Future Business Leaders of America (FBLA) Business Management Practice Test

Which of the following is a characteristic of a free trade area?

1. High tariffs on imports

2. No restrictions on trade

3. The imposition of quotas

4. Trade wars

The correct answer is: No restrictions on trade

A characteristic of a free trade area is that there are no restrictions on trade among the member countries. This means that goods and services can move freely between the participating nations without being hindered by tariffs or quotas. The primary goal of a free trade area is to facilitate economic integration and enhance trade efficiency among its members, ultimately leading to increased economic growth. In such arrangements, member states typically agree to eliminate tariffs and other trade barriers on a wide array of goods and services, which fosters a more competitive market and allows consumers to benefit from lower prices and greater variety. The absence of trade restrictions helps to encourage collaboration, resource allocation, and innovation among the member countries, making it a fundamental characteristic of a free trade area. In contrast, high tariffs on imports, the imposition of quotas, and trade wars are all characteristics that would restrict trade, which contradicts the fundamental principles of a free trade area.