Ch3 Doing Business In Global Markets Test Bank Docx - Understanding Business 12e Complete Test Bank by William Nickels. DOCX document preview.
Understanding Business, 12e (Nickels)
Chapter 03 Doing Business in Global Markets
1) Today, over 90% of the companies doing business globally believe it is important for their employees to have experience working in other countries.
2) Importing is the selling of products to another country.
3) Exporting is the selling of products to another country.
4) The United States imports more products and services than any nation in the world.
5) The United States is the largest exporter in the world.
6) Competition among exporting nations is mild.
7) One reason countries trade with other countries is that even technologically advanced nations cannot produce all the products their people want and need.
8) Free trade is the movement of goods and services between nations without political or economic barriers.
9) Global trade is the exchange of goods and services between countries.
10) Global trade includes the exchange of art, sports, and cultural events.
11) Absolute advantage is the basis for most global trade today.
12) Comparative advantage theory states that a country should sell to other countries those products that it produces most efficiently and buy from other countries those products it cannot produce as efficiently.
13) A country has an absolute advantage if the production of a specific product is more efficient than all other nations.
14) Today, there are more countries that have some form of absolute advantage in a product or service, than years ago.
15) Free trade results in a mutually beneficial exchange between and among nations.
16) With respect to free trade, many American citizens prefer "fair trade, not free trade."
17) Opportunities for college graduates in international business continue to decrease, since it is too expensive to travel abroad.
18) An example of a U.S. import would be the purchase of oil by U.S. companies from Saudi Arabia.
19) According to the theory of comparative advantage, a country should buy from other countries those goods it produces most efficiently.
20) In order to enjoy the highest standard of living possible, comparative advantage theory states that all nations should strive to become self-sufficient.
21) Products made in Canada are sold in the U.S. because these two nations agree to eliminate economic and political barriers between nations. They participate in free trade.
22) Shortly after graduating college, Roberto took his place in his family's company in Miami. Roberto's father and uncle started a company that buys bauxite, copper, and other minerals from Chile, and brings them into the U.S. Every day, Roberto brokers trades with mines in Chile. The company is in the export business.
23) Banana plantations in Hawaii cannot produce nearly enough of all the bananas consumed by Americans. The fact that the U.S. grows and sells bananas gives it a comparative advantage in bananas. It is not an absolute advantage and that is why we choose to import bananas from South America, as well.
24) Small businesses are less involved in global trade today than in the past.
25) Many students in studying abroad programs at U.S. colleges and universities have discovered profitable opportunities by importing goods from their home countries into the United States.
26) International trade is not limited to multinational corporations. Small businesses do about 30% of all exporting out of the U.S.
27) Just about anything that can be sold in the United States can also be sold to buyers in other countries.
28) Foreign travel can help in identifying global business opportunities.
29) If your business has an outstanding product, exporting offers a quick, easy, no-hassle way to improve your profitability.
30) U.S. exports boost the U.S. economy.
31) A favorable balance of trade occurs when the value of a country's imports exceeds the value of its exports.
32) A favorable balance of trade occurs when the value of a country's exports exceeds the value of its exports.
33) The balance of payments measures the inflows and outflows of money from tourism, foreign aid, military expenditures, and foreign investments as well as flows resulting from exports and imports.
34) A trade deficit is the same as an unfavorable balance of trade.
35) The United States enjoys a trade surplus in the global market.
36) The United States' highest trade deficit is with China.
37) Even though the U.S. exports a vast amount of goods globally, it exports a much lower percentage of its products than other countries do.
38) Dumping is the practice of selling products in foreign markets at lower prices than what domestic firms are charging for the same product.
39) In order to prevent dumping, U.S. law stipulates that foreign firms selling similar products as domestic firms to U.S. customers must charge at least 10% more than what U.S. firms charge.
40) The United States currently enjoys a favorable balance of trade with the rest of the world.
41) A favorable balance of trade occurs when the value of a nation's exports exceeds its imports.
42) In any given year, the United States' cash outflow to other nations exceeds its cash inflow from other nations.
43) Though illegal in the United States, some firms will practice dumping in order to gain a foothold in a new market.
44) As the most powerful economy in the world, the United States does not need to concern itself with having an unfavorable balance of payments.
45) The island nation of Hasalot exports $350 of goods and services and imports $180 of goods and services. Hasalot has an unfavorable balance of trade of $170.
46) If tourists from Norway spend money at Orlando's Island of Adventure theme park, it will increase the U.S.'s unfavorable balance of payments.
47) A Brazilian steel manufacturer started selling certain categories of steel in the United States. However, the Brazilian manufacturer is selling the steel at a price significantly lower than it sells the same product back in Brazil. This practice may be a violation of U.S. law.
48) Japanese auto manufacturers, such as Toyota and Nissan, have invested billions of dollars in the United States by building new factories, warehouses, and offices. These investments increase favorably the balance of payments for the United States.
49) When the U.S. provides foreign aid to countries abroad, a balance of payments outflow occurs.
50) The value of German exports coming to the United States is greater than the value of the goods Germany buys from the U.S. This results in a U.S. trade deficit with Germany.
51) When competing in global markets, business organizations utilize a variety of strategies to reach foreign buyers.
52) Through licensing, domestic firms give foreign manufacturers/producers the right to produce their product and use their trademark in exchange for royalties.
53) When a firm agrees to license its product, it gains notoriety but gives up all revenues.
54) Franchising is popular both domestically and internationally.
55) An advantage of licensing is that licensors spend little or no money to produce and market their products. These costs are paid for by the licensees.
56) The U.S. government is reducing Export Assistance Centers due to businesses' lack of interest in their support.
57) Export trading companies assist businesses in reaching buyers, and dealing with customs, documentation, and payment.
58) One advantage of licensing is the relatively low cost of entering a foreign market.
59) One advantage of licensing as a strategy to enter the global market is the sharing of trade secrets.
60) While franchising is popular in the United States, it is not an accepted strategy for firms in the global market.
61) One advantage of franchising is that the parent corporation does not need to concern itself with adapting to the culture of another country.
62) Contract manufacturing is when a firm pays foreign manufacturers to produce its product. The foreign manufacturer places the domestic company's label on the products.
63) Contract manufacturing requires heavy start-up costs by the domestic company.
64) Contract manufacturing is a form of outsourcing.
65) A joint venture is a partnership in which two or more companies join to undertake a major project. All parties commit financing and risk to the project.
66) According to current U.S. laws, American firms are prohibited from participating in joint ventures with foreign firms.
67) A disadvantage of creating a foreign subsidiary is the loss of control over technology and expertise used in the production of the product.
68) Foreign direct investment refers to the buying of goods produced in another country.
69) Expropriation occurs when a host government takes over the assets of a foreign company.
70) A corporation that manufactures or markets its products in many different countries and has multinational stock ownership and management can be classified as a multinational corporation.
71) Firms with a physical presence in several different nations are considered multinational corporations.
72) Sovereign wealth funds are investment funds controlled by governments that hold large stakes in foreign companies.
73) As a form of franchising, sovereign wealth funds are getting very little attention as a strategy for doing business in foreign markets.
74) One characteristic of an international joint venture is all parties sharing the risk of a major project.
75) A firm looking to enter a foreign market with a limited investment should consider licensing.
76) A firm may export everything it produces overseas and still not be considered a multinational.
77) Strategic alliances almost always result in one company taking over the financial interests of another company.
78) Governments directly participate in global markets through sovereign wealth funds.
79) The appeal of global marketing strategies is that they all involve the same amount of risk.
80) When Nestlé, a Swiss company, purchased Ralston Purina, a U.S. company, Ralston Purina became a foreign licensee.
81) Contract manufacturing is a low-cost way for Banana Republic to outsource the production of its clothing designs.
82) Jessie has crafted a new technique for drying flowers that still keeps the vibrant color of fresh flowers. After unsuccessfully trying to sell the dried flowers at her shop, Flowers and Weeds, she discovered that although dried flowers are out of style in the U.S., these flower arrangements are still highly sought after in several nations abroad. It is difficult to preserve the ingredients that go into her formula for more than a month. She decides to partner with firms in Europe and Asia to make and sell her formula, but you suggest she license it to foreign companies and agree to royalties when they create the formula and sell it. Your advice makes better sense.
83) A Kia Motors assembly plant in Georgia is an example of foreign direct investment in the United States.
84) Disney contracted with a firm in China to open a Disneyland theme park in Shanghai. This is an example of a joint venture.
