Test Bank For Changing World 6Th Canadian Edition By O. C. Ferrell

Chapter 03 - Business in a Borderless World True / False Questions 1. Exporting is the purchase of products from another nation. FALSE Exporting is the selling of goods and services to foreign markets. Blooms: Remember Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-04 Trade Between Countries 2. Falling political barriers and new technologies have made it increasingly difficult to trade with other nations. FALSE New technologies and the collapse of old political barriers have facilitated international trade. Blooms: Remember Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-02 The Role of International Business 3. When a nation is importing more than it is exporting, it has a positive balance of trade. FALSE When a nation is importing more than it is exporting, it has a trade deficit, or a negative balance of trade. Blooms: Remember Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade Chapter 03 Business in a Borderless World 3-1 Chapter 03 - Business in a Borderless World 4. A balance of trade refers to the buying, selling, and trading of goods and services across national boundaries. FALSE A nation's balance of trade is the difference in value between its exports and imports. Blooms: Remember Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 5. Nations trade with other nations to obtain resources that would otherwise be unavailable to them. TRUE Nations and businesses engage in international trade to obtain raw materials and goods that are otherwise unavailable to them or are available elsewhere at a lower price than that at which they themselves can produce. Blooms: Remember Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 6. An absolute advantage exists when a country has a monopoly on a natural resource. TRUE An absolute advantage, or monopoly, exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item. Blooms: Remember Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 7. De Beers Consolidated Mines, Ltd., has the largest deposits of diamonds in the world. As such, they are said to have a comparative advantage. FALSE De Beers has an absolute advantage over the world's diamond trade and uses its control to maintain high prices for gem- quality diamonds. Blooms: Remember Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 3-2 Chapter 03 - Business in a Borderless World 3-3 Chapter 03 - Business in a Borderless World 8. Outsourcing refers to the transfer of manufacturing and other tasks to countries where labour and supplies are less expensive. TRUE Outsourcing has become a controversial practice because many jobs have moved overseas where those tasks can be accomplished for lower costs. Blooms: Remember Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 9. Canada's top trading partner, in terms of both imports and exports, is China. FALSE Canada's top trading partner, in terms of export destinations and import sources, is the United States. Blooms: Remember Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 10. The trade deficit fluctuates according to such factors as the economic health of Canada and other countries, productivity, perceived quality, and exchange rates. TRUE In 2014, Canada had a $4.9 billion trade surplus with the United States and a $14.9 billion trade deficit with China. Blooms: Understand Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 11. Trade surpluses are harmful because they can mean the failure of businesses, the loss of jobs, and a lowered standard of living. FALSE Trade deficits are harmful because they can mean the failure of businesses, the loss of jobs, and a lowered standard of living. Blooms: Understand Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 3-4 Chapter 03 - Business in a Borderless World 3-5 Chapter 03 - Business in a Borderless World 12. A nation's balance of trade is the difference in value between its exports and imports. TRUE A trade surplus is a positive balance of trade and a trade deficit is a negative balance of trade. Blooms: Remember Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 13. Completely free trade always exists. FALSE When a company decides to do business outside its own country, it will encounter a number of barriers to international trade. Blooms: Remember Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-06 International Trade Barriers 14. Protective tariffs raise the price of foreign goods to allow competition with more expensive domestic goods. TRUE Protective tariffs allow more expensive domestic goods to compete with foreign ones. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 15. When the value of the Canadian dollar declines relative to other currencies, such as the euro, the price of imports becomes relatively less expensive for Canadian consumers. FALSE When the value of the Canadian dollar declines relative to other currencies, such as the euro, the price of imports becomes relatively more expensive for Canadian consumers. Blooms: Remember Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-07 Economic Barriers 3-6 Chapter 03 - Business in a Borderless World 3-7 Chapter 03 - Business in a Borderless World 16. A common reason for establishing quotas or tariffs is to prohibit dumping. TRUE Dumping occurs when a country or business sells products at a lower price than what it costs to produce them and setting a quota or tariff will rescind this practice. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 17. An embargo gives the importing country complete control over the domestic price of the good. FALSE An embargo prohibits trade in a particular product. They are generally directed at specific goods or countries and may be established for political, economic, health, or religious reasons. Blooms: Remember Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 18. Political considerations change slowly, while laws change rapidly. FALSE Political considerations are seldom written down and often change rapidly, unlike legal issues. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 3-8 Chapter 03 - Business in a Borderless World 19. Differences in spoken language and body language have no impact on international business. FALSE Cultural differences, including body language and gestures, affect international trade. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-09 Social and Cultural Barriers 3-9 Chapter 03 - Business in a Borderless World 20. Many marketers view technological barriers to trade as opportunities to enter new markets. TRUE Countries such as India and China have been targeted because they have few private phone lines. These present tremendous opportunities for North American businesses to expand into these markets. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-10 Technological Barriers 21. Probably the most illegal cartel is OPEC, the Organization of Petroleum Exporting Countries. FALSE OPEC is legal. It is the most famous cartel. Blooms: Remember Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 22. The North American Free Trade Agreement (NAFTA), which went into effect on January 1, 1994, effectively merged Canada and the United States into one market of more than 440 million consumers. FALSE The NAFTA agreement includes Canada, the United States, and Mexico. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-13 The North American Free Trade Agreement (NAFTA) 3-10 Chapter 03 - Business in a Borderless World 23. The Doha Development Round collapsed in 2008 after failing to agree on farm import rules, which allow countries to protect poor farmers by imposing a tariff on certain goods in the event of a drop in prices or a surge in imports. TRUE There were other major issues, but the main stumbling block was farm import rules. Blooms: Remember Difficulty: Hard Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-12 General Agreement on Tariffs and Trade (GATT) 24. GATT provided a forum for tariff negotiations. TRUE The General Agreement on Tariffs and Trade (GATT) provides a forum for tariff negotiations and a place where international trade problems can be discussed and resolved. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-12 General Agreement on Tariffs and Trade (GATT) 25. The International Monetary Fund promotes trade among member nations by eliminating trade barriers and fostering financial cooperation. TRUE The International Monetary Fund (IMF) was established in 1947 to promote trade among member nations by eliminating trade barriers and fostering financial cooperation. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-18 International Monetary Fund 3-11 Chapter 03 - Business in a Borderless World 26. The World Bank and other multilateral development banks are the largest source of advice and assistance for developing nations. TRUE The World Bank, also known as the International Bank for Reconstruction and Development, was established by the industrialized nations in 1946 to loan money to underdeveloped and developing countries. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-17 World Bank 27. Maquiladoras are possible under the Asia-Pacific Economic Cooperation. FALSE Maquiladoras are U.S. production facilities in Mexico which account for half of Mexico's exports. Blooms: Understand Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-13 The North American Free Trade Agreement (NAFTA) 28. The WTO agreements are the optional ground rules for international commerce. FALSE Key to the World Trade Organization are the WTO agreements, which are the legal ground rules for international commerce. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-12 General Agreement on Tariffs and Trade (GATT) 29. Under the European Union (EU), each member nation functions as a separate market. FALSE Until 1993, each nation functioned as a separate market, but at that time members officially unified into one of the largest single world markets. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-14 The European Union (EU) 3-12 Chapter 03 - Business in a Borderless World 3-13 Chapter 03 - Business in a Borderless World 30. The prosperity of the EU has suffered in recent years. EU members experienced a severe economic crisis in 2010 that required steep bailouts from the International Monetary Fund (IMF). TRUE The first country to come to the forefront was Greece, which had so much debt that it risked default. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-14 The European Union (EU) 31. The People's Republic of China has launched a program of economic reform to stimulate its economy by privatizing many industries, restructuring its banking system, and increasing public spending on infrastructure. TRUE As a result, China has become a manufacturing powerhouse, with an estimated economic growth rate of 8 to 10 percent a year. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-15 Asia-Pacific Economic Cooperation (APEC) 32. The World Bank is more formally known as the International Monetary Fund. FALSE The World Bank has the formal title of International Bank for Reconstruction and Development. It was established in 1946 to loan money to underdeveloped and developing countries. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-17 World Bank 3-14 Chapter 03 - Business in a Borderless World 33. Exporting is available only to large corporations. FALSE When a company is called upon to supply a foreign company with a particular product, this allows enterprises of all sizes to participate in international business. Blooms: Understand Difficulty: Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-20 Exporting and Importing 34. Licensing is a way of entering the international marketplace without spending large amounts of money abroad. TRUE Licensing and franchising enable a firm to enter the international marketplace without spending large sums of money abroad or hiring or transferring personnel to handle overseas affairs. Blooms: Remember Difficulty: Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-22 Licensing and Franchising 35. Countertrade agreements require that countries trade using the currency of the importing nation. FALSE Countertrade agreements are foreign trade agreements that involve bartering products for other products instead of for currency. Blooms: Remember Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-20 Exporting and Importing 36. Direct investment is the least risky and least expensive way to participate in foreign trade. FALSE Licensing and franchising is an attractive alternative to direct investments because of the ability to enter the international marketplace without spending large sums of money abroad or hiring or transferring personnel to handle overseas affairs. Blooms: Understand Difficulty: Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-22 