by operating in overseas countries because they can take advantage of lower tax rates or tax incentives offered by those countries. By establishing subsidiaries or branches in these jurisdictions, multinational companies can shift their profits to countries with more favorable tax regimes, thereby reducing their overall tax liability. This practice, known as international tax planning, allows multinationals to optimize their tax strategies and maximize their profits.

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  • 21. 

    Benefits of globalisation to a business include

    • Economies of scale

    • Rivalry

    • Price transparency

    • Increased market choice

    Correct Answer
    A. Economies of scale
    Explanation
    Economies of scale refers to the cost advantages that a business can achieve by increasing the scale of its operations. With globalization, businesses can expand their operations to reach a larger customer base, which allows them to produce goods or services in larger quantities, leading to lower production costs per unit. This cost advantage enables businesses to offer competitive prices, increase profitability, and gain a larger market share. Additionally, economies of scale can also lead to improved efficiency and productivity, as businesses can invest in advanced technologies and streamline their operations to meet global demand.

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  • 22. 

    Globalisation presents many opportunities for businesses. Which one of the options below is the most likley exception to this rule?

    • Mergers, acquisitions and joint ventures

    • Economies of scale

    • Larger customer base

    • Language translation

    Correct Answer
    A. Language translation
    Explanation
    Language translation is the most likely exception to the rule that globalization presents many opportunities for businesses. While globalization allows businesses to expand their customer base, benefit from economies of scale, and engage in mergers, acquisitions, and joint ventures, language translation can pose challenges. Language barriers can hinder effective communication and limit a business's ability to reach and engage with a global audience. Therefore, language translation may not always present a straightforward opportunity for businesses in the context of globalization.

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  • 23. 

    Which of the following reasons does not explain why multinationals are better than domestic rivals in the provision of goods and services?

    • Well-known brand names

    • Economies of scale in production, distribution and marketing

    • Better knowledge of local cultures

    • The economic power to influence or encourage national governments

    Correct Answer
    A. Better knowledge of local cultures
    Explanation
    Multinationals being better than domestic rivals in the provision of goods and services is not explained by their better knowledge of local cultures. While this knowledge can be advantageous, it is not the sole reason for their superiority. Other factors such as well-known brand names, economies of scale, and the economic power to influence or encourage national governments also contribute to their competitive advantage.

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  • 24. 

    All the statements below are valid arguments for limiting free international trade except

    • Opportunities for specialisation

    • The protection of infant industries from international rivals

    • Political and strategic reasons

    • Protect domestic employment

    Correct Answer
    A. Opportunities for specialisation
    Explanation
    Opportunities for specialization are a valid argument for promoting free international trade rather than limiting it. Free trade allows countries to focus on producing goods and services that they are most efficient at, leading to increased productivity and economic growth. By specializing in certain industries, countries can take advantage of their comparative advantages and benefit from economies of scale. Therefore, opportunities for specialization support the case for free trade rather than limiting it.

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  • 25. 

    Members of a fre trade area agree to remove all the following except

    • Tariffs

    • Quotas

    • Taxes

    • Export restraints

    Correct Answer
    A. Taxes
    Explanation
    A free trade area is a region where member countries agree to eliminate barriers to trade such as tariffs, quotas, and export restraints. Taxes, however, are not typically removed in a free trade area as they are a source of revenue for governments. Therefore, the correct answer is taxes.

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  • 26. 

    An advantage of not joining a trading bloc is the opportunity to

    • Exploit new market opportunities

    • Lower costs by operating in overseas markets

    • Enjoy economic independence

    • Spread risks

    Correct Answer
    A. Enjoy economic independence
    Explanation
    Not joining a trading bloc allows a country to have economic independence. By not being part of a trading bloc, a country can make its own economic decisions without being influenced by the policies and regulations of the bloc. This allows for greater flexibility and control over the country's economy.

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  • 27. 