85) Digital Life Gaming has avoided contract manufacturing its consoles abroad due to the significant start-up costs in buying land and setting up its own manufacturing plants. They have made the right decision.
86) The Tsingtao Brewing company pays a fee to Anheuser-Busch InBev for the right to brew and distribute Budweiser in China. Tsingtao is the licensor and the fee paid is a royalty.
87) The purchase of U.S.-based Anheuser-Busch by Belgian brewer InBev is an example of foreign direct investment.
88) The website for Electricity City noted, "Russia has been a country in which Electricity City has made substantial investments. We are one of the largest foreign companies in Russia, operating multiple businesses, including an equipment fleet with more than 1,500 large units." With physical presence in Russia, Brazil, New Zealand, France, Turkey, Nigeria, Canada, and other countries, Electricity City is an example of a multinational company.
89) In recent years, the government of Norway has invested over $905 billion in foreign companies, including several U.S. companies. This move constitutes the creation of a sovereign wealth fund, an emerging type of foreign direct investment.
90) Sociocultural, economic, and legal/regulatory hurdles cause significant challenges in global trade.
91) From a sociocultural perspective, U.S. businesspeople are often accused of ethnocentricity.
92) Successful multinational corporations disregard cultural differences between countries where they own property and perform business transactions.
93) Sociocultural differences that affect global businesses include customs, language, and religion.
94) In the past, foreign companies have adapted to U.S. culture more easily than U.S firms have adapted to foreign cultures.
95) Effective human resource management styles are transferable from one culture to another.
96) Effective marketing strategies focus on the product and ignore the sociocultural differences in the global environment.
97) Many U.S. companies fail to think globally.
98) In global markets, there is not a central system of law.
99) The Foreign Corrupt Practices Act of 1978 created an advantage for American businesspeople to compete in global markets.
100) An exchange rate is the value of one nation's currency relative to the currencies of other nations.
101) Global markets consider the U.S. dollar to be a weak currency.
102) Under a system of floating exchange rates, the value of a country's currency is determined by government regulation.
103) Devaluation refers to a decline in the value of a nation's currency relative to other currencies.
104) Bartering is the exchange of goods or services for other goods or services without the exchange of money.
105) Countertrading is a form of exchange where firms will put certain products "on the counter" offering them to foreign customers at a cheaper price than what they would offer them to domestic customers.
106) Efficient currency exchange markets have eliminated countertrade in global business transactions.
107) Currency fluctuations can be an advantage to firms trading in the global market.
108) Technological differences can prevent some companies from successfully doing business abroad.
109) The introduction of standardized international laws regulating business organizations has greatly simplified global trade.
110) The same proven management styles used by companies in their domestic operations can be employed in their foreign subsidiaries.
111) A devaluation of the U.S. dollar would make American goods cheaper to foreign buyers.
112) From a sociocultural perspective, foreign companies have experienced a good amount of success in adapting their products and services to the U.S. market.
113) When it comes to ethics, successful American businesspeople are encouraged to follow the policy of "when in Rome, do as the Romans."
114) Since patent and copyright laws are the same in all nations, they are not of much impact to firms that compete globally.
115) American businesspeople often fail to adapt to foreign markets because they feel that the American culture is superior to other cultures in the world.
116) Differences in electrical systems throughout the world could weaken a U.S. firm's ability to sell its products to other countries.
117) There's a problem overseas of the reproduction of music originally recorded by popular American artists. It seems that a recording made in the U.S. can be copied within a couple of hours and then immediately sold abroad. The U.S. government is able to readily prosecute these foreign companies.
118) A United States company won a large contract with a company in Sri Lanka by giving government and company representatives American cars. The company also promised to provide monetary gifts in exchange for the business. Fortunately, U.S. law, under the Foreign Corrupt Practices Act, permits U.S. companies to operate in this manner.
119) While studying abroad, Joe found that his U.S. dollars did not stretch as far as he had hoped. Every time he exchanged U.S. dollars for euros, he gave up more dollars in exchange for fewer euros. Obviously, the dollar was weak against the euro.
120) The Ozark Bike Company recently entered into an agreement with a large Japanese retailer to distribute its bicycles in Japan. Ozark Bike Company sees itself in a favorable position because the yen is gaining strength compared to the U.S. dollar making it cheaper for Japanese customers to buy U.S. products.
121) Nicky Larson, a well-known American celebrity, promoted a line of clothing that was accused of supporting child labor in a Bangladesh factory. Although her image was immediately tarnished, she quickly was able to close down the unethical operation due to a violation of international law.
122) Game Guys, Inc. needed a special silicon substrate. The company executives knew that a new start-up in India, Silicon Sisters, Inc., was the best in the world at efficiently mass-producing the product. The Indian company needed MSG (metallurgical grade silicon) in order to make the substrate, which it knew it could get from a Chinese firm. The Chinese firm (mostly owned by the Chinese government) agreed to supply the silicon to Silicon Sisters if it could get a certain quantity of gaming hardware from Game Guys. This beneficial exchange is described as countertrading.
123) Johanna Breese, a graduate student from Carnegie Mellon, connected with the culture of Madagascar when she created lamba hoany (a native garment) with artful messages to save the more than 150 rare species of animals that inhabit Madagascar. In contrast to many Americans trying to do business abroad, Johanna successfully adapted her message to the native culture when she imprinted it on the native garment.
124) Trade protectionism is the use of government regulations to encourage the import of goods and services.
125) Countries often use trade protectionism measures to protect their domestic industries from foreign competition.
126) Under mercantilism, the basic economic idea was to achieve a favorable balance of trade.
127) Protective tariffs are designed to raise money for the government.
128) An import quota is a complete ban on the import or export of certain products.
129) A complete ban on the import or export of a specific good is called an embargo.
130) Restrictive standards that detail exactly how a product must be sold in a country are examples of protective tariffs.
131) Though not as specific or formal as tariffs, nontariff barriers can be just as detrimental to free trade.
132) The main goal of the General Agreement on Tariffs and Trade (GATT) was to reduce trade restrictions among world nations.
133) The World Trade Organization (WTO) was established to mediate trade disputes among nations.
134) One of the goals of the World Trade Organization (WTO) is to eliminate national subsidies on agricultural products.
135) A common market is a group of countries that have no internal tariffs among member nations, yet have a common external tariff.
136) A major goal of the Mercosur common market consisting of several South American countries is to better expand the movement of goods and services.
137) In 1999, the European Economic Community adopted a common currency known as the euro.
138) CAFTA permits the United States, Canada, and Mexico to reduce trade barriers with one another while maintaining independent trade agreements with other countries.
139) Since the approval of the North American Free Trade Agreement (NAFTA), the value of U.S. exports to Mexico and Canada has increased.
140) Opponents of the North American Free Trade Agreement (NAFTA) warned that it would have serious economic consequences such as the loss of U.S. jobs.
141) According to the theory of mercantilism, a country should develop policies that encourage a favorable balance of trade.
142) The principle of mercantilism encouraged nations to keep economics separate from politics.
143) If a protective tariff is placed on an imported product, the added cost will go to the government.
144) The ban on the sale of Cuban cigars in the United States is an example of an import quota.
145) Imported wines such as a bordeaux from France or a prosecco from Italy often sell at a higher price than wine made in Napa Valley, California. This is due to the protective tariff importers pay for the foreign wine.
146) The purpose of enacting some type of protectionist policy toward foreign goods is to limit competition from abroad, particularly when the country has domestic companies that produce and sell the same products and services.
147) The North American Free Trade Agreement (NAFTA) requires member nations to negotiate uniform trade agreements with nonmember nations.
148) With the achievements of the General Agreement on Tariffs and Trade (GATT) and the World Trade Organization (WTO), nearly all barriers to trade expansion are finally removed.
149) The objectives of the North American Free Trade Agreement (NAFTA) include allowing free immigration among Canada, Mexico, and the U.S.
150) A free-trade agreement among Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, Nicaragua, and the U.S. is known as the Central American Free Trade Agreement. Its strategy is to open new markets for all member countries and to raise tariffs among participating nations.
151) Often, the strategy of common markets is debatable, but GATT is certain that such alliances do not prohibit individual member nations from expanding globally.
152) One of the rules of a common market is that all participating nations will uphold a common external tariff on goods and services imported from countries that are not of the trading bloc. Goods imported from nonmember countries are more expensive than goods coming from member countries.