Licensing and Franchising 3-15 Chapter 03 - Business in a Borderless World 3-16 Chapter 03 - Business in a Borderless World 37. A strategic alliance is a partnership formed to create competitive advantage on a worldwide basis. TRUE Strategic alliances are becoming the predominant means of competing in fierce, international markets. Blooms: Remember Difficulty: Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-26 Joint Ventures and Alliances 38. All multinationals are Canadian firms. FALSE The multinational corporation (MNC) is a corporation that operates on a worldwide scale, without significant ties to any one nation or region. Blooms: Remember Difficulty: Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-27 Direct Investment 39. Export agents produce goods and sell them in a foreign country. FALSE Export agents seldom produce goods themselves, instead, they usually handle international transactions for other firms. Export agents either purchase products outright or take them on consignment. Blooms: Remember Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-20 Exporting and Importing 40. An advantage of trading through an agent instead of directly is that the company does not have to deal with foreign currencies or the red tape of international business. TRUE A major disadvantage is that, because the export agent must make a profit, either the price of the product must be increased or the domestic company must provide a larger discount than it would in a domestic transaction. Blooms: Remember Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-20 Exporting and Importing 3-17 Chapter 03 - Business in a Borderless World 3-18 Chapter 03 - Business in a Borderless World 41. Offshoring and outsourcing mean the same thing. FALSE Offshoring is different than outsourcing: the company retains control of the process because it is not subcontracting to a different company. Blooms: Remember Difficulty: Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-25 Offshoring 42. The oldest trading company in Canada is the Canadian Commercial Corporation (CCC). TRUE This is a federal Crown corporation in existence since 1946. Blooms: Remember Difficulty: Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-21 Trading Companies 43. Canada's top global franchise is McDonald's. FALSE Canada's top global franchise is Tim Hortons. Blooms: Remember Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-22 Licensing and Franchising 44. Licensing and franchising enable a company to enter the international marketplace. However, this requires spending large sums of money abroad. FALSE Licensing and franchising enable a company to enter the international marketplace without spending large sums of money abroad or hiring or transferring personnel to handle overseas affairs. Blooms: Understand Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-22 Licensing and Franchising 3-19 Chapter 03 - Business in a Borderless World 45. Companies doing business internationally have traditionally used a globalization strategy. FALSE Companies doing business internationally have traditionally used a multinational strategy. Blooms: Remember Difficulty: Easy Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 46. Even when products are standardized, advertising often has to be modified. TRUE Even when products are standardized, advertising often has to be modified to adapt to language and cultural differences. Blooms: Remember Difficulty: Easy Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 47. Many businesspeople today try to "think locally, act globally." FALSE Astute businesspeople today "think globally, act locally," which means constantly being aware of the big picture, but adjusting their firms' strategies to conform to local tastes and needs. Blooms: Remember Difficulty: Medium Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 48. Globalization involves standardizing products for the whole world as if it were a single entity. TRUE A global strategy or globalization involves standardizing products, promotion, and distribution for the whole world, as if it were a single entity. Blooms: Remember Difficulty: Easy Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 3-20 Chapter 03 - Business in a Borderless World 49. Globalization refers only to products, not promotion or distribution. FALSE A global strategy or globalization involves standardizing products, promotion, and distribution for the whole world, as if it were a single entity. Blooms: Remember Difficulty: Medium Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 50. More and more companies are moving from a global strategy to a customization strategy, which involves standardizing products for the whole world, as if it were a single entity. FALSE More and more companies are moving from a customization strategy to a global strategy. The global strategy involves standardizing products (and, as much as possible, their promotion and distribution) for the whole world, as if it were a single entity. Blooms: Remember Difficulty: Hard Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies Multiple Choice Questions 51. When Weseeyu, Inc., of Moose Jaw, Saskatchewan sells contact lenses to a firm in Moscow, Weseeyu is: A. importing the lenses. B. exporting the lenses. C. displaying their absolute advantage. D. increasing the trade deficit. E. considered a multi-national organization. Exporting is the sale of goods and services (contacts) to foreign markets (from Canada to Russia). Blooms: Understand Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-04 Trade Between Countries 3-21 Chapter 03 - Business in a Borderless World 52. When a Montreal-based company buys coffee from Colombia, it: A. is importing the coffee. B. is exporting the coffee. C. has an absolute advantage. D. is decreasing the trade deficit. E. is making a big mistake. Importing is the purchase of goods and services (coffee) from foreign markets (to Canada from Colombia). Blooms: Understand Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-04 Trade Between Countries 53. A favourable balance of trade exists when a country: A. imports more than it exports. B. exports more than it imports. C. sends out more cash than it takes in. D. spends more than it saves. E. saves more than it spends. A trade surplus is when a country exports more than it imports, which is favourable because it is receiving more money than it is