Test Bank For Business Foundations A Changing World 11th Edition Ferrel

Chapter 03 Business in a Borderless World True / False Questions 1. International business involves the buying, selling, and trading of goods and services across national boundaries. True False 2. Nations trade with other nations to obtain resources that would otherwise be unavailable to them. True False 3. Importing is the sale of goods and services to foreign markets. True False 4. When a nation imports more than it exports, it has a positive balance of trade. True False 5. Trade deficits can help businesses succeed, create more jobs, and improve the standard of living. True False 6. The Webb-Pomerene Export Trade Act allows selected U.S. firms to form monopolies to compete with foreign monopolistic organizations and also to operate as monopolies within the United States. True False 7. A common reason for establishing quotas or tariffs is to encourage dumping. True False 8. Political unrest in countries often creates a hostile environment for foreign businesses and can act as a barrier to international trade. True False 9. Sociocultural differences, such as variations in body language and personal space, usually have almost negligible impact on international business. True False 10. The General Agreement on Tariffs and Trade provided a forum for tariff negotiations and a place where international trade problems could be resolved. True False 11. The World Trade Organization agreements were rejected by most of the world's trading nations. True False 12. Many U.S. companies have taken advantage of Mexico's low labor costs and proximity to the United States to set up maquiladoras. True False 13. The Association of Southeast Asian Nations (ASEAN) effectively united Singapore, Britain, and Japan into one market. True False 14. The International Monetary Fund promotes trade among member nations by eliminating trade barriers and fostering financial cooperation. True False 15. Only large businesses get involved in exporting. True False 16. Licensing allows a company to enter the international marketplace without spending large amounts of money abroad. True False 17. A strategic alliance is a partnership formed to create competitive advantage on a worldwide basis. True False 18. Direct investment gives lesser power and is the least expensive way to participate in foreign trade. True False 19. Multinational corporations (MNCs) rarely get targeted by activists because they provide so many benefits to the countries in which they do business. True False 20. Companies doing business internationally have traditionally used a globalization strategy. True False 21. A global strategy involves standardizing products for the whole world. True False 22. Even when products are standardized, advertising often has to be modified to adapt to local cultures. True False Multiple Choice Questions 23. A(n) _____ exists when a country is the most efficient producer of an item. A. comparative advantage B. comparative disadvantage C. absolute advantage D. absolute disadvantage E. domestic advantage 24. A mining company in Malyia that possesses the only mine where a specialty ruby can be found has a(n) A. comparative advantage. B. comparative disadvantage. C. absolute advantage. D. absolute disadvantage. E. domestic advantage. 25. Malyia can produce sugar more efficiently than it can produce other items, giving it a(n) _____ advantage. A. absolute B. competitive C. domestic D. marginal E. comparative 26. _____ is the transferring of manufacturing or other tasks—such as data processing—to countries where labor and supplies are less expensive. A. Importing B. Exporting C. Outsourcing D. Dumping E. Insourcing 27. Why has outsourcing become a controversial practice in the United States? A. Many jobs have moved overseas where those tasks can be accomplished for lower costs. B. Outsourcing empowers the outsourcing company with more managerial control. C. The losses incurred out of the hidden costs of outsourcing are making companies go bankrupt. D. Delegation of several processes leaves the outsourcing company with much less time to concentrate on its core business process. E. The outsourced products end up having sub-standard quality because their producers lack expertise. 28. _____ is best described as the sale of goods and services to foreign markets. A. Franchising B. Offshoring C. Outsourcing D. Exporting E. Importing 29. Sarah bought a new shirt at a U.S. boutique. When she checked the tag, she saw that her shirt was made in China. This means her shirt is a(n) _______ good. A. exported B. outsourced C. absolute D. imported E. domestic 30. A nation's _____ can be best defined as the difference in value between its exports and imports. A. balance of import B. balance of export C. balance of trade D. trade surplus E. trade deficit 31. U.S. exports to China have been rapidly increasing but not fast enough to offset the imports from China. This means that the United States has a(n) A. domestic gain. B. trade surplus. C. trade deficit. D. absolute advantage. E. comparative advantage. 