DECA DECA International Business 1 — Questions and Answers
Question 1: What is a 'tariff' in international trade?
- A tax imposed by a government on imported or exported goods (Correct answer)
- An international shipping contract
- A currency exchange agreement between countries
- A quota limiting how much of a product can be sold
Correct answer: A tax imposed by a government on imported or exported goods
A tariff is a government-imposed tax on imported or exported goods, often used to protect domestic industries or generate government revenue.
Question 2: Which organization oversees the rules governing international trade between nations?
- International Monetary Fund (IMF)
- World Trade Organization (WTO) (Correct answer)
- United Nations (UN)
- World Bank
Correct answer: World Trade Organization (WTO)
The World Trade Organization (WTO) establishes and enforces the rules of international trade and provides a forum for negotiating trade agreements between member nations.
Question 3: What is the term for a situation where a country can produce a good at a lower opportunity cost than another country?
- Absolute advantage
- Comparative advantage (Correct answer)
- Trade surplus
- Economies of scale
Correct answer: Comparative advantage
Comparative advantage means a country can produce a good at a lower opportunity cost relative to another country, forming the basis for mutually beneficial trade.
Question 4: What is 'foreign direct investment' (FDI)?
- Buying foreign government bonds
- A company investing in business operations or assets in another country (Correct answer)
- Exchanging currency in a foreign bank
- Purchasing stock in a foreign company on an exchange
Correct answer: A company investing in business operations or assets in another country
FDI occurs when a company establishes business operations, builds facilities, or acquires companies in a foreign country, giving it a lasting ownership interest.
Question 5: Which entry strategy requires the LEAST financial risk when entering a foreign market?
- Wholly owned subsidiary
- Joint venture
- Exporting (Correct answer)
- Greenfield investment
Correct answer: Exporting
Exporting requires the least financial commitment because the company sells domestically produced goods abroad without establishing foreign operations or significant capital investment.
Question 6: What does the term 'balance of trade' refer to?
- The ratio of government spending to tax revenue
- The difference between a country's total exports and imports (Correct answer)
- The exchange rate between two currencies
- The total value of foreign investments in a country
Correct answer: The difference between a country's total exports and imports
Balance of trade measures the difference between a country's exports and imports; a surplus occurs when exports exceed imports, and a deficit when imports exceed exports.
DECA DECA International Business 1
What is a 'tariff' in international trade?