Certified Supply Chain Professional (CSCP) Practice Exam

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Study for the Certified Supply Chain Professional exam. Explore multiple-choice questions with detailed explanations. Perfect your skills and ensure success!

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What is a free trade zone?

  1. A geographic area where trade barriers are increased

  2. A designated area where normal trade barriers are eliminated

  3. A region with strict import quotas

  4. An area where only local products can be sold

The correct answer is: A designated area where normal trade barriers are eliminated

A free trade zone refers to a designated area where normal trade barriers, such as tariffs and quotas, are eliminated or significantly reduced. This allows for the seamless flow of goods and services across borders without the typical restrictions associated with international trade. By facilitating this free movement, businesses can operate more efficiently, reduce costs, and enhance their competitiveness in the global market. The existence of such zones promotes international investment and can lead to increased economic activity within the region. These zones are strategically designated to attract foreign direct investment by creating an environment that minimizes the regulatory and financial burdens typically associated with trade. In contrast, the other options describe scenarios that do not align with the concept of a free trade zone. For instance, increasing trade barriers, implementing strict import quotas, or restricting sales only to local products all contradict the fundamental purpose of a free trade zone, which is to promote free and unrestricted trade among nations or regions. This understanding is crucial for professionals studying supply chain management, as it highlights the importance of trade policies in shaping global supply chain strategies.