32. Which of the following is one of the implications of trade deficits? A. the success of businesses B. the import of more products C. the loss of jobs D. the export of more services E. a higher standard of living 33. A favorable balance of trade exists when a country A. imports more than it exports. B. exports more than it imports. C. has more debt liabilities than assets. D. spends more than it saves. E. saves more than it spends. 34. Which of the following is most likely to cause a trade surplus? A. inefficient manufacturing systems B. plentiful imports from other countries C. insufficient natural resources D. an abundance of natural resources E. healthy economies in other countries 35. The difference between the flow of money into and out of a country is called its A. balance of trade. B. domestic gain. C. balance of payments. D. credit balance. E. exchange rate. 36. Thelisia has a trade deficit, and it is receiving less money from trade with foreign countries than it is paying out in foreign investments, loans, and military expenditures. This means Thelisia may experience A. declining production and higher unemployment. B. increasing production and employment. C. increasing production and higher unemployment. D. declining production and higher employment. E. no change in production or employment. 37. Which of the following is an industrialized nation? A. Iraq B. Myanmar C. Pakistan D. North Korea E. Japan 38. Which of the following statements is true about less-developed countries (LDCs)? A. Many countries in Europe are LDCs. B. In LDCs, consumers tend to purchase more nonessential products. C. Many businesses avoid doing business in LDCs. D. LDCs represent a potentially huge and profitable market for many businesses. E. LDCs are characterized by high per-capita income. 39. Thelisia has abundant railroads, highways, ports, airfields, utilities and power plants, schools, hospitals, communication systems, and commercial distribution systems to support its economic activities. This means Thelisia has a strong A. business structure. B. economic structure. C. infrastructure. D. exchange rate. E. consumer base. 40. _____ can be best defined as the ratio at which one nation's currency can be exchanged for another nation's currency. A. Exchange rate B. National rate C. Exchange ratio D. Value ratio E. Currency ratio 41. If the United States were to devalue its currency, the most likely result would be A. a decrease in the number of foreign tourists to the United States. B. a decrease in the sale of domestic goods abroad. C. an increase in the cost of American goods abroad. D. an increase in its imports. E. an increase in its exports. 42. Which of the following is likely to be an impact of a decrease in the value of the U.S. dollar in relation to the euro? A. Imports from Europe would be more expensive. B. U.S. exports would become relatively expensive for international markets. C. Trips to the United States would become more expensive for foreign tourists. D. The price of imports would become more economical for U.S. consumers. E. The U.S. dollar would be used less frequently in international trade. 43. Which of the following is a true statement about barriers to international business? A. Devaluation discourages the sale of domestic goods and tourism. B. Revaluations occur daily because of the daily changes in exchange rates. C. Legal and ethical requirements for successful business are decreasing globally. D. Many of the legal rights that Americans take for granted do not exist in other countries. E. The Webb-Pomerene Export Trade Act of 1918 allows selected U.S. firms to limit free trade within the United States. 44. AgroKing, a U.S. firm that produces agricultural products, relocated to Malyia to avoid having to pay the high U.S. tax rate. AgroKing prefers Malyia's low tax rate, low wages, and sufficient infrastructure. This is an example of tax A. evasion. B. avoidance. C. loopholes. D. outsourcing. E. inversion. 45. A specific amount of money levied on each unit of a product brought into a country is termed as a(n) _______ tariff. A. ad valorem B. value-added C. fixed D. prohibitive E. zero 46. A fixed tariff differs from an ad valorem tariff because an ad valorem tariff A. is a specific amount of money levied on each unit of a product sold by a country. B. is a specific amount of money levied on each unit of a product brought into a country. C. is based on the value of an item. D. prohibits trade in a particular product. E. limits the number of units of a particular product that can be imported into a country. 47. A U.S. citizen may bring $200 worth of merchandise into the United States duty free. After that, U.S. citizens must pay a(n) _______ based on the cost of the item and the country of origin. A. sales tax B. transactional tax C. ad valorem tariff D. fixed tariff E. export tariff 48. Which of the following statements is true about tariffs and trade restrictions? A. Countries are not allowed to levy tariffs for political reasons. B. Protective tariffs allow more expensive domestic goods to compete with foreign ones. C. Critics of protective tariffs argue that their use inhibits free trade and competition. D. Countries cannot allow citizens traveling abroad to bring home merchandise without paying an import tariff. E. Quotas cannot be established by voluntary agreements. 