paying out. Blooms: Remember Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 54. In 2010, Canada had a trade deficit of $10.8 billion because: A. Canadian companies sold more goods to other countries than foreign companies sold here. B. Japan stopped exporting goods to Canada. C. Canada imported more products than it exported. D. Canadian consumers stopped buying Japanese goods and services. E. Canadian consumers bought far more domestic goods and services than foreign goods and services. A trade deficit is when a country imports more goods and services than it exports. Blooms: Remember Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 3-22 Chapter 03 - Business in a Borderless World 3-23 Chapter 03 - Business in a Borderless World 55. The balance of payments includes all the following, except: A. a country's balance of trade. B. foreign investments. C. domestic investments. D. tourist expenditures. E. foreign aid and military expenditures. A balance of payments is the difference between the flow of money into and out of a country and domestic investments do not flow out of the country. Blooms: Understand Difficulty: Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 56. When Kelly flies from Canada to Scotland on an American airline, stays in an Edinburgh hotel, and buys wool sweaters from Scotland to bring home, she: A. decreases the trade deficit. B. is disloyal and unpatriotic. C. contributes to the negative balance of payments. D. buys American-made goods. E. does all of them. A negative balance of payments is also known as a trade deficit. Therefore, Kelly is spending money outside Canada which increases the trade deficit. Blooms: Understand Difficulty: Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 57. The primary problem with a trade deficit is: A. that a country is exporting more than it is importing. B. that more cash is leaving the country than is flowing in. C. that a country is spending more than saving. D. that a country is saving more than spending. E. that export taxes are minimal. A trade deficit may be harmful to a country's economy through failed businesses, the loss of jobs, and a lowered standard of living. Blooms: Remember Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 3-24 Chapter 03 - Business in a Borderless World 3-25 Chapter 03 - Business in a Borderless World 58. In 2014, Canada's top trading partner was: A. Mexico B. Germany C. China D. the United States E. the United Kingdom See Table 3.2 | Canada's Top 10 Principal Trading Partners (2014). The trade balance with the U.S. was the highest among the countries at $49.3. Blooms: Remember Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 59. The difference between the flow of money into and out of a country is called its: A. balance of trade. B. imbalance of trade. C. balance of payments. D. trade payment balance. E. exchange rate. A balance of payments includes a country's balance of trade, foreign investments and aid, loans, military expenditures, and money spent by tourists. Blooms: Remember Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 60. Colombia can produce coffee so much more efficiently than other items produced there. As a result, Colombia is said to have which of the following advantages? A. Absolute B. Positive C. Negative D. Marginal E. Comparative A comparative advantage occurs when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items. Blooms: Understand Difficulty: Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 3-26 Chapter 03 - Business in a Borderless World 3-27 Chapter 03 - Business in a Borderless World 61. Because it has the largest deposits of gem-quality diamonds in the world, and is able to control the price of diamonds, De Beers Consolidated Mines, Ltd., has a(n): A. absolute advantage. B. comparative advantage. C. advantage based on efficient production. D. trade deficit. E. balance of payment. An absolute advantage is a monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item. Blooms: Remember Difficulty: Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 62. A trade advantage with the best chance of surviving is one based on: A. worker know-how. B. technology. C. the monopoly of a resource. D. production efficiency. E. the lack of a resource. When a country has the monopoly of a resource, it has the ability to exploit this advantage, as in the case of De Beers Consolidated Mines, by maintaining high prices for the resource. Blooms: Understand Difficulty: Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 3-28 Chapter 03 - Business in a Borderless World 63. Until recently, the United States could produce oil-drilling equipment more efficiently than other countries, and, in a sense, monopolized the industry. In the market for oil-drilling equipment, the United States had a(n): A. positive advantage. B. comparative advantage. C. negative advantage. D. absolute advantage. E. marginal advantage. An absolute advantage is a monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item. Blooms: Remember Difficulty: Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 64. In 2014, Canada had a balance of trade surplus with: A. the United States B. China C. Mexico D. South Korea E. France See Table 3.2 | Canada's Top 10 Principal Trading Partners (2014). Blooms: Apply Difficulty: Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 65. The purchase of goods and services from foreign sources is called: A. exporting. B. bartering. C. importing. D. natural advantage. E. comparative advantage. Importing is the purchase of goods and services from foreign markets. Blooms: Remember Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-04 Trade Between Countries 3-29 Chapter 03 - Business in a Borderless World 3-30 Chapter 03 - Business in a Borderless World 66. When a company decides to do business outside its own country, it must research several factors, including potential barriers to international trade. Which of the following is not a potential barrier cited in your text? A. Legal B. Political C. Cultural D. Economic E. Scientific When a company decides to do business outside its own country, it will encounter barriers such as economic, legal, political, cultural, social, and technological. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-06 International Trade Barriers 67. The United States, Canada, Great Britain, and Japan are considered to be: A. less-developed countries. B. industrialized nations. C. third-world countries. D. relatively low in terms of per capita incomes. E. none of these answers apply to these countries. Industrialized nations are economically advanced nations such as the United States, Great Britain, Japan, and Canada. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-07 Economic Barriers 3-31 Chapter 03 - Business in a Borderless World 68. Which of the following terms best describes many countries in Africa, Asia, and Europe? A. Less-developed countries. B. Industrialized nations. C. Third-world countries. D. High income capitals. E. None of these answers apply to these countries. LDCs are characterized by low per-capita income (income generated by the nation's production of goods and services divided by the population), which means that consumers are less likely to purchase non-essential products. Blooms: Remember Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-07 Economic Barriers 69. When a country devalues its currency, it encourages the sale of its: A. imports. B. domestic goods to foreign countries. C. international goods. D. international services. E. debts. Devaluation decreases the value of currency in relation to other currencies, which encourages tourism and exportation. Blooms: Remember Difficulty: Hard Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-07 Economic Barriers 70. The physical facilities that support a country's development is called its: A. capital stock B. resource base C. infrastructure D. potential growth E. growth constraints Examples include railroads, highways, ports, airfields, utilities and power plants, schools, hospitals, communication systems, and commercial distribution systems. Blooms: Remember Difficulty: Hard Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-07 Economic Barriers 3-32 Chapter 03 - Business in a Borderless World 3-33 Chapter 03 - Business in a Borderless World 71. If Canada wanted to reduce the cost of its goods in foreign markets, it could: A. revalue its currency. B. devalue its currency. C. pay off its trade deficit. D. borrow from the Exim bank. E. sell more goods abroad. Devaluation decreases the value of currency in relation to other currencies, which encourages tourism and exportation. Blooms: Understand Difficulty: Hard Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-07 Economic Barriers 72. Critics of protective tariffs argue that their use inhibits: A. free trade and competition B. competition and demand C. demand and supply D. tax revenues E. embargoes Supporters of protective tariffs say they insulate domestic industries. Blooms: Understand Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 3-34 Chapter 03 - Business in a Borderless World 73. Laws protecting copyrights and intellectual property are weak and minimally enforced in which of the following countries, resulting in a high degree of counterfeit videos, movies, CDs, computer software, furniture, and clothing? A. Ireland and Scotland B. Canada and the United States C. Greece and Portugal D. China and Vietnam E. Denmark and Norway Companies are angry because the counterfeits harm not only their sales but also their reputations if the knock-offs are of poor quality. Such counterfeiting is not limited to China or Vietnam. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 74. A specific amount of money levied on each unit of a product brought into the country is a(n): A. ad valorem tariff. B. value-added tariff. C. fixed tariff. D. protective tariff. E. duty-free tariff. A fixed tariff is a specific amount of money levied on each unit of a product brought into the country. Blooms: Remember Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 3-35 Chapter 03 - Business in a Borderless World 75. To reduce dollars flowing out of the country, Canada can limit the number of Japanese cars being imported by imposing a(n): A. quota. B. exchange control. C. trade deficit. D. embargo. E. free trade zone. A quota limits the number of units of a particular product that can be imported into a country. Blooms: Understand Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 76. The United States' prohibition of imported Cuban cigars is an example of: A. an embargo. B. a quota. C. dumping. D. a tariff. E. countertrade. An embargo prohibits trade in a particular product. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 3-36 Chapter 03 - Business in a Borderless World 77. By requiring products to be sold for not less than their production cost plus a percentage for overhead and profit, the United States is attempting to prohibit: A. embargoes. B. quotas. C. dumping. D. surpluses. E. shortages. Dumping occurs when a country or business sells products at a lower price than what it costs to produce them and setting a quota or tariff will rescind this practice. Blooms: Understand Difficulty: Hard Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 78. A group of nations or companies that band together to act as a monopoly is known as a: A. conglomerate. B. franchise. C. cartel. D. multinational. E. licensee. A cartel is a group of firms or nations that agree to act as a monopoly and not compete with each other, to generate a competitive advantage in world markets. Blooms: Remember Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 3-37 Chapter 03 - Business in a Borderless World 79. The Organization of Petroleum Exporting Countries is an example of a(n): A. embargo. B. democracy. C. boycott. D. cartel. E. coalition. OPEC is a permanent intergovernmental organization consisting of 12 member countries across three continents. Blooms: Remember Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 80. A change in administration in a foreign government is an example of a new: A. political factor. B. cultural factor. C. exchange factor. D. export quota. E. body language. A political factor centers around governments. Blooms: Understand Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-08 Ethical, Legal, and Political Barriers 3-38 Chapter 03 - Business in a Borderless World 81. If companies research cultural differences before engaging in foreign trade, problems that might arise from cultural differences can be: A. completely avoided. B. minimized. C. unaffected. D. maximized. E. exploited. Problems cannot always be avoided, but they can be minimized through research on the cultural and social differences of the host