RSM490 — International Business Strategy
University of Toronto | Rotman Commerce | 2026/2027
FINAL EXAM Preparation — 20 Questions with Verified Answers & Rationales
Topics: Government Intervention & Trade Policy • Global Sourcing & Supply Chains • Financial Management in the Global
Firm • Integrative / Cumulative
⚡ Final Exam is CUMULATIVE — covers all Sessions 1–11
Aligned to: CKR Textbook (6th ed.) | Sessions 7–11 + Cumulative | Verified Answers | Graded A+
● GOVERNMENT INTERVENTION & TRADE POLICY Session 8
Q1. Which of the following BEST describes the economic rationale for the 'infant
industry argument' used to justify trade protection?
[Multiple Choice]
A) Domestic industries should be protected permanently from foreign competition to
preserve jobs
B) Newly established domestic industries may need temporary protection until they
develop scale, efficiency, and competitiveness to compete internationally
C) Foreign firms are inherently more efficient and should be taxed to create a level
playing field
D) Governments should always prioritize self-sufficiency over comparative advantage
✓ VERIFIED ANSWER
B) Newly established domestic industries may need temporary protection until
they develop scale, efficiency, and competitiveness to compete internationally
RATIONALE The infant industry argument holds that new domestic industries
cannot yet compete with established foreign rivals who benefit from
economies of scale and learning-curve effects. Temporary protection (tariffs,
subsidies) gives the domestic industry time to develop. The key word is
'temporary' — permanent protection (Option A) leads to inefficiency. This
, argument is frequently used by emerging market governments and is central to
Session 8's discussion of government intervention tools.
● GOVERNMENT INTERVENTION & TRADE POLICY Session 8
Q2. Explain the difference between a tariff and a non-tariff barrier (NTB). Provide one
example of each and explain how each affects MNC strategy.
[Short Answer]
✓ VERIFIED ANSWER
A tariff is a direct tax levied on imported goods, raising their price and making
them less competitive relative to domestic alternatives. Example: The US
imposing a 25% tariff on imported steel raises costs for foreign steel producers
and protects domestic steel manufacturers. A non-tariff barrier (NTB) is any
trade restriction that is not a tariff — including quotas, import licensing, local
content requirements, technical standards, and sanitary regulations. Example:
The EU's strict food safety standards (phytosanitary rules) effectively restrict
imports of agricultural products that do not meet European norms. For MNCs,
tariffs are more transparent and predictable — they raise costs but can be
absorbed or offset through pricing. NTBs are often more disruptive because
they may require costly product redesign, certification, or restructured supply
chains.
RATIONALE Session 8 covers the full toolkit of government intervention. The
distinction between tariffs and NTBs is frequently tested. Examiners look for:
(1) accurate definitions, (2) a concrete example of each, and (3) the strategic
implication for MNCs. Strong answers note that NTBs have proliferated as WTO
rules constrain tariff use, making them a more common and strategically
significant challenge for international firms today.
● GOVERNMENT INTERVENTION & TRADE POLICY Session 8
Q3. Iran's use of informal oil trading networks to circumvent US sanctions (as
discussed in course readings) is BEST described as an example of:
[Multiple Choice]
A) Standard bilateral trade operating under WTO rules
, B) An emerging market firm exploiting institutional voids to bypass formal trade
restrictions through shadow market mechanisms
C) A successful case of multilateral trade liberalization
D) A joint venture between Iran and sanctioning nations to maintain economic ties
✓ VERIFIED ANSWER
B) An emerging market firm exploiting institutional voids to bypass formal
trade restrictions through shadow market mechanisms
RATIONALE The Economist reading from Session 8 ('Inside the secret oil trade
that funds Iran's wars') illustrates how sanctioned states develop shadow trade
infrastructure — using intermediaries, third-country flags, and opaque
ownership structures — to circumvent formal trade restrictions. This links to
the course's broader theme of how institutional environments shape
international business behaviour. MNCs must be aware of both formal
sanctions regimes and the shadow networks that can implicate them in
compliance violations.
● GOVERNMENT INTERVENTION & TRADE POLICY Session 8
Q4. The US imposing tariffs on Chinese goods under the Trump and Biden
administrations is BEST analysed through which RSM490 framework?