    Potential problems of overseas expansion do not include

    • Lack of local knowledge

    • Higher distribution costs

    • Language and cultural barriers

    • Lower tax liabilities

    Correct Answer
    A. Lower tax liabilities
    Explanation
    Overseas expansion typically involves entering new markets in different countries, which can present various challenges. Potential problems may include a lack of local knowledge, higher distribution costs, and language and cultural barriers. However, lower tax liabilities are not considered a problem but rather a potential benefit of overseas expansion. This is because companies may be able to take advantage of tax incentives or lower tax rates in certain countries, which can help reduce their overall tax burden and increase profitability.

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  • 28. 

    Reasons for a business developing overseas include

    • Incurring more risks

    • Favourable trading conditions in the domestic economy

    • Cheaper access to factors of production

    • Relocation costs

    Correct Answer
    A. Cheaper access to factors of production
    Explanation
    One reason for a business developing overseas is the cheaper access to factors of production. By expanding their operations to another country, businesses can take advantage of lower costs for labor, raw materials, and other resources. This can help them reduce production costs and increase their competitiveness in the global market. Additionally, accessing cheaper factors of production can also enable businesses to increase their profit margins and potentially expand their customer base by offering more competitive prices for their products or services.

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  • 29. 

    The concept of adjusting global marketing techniques to better suit the varying needs of overseas customers is known as

    • Direct marketing

    • Global localisation (glocalisation)

    • International marketing

    • Technology transfer

    Correct Answer
    A. Global localisation (glocalisation)
    Explanation
    Global localisation, also known as glocalisation, refers to the practice of adapting global marketing strategies to meet the specific needs and preferences of customers in different countries or regions. This involves taking into account cultural, social, economic, and political factors that may influence consumer behavior. By tailoring marketing techniques to local markets, companies can increase their chances of success and effectively compete in international markets.

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  • 30. 

    Multinational companies are public limited companies that operate overseas.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Multinational companies are not necessarily public limited companies. They can be either public or private limited companies. The key characteristic of multinational companies is that they operate in multiple countries, regardless of their legal structure. Therefore, the statement that multinational companies are public limited companies is false.

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  • 31. 

    A free trade ___________ requires state members to remove trade _________ with each other

    • Area, barriers

    • Agreement, barriers

    • Area, conflict

    • Agreement, conflict

    Correct Answer
    A. Area, barriers
    Explanation
    A free trade area refers to a geographic region where member states eliminate trade barriers with each other. This means that countries within the area agree to remove restrictions such as tariffs, quotas, and other barriers to facilitate the flow of goods and services between them. By doing so, they aim to promote economic integration and enhance trade relations among the member states. Therefore, the correct answer is "area, barriers."

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  • 32. 

    Mercosur is an example of a common market.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Mercosur is not an example of a common market. It is a regional trade bloc that aims to promote free trade and economic integration among its member countries in South America. While Mercosur has implemented some elements of a common market, such as the elimination of tariffs and the establishment of a common external tariff, it does not fully meet the criteria of a common market, which includes the free movement of goods, services, capital, and labor among member countries. Therefore, the statement is false.

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  • 33. 

    Firms that establish themselves overseas before any other competitor is able to do so are likely to enjoy the exclusive benefit of

    • Economies of scope

    • Economies of scale

    • First mover advantage

    • Brand loyalty

    Correct Answer
    A. First mover advantage
    Explanation
    Establishing themselves overseas before any other competitor allows firms to gain a first mover advantage. This means that they are able to capture a significant share of the market and establish themselves as the leader in that particular industry or market segment. By being the first to enter a new market, firms can build brand recognition, customer loyalty, and establish strong relationships with suppliers and distributors. This can result in higher profits, increased market share, and a competitive edge over other firms that enter the market later.

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  • 34. 

    Which of the following is not a potential problem for Chinese firm Lau & Chen Manufacturers expanding to the USA?

    • Differences in culture and language

    • Administration procedures and costs

    • Lack of infrastructure networks

    • Potential conflict and restrictions

    Correct Answer
    A. Lack of infrastructure networks
    Explanation
    A potential problem for Chinese firm Lau & Chen Manufacturers expanding to the USA is not the lack of infrastructure networks. This means that they will not face any issues related to the availability or quality of transportation, communication, or other essential infrastructure systems in the USA.