49. Which of the following is a measure that does not yield revenue for the government of Malyia, but can effectively limit the quantity of a particular good being imported from Thetasia? A. quota B. value-added tax C. tariff D. embargo E. subsidy 50. A(n) _____ is best defined as a prohibition on trade in a particular product. A. ad valorem tariff B. excise C. cartel D. quota E. embargo 51. Because of an unfavorable political situation between the countries, the country of Thetasia has placed a government order to prohibit the trade of private vehicles with the country of Calibria. Thetasia has maintained a(n) _____ with Calibria. A. trade tariff B. trade embargo C. quota limit D. fixed tariff E. ad valorem tariff 52. _____ can be best defined as the act of a country or business selling products at less than what it costs to produce them. A. Dumping B. Offshoring C. Outsourcing D. Exporting E. Importing 53. All of the following are nations that have been subject to economic sanctions for political reasons in recent years EXCEPT A. the United States. B. Cuba. C. Iran. D. Syria. E. North Korea. 54. Political concerns may lead a group of nations to form a(n) _______, a group of firms or nations that agrees to act as a monopoly and not compete with each other. A. embargo B. conglomerate C. economic sanction D. cartel E. franchise 55. Which of the following statements is true about dumping? A. Dumping occurs when the country of origin has products with the latest technology that are in high demand in overseas markets. B. Dumping occurs when a business sells products at much more than what it costs to produce them. C. Dumping occurs when the domestic market for a firm's product is too big to match the level of production. D. Quotas cannot be imposed based on suspicion of dumping unless proven. E. Dumping permits quick entry into a market. 56. Agro Corp., based in the country of Arahonia, is a company that produces agricultural products. The domestic market of Arahonia is not sufficient to support Agro Corp.'s large-scale level of production because Arahonia is a small but highly industrialized country. Thus, Agro Corp. decides to sell its products to the agriculture-based country of Petinberg at less than its production cost. This process is termed as A. dumping. B. offshoring. C. outsourcing. D. monopolizing. E. franchising. 57. A sudden change in power can result in a regime that is hostile to foreign investment. This is a primary example of a(n) _______ barrier. A. political B. cultural C. exchange D. language E. geographic 58. A catastrophic flood crippled Malyia's government. In an effort to help local businesses rebuild, the government forced foreign businesses out of the country. This is an example of a(n) ______ barrier to trade. A. political B. social C. economic D. ethical E. legal 59. Auto Corp. learned that in order to sell more cars in Thelisia, it needed a bold and strategic advertising plan; while in Malyia, it needed more attentive customer service. This is an example of a(n) _____ barrier. A. technological B. political C. legal D. social E. economic 60. Understanding that Arab businessmen tend to stand face-to-face when holding a conversation reveals the importance of understanding another culture's use of A. language. B. dialect. C. religious practices. D. ethics. E. body language. 61. All of the following are true about gestures that are viewed as rude or unacceptable in particular countries EXCEPT A. summoning with an index finger is unacceptable in Japan, Hong Kong, and the Middle East. B. pointing with the index finger is unacceptable in the Middle and Far East. C. sitting with the soles of the shoes showing is unacceptable in Brazil and Germany. D. patting someone on the head is unacceptable in Buddhist countries. E. forming a circle with the fingers is unacceptable in Brazil and Germany. 62. The effective translation of product names can be crucial to the success in foreign markets because of A. political barriers. B. cultural barriers. C. legal barriers. D. the presence of export quotas. E. the differences in body language. 63. Many countries do not allow children to be used in advertising. This is an example of a(n) _____ barrier. A. political B. cultural C. economic D. geographic E. religious 64. Auto Corp. released an advertisement showing fair-skinned people driving their cars into an indigenous Malyian village, while the indigenous people watched in awe. Malyian activists claimed this ad reinforced negative stereotypes of the indigenous people and called for their government to issue sanctions against Auto Corp. This is an example of a(n) _______ barrier. A. economic B. cultural C. legal D. ethical E. political 65. Which of the following is true about the General Agreement on Tariffs and Trade (GATT)? A. More than 100 nations abided by its rules. B. It was originally signed by 27 nations in 1947. C. It sponsored rounds of negotiations aimed at increasing trade restrictions. D. The Uruguay Round promoted dumping. E. The most recent round was the Paraguay Round. 