153) If two nations have a trade dispute, the World Trade Organization may be asked to mediate and provide a decision within one year's time.
154) Serentia, a small nation, has a small automotive industry and is struggling to keep up with larger international automobile manufacturers. Other countries in Serentia's trading bloc have agreed on an import quota on other nations, which limits the number of cars that any country in the trading bloc can buy from other auto manufacturers. This strategy is necessary to help Serentia's auto manufacturer while it is in its infancy.
155) A small wine and cheese store in Milwaukee sells dozens of different types of cheese—Bulgarian, French, Danish, Greek, and a domestic from its home state of Wisconsin. The domestic cheese sells for less than $2.00 per pound, while all the international cheeses are priced at over $4.00 per pound. Clearly, there is an embargo on international food products.
156) The nation of Taubestan requires that all imported beverages be contained in clear, well-labeled recyclable glass bottles. Several international beverage manufacturers refuse to trade with the country because the cost of glass bottles cuts into their profits to the point where it just isn't worth it. Taubestan has created a nontariff barrier.
157) With all its perception of opportunity, the expansion of global trade is still plagued by terrorism, nuclear proliferation, rogue states, and other issues.
158) China and Russia present enormous trading opportunities. However, due to political risks in those counties, foreign direct investment is halted.
159) While Asia represents an important source of U.S. imports, few export opportunities exist for U.S. firms to sell goods and services to Asian consumers.
160) China is currently one of the three largest exporters in the world today.
161) India and Russia are emerging markets that present enormous business opportunities.
162) Profitable opportunities in global markets are diminishing for small and medium-sized businesses.
163) Offshore outsourcing is another term used to describe the act of U.S. firms selling their domestically manufactured goods to foreign customers.
164) A "second wave" of offshore outsourcing involves sizable numbers of skilled, well-educated, middle-income workers in service-sector jobs.
165) One advantage of offshore outsourcing is that consumers benefit from lower prices.
166) A concern with the second wave of offshore outsourcing is greater job loss for service-sector working Americans.
167) Only large firms have the resources needed to successfully compete in the global environment.
168) As a market for U.S. exports, China represents the only major business opportunity on the continent of Asia.
169) China's one-party political system, its past human rights abuses, and issues related to counterfeiting of products continue to concern some U.S. firms about doing business there.
170) In the past few decades, U.S. manufacturers shifted focus from manufacturing and assembling products, to the design and architecture of products. Now, a new shift: the offshore outsourcing of design and architecture can be an even more serious disruption to the U.S. economy.
171) Don was messing around with his new tablet and checking out its features, but he was struggling. His warranty gave him three months of free technical support, so he quickly called the tech support number. After waiting on hold, he finally got through to a technician but though they were both speaking English, the technician's accent was difficult for Don to understand. As he listened carefully to every word the technician provided, he thought to himself, "There are some pros and cons to outsourcing. I'm not certain the service is adding value for the customer." Don was correct.
172) Telewhiz, Inc., just contracted with a firm in the Philippines to provide customer service for its smartphone customers. Although there were cheaper labor markets that Telewhiz could have tapped, customers have reported that they understand English-speaking Filipino people better than English-speaking people in other countries. As an outsourcing option, it is a good compromise.
173) Your college career is coming to an end and you're trying to decide on the last two business electives to take. You are leaning toward international marketing and international financing because you recall reading that Forrester Research estimates millions of jobs will move to global markets in the next 10 years.
174) You sell paint products and accessories for painters. Recently, you were in contact with merchants from India who have taken an interest in your products and are willing to talk more about entering into a contractual deal to purchase your goods. This opportunity may be just the thing to get your business out of its slump, because you learned from your Introduction to Business class that very few barriers exist between U.S. and Indian markets.
175) ________ is the selling of products to another country.
A) In-trading
B) Exporting
C) Importing
D) Dumping
176) ________ is buying products from another country.
A) Importing
B) Outsourcing
C) Retailing
D) Exporting
177) The largest importer in the global market today is
A) Japan.
B) Russia.
C) Germany.
D) the United States.
178) In volume of exports, the two leading nations are
A) the U.S. and China.
B) the U.S. and Canada.
C) China and Germany.
D) China and France.
179) The global market is ________ potential customers.
A) over 7 billion
B) over 300 million
C) under 200 billion
D) under 30 billion
180) Which of the following continents is home to the largest percentage of the world's population?
A) Africa
B) Europe
C) North America
D) Asia
181) A nation has a ________ in the production of a good or service if it can produce that good or service more effectively or efficiently than it can produce other goods.
A) supreme advantage
B) primary efficiency
C) qualified advantage
D) comparative advantage
182) ________ occurs when a country has a monopoly on producing a product or is able to produce it at a cost well below that of all other countries.
A) Comparative advantage
B) Absolute advantage
C) Complete advantage
D) Dumping advantage
183) The theory of comparative advantage exists because
A) there are too many products and services to choose from today.
B) customers are always comparing the quality of service from companies in the same industry.
C) no nation can produce all the products its people want and need.
D) free-trade agreements became the trend during the past 15 years.
184) One advantage of free trade is
A) jobs are shifted to low-wage global markets.
B) service jobs are moved overseas.
C) advanced production operations are built in low-wage countries.
D) innovation for new products occurs which keeps firms competitively challenged.
185) The concept of free trade means
A) buyers and sellers contract with each other and offer some goods at no cost.
B) goods and services can be traded freely across borders without political and/or economic barriers.
C) there is no exchange of currency for these products.
D) there is no exchange of currency, but the trading partners determine the value of the product and perform a bartering process to exchange goods.
186) Why does it make sense to trade with other nations?
A) After producing all the product and service its people want and need, a nation can sell the excess products to the world.
B) Some nations have lots of natural resources and technological know-how. They have an ethical obligation to offer the rest to other nations.
C) Other nations need foreign currency.
D) A nation will produce what it can produce most efficiently and effectively and buy from other nations what they can produce most efficiently and effectively.
187) Which of the following statements is the best description of comparative advantage?
A) The best way for a nation to ensure full employment is to be completely self-sufficient and not at all reliant on trading with other nations.
B) Each nation should produce those goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce as efficiently as the nations that can.
C) The nation that has the largest reserves of gold and other highly valued natural resources will enjoy a position of comparative advantage in trade relationships.
D) A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak.
188) The theory of ________ states that a nation should produce and sell goods to other countries that it produces most efficiently, and buy goods from other nations that they produce more efficiently.
A) comparative advantage
B) absolute advantage
C) mercantilism
D) bilateral advantage
189) Free trade between nations generally results in
A) industrialized nations gaining at the expense of developing nations.
B) an increase of jobs in developed nations.
C) mutually beneficial exchange relationships.
D) higher prices for imported goods.
190) A free-trade agreement is likely to result in
A) an increase in imported goods and services.
B) an absolute advantage.
C) less competition.
D) productivity increases in all product categories, for all participating nations.
191) The tiny nation of Tinian is extremely efficient in the mining of tin. However, its climate and terrain make it difficult to produce corn. According to the theory of comparative advantage, Tinian should
A) produce both tin and corn in order to remain self-sufficient.
B) watch the global market to see which product is bringing the highest price.
C) import the resources needed to produce corn.
D) concentrate its production on tin and buy corn from an efficient producer.
192) Taubestan produces nearly 97% of the quinoa consumed around the world, and most of it is sold to wealthy nations. Although there are other areas where the seed will grow, including some areas in wealthier nations, the majority of the quinoa sold is imported from Taubestan. This country has a(n) ________ in the production of quinoa.
A) absolute advantage
B) comprehensive advantage
C) comparative advantage
D) tertiary advantage
193) Erin, an American citizen, says that her laptop was made in Japan. Erin purchased a(n)
A) imported item.
B) exported item.
C) protected good.
D) generic good.
194) Home of Households, Inc., has an appliance manufacturing plant in the Chicago area. The company specializes in producing smaller washers and dryers for countries where consumers have less living space. Home of Households participates in the global market through
A) importing.
B) dumping.
C) exporting.
D) balancing trade.
195) The nation of Hasalot is home to roughly 95% of the world's Diamontite, a rare stone used in consumer products including watch faces, smartphones, computer monitors, and tablets. The fact that this is necessary for the production of many products we use today means Hasalot can almost name its price! Which of the following describes this situation?
A) Hasalot has a near absolute advantage in Diamontite.
B) Hasalot has a comparative advantage in Diamontite.