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  • 35. 

    Which of the following is a disadvantage of joining a regional trading bloc?

    • Removal of barriers to trade

    • Promotes international trade of goods and services

    • Trade diversion

    • Trade creation

    Correct Answer
    A. Trade diversion
    Explanation
    Trade diversion is a disadvantage of joining a regional trading bloc. This occurs when a country starts importing goods from another member of the bloc instead of from a more efficient non-member country. This can lead to a loss of economic efficiency and higher prices for consumers. Additionally, trade diversion can harm non-member countries, as they may lose out on potential export opportunities to the bloc.

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  • 36. 

    Which of the following is drawback to a multinational expanding overseas?

    • The spreading of risks by not relying on any one economy

    • Opportunities for economies of scale

    • Different business etiquette and customs

    • Wage rates in less developed countries

    Correct Answer
    A. Different business etiquette and customs
    Explanation
    Expanding overseas can offer several advantages, such as spreading risks and accessing economies of scale. However, a drawback to multinational expansion is the presence of different business etiquette and customs in foreign markets. These cultural differences can pose challenges in terms of communication, negotiation, and building relationships with local partners and customers. Multinational companies need to invest time and resources in understanding and adapting to these differences to ensure successful operations in foreign markets.

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  • 37. 

    The euro-zone is an example of a free trade area.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The euro-zone is not an example of a free trade area because it is a monetary union, not a free trade area. A free trade area is a region where member countries eliminate trade barriers, such as tariffs and quotas, between themselves but maintain their own external trade policies. In the euro-zone, member countries not only have eliminated trade barriers but also share a common currency, the euro, and have a unified monetary policy. Therefore, the euro-zone goes beyond the concept of a free trade area.

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  • 38. 

    Barriers to globalisation in developing countries do not include

    • Infrastructure

    • Distribution networks

    • Legal restrictions

    • Large populations

    Correct Answer
    A. Large populations
    Explanation
    Large populations are not considered barriers to globalization in developing countries. In fact, large populations can often be seen as an advantage, as they provide a larger consumer base and potential labor force. Infrastructure, distribution networks, and legal restrictions are commonly recognized as barriers to globalization in developing countries.

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  • 39. 

    A regional trading bloc allows member countries from all over the world to unite to remove barriers to international trade.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The statement is false because a regional trading bloc is a group of countries from a specific region that come together to promote trade and economic integration within that region, not from all over the world. It aims to reduce or eliminate trade barriers among member countries, but it does not involve countries from all over the world.

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  • 40. 

    A common market has all the benefits of a free trade area AND countries adopt a common set of trade restrictions with non-members.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    A common market does not require countries to adopt a common set of trade restrictions with non-members. While it does have all the benefits of a free trade area, such as the elimination of tariffs and quotas between member countries, it does not necessarily involve a unified approach towards trade restrictions with non-members. Each member country in a common market can still have its own individual trade policies and restrictions in place. Therefore, the statement is false.

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  • 41. 

    Costs of globalisation to a business do not include

    • Increased rivalry in the market place

    • Larger budget devoted to research and development

    • Relocation costs

    • Increasing returns to scale

    Correct Answer
    A. Increasing returns to scale
    Explanation
    Increasing returns to scale refers to the phenomenon where an increase in production leads to a proportionally greater increase in output. This concept is usually associated with economies of scale, where a business can achieve cost savings by producing more units. However, in the context of the question, the costs of globalization to a business do not include increasing returns to scale. This means that while globalization may bring about increased competition, higher research and development expenses, and relocation costs, it does not directly result in increasing returns to scale.

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  • 42. 