country. Blooms: Understand Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-09 Social and Cultural Barriers 3-39 Chapter 03 - Business in a Borderless World 82. Not all countries trading in international markets package goods in the same units. Unlike the United States, most countries rely on: A. currency. B. gold. C. the metric system. D. daylight savings. E. colour coding. Most countries use the metric system which causes problems for both sellers and buyers in the international marketplace. Blooms: Remember Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-09 Social and Cultural Barriers 83. Understanding that Arab businessmen tend to stand face-to-face with the object of their conversation reveals the importance of knowing another culture's use of: A. language. B. dialect. C. religious practices. D. manners. E. body language. Differences in body language and personal space affect international trade. Blooms: Remember Difficulty: Easy Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-09 Social and Cultural Barriers 3-40 Chapter 03 - Business in a Borderless World 84. The translation of product names can be crucial in the success of a foreign marketing effort because of: A. political barriers. B. cultural barriers. C. legal barriers. D. export quotas. E. body language. Cultural differences include those in spoken and written language. Blooms: Understand Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-09 Social and Cultural Barriers 85. A forum to discuss trade problems and negotiate a reduction of trade barriers was provided by: A. the General Agreement on Tariffs and Trade. B. the World Trade Organization. C. the World Bank. D. the European Union. E. the International Monetary Fund. The General Agreement on Tariffs and Trade (GATT) provides a forum for tariff negotiations and a place where international trade problems can be discussed and resolved. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-12 General Agreement on Tariffs and Trade (GATT) 3-41 Chapter 03 - Business in a Borderless World 86. Which countries were merged into one market by NAFTA? A. Canada, the U.S., and Mexico B. North America and South America C. Mexico, the U.S., and Brazil D. Canada and the U.S. E. Canada and Mexico The North American Free Trade Agreement (NAFTA) merged Canada, the United States, and Mexico into one market. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-13 The North American Free Trade Agreement (NAFTA) 87. To facilitate free trade among members, the European Union is working toward all of the following, except: A. the standardization of business regulations. B. the standardization of import duties. C. the elimination of customs checks. D. the creation of opportunities to trade with countries in South America. E. the creation of a standardized currency. The European Union (EU) is an economic and political union of 27 member states located primarily in Europe. Blooms: Remember Difficulty: Medium Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-14 The European Union (EU) 3-42 Chapter 03 - Business in a Borderless World 88. Which 21-member alliance represents approximately 41 percent of the world's population, 44 percent of world trade, and 54 percent of world GDP? A. General Agreement on Tariffs and Trade B. Asia-Pacific Economic Cooperation C. North American Free Trade Agreement D. European Union E. Free Trade Area of the Americas The Asia-Pacific Economic Cooperation (APEC) differs from other international trade agreements in its commitment to facilitating business and its practice of allowing the business/private sector to participate in a wide range of APEC activities. Blooms: Remember Difficulty: Medium Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-15 Asia-Pacific Economic Cooperation (APEC) 89. Which of the following countries was one of the original member nations of APEC? A. Belgium B. Mexico C. China D. Japan E. Chile The initial member nations of APEC included Japan, Korea, Malaysia, New Zealand, Singapore, the Philippines, Indonesia, Canada, Australia, Brunei Darussalam, Thailand, and the United States. Blooms: Remember Difficulty: Hard Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-15 Asia-Pacific Economic Cooperation (APEC) 3-43 Chapter 03 - Business in a Borderless World 90. Which of the following makes short-term loans to member countries with trade deficits and provides foreign currencies to member nations? A. Foreign Credit Insurance Association B. General Agreement on Tariffs and Trade C. World Bank D. Exim bank E. International Monetary Fund The IMF makes short-term loans to member countries that have balance-of-payment deficits and provides foreign currencies to member nations. Blooms: Remember Difficulty: Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-18 International Monetary Fund 91. If Peru wants to purchase machine parts from a German company but lacks German marks, it will probably borrow the marks from which of the following institutions? A. International Monetary Fund B. World Bank C. Citicorp Bank D. International Bank E. Bank of Canada One of the services offered by the IMF is to provide foreign currencies to member nations. Blooms: Apply Difficulty: Hard Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-18 International Monetary Fund 3-44 Chapter 03 - Business in a Borderless World 92. An intermediary, or middleman, who markets goods in another country is acting as a(n): A. licensing agent. B. franchising agent. C. export agent. D. contract manufacturer. E. direct investor. An export agent is an intermediary who handles international transactions for other firms. Blooms: Remember Difficulty: Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-20 Exporting and Importing 3-45 Chapter 03 - Business in a Borderless World 93. A major advantage of exporting through an agent is that the company does not have to deal with: A. a middleman. B. raising prices. C. foreign currencies and red tape. D. discounts. E. increasing volume. The advantage of working with an exporting agent is that the firm does not have to deal with foreign currencies and the red tape. Blooms: Remember Difficulty: Hard Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-20 Exporting and Importing 94. Trading companies offer all of the following services, except: A. consulting. B. advertising. C. manufacturing. D. warehousing. E. foreign exchange. Trading companies handle all