C) Hasalot's rare earth industry is considered perfect competition.
D) Hasalot's rare earth industry participates in monopolistic competition.
196) Many of the toys sold in the United States are imported from Taiwan because the Taiwanese can produce these products more efficiently than U.S. companies. This is an example of
A) bilateral advantage.
B) comparative advantage.
C) absolute advantage.
D) unilateral advantage.
197) Climate and terrain in several South American countries are conducive to growing coffee beans efficiently. While other countries have the ability to grow the bean, they are not as efficient and effective because of short seasons and climate concerns. This fact would lead you to believe that these South American countries have a(n) ________ advantage in the production of coffee.
A) comparative
B) absolute
C) unprotected
D) progressive
198) The only deposits of a rare and sought-after mineral known as ursarite are found in Russia. Since no other nation has deposits of ursarite, Russia has a(n)________ in this mineral.
A) protected advantage
B) diversified benefit
C) absolute advantage
D) relative internal benefit
199) Engineering Chiefs, a large U.S.-based mechanical engineering firm, wants to enter the global market. Upon careful analysis of the market, they will find that global trade
A) opportunities are diminishing.
B) is dominated by emerging, developing countries.
C) is big business today and is expected to be more important in the future.
D) is likely to be severely restricted in the future by nontariff trade barriers.
200) Shortly after graduating college, Roberto took his place in his family's company in Miami. Roberto's father and uncle started a company that buys bauxite, copper, and other minerals from Chile, and brings them into the U.S. Roberto brokers trades with mines in Chile. Roberto is a(n)
A) exporter.
B) quota manager.
C) importer.
D) domestic trader.
201) Fred Bergsten of the Institute for International Economics estimates that every $1 billion of U.S. exports
A) replaces 250 service sector jobs with 25 manufacturing jobs in the U.S.
B) causes lost revenues for the U.S. federal government.
C) results in reduced profits for U.S. businesses.
D) generates over 7,000 jobs in the U.S.
202) A favorable balance of trade occurs when the value of
A) imports equals the value of exports.
B) the cash inflows equals the value of the cash outflows.
C) imports is less than the value of exports.
D) the dollar is greater than the value of the euro.
203) An unfavorable balance of trade occurs when the value of
A) imports equals the value of exports.
B) imports exceeds the value of exports.
C) cash inflows is equal to the value of cash outflows.
D) exports exceeds the value of imports.
204) The ________ is the total value of a nation's exports compared to its imports measured over a specific period of time.
A) balance of payments
B) balance of trade surplus
C) balance of trade deficit
D) balance of trade
205) The ________ is the difference between money flowing into a country from exports, and money leaving the country for imports, plus money flows coming from other factors such as tourism, foreign aid, military expenditures, and foreign investment.
A) balance of payments
B) balance of trade surplus
C) balance of cash flows
D) balance of trade
206) Which of the following is included when calculating a country's balance of payments?
A) Foreign aid
B) Domestic unemployment
C) Domestic inflation rates
D) Foreign inflation rates
207) Which of the following is considered when calculating a country's balance of payments?
A) Military expenditures
B) State unemployment
C) Domestic inflation rates
D) Foreign inflation rates
208) Since 1975, the U.S. has had a(n) ________.
A) export surplus
B) import surplus
C) trade surplus
D) trade deficit
209) ________ is the practice of selling a product in foreign countries for a lower price than the good is sold in the producing country.
A) Deflating
B) Countertrading
C) Inflating
D) Dumping
210) When Anhueser Busch InBev sells Budweiser beer made in St. Louis, MO, to Germany, the sales of its product would be classified as a U.S. ________.
A) countertrade arrangement
B) export
C) import
D) foreign aid shipment
211) Even though the U.S. exports a large ________ of goods and services, it exports a much lower ________ of its products than many other countries do.
A) percentage; amount
B) amount; percentage
C) amount; value
D) percentage; percentage
212) An important principle for firms desiring to export is
A) sell to countries with high standards of living.
B) keep in mind that American methods are probably always best.
C) find a need in the global market and fill it.
D) if your product sells well in the U.S. it will sell well globally.
213) As a business strategy, the strategy behind dumping is to
A) gain a foothold in a new market.
B) better utilize e-commerce opportunities.
C) avoid trade protectionist laws.
D) achieve eligibility for foreign aid.
214) Reviewing the recent experience of the United States in global markets reveals that the U.S has
A) a merchandise trade surplus with the rest of the world.
B) a large trade deficit with China.
C) avoided becoming a debtor nation.
D) attracted very little foreign direct investment.
215) The value of goods imported into Spain exceeds the value of Spanish exports. This indicates that Spain
A) has an exchange rate decrease.
B) utilizes high tariffs.
C) has a budget deficit.
D) has a trade deficit.
216) Current trade data shows that the country of Hasalot exports far more to other nations than it imports. Hasalot has
A) an unfavorable balance of trade.
B) a trade surplus.
C) a trade deficit.
D) a low balance of trade.
217) Japanese automobile producers sold more of their Japanese production overseas than they sold in Japan. Their business strategy emphasizes:
A) importing.
B) licensing.
C) dumping.
D) exporting.
218) Monique's Unique Boutique sells clothing from around the world in the U.S. Monique regularly travels overseas to find the best and most unusual shirts, dresses, and pants that foreign producers have to offer. Monique is a(n)
A) importer.
B) licensee.
C) dumper.
D) exporter.
219) Last year, the island nation of Winstone imported goods totaling $300 million and exported products totaling $86 million. Tigerland experienced a(n)
A) unfavorable balance of trade.
B) favorable balance of trade.
C) trade surplus.
D) benefit from membership in a free trade zone.
220) Last year, the nation Hasalot reported that it had a favorable balance of trade even though it imported $9 billion worth of goods. This indicates that Winstone
A) exported $9 billion worth of goods.
B) exported more than $9 billion worth of goods.
C) overpriced the value of its exports.
D) exported less than $9 billion worth of goods.
221) The nation of Mainland recently reported that its imports for the previous year were $7 billion greater than its exports. During the same period, the country reported a favorable balance of payments. This information suggests
A) Mainland has misstated information in its report. The nation must have had a balance of payments deficit since more money flowed out of Redland for imports than flowed into the country for its exports.
B) Mainland's gold and other precious metal reserves increased in value.
C) money inflows from tourism, foreign aid, foreign investment, and other sources more than offset Mainland's trade deficit.
D) Mainland devalued their currency to obtain a more favorable exchange rate.
222) The president of Car Parts Kings, Inc. just testified before Congress. He urged them to limit the flow of imported automobile parts into the country. He stated that these imports were priced lower than foreign producers were charging for them in their own countries. He believes foreign producers are
A) dumping.
B) exercising trade deficits.
C) promoting free trade.
D) exhibiting ethnocentricity.
223) Jitensha Bike Parts was called to testify before the U.S. Congress. The CEO of Jitensha defended the company against an accusation that it was dumping parts on the U.S. market. In her testimony, the CEO claimed ________. Using traditional guidelines, Congress determined that Jitensha was not dumping.
A) Jitensha includes 10% overhead costs and an 8% profit margin in the price of all the parts they export to the U.S.
B) Japan runs a trade deficit with the U.S. in bike parts.
C) Jitensha is a staunch supporter of free trade.
D) Jitensha sells more bike parts in Europe than it does in the U.S.
224) Granting a foreign company the right to manufacture your product or to use your firm's trademark in return for a fee is called
A) a joint venture.
B) a foreign subsidiary.
C) licensing.
D) outsourcing.
225) The fee paid to a firm in a licensing agreement that gives another firm the right to manufacture their product or use its trademark is called
A) a joint venture.
B) a royalty.
C) a licensee.
D) an outsource agreement.
226) A major advantage of licensing is
A) these arrangements almost always lead to a joint venture.
B) the bulk of the revenues gained by the licensee come back to the licensor.
C) your company name does not need to be associated with the product in a foreign country.
D) very little cost to the licensor.
227) A disadvantage of licensing is
A) it's very costly for the licensor.
B) the licensee can decide to end the contract at a moment's notice.
C) your company's image is never permitted to be associated with the product, even though you are the developer.
D) the licensee may decide to use the expertise you have developed, break the agreement, and begin producing the product on his/her own.
228) The federal government created ________ to help small and medium-sized businesses get involved in exporting.