66. Which of the following is the international organization based in Geneva, Switzerland, that was created in 1995 by the Uruguay Round of the General Agreement on Tariffs and Trade (GATT)? A. the European Union B. the World Trade Organization C. the World Bank D. the Association of Southeast Asian Nations E. the Asia-Pacific Economic Cooperation 67. Which of the following were merged into one market by the North American Free Trade Agreement (NAFTA)? A. Canada and Alaska B. Brazil, Mexico, and the United States C. Chile, Brazil, and the United States D. Canada, Mexico, and the United States E. Canada and Chile 68. _____ is the single largest trading partner of the United States. A. Mexico B. India C. China D. Japan E. Canada 69. Which of the following is a true statement about the European Union? A. It is trying to create opportunities to trade with South America. B. It is working toward the creation of a standardized currency. C. It is striving to impose customs checks within Europe. D. It is working toward the abolition of import duties. E. It is trying to increase value-added taxes. 70. Which of the following is an international trade alliance between 21 nations that promotes open trade and economic and technical cooperation among its member nations? A. the General Agreement on Tariffs and Trade (GATT) B. the Asia-Pacific Economic Cooperation (APEC) C. the North American Free Trade Agreement (NAFTA) D. the European Union (EU) E. the Association of Southeast Asian Nations (ASEAN) 71. Which of the following countries was a member nation of Asia-Pacific Economic Cooperation (APEC) when it was established in 1989? A. Vietnam B. Japan C. China D. Hong Kong E. Chile 72. Which of the following is true about the Association of Southeast Asian Nations (ASEAN)? A. It will not have fully free labor flows between member-nations. B. In 1993, it began to increase tariffs among countries. C. It will have a common currency. D. It has a 21-member alliance. E. It was established in 1989. 73. Which of the following was established by the industrialized nations in 1946 to loan money to underdeveloped and developing countries? A. the Foreign Credit Insurance Association B. the Exim Bank C. the World Bank D. the World Trade Organization E. the International Monetary Fund 74. Which of the following is true of the World Bank? A. It funds the member nations of the NAFTA and EU. B. It provides aid to industrialized nations in times of financial crisis. C. It acts as a global police force. D. It finances construction projects in underdeveloped and developing countries. E. It helps developed nations obtain money to start businesses. 75. The _____ is the closest thing the world has to an international central bank. A. International Monetary Fund B. World Bank C. Citicorp Bank D. Organization for Economic Cooperation and Development E. World Trade Organization 76. The usefulness of the International Monetary Fund (IMF) for developed countries is limited because A. these countries rely extensively on the public market. B. the IMF does not provide short-term loans. C. the IMF does not aid countries with balance-of-payment deficits. D. the IMF was forced to decrease its funds to emerging economies. E. these countries use private markets as a major source of capital. 77. An intermediary who handles international transactions for other firms is acting as a(n) A. licensing agent. B. franchising agent. C. export agent. D. contract manufacturer. E. direct investor. 78. Which of the following is an advantage of using an export agent? A. The firm does not have to deal with a middleman. B. The firm is not responsible for the procurement and storage of raw materials. C. The firm does not have to deal with the red tape of international business. D. The firm does not need to worry about product pricing. E. The firm does not need to invest in research and development. 79. Exporting may occur through _____, which involve bartering products for other products rather than currency. A. export agencies B. free-trade agreements C. direct selling contracts D. countertrade agreements E. outsourcing agreements 80. Auto Corp. buys engines from Malyia and resells them in its stores in Thetasia. This is an example of A. exporting. B. countertrading. C. bartering. D. outsourcing. E. importing. 81. Which of the following is true regarding trading companies? A. They buy and sell goods in only one country. B. They handle all activities required to move products from one country to another. C. They rarely offer warehousing facilities. D. They are very different from export agents. E. They refrain from handling consulting activities. 