Quiz on Trade Policies

Which of the following is a type of restriction on free trade?

• Tariffs

• Subsidies to foreign producers

• Floating exchange rates

• Microfinance schemes

What is the primary purpose of a quota?

• To increase government revenue

• To make imports cheaper

• To limit the quantity of imported goods

• To encourage domestic consumption

What is a key difference between a free trade area and a customs union?

• A free trade area has a common currency

• A customs union has no tariffs on trade between members

• A customs union has a common external tariff

• A free trade area has free movement of labour

Which of the following best describes a common market?

• A group of countries that have abolished tariffs between them

• A group of countries with a common external trade policy

• A group of countries that allow free movement of goods, services, capital and labour

• A group of countries that use a common currency

What is a potential benefit of protectionist policies for domestic firms?

• Increased competition

• Lower production costs

• Protection from foreign competition

• Decreased prices for consumers

What is a likely impact of tariffs on domestic consumers?

• Increased choice

• Higher prices

• Lower prices

• Improved quality

How might protectionist policies affect efficiency?

• Encourages innovation

• Reduces competitive pressure for domestic firms to be efficient

• Increases imports

• Lowers costs of production

How can subsidies to domestic producers affect foreign firms?

• Makes it easier for them to compete

• Lowers their costs

• Creates unfair competition

• Increases demand for their product

What is the role of the World Trade Organization (WTO)?

• To promote protectionism

• To manage fixed exchange rates

• To encourage trade liberalization

• To manage monetary policy

How might a government use tariffs to achieve its objectives?

• To reduce government spending

• To reduce prices for consumers

• To raise revenue and protect domestic industries

• To increase international competition