A) the World Trade Organization
B) Federal Export Loan Banks
C) Export Assistance Centers
D) the Federal Trade Promotion Commission
229) ________ are specialists that match buyers and sellers from different countries and provide services to ease the process of entering global markets.
A) Export trading companies
B) Licensees
C) Strategic alliances
D) Keiretsus
230) Export trading companies
A) enter into joint ventures with firms wanting to export goods and services.
B) are government-owned businesses that help companies go global.
C) connect sellers in the U.S. with buyers in other nations, and help with customs, documentation, and payments.
D) are similar to a corporation that sells franchises.
231) ________ is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell the parent company's product or service to others in a given territory in a specified manner.
A) Franchising
B) Contract manufacturing
C) Import trading
D) Export trading
232) When a company's strategy is ________, the firm makes arrangements for a foreign manufacturer to produce the product. The domestic company's label and/or trademark are attached to the completed product.
A) franchising
B) contract manufacturing
C) import sourcing
D) export trading
233) A ________ is a partnership in which two or more companies (often from different countries) join together and share the risk and costs in order to undertake a major project.
A) multinational cooperative
B) joint venture
C) franchisee transfer
D) recruit affiliation
234) A ________ represents a long-term partnership between two or more companies established to help each firm build competitive market advantages, without sharing the cost of risk.
A) multinational cooperative
B) shared venture
C) global franchise
D) strategic alliance
235) An advantage of forming a joint venture is
A) no shared costs or risk.
B) a perpetual arrangement.
C) it's a good strategy for entering new markets where you have never had a presence.
D) it's a great way to enter new markets without divulging any marketing or management strategy to the other member of the joint venture.
236) A form of foreign direct investment, where a domestic company purchases a company in a foreign country to produce a similar product or service, is a
A) licensor.
B) joint venture.
C) foreign subsidiary.
D) host company.
237) When foreign firms build production facilities in the United States, they are engaging in
A) exporting.
B) foreign direct investment.
C) importing.
D) countertrading.
238) A risk unique to firms with direct investment in a foreign country is the potential takeover of the firm's assets by the government of that country. This takeover is called a(n)
A) hostile takeover.
B) political bias.
C) appropriation.
D) expropriation.
239) A(n) ________ is a firm that has made sizeable investments and has a physical presence in several foreign countries as a manufacturer and marketer of products and services.
A) trade cartel
B) multinational corporation
C) host company
D) import trading company
240) A fast-growing form of foreign direct investment is ________, which are government-controlled investments in foreign companies.
A) sovereign wealth funds
B) multinational wealth funds
C) government mutual funds
D) government wealth management derivatives
241) A specialized organization that assists businesses in creating relationships with foreign customers and suppliers is known as a(n)
A) export trading company.
B) international brokerage house.
C) keiretsu.
D) global trade bank.
242) What is a benefit of contracting with export trading companies?
A) They are the experts in establishing trading partners abroad, and negotiating all the details in retaining customers.
B) They are experts in staying out of the financial transactions of establishing new markets.
C) They will always assume the risk if your product does not sell to the foreign customer.
D) They keep you legal because they serve as the franchisor and make certain that your products meet ISO requirements.
243) One of the purposes of Export Assistance Centers is to
A) help multinational corporations reach agreements with foreign governments.
B) provide subsidies to domestic firms hurt by dumping by foreign firms.
C) provide trade-finance support for small and medium-sized firms involved in direct exporting.
D) encourage domestic firms to become more competitive by forming keiretsu-like organizations, much like those found in Japan.
244) Licensing is a popular strategy because
A) it boosts domestic market revenues.
B) the licensee has incentive to work hard and succeed because he/she has borne the cost.
C) licensees spend little or no money to produce and market their products.
D) there are seldom any long-term contractual requirements.
245) Using contract manufacturing as a strategy to reach global markets gives firms the advantage of
A) expert and experienced laborers.
B) reduced financial risks.
C) increased volatility.
D) currency stability.
246) Companies may have several reasons for creating joint ventures. Which of the following statements is one reason why firms may decide to form a joint venture?
A) They may wish to contract manufacture with each other.
B) They will save time to market if they pool their technological know-how.
C) These arrangements are always less risky than strategic alliances.
D) These arrangements avoid the temptation to tap into marketing and management expertise of the parent companies.
247) For a firm to be considered a multinational corporation, which of the following conditions must be true?
A) It must have manufacturing facilities and a physical presence in several countries.
B) Its marketing arm must be based at the company's world corporate headquarters.
C) Stock ownership must be domestic.
D) All transactions must be financed by the International Monetary Fund.
248) A fast-growing form of foreign direct investment is sovereign wealth funds (SWFs). Why do these investments by governments with surplus cash flows worry trade experts?
A) SWFs invest in high-risk start-ups with no proven history of producing goods and services that developing or developed countries need. They may likely undermine the years of development of growing economies.
B) SWFs have a greater risk of going bankrupt than other investments because governments are not good at running businesses.
C) Some fear that governments investing their SWFs in large firms may gain control of natural resources, sensitive technologies, and the decision making of management.
D) Some trading experts believe that SWFs are supported by terrorist organizations, and their strategy is an indirect way to undermine the creation of U.S. jobs.
249) In the box, "Many Flags Fly Over the Golden Arches," the textbook describes one of the reasons McDonald's has become a global powerhouse. Which statement best describes what led to McDonald's success?
A) McDonald's was careful to include regional tastes along with its traditional burgers and fries.
B) McDonald's kept to what it did best and only served its American menu overseas.
C) McDonald's licensed all of its overseas restaurants.
D) McDonald's participates in contract manufacturing.
250) When entering a foreign market, Mountain Stream Brewery entered into an agreement with a local firm to brew and market Mountain Stream's beer. This is an example of
A) licensing.
B) franchising.
C) foreign direct investment.
D) foreign subsidiaries.
251) The Dabble Corporation wants to begin exporting its products. The company needs advice about how to get started, as well as trade-finance support. The federal government has established ________ to help companies like Dabble Corporation.
A) the World Trade Commission
B) Export Assistance Centers
C) export trading companies
D) Federal Reserve Banks
252) The quinoa seed is in high demand in wealthy countries but is not farmed in those countries. Approximately 97% of all quinoa production comes from small farmers in Taubestan who farm at high elevations. The seed is now considered an important ________ for Taubestan.
A) foreign direct investment
B) quota
C) export
D) import
253) PepsiCo entered into a long-term contract with a South African beverage company. The contract calls for the South African firm to produce and market Pepsi products in the country. PepsiCo will receive royalties on each case of sodas sold. This is an example of
A) licensing.
B) a joint venture.
C) a foreign subsidiary.
D) foreign direct investment.
254) Tebeau Partners of France and Morimoto Management based in Japan recently produced a new electric car with rechargeable batteries that can be driven at high speeds for long distances. They shared the investment, each contributing important technological expertise to the effort. These firms entered into a(n) ________ to build this car.
A) joint venture
B) multinational cartel
C) industrial countertrade agreement
D) multinational limited partnership
255) EBL Industries ________ its products in foreign countries, where labor is less expensive and production sites are owned by other companies. This strategy allows EBL Industries to experiment in new markets without incurring the large start-up costs involved with building its own production facilities.
A) contract franchises
B) pays governments to market
C) globally licenses
D) contract manufactures
256) If a Swiss chocolate firm purchases an American ice cream manufacturer, the American ice cream manufacturer becomes a
A) global franchise.
B) global joint venture.
C) foreign subsidiary.
D) contract manufacturer.
257) Which of the following statements is the most accurate observation regarding multinational corporations?
A) Rather than manage manufacturing and marketing facilities overseas, most multinational corporations attempt to enter global markets by exporting domestically produced goods.
B) Most multinational corporations are small- to medium-sized firms.
C) Because of political and economic concerns, most multinational corporations choose to ignore investment opportunities in China and Russia.
D) Only those firms with a physical presence in different nations qualify as multinational corporations.
258) Jamieson Brothers, Inc. reported that it owns and operates 189 companies worldwide with 13% of its sales coming from Europe, 38% from Asia, 36% from the U.S., and 13% from other parts of the world. Clearly, Jamieson Brothers is
A) a sovereign wealth fund.
B) a multinational corporation.
C) a foreign subsidiary.
D) an expropriated organization.
259) Johnny Appleseed and Company ships all of the apples from its orchards in the Pacific Northwest to a single buyer in Japan. The firm's entire profits are derived from this international transaction. Johnny Appleseed and Company is
A) an example of a multinational corporation.