    Memeber countries of a trade agreement that agree to establish a common external tariff to non-member states are collectively known as a

    • Customs union

    • Economic trading bloc

    • Partnership agreement

    • Free trade area

    Correct Answer
    A. Customs union
    Explanation
    A customs union is a trade agreement among member countries that establishes a common external tariff to non-member states. This means that all member countries agree to apply the same tariffs on goods imported from non-member countries. This helps to create a level playing field and prevent trade diversion within the union. Additionally, a customs union often involves a high degree of economic integration, including the elimination of internal tariffs and the coordination of trade policies. Therefore, the correct answer is customs union.

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  • 43. 

    The EU is an example of an economic and monetary union.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The EU is not just an economic and monetary union, but also a political and social union. It was established to promote peace, stability, and prosperity among its member states. In addition to having a common currency (the Euro) and a single market, the EU also has a common foreign and security policy, as well as shared policies on agriculture, fisheries, and regional development. Therefore, the statement that the EU is only an economic and monetary union is false.

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  • 44. 

    Cutoms unions are an attempt to create the economic conditions that exist in just one country for all members; e.g. a common currency, a single interest rate and agreement on fiscal policy.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The statement is incorrect. Customs unions are not an attempt to create the economic conditions of just one country for all members. Instead, customs unions are formed to eliminate trade barriers between member countries while maintaining individual economic policies and currencies. They do not aim to establish a common currency, a single interest rate, or agreement on fiscal policy. Therefore, the correct answer is false.

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  • 45. 

    Which of the following is not a drawback of joining a regional tradding bloc?

    • Unemployment could be created as domestic firms face increased competition

    • Trade diversion is created

    • Trade creation takes place

    • Policies taken by the RTB might not suit all member states

    Correct Answer
    A. Trade creation takes place
    Explanation
    Trade creation refers to the increase in economic welfare that occurs when countries within a regional trading bloc trade with each other instead of trading with countries outside the bloc. This can lead to increased efficiency, specialization, and economic growth. Therefore, trade creation is not considered a drawback of joining a regional trading bloc, as it brings benefits to member states rather than negative consequences.

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  • 46. 

    A valid argument for multinational firms to spend money on foreign direct investment is that

    • Businesses will make more money by operating overseas

    • It is a form of altruism

    • It can avoid trade restrictions

    • They benefit from economies of scope

    Correct Answer
    A. It can avoid trade restrictions
    Explanation
    Multinational firms may choose to invest in foreign direct investment as it can help them avoid trade restrictions. By establishing operations in different countries, these firms can bypass barriers such as tariffs or quotas that may be imposed on imports or exports. This allows them to freely trade and expand their market reach without being hindered by trade barriers. Consequently, multinational firms can maintain a competitive advantage and increase their profitability by avoiding trade restrictions through foreign direct investment.

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  • 47. 

    Globalization can be defined as an increase in international trade across the world.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    Globalization is not solely limited to an increase in international trade. It encompasses a broader concept that includes cultural exchange, technological advancements, and integration of economies. While international trade is a significant aspect of globalization, it is not the only defining factor. Therefore, the given statement is false.

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  • 48. 

    Which of the following is least likely to be a barrier to international trading?

    • International business etiquette

    • Political and economic conflict

    • Cultural differences

    • Communication across geographical locations

    Correct Answer
    A. Communication across geographical locations
    Explanation
    Communication across geographical locations is least likely to be a barrier to international trading because advancements in technology, such as the internet, have made it easier for businesses to communicate and collaborate across different countries and time zones. With the availability of various communication tools and platforms, businesses can overcome the challenges of distance and ensure effective communication with their international partners and customers.

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  • 49. 

    In a free trade area, members do away with duties and other trade barriers. They allow companies to invest freely in each member's country.

    • True

    • False

    Correct Answer
    A. False
    Explanation
    The statement is false because in a free trade area, members eliminate or reduce tariffs and other trade barriers among themselves, but they do not necessarily allow companies to invest freely in each member's country. Investment regulations and restrictions on foreign companies may still exist within a free trade area.

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  • Feb 14, 2023
    Quiz Edited by
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  • Jul 15, 2012
    Quiz Created by
    Catherine Halcomb
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