activities required to move products from one country to another, including consulting, marketing research, advertising, insurance, product research and design, warehousing, and foreign exchange services to companies interested in selling their products in foreign markets. Blooms: Remember Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-21 Trading Companies 95. Which of the following companies was ranked number one in global franchising? A. Kumon B. Yogen Fruz C. McDonald's D. Tim Hortons E. Subway See Table 3.5 in text. Blooms: Apply Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-22 Licensing and Franchising 3-46 Chapter 03 - Business in a Borderless World 3-47 Chapter 03 - Business in a Borderless World 96. Yoplait, a French Yogurt, allows a Canadian firm to use its name, formula, and brands in return for a royalty. This arrangement is known as: A. exporting. B. licensing. C. a direct investment. D. contract manufacturing. E. a joint venture. Licensing is a trade arrangement in which one company (the licensor) allows another company (the licensee) to use its company name, products, patents, brands, trademarks, raw materials, and/or production processes in exchange for a fee or royalty. Blooms: Remember Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-22 Licensing and Franchising 97. When two countries barter products for other products without the use of currency, it is called: A. exporting. B. licensing. C. countertrade. D. a strategic alliance. E. a joint venture. Such arrangements are fairly common in international trade, especially between Western companies and Eastern European nations. Blooms: Remember Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-20 Exporting and Importing 3-48 Chapter 03 - Business in a Borderless World 98. When Reebok has some of its athletic shoes produced by a Korean company, the Reebok name still appears on the shoes. This illustrates: A. contract manufacturing. B. licensing. C. a direct investment. D. exporting. E. importing. Contract manufacturing occurs when a company hires a foreign company to produce a specified volume of the firm's product to specification, the final product carries the domestic firm's name. Blooms: Apply Difficulty: Hard Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-23 Contract Manufacturing 99. The purchase of overseas production and marketing facilities implies: A. licensing. B. contract manufacturing. C. using an export agent. D. a direct investment. E. exporting. Direct investment is the ownership of overseas facilities. Blooms: Remember Difficulty: Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-27 Direct Investment 100. The fact that the American company 3M owns a film-manufacturing facility in Italy is an example of: A. contract manufacturing. B. a direct investment. C. a trading company. D. licensing. E. exporting. Direct investment is the ownership of overseas facilities. Blooms: Understand Difficulty: Hard Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-27 Direct Investment 3-49 Chapter 03 - Business in a Borderless World 3-50 Chapter 03 - Business in a Borderless World 101. Offshoring is different than outsourcing because: A. offshoring requires that the company relinquish control to the offshored organization. B. outsourcing is typically done to lower production costs, while offshoring is not. C. they are financed differently. D. the operations are run by different top executives. E. the company retains control of the offshored processes. Offshoring is different from outsourcing: the company retains control of the process because it is not subcontracting to a different company. Blooms: Understand Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-25 Offshoring 102. The highest level of international business involvement is: A. direct foreign investment. B. a contract manufacturing arrangement. C. exporting. D. a joint venture. E. a countertrade agreement. The lowest level, with the least commitment and investment is exporting or licensing, the highest commitment and investment is when there is direct foreign investment. Blooms: Understand Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-27 Direct Investment 103. Because many countries do not permit foreign companies to purchase and operate facilities in their countries, a company wishing to do business in such a country may share the business costs with the host country by forming a: A. direct investment. B. contract manufacturing arrangement. C. corporation. D. joint venture. E. sole proprietorship. A joint venture is a partnership between a foreign firm and a local firm. Blooms: Remember Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-26 Joint Ventures and Alliances 3-51 Chapter 03 - Business in a Borderless World 3-52 Chapter 03 - Business in a Borderless World 104. When two computer companies join together in hopes of obtaining a competitive advantage on a worldwide basis, this exemplifies: A. a direct investment. B. contract manufacturing. C. a cartel arrangement. D. a joint venture. E. a strategic alliance. A strategic alliance is a partnership formed to create competitive advantage on a worldwide basis. Blooms: Understand Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-26 Joint Ventures and Alliances 105. A corporation that operates in several countries but without significant ties to any of them is a(n): A. joint venture. B. exporter. C. cartel. D. multinational corporation (MNC). E. strategic alliance. A multinational corporation (MNC) is a corporation that operates on a worldwide scale and has no direct ties to any one country or region. Blooms: Remember Difficulty: Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: 03-27 Direct Investment 3-53 Chapter 03 - Business in a Borderless World 106. All of the following organizations can help Canadian organizations meet the challenges of creating and implementing effective and sensitive business strategies for the global marketplace, except: A. Canadian Trade Commissioner Service B. Canadian Commercial Corporation (CCC) C. Export Development Canada (EDC) D. Canadian Deposit Insurance Corporation (CDIC) E. Foreign Affairs and International Trade Canada The CDIC insures consumer deposits at member financial institutions in Canada. Blooms: Remember Difficulty: Medium Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-30 Managing the Challenges of Global Business 107. Which strategy did