B) not a multinational corporation.
C) contributing to the U.S. balance of trade deficit.
D) benefitting greatly from the establishment of NAFTA.
260) Oilers, Inc. refines and markets its energy products in different nations around the world. In addition, Oilers' stockholders and managers come from many different nations. If some of the nations where it operates decided to take over the assets of the company, this act would constitute
A) patent infringement.
B) expropriation.
C) illegal activity.
D) hostile takeover.
261) Which of the following terms describes the set of values, beliefs, rules, language, and institutions held by a specific group of people?
A) Culture
B) Ethnocentricity
C) Institutional society
D) Social myopia
262) ________ describes an attitude held by some American businesspeople that American culture is superior to all others.
A) Primary culture
B) Ethnocentricity
C) Cultural institutionalism
D) Social myopia
263) Ethnocentricity means
A) "when in Rome, do as the Romans!"
B) you believe your culture is superior to others.
C) cultural awareness.
D) a trend toward accepting other cultures and trying various foods and religions to see if they fit your lifestyle.
264) Which of the following sociocultural forces can have a significant impact on global business operations?
A) Religion
B) Universal sales standards
C) Single-phase marketing
D) Global marketing
265) Which of the following represents the value of one nation's currency relative to the currencies of another country?
A) Euro rate
B) Currency rate
C) Exchange rate
D) Standard of living
266) Global financial markets operate under a system of ________, where the supply and demand for various currencies will determine their value at any moment in time.
A) living rates
B) foreign good rates
C) floating exchange rates
D) live trading rates
267) ________ is the exchange of merchandise or services for other merchandise or services without the exchange of money.
A) Exporting
B) Bartering
C) Importing
D) Factoring
268) If a nation's currency is weak, people may have to fall back on
A) exporting.
B) bartering.
C) importing.
D) factoring.
269) ________ is lowering the value of a nation's currency relative to other currencies.
A) Revaluation
B) Deflation
C) Devaluation
D) Negative valuation
270) _______ is a complex form of bartering in which several countries may be involved, each trading products and services for the products and services of another country.
A) Venture bartering
B) Global monetarism
C) Countertrading
D) Global counter-exchange
271) Under the floating exchange rate system, the value of a country's currency is determined by
A) the monetary authorities of that country.
B) the United Nations Committee on Floating Currencies.
C) the currency's supply and demand in the global market.
D) countertrading.
272) The legislation that prohibits U.S. businesses from making "questionable" or "dubious" payments to foreign officials, to secure business contracts is the
A) Foreign Corrupt Practices Act.
B) Foreign Anti-trust Act.
C) Multinational Collusion law.
D) Global Good Conduct law.
273) Which of the following statements describes laws and regulations in global markets?
A) There is not a central system of law in existence.
B) The World Trade Organization reigns supreme and dictates global law for all markets.
C) Most trading partners will default to the laws that govern the seller's home country.
D) With the exception of labor relations, most laws are pretty standard across global markets.
274) To understand legal and regulatory conditions and be successful in global markets it's often useful to contact
A) the local Better Business Bureau.
B) local businesspeople in the host countries.
C) the Regional Economic Development Trading Desk (REDTD).
D) the Organization for Economic Cooperation and Development (OECD).
275) People from other nations sometimes comment on the ethnocentric attitudes of U.S. businesspeople. This indicates that American businesspeople
A) follow the philosophy of "when in Rome, do as the Romans."
B) quickly accept the suggestions and ideas of others.
C) believe that American culture is superior to all others.
D) celebrate the many ethnic groups that make up American life.
276) A sociological challenge that must be overcome in order to be successful in the global market is
A) a lack of cultural understanding.
B) an overly anxious desire to please at all cost.
C) inequality of global natural resources.
D) wealth management.
277) ________ differences such as insufficient electrical power and transportation systems can present special problems for U.S. firms when attempting to enter global markets.
A) Physical and environmental
B) Legal and regulatory
C) Economic
D) Governmental
278) In some countries it is customary to pay government officials to secure necessary business contracts and permits. American businesses must follow U.S. law and cannot make these payments according to the
A) Foreign Antitrust Act.
B) Foreign Corrupt Practices Act.
C) Multinational Collusion Law.
D) Global Good Conduct Law.
279) Under a system of floating exchange rates, changes in the value of the U.S. dollar relative to other currencies are the result of
A) negotiated rate adjustments between the U.S. government and the World Trade Organization.
B) decisions made by the Federal Reserve Board of Governors in order to implement monetary policy.
C) fluctuations in the world price of gold.
D) changes in the supply of and/or demand for dollars in the global currency market.
280) If global trade experts predict that the value of the dollar will soon fall, it will result in
A) both the prices of imported goods rising and prices of U.S. goods sold overseas rising, as well.
B) prices of imported goods rising, but prices of U.S. goods sold overseas falling.
C) prices of imported goods falling and prices of U.S. goods sold overseas falling, as well.
D) prices of imported goods falling, but prices of U.S. goods sold overseas rising.
281) Laura is typical of many U.S. businesspeople. She feels the U.S. culture defines the model for the rest of the world, and that the "American way" of doing things is the best. Laura is guilty of
A) ethnic plagiarism.
B) ethnocentricity.
C) culture shock.
D) counter culture.
282) In order to level the playing field in trade between the U.S. and China, U.S. policymakers have called upon China's government to allow the yuan to float freely, as other world currencies. Through government regulation, China maintains an undervalued currency, which results in
A) more buying power for Chinese consumers who want to purchase U.S. goods and goods from other countries.
B) maintaining robust Chinese exports and a favorable balance of trade for China.
C) developing better relations with industrialized countries who want to increase the value of their exports.
D) stability and strength of the Chinese yuan against the U.S. dollar and the euro.
283) Workers in the nation of Brotherton expect managers to forcefully tell employees what to do, how to do it, and when. On the other hand, American employees prefer to take part in workplace decision making. This ________ difference between Brotherton workers and American workers represents a management challenge for firms trading in the global market.
A) geo-political
B) economic
C) sociocultural
D) regulatory
284) A company in Mexico recently agreed to trade coal to an American importer in return for American-made cars. This arrangement is an example of
A) a letter of credit arrangement.
B) a nontariff trade.
C) arbitrage.
D) barter.
285) Game Guys, Inc. needed a special silicon substrate. The company executives knew a new start-up in India, Silicon Sisters, Inc., was the best in the world at efficiently mass-producing the product. The Indian company needed MSG (metallurgical grade silicon) in order to make the substrate, which it knew it could get from a Chinese firm. The Chinese firm (mostly owned by the Chinese government) agreed to supply the silicon to Silicon Sisters if it could get a certain quantity of gaming hardware from Game Guys. This beneficial exchange is described as
A) beneficial contracting.
B) contract manufacturing.
C) third-party purchasing.
D) countertrading.
286) A highly powerful foreign government official approaches your company and requests a large sum of money. In return for this bribe, he promises your company will receive preferential treatment in all future government contracts. You quickly refuse his request, explaining that the ________ Act of the United States prohibits you from making such payments.
A) Federal Trade Commission
B) Sherman Anti-trust
C) Foreign Corrupt Practices
D) Celler-Kefauver
287) U.S. recording studios are feeling the pinch in profits due to the fact that artists' music is copied and sold overseas within 24 hours of the music selling in the U.S. market. As a student who is now aware of the challenges businesses face in global trade, which of the following statements do you think is an accurate representation of this situation?
A) The copying and selling of the artist's original music is illegal and enforceable by international copyright law.
B) The copying and selling of the artist's music is legal due to the fact that are no online copyright laws.
C) United States copyright laws do not necessarily apply globally.
D) Copyright laws only protect the artist, but not the recording studios.
288) An American company recently won a huge contract with a company in Indonesia, by gifting the Indonesian government officials with American cars and an assurance of monetary gifts. Clearly, this procedure
A) violates the Foreign Corrupt Practices Act.
B) violates the Fair and Balanced Competitive Practices Act.
C) defines the common business practices of the foreign nation and should be respected.
D) defines the terms of the business contract, and as long as both parties sign, the agreement is binding.
289) When studying abroad last year, Thomas found that his U.S. dollars didn't stretch as far as he had expected. Each time he exchanged his dollars for euros, he had to give up more dollars in exchange for fewer euros. The exchange rate indicates
A) the dollar has gained strength against the euro.
