International Trade

14 Grade 10 Business Studies questions on International Trade, with worked marking schemes. 14 questions are available on this topic in full.

1. Question 1

   6 marks

   Explain three ways in which the government of Kenya promotes the export of locally made goods.

   (6 marks)

   Marking scheme

   Award 2 marks for each of any THREE ways (1 mark for the measure, 1 mark for the explanation): setting up export processing zones where firms enjoy tax holidays and serviced premises, lowering their production costs; marketing Kenyan goods abroad through an export promotion agency and international trade fairs, which wins new buyers and supplies market information; improving infrastructure such as the port, the railway and airport cargo terminals, which cuts the time and cost of getting goods to the buyer; negotiating trade agreements within the EAC, COMESA and AfCFTA, which give Kenyan goods duty-free or preferential entry; removing export duties and simplifying export documentation so that goods clear faster; providing credit and export insurance so exporters can finance large orders and are protected against non-payment.

2. Question 2

   1 mark

   The government raises import duty on imported nails so that a newly opened nail factory in Thika can find buyers for its output. The main reason for this restriction is to:

   A. Protect an infant industry

   B. Raise more revenue for the exchequer

   C. Stop the dumping of cheap nails

   D. Correct an unfavourable balance of payments

   (1 mark)

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3. Question 3

   1 mark

   An exporter in Mombasa attaches a document showing the country in which the goods were produced so that the buyer in Kigali pays a lower rate of duty. This document is the:

   A. Certificate of insurance

   B. Proforma invoice

   C. Certificate of origin

   D. Consular invoice

   (1 mark)

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4. Question 4

   4 marks

   State four benefits Kenya obtains from being a member of the East African Community.

   (4 marks)

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5. Question 5

   1 mark

   The government announces that only 50,000 tonnes of sugar may be brought into the country in a year. This trade restriction is a:

   A. Tariff

   B. Embargo

   C. Quota

   D. Subsidy

   (1 mark)

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6. Question 6

   2 marks

   Distinguish between balance of trade and balance of payments.

   (2 marks)

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7. Question 7

   4 marks

   Outline four reasons why Kenya engages in international trade.

   (4 marks)

   Marking scheme

   Award 1 mark each for any FOUR of: differences in climate and soils, so Kenya grows tea and coffee well but must import wheat and rice; uneven distribution of natural resources, so Kenya imports petroleum products; differences in technology and skills, so Kenya imports machinery, vehicles and medicines; to dispose of surplus output such as tea, coffee and cut flowers and earn foreign exchange; to obtain goods more cheaply abroad than they could be produced at home; to widen the variety of goods available to Kenyan consumers; to build friendly relations and cooperation with other countries.

8. Question 8

   1 mark

   A foreign firm sells cooking oil in Kenya at a price lower than the price it charges for the same oil in its own country. This practice is known as:

   A. Devaluation

   B. Bilateral trade

   C. An export subsidy

   D. Dumping

   (1 mark)

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9. Question 9

   3 marks

   Outline three disadvantages of international trade to a developing country such as Kenya.

   (3 marks)

   Marking scheme

   Award 1 mark each for any THREE of: over-dependence on imported goods discourages the growth of local infant industries; dumping of cheap foreign goods drives local producers out of business and causes unemployment; export earnings are unstable because world prices of primary products such as coffee fluctuate; unfavourable terms of trade, since the country exports low-priced raw materials and imports high-priced manufactured goods; importation of harmful goods and undesirable cultural practices; a continuous outflow of foreign exchange leading to balance of payments problems; political and economic over-dependence on the countries that supply essential imports.

10. Question 10

    3 marks

    Outline three effects on a Kenyan importer of motorcycle spare parts when the Kenya shilling weakens against the United States dollar.

    (3 marks)

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11. Question 11

    1 mark

    Members of a trading bloc have abolished duty on goods traded among themselves and charge one agreed rate of duty on goods entering from outside the bloc, but labour and capital are still not free to move between the member states. This level of economic integration is a:

    A. Common market

    B. Free trade area

    C. Economic union

    D. Customs union

    (1 mark)

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12. Question 12

    1 mark

    Which one of the following transactions is an example of invisible trade?

    A. Kenya importing wheat from Russia

    B. Kenya exporting cut flowers to the Netherlands

    C. Kenya exporting tea to Pakistan

    D. A Kenyan insurance company insuring cargo belonging to a Ugandan trader

    (1 mark)

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13. Question 13

    4 marks

    Outline four challenges faced by Kenyan exporters of fresh horticultural produce in international trade.

    (4 marks)

    Marking scheme

    Award 1 mark each for any FOUR of: strict quality and phytosanitary standards in foreign markets, which lead to whole consignments being rejected; high air freight and cold-storage costs that reduce the exporter's margin; perishability combined with delays at the airport or port, causing heavy losses; fluctuating exchange rates that cut the shilling value of earnings; stiff competition from other producing countries such as Ethiopia and Colombia; tariff and non-tariff barriers imposed by importing countries; poor rural roads that delay delivery of produce to the packhouse; difficulty in finding and keeping reliable buyers abroad.

14. Question 14

    1 mark

    Which document is evidence of title to goods being shipped by sea and must be produced before the goods are released at the port?

    A. Airway bill

    B. Bill of lading

    C. Indent

    D. Proforma invoice

    (1 mark)

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