[Multiple Choice]
A) Uppsala Model of internationalization
B) OLI Paradigm — Ownership advantages of US firms
C) Strategic trade policy — governments using trade barriers to shift competitive
advantage toward domestic industries in strategic sectors
D) Porter's Diamond — improving domestic factor conditions
✓ VERIFIED ANSWER
C) Strategic trade policy — governments using trade barriers to shift
competitive advantage toward domestic industries in strategic sectors
RATIONALE The US-China trade war exemplifies strategic trade policy —
governments intervening in trade not just to protect industries but to
deliberately shape the competitive landscape in strategic sectors
University of Toronto | Rotman Commerce | 2026/2027
FINAL EXAM Preparation — 20 Questions with Verified Answers & Rationales
Topics: Government Intervention & Trade Policy • Global Sourcing & Supply Chains • Financial Management in the Global
Firm • Integrative / Cumulative
⚡ Final Exam is CUMULATIVE — covers all Sessions 1–11
Aligned to: CKR Textbook (6th ed.) | Sessions 7–11 + Cumulative | Verified Answers | Graded A+
● GOVERNMENT INTERVENTION & TRADE POLICY Session 8
Q1. Which of the following BEST describes the economic rationale for the 'infant
industry argument' used to justify trade protection?
[Multiple Choice]
A) Domestic industries should be protected permanently from foreign competition to
preserve jobs
B) Newly established domestic industries may need temporary protection until they
develop scale, efficiency, and competitiveness to compete internationally
C) Foreign firms are inherently more efficient and should be taxed to create a level
playing field
D) Governments should always prioritize self-sufficiency over comparative advantage
✓ VERIFIED ANSWER
B) Newly established domestic industries may need temporary protection until
they develop scale, efficiency, and competitiveness to compete internationally
RATIONALE The infant industry argument holds that new domestic industries
cannot yet compete with established foreign rivals who benefit from
economies of scale and learning-curve effects. Temporary protection (tariffs,
subsidies) gives the domestic industry time to develop. The key word is
'temporary' — permanent protection (Option A) leads to inefficiency. This
, argument is frequently used by emerging market governments and is central to
Session 8's discussion of government intervention tools.
● GOVERNMENT INTERVENTION & TRADE POLICY Session 8
Q2. Explain the difference between a tariff and a non-tariff barrier (NTB). Provide one
example of each and explain how each affects MNC strategy.
[Short Answer]
✓ VERIFIED ANSWER
A tariff is a direct tax levied on imported goods, raising their price and making
them less competitive relative to domestic alternatives. Example: The US
imposing a 25% tariff on imported steel raises costs for foreign steel producers
and protects domestic steel manufacturers. A non-tariff barrier (NTB) is any
trade restriction that is not a tariff — including quotas, import licensing, local
content requirements, technical standards, and sanitary regulations. Example:
The EU's strict food safety standards (phytosanitary rules) effectively restrict
imports of agricultural products that do not meet European norms. For MNCs,
tariffs are more transparent and predictable — they raise costs but can be
absorbed or offset through pricing. NTBs are often more disruptive because
they may require costly product redesign, certification, or restructured supply
chains.
RATIONALE Session 8 covers the full toolkit of government intervention. The
distinction between tariffs and NTBs is frequently tested. Examiners look for:
(1) accurate definitions, (2) a concrete example of each, and (3) the strategic
implication for MNCs. Strong answers note that NTBs have proliferated as WTO
rules constrain tariff use, making them a more common and strategically
significant challenge for international firms today.
● GOVERNMENT INTERVENTION & TRADE POLICY Session 8
Q3. Iran's use of informal oil trading networks to circumvent US sanctions (as
discussed in course readings) is BEST described as an example of:
[Multiple Choice]
A) Standard bilateral trade operating under WTO rules
, B) An emerging market firm exploiting institutional voids to bypass formal trade
restrictions through shadow market mechanisms
C) A successful case of multilateral trade liberalization
D) A joint venture between Iran and sanctioning nations to maintain economic ties
✓ VERIFIED ANSWER
B) An emerging market firm exploiting institutional voids to bypass formal
trade restrictions through shadow market mechanisms
RATIONALE The Economist reading from Session 8 ('Inside the secret oil trade
that funds Iran's wars') illustrates how sanctioned states develop shadow trade
infrastructure — using intermediaries, third-country flags, and opaque
ownership structures — to circumvent formal trade restrictions. This links to
the course's broader theme of how institutional environments shape
international business behaviour. MNCs must be aware of both formal
sanctions regimes and the shadow networks that can implicate them in
compliance violations.
● GOVERNMENT INTERVENTION & TRADE POLICY Session 8
Q4. The US imposing tariffs on Chinese goods under the Trump and Biden
administrations is BEST analysed through which RSM490 framework?
[Multiple Choice]
A) Uppsala Model of internationalization
B) OLI Paradigm — Ownership advantages of US firms
C) Strategic trade policy — governments using trade barriers to shift competitive
advantage toward domestic industries in strategic sectors
D) Porter's Diamond — improving domestic factor conditions
✓ VERIFIED ANSWER
C) Strategic trade policy — governments using trade barriers to shift
competitive advantage toward domestic industries in strategic sectors
RATIONALE The US-China trade war exemplifies strategic trade policy —
governments intervening in trade not just to protect industries but to
deliberately shape the competitive landscape in strategic sectors