B) the euro is weak against the dollar.
C) the euro has gained strength against the dollar.
D) the demand for dollars is stronger than the demand for euros.
290) The Ozark Bike Company recently entered into an agreement with a large Japanese retailer to distribute its bicycles in Japan. Ozark Bike Company sees itself in a favorable position because
A) the yen is gaining strength compared to the U.S. dollar, making it cheaper for Japanese customers to buy American products.
B) the yen is down against the U.S. dollar, making it cheaper for Japanese customers to buy American products.
C) it was traditionally against Japanese culture to ride bicycles, so the U.S. bike company would be dealing with a niche market.
D) the Japanese do not permit foreign direct investment. American companies will make all the bikes in the U.S., which creates more jobs on American soil.
291) Maria's aunt, Juanita, is cruising in South America. Juanita told Maria she would be glad to buy her some jewelry while in one of the ports. She said she will shop in Santiago, Chile, because the exchange rate would be to her benefit. This means
A) the currency in the U.S. is weak against the Chilean currency.
B) the currency in the U.S. will be almost equal to the Chilean currency; otherwise it would not be a good exchange.
C) the currency in the U.S. is devalued.
D) the currency in the U.S. has strength against the Chilean currency.
292) Halpert Hardware Pros, an American retail store, buys most of its inventory from Asian countries. Halpert Hardware Pros would benefit if the value of the dollar ________ relative to the currencies of the countries from which Halpert imports.
A) rose
B) fell
C) remained constant
D) floated unpredictably
293) James's family business, J&J Interiors, sells and installs tile in bathrooms and kitchens. More and more of J&J's customers are asking for heater coils under bathroom floors, and James thinks there is a greater opportunity in heated tiles. In his effort to avoid domestic competition, he sets his sights on the vast Hasalot market. Much to his surprise, most of Hasalot's citizens do not yet have indoor plumbing and are accustomed to government-run communal baths. James realizes that his global marketing effort is hampered by
A) legal and regulatory constraints.
B) cultural constraints.
C) physical and environmental constraints.
D) the floating exchange rate.
294) ________ is the use of government regulations to limit the import of goods and services.
A) Trade protectionism
B) Fiscal policy
C) Countertrade policy
D) Monetary policy
295) Trade protectionism
A) always leads to a favorable balance of trade.
B) is the use of government regulations to limit the import of goods and services.
C) is not a barrier to global trade.
D) encourages dumping by foreign industries in the home country.
296) ________ was a seventeenth- and eighteenth-century belief that a nation should try to sell more goods to other nations than it buys from them.
A) Capitalism
B) Comparative advantage
C) Mercantilism
D) Inflation
297) The two basic types of tariffs are
A) goods and services.
B) general and limited.
C) comparative and absolute.
D) revenue and protective.
298) A ________ tariff is designed to raise the price of imported products so that domestic goods are more competitively priced.
A) protective
B) restrictive
C) progressive
D) revenue
299) ________ tariffs are designed to raise money for the government.
A) Regulatory
B) Revenue
C) Price
D) Profit
300) In an effort to protect domestic jobs, some countries will place a limit on the number of certain types of products that can be imported. These limits are called
A) revenue tariffs.
B) protective tariffs.
C) import quotas.
D) tariffs.
301) A(n) ________ refers to a complete ban on importing or exporting of products from a specific country.
A) absolute tariff
B) health quarantine
C) quota
D) embargo
302) Some governments initiate restrictive standards that detail exactly how a product must be sold in a country. Trade experts call these restrictions
A) monetary tariffs.
B) countertrade policies.
C) nontariff barriers.
D) export constraint policies.
303) The purpose of the General Agreement on Tariffs and Trade (GATT) is to
A) facilitate global trade.
B) create common market arrangements in specific geographical regions.
C) negotiate an end to civil wars.
D) establish a set of international property right laws.
304) The ________ represents the first attempt to establish a truly global mediation center to resolve international trade disputes.
A) International Trade Court
B) World Trade Organization
C) Global Trade Commission
D) United Nations Arbitration Center
305) With GDP of over $658 billion, the common market known as COMESCA is
A) a subset of the Mercosur trading bloc.
B) a subset of the European Union.
C) composed of Southern African and Eastern African nations.
D) composed of Ecuador, San Simeon, Chile, and Argentina.
306) The European Union created a single monetary unit to replace the national currencies of 12 member nations. This common currency is known as the
A) e-dollar.
B) pound.
C) mercosur.
D) euro.
307) The three countries participating in NAFTA are
A) Canada, Panama, and the United States.
B) Mexico, Panama, and the United States.
C) Canada, Nicaragua, and Mexico.
D) Canada, Mexico, and the United States.
308) The common market arrangement that groups Brazil, Argentina, Paraguay, Uruguay, Bolivia, Chile, Colombia, Ecuador, Peru, and Suriname is called
A) the South American Trade Organization.
B) the World Trade Organization (WTO).
C) the Latin Free Trade Zone.
D) Mercosur.
309) Another name for a common market is
A) FTA.
B) trading bloc.
C) continental community.
D) economic cooperative.
310) Traders in the seventeenth and eighteenth century were encouraged to focus on selling their nation's goods in the global market to create a favorable balance of trade. Nations attempted to sell more goods to other nations than they bought from other nations. This approach to global trading is called
A) ethnocentrism.
B) mercantilism.
C) protectionism.
D) isolationism.
311) The motivation behind trade protectionism is
A) to limit accelerated growth of GDP that would cause inflation to escalate.
B) to facilitate the belief that it will keep one's nation disease free.
C) to increase the positive economic consequences of one's trade position.
D) solely for the protection of nuclear attack.
312) Although embargos are enacted upon both imports and exports, this form of trade protectionism is often the result of
A) physical and environmental limitations on trade.
B) nontariff barriers.
C) currency fluctuations.
D) political disagreements between nations.
313) The benefits of protective tariffs are
A) they increase the revenues of the government that has implemented them.
B) they decrease the cost of the product to the consumer (end user).
C) they help develop friendlier trade relations with loyal trading partners. Both parties are protected.
D) they protect domestic jobs by encouraging cost-sensitive consumers to purchase domestic products.
314) A major concern voiced by U.S. critics of the North American Free Trade Agreement (NAFTA) was that it would result in
A) higher prices for consumer goods.
B) loss of jobs in the U.S. economy.
C) national security problems.
D) increased illegal immigration from Mexico.
315) One objective of NAFTA is to
A) increase trade barriers between the countries involved.
B) decrease investment opportunities in the countries involved.
C) promote conditions of fair competition for the three trading partners.
D) improve working conditions in Central America.
316) American companies that produce sophisticated military weaponry are prohibited from exporting that equipment to unfriendly governments, such as Iran. This complete ban on exporting sensitive technology to specific countries is an example of a(n)
A) import quota.
B) boycott.
C) tariff.
D) embargo.
317) The U.S. and China continue to spar over sociocultural issues, such as human rights, and economic and financial issues, such as the value of the Chinese yuan against the U.S. dollar. U.S. diplomats assert that these differences continue to bolster China's favorable balance of trade and increase the U.S. trade deficit. The trade protectionist policy exhibited by the Chinese is similar to an economic policy known as ________ that was followed during the seventeenth and eighteenth centuries. This policy resulted in a flow of money to the country that sold the most globally.
A) trade embargoing
B) countertrading
C) profiteering
D) mercantilism
318) The U.S. government announced a 13-million-pound annual limit on Diamontite imported from Taubestan. This type of trade restriction is called a(n)
A) embargo.
B) revenue tariff.
C) import quota.
D) export cap.
319) Denmark requires foreign companies that sell butter in Denmark to sell it in cubes, not tubs. This type of requirement is known as a
A) protective tariff.
B) revenue tariff.
C) quota.
D) nontariff barrier.
320) The U.S. government, responding to pressure from political lobbyists representing the U.S. steel industry, will impose a tax on steel products imported from South America. This is an example of a(n)
A) protective tariff.
B) revenue tariff.
C) quota.
D) embargo.
321) Having recently found sources of oil on their own land, the newly established nation of Brotherton enacted a tariff on imported petroleum in order to raise money for their new government. This trade restriction is an example of a ________ tariff.
A) revenue
B) protective
C) percentage
D) fixed
322) Hasalot is a small nation that has followed protectionist policies for many years. Which of the following would be an example of a nontariff barrier established by Hasalot?