Starbucks use as it became a global brand? A. Strategic alliance B. Joint venture C. Global strategy D. Multinational strategy E. Customization As it has become a global brand, Starbucks has standardized its products and stores. Blooms: Apply Difficulty: Medium Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 3-54 Chapter 03 - Business in a Borderless World 108. Customizing products, promotion, and distribution according to cultural, technological, and national differences indicate a: A. globalization strategy. B. multinational strategy. C. strategic alliance. D. multinational corporation. E. joint venture. A multinational strategy customizes products, promotion, and distribution according to cultural, technological, and national differences. Blooms: Remember Difficulty: Easy Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 3-55 Chapter 03 - Business in a Borderless World 109. When many soap and detergent manufacturers change the formula of their bar soaps to match different countries' water conditions and washing habits, this is an example of a: A. globalization strategy. B. marketing strategy. C. strategic alliance. D. multinational strategy. E. joint venture. A multinational strategy customizes products, promotion, and distribution according to cultural, technological, and national differences. Blooms: Understand Difficulty: Medium Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 110. When a firm's products are standardized in all countries: A. advertising cannot be used. B. only publicity can be used for promotion. C. different ads are illegal. D. distribution is more expensive. E. advertising may have to be modified. Even when products are standardized, advertising has to be modified to adapt to language and cultural differences. Blooms: Remember Difficulty: Medium Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 111. Standardizing products for the whole world, as if it were a single entity, is a characteristic of which strategy? A. Global strategy B. Multilevel strategy C. Standardization strategy D. Marketing strategy E. National strategy A global strategy or globalization involves standardizing products, promotion, and distribution for the whole world, as if it were a single entity. Blooms: Remember Difficulty: Easy Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: 03-29 Developing Strategies 3-56 Chapter 03 - Business in a Borderless World 3-57 Chapter 03 - Business in a Borderless World Short Answer Questions 112. What is the difference between an absolute advantage and a comparative advantage when considering international trade? Answers will vary Feedback: An absolute advantage in trade exists when a nation is the only source of an item or, in some cases, when it can produce the item more efficiently than any other nation. Most international trade is based on comparative advantage, which occurs when a country specializes in products that it can supply more efficiently or more cheaply than other products. Blooms: Understand Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-03 Why Nations Trade 113. Compare a trade deficit with a trade surplus. Answers will vary Feedback: A nation's balance of trade is the difference in value between its exports and imports. Because some nations import more products than they export, they have a negative balance of trade, or trade deficit. When a nation exports more goods than it imports, it has a favourable balance of trade, or trade surplus. Blooms: Remember Difficulty: Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: 03-05 Balance of Trade 3-58 Chapter 03 - Business in a Borderless World 114. What cultural issues should a manager consider before doing business in a foreign country? Answers will vary Feedback: It is important for the manager to understand the importance of social and cultural differences between countries. As cultural norms are rarely written down, careful research is important. Cultural differences include differences in spoken and written language, body language, family roles, perceptions of time, national and religious holidays, local customs, and measurement systems. Blooms: Understand Difficulty: Medium Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-09 Social and Cultural Barriers 115. Who are the less-developed countries (LDCs)? Why are they called this and what opportunities do they present to more developed nations? Answers will vary Feedback: Many countries in Africa, Asia, and South America are referred to as LDCs. In general, these countries are poorer and less economically advanced than those in North America and Europe. LDCs are characterized by low per-capita income (income generated by the nation's production of goods and services divided by the population), which means that consumers are less likely to purchase non-essential products. Nonetheless, LDCs represent a potentially huge and profitable market for many businesses because they may be buying technology to improve their infrastructures, and much of the population may desire consumer products. Blooms: Understand Difficulty: Hard Learning Objective: 03-02 Investigate some of the economic, legal-political, social, cultural, and technological barriers to international business. Topic: 03-07 Economic Barriers 3-59 Chapter 03 - Business in a Borderless World 116. What is the International Monetary Fund (IMF)? Answers will vary Feedback: The IMF is an organization established in 1947 to promote trade among member nations by eliminating trade barriers and fostering financial cooperation. It also makes short- term loans to member countries that have balance-of-payment deficits and provides foreign currencies to member nations. Blooms: Understand Difficulty: Medium Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: 03-18 International Monetary Fund 117. Why was NAFTA controversial and what kind of disputes have arisen over the implementation of the trade agreement? Answers will vary Feedback: While many Canadians feared the agreement would erase jobs in Canada, Mexicans have been disappointed that the agreement failed to create more jobs. Moreover, Mexico's rising standard of living has increased the cost of doing business there, some 850 maquiladoras have closed their doors and transferred work to China and other nations where labour costs are cheaper. Blooms: Understand Difficulty: Hard Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across in