A) Establishment of a tax levied on imported goods so that foreign products are more expensive than competing domestic goods.
B) Establishment of a tax levied on imported goods designed primarily to raise money for the government.
C) Establishment of restrictive quality standards requiring foreign firms to make expensive modifications to their products before they can be exported to Hasalot.
D) Participation in the Uruguay Round of GATT negotiations.
323) A small wine and cheese store in Milwaukee sells dozens of different type of cheese: Bulgarian, French, Danish, Greek, and a domestic from its home state of Wisconsin. The domestic Wisconsin cheese sells for $1.99/pound, while all the others sell for more than $2.99/pound, and the Greek variety is priced at $6.99/pound. The domestic variety is much cheaper because
A) customers always perceive the domestic varieties to be of lower quality than the imported varieties.
B) the value of the dollar never favors imported goods.
C) imported cheese producers often pay protective tariffs on these goods, which ultimately raises the price at the grocery store.
D) the distributors of these imports refuse to buy the cheese in large enough quantities to enjoy economies of scale.
324) Belgium, Hungary, Sweden, and Germany are all members of the EU. Which of the following statements is an accurate description of trade between these nations?
A) Belgium and Germany are permitted to engage in free trade due to their proximity to each other, however, Sweden only has free trade with Finland, and Hungary only has free trade with Switzerland, Austria, and Croatia.
B) The EU has abolished customs duties at internal borders for these and other member nations and put in place a uniform system for taxing imports. Internal border controls subsequently disappeared.
C) Customs officers that collect tariffs are now found at the internal borders of all EU member nations.
D) Belgium, Hungary, Sweden, and Germany are four nations strongly considering abandoning the EU common market. The global trading bloc has proved inefficient in these nations' attracting global business.
325) The outlook for growth in global trade appears to be
A) less optimistic than in the past.
B) more interesting yet more challenging every day.
C) unclear and lacking focus.
D) nonexistent.
326) Global trade with China is
A) too risky and not worth the effort.
B) illegal based on World Trade Organization (WTO) rulings.
C) an emerging business opportunity for several companies.
D) dependent upon the success of multinational corporations.
327) Many business experts contend that ________ will likely be the growth market of the future.
A) Asia
B) Africa
C) South America
D) the Middle East
328) The "second wave" of offshore outsourcing refers to
A) moving jobs to South America in addition to China.
B) moving skilled service jobs such as those in accounting offshore.
C) moving jobs to India in addition to China.
D) moving manufacturing jobs offshore.
329) When U.S. firms choose to hire skilled and unskilled workers in other countries to produce goods and services, rather than producing them in the United States, we refer to this as
A) offshore procurement.
B) domestic outsourcing.
C) foreign distribution.
D) offshore outsourcing.
330) As students think about a career in the business world today, which of the following is a good strategic suggestion?
A) Study a foreign language.
B) Secure a job with a large multinational corporation.
C) Stay away from franchising due to the saturation of this form of business globally.
D) Avoid spending a lot of time studying fluctuations in currencies because a global currency is imminent.
331) Which of the following nations has joined the U.S., Japan, and the EU as a key driver of the world economy?
A) Thailand
B) Brazil
C) Russia
D) China
332) Trade experts' concerns about trading with China include its
A) small population size compared to other nations, which puts doubt in businesspeople's minds about the worthiness of the investment.
B) one-party political system, counterfeiting activities, and human rights abuses.
C) ties with organized labor unions.
D) economic philosophy that has changed from free market to command economy.
333) Which of the following is an advantage of offshore outsourcing?
A) Companies can create efficiencies by hiring low-wage employees.
B) Wages increase in the home country.
C) Product quality improves permitting firms to charge more for their products.
D) Communication between the company and its customers improves.
334) Which of the following statements is a good prediction of future occurrences in global markets?
A) Fortunately, safety issues will become less of a concern as developing nations begin to participate in global trade at a faster pace.
B) It is doubtful that service and technical jobs such as accounting, legal representation, or financial management will become part of offshore outsourcing.
C) China will continue to be the only viable global trader in Asia for several years to come.
D) With the strong growth in technical talent globally, offshore outsourcing should continue to increase.
335) Candace is a flight attendant for a large, international airline. While in China, Candace often finds look-alikes in famous designer brands of watches, handbags, clothing, and golf clubs. In fact, she'll do her Christmas shopping there and will even buy good-quality items for auctioning at her son's preschool events back in the U.S. Candace's actions demonstrate
A) a continual problem with product piracy in China.
B) how expensive it is to trade with China. People who travel there are really the only ones who can benefit from China trade.
C) the low level of economic development in China, and the fact that only tourists can afford to purchase name-brand goods in that nation.
D) the World Trade Organization's encouragement of China to increase its production of counterfeit goods because there is a high demand for these globally.
336) Compare and contrast comparative and absolute advantage in global markets. Provide examples.
337) Describe and provide examples of four different strategies for reaching global markets.
338) Explain and provide at least one example of how sociocultural differences can create trade difficulties in world markets.
339) Explain and provide at least one example of how legal and regulatory forces impede global trade.
340) Define offshore outsourcing and explain its pros and cons.
Mini-Case
Ever since he was five years old, Rhett Tenna has had poor eyesight and as an eyeglass wearer he suffered through all the names that went along with it. Rhett eventually switched from glasses to contacts, but he always wondered why his glasses were not fashionable. After graduation from college, Rhett set out on a lifelong goal: to make eyewear synonymous with fashion. He opened a specialty store called "The Eyes Have It." His marketing plan was to remove the social stigma of wearing glasses, and replace it with a sense of flair and high fashion. From the day he opened his first store, Rhett's plan met with resounding success. Today, "The Eyes Have It" has grown from that single outlet to a medium-sized company with dozens of stores located in six states, and a manufacturing plant that turns out designer frames.
A recent internal audit, however, suggested a problem that Rhett had not anticipated. The study indicated that the U.S. market is just about saturated and growth of "The Eyes Have It" stores will be very limited. The audit concerned Rhett until he recognized an untapped market existed overseas. If people all over the world have the same problem, the global market opportunities are fantastic! All in favor of going global say: "The Eyes Have It"!
341) At first, Rhett believed he should maintain all of his manufacturing within the United States and simply export his designer frames to foreign sellers. However, he lacked expertise in exporting. Rhett decided to see if the federal government could provide any help by contacting a(n)
A) World Trade Center.
B) Export Assistance Center.
C) Federal Reserve Bank.
D) U.S. Export Savings Bank.
342) Although he is confident of success, Rhett is concerned that social, cultural, and economic differences in other nations may create some problems. He believes he should adapt his approach to these differences rather than trying to force the "American way" on foreign consumers. Rhett's attitude suggests that he wants to avoid a(n) ________ approach to business.
A) ethnocentric
B) flexible
C) ethical
D) countercultural
343) Rhett heard predictions that the value of the U.S. dollar is likely to increase substantially over the next six months. This should
A) hurt his overseas efforts since his prices will be very high.
B) stop overseas efforts because dollars will not be negotiable.
C) help his overseas efforts since his prices will be lower.
D) force him into accepting no other currency except the dollar.
344) Rhett spoke with a Korean company that said it might be interested in producing his products in their market. They would pay him a royalty for what they sold and would bear all the start-up expenses of this effort. This Korean company is proposing a(n)
A) subsidiary agreement.
B) joint venture.
C) export trading company.
D) licensing agreement.
345) The company was informed by the Taiwanese Ministry of Trade that they could only export 1.1 million pairs of eyeglasses to the Taiwanese market during a given year. The Taiwanese have imposed a(n)
A) revenue tariff.
B) embargo.
C) import quota.
D) limit order.
346) Next year, in order to cut both time and cost in getting new styles to global markets, Rhett plans to ________ a few of his designer lines. Rhett will send his designs to manufacturers in India, Bangladesh, and Turkey who will produce the eyeglasses in facilities in their respective countries. This will not only reduce the cost of labor, it will help Rhett reach regional markets in a timely manner.
A) license
B) contract manufacture
C) franchise
D) subsidize
Document Information
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Chapter 1 Business Profits, Risk, Dynamics
DOCX Ch. 1
Chapter 2 Understanding Economics And How It Affects Business
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Chapter 3 Doing Business In Global Markets
DOCX Ch. 3 Current
Chapter 4 Demanding Ethical And Socially Responsible Behavior
DOCX Ch. 4
Chapter 5 How To Form A Business
DOCX Ch. 5