82. Which of the following can be best defined as a trade agreement in which one company allows another company to use its company name, products, patents, brands, trademarks, raw materials, and/or production processes in exchange for a fee or royalty? A. direct investment B. strategic alliance C. joint venture D. outsourcing E. licensing 83. What type of company benefits the most from licensing? A. a large manufacturer that wants to launch its own brand internationally B. a small manufacturer that wants to launch a well-known brand internationally C. a small manufacturer that wants to launch its own brand internationally D. a large manufacturer that wants to transform a less-known brand into a well-known brand internationally E. a small manufacturer that wants to launch a well-known brand locally 84. Which of the following can be best defined as a form of licensing in which a company agrees to provide another company with its name, logo, methods of operation, advertising, products, and other elements associated with it in return for a financial commitment and the agreement to conduct business in accordance with its standard of operations? A. franchising B. outsourcing C. joint venture D. strategic alliance E. direct investment 85. If GloboTron hires a Thetasian company to manufacture many of its stereo components, and these products carry GlobalTron's name, this business arrangement is called A. contract manufacturing. B. licensing. C. direct investment. D. exporting. E. importing. 86. Offshoring is different from outsourcing because A. in offshoring, the company subcontracts to a different company. B. in offshoring, the company retains control of the process. C. in offshoring, a subsidiary cannot relocate a business process to another country. D. in outsourcing, tasks cannot be transferred to countries where supplies are less expensive. E. outsourced jobs cannot be brought back for concerns like foreign workers not adding enough value. 87. Which of the following is true of offshoring? A. Companies may choose to offshore to take advantage of lower wages, skilled labor, or time zone differences. B. Some banks have chosen not to offshore because of concerns about data security in other countries. C. Offshoring prevents companies from controlling international operations. D. Companies often choose not to offshore to avoid having to pay higher wages and deal with time zone differences. E. Offshore offices are subcontracted to different companies. 88. DMC Inc., headquartered in Malyia, has completely transferred its tax services to Apex Corp in Thetasia because there are many well-educated workers and lower labor costs. This is an example of A. licensing. B. franchising. C. offshoring. D. insourcing. E. outsourcing. 89. Which of the following is likely to be a reason for some U.S. companies to bring their outsourced production processes back to the United States? A. increasing labor unionization in the United States B. increased government regulation of business in the United States C. increasingly strict enforcement of intellectual property rights in Asian countries D. high cost of transporting products to the home country E. increase in labor turnover rates in the United States 90. _____ can be best defined as the sharing of the costs and operations of a business between a foreign company and a local partner. A. Exporting B. Licensing C. A direct investment D. Contract manufacturing E. A joint venture 91. In industries where international competition is so fierce and the costs of competing on a global basis are so high that only a few firms have the resources to do it alone, they collaborate with other companies to form a A. direct investment. B. greenfield venture. C. franchise. D. joint venture. E. strategic alliance. 92. The purchase of overseas production and marketing facilities is an example of A. licensing. B. contract manufacturing. C. using an export agent. D. direct investment. E. exporting. 93. When UPS invested in a foreign tech startup Ally Commerce Inc. to give it greater access to online sales, it was exemplifying A. strategic alliance. B. direct investment. C. joint venture. D. licensing. E. exporting. 94. Which of the following can be best defined as a corporation that operates in several countries without significant ties to any of them? A. a licensor B. an exporter C. a monopolist corporation D. a multinational corporation E. a contract manufacturing corporation 95. Which of the following is true of multinational corporations (MNCs)? A. They are the highest level of international business involvement. B. They decrease the gap between rich and poor nations. C. They have significant ties to specific nations or regions. D. They usually have lesser assets than the countries in which they operate. E. They are less complicated than corporations. 96. GloboTron is headquartered in Argonia, and it operates over 500 factories around the world. It is one of the world's major producers of home entertainment equipment. Globotron is an example of a(n) A. simple corporation. B. multinational corporation. C. strategic alliance. D. joint venture. E. large company. 97. On which of the following grounds are multinational corporations (MNCs) often criticized by antiglobalization activists? A. They increase unemployment in the host country. B. They bring in technology that is unknown to the host country. C. They use the capital-intensive mode of production. D. They are liable to pay the taxes levied by the government of the host country. E. They misuse and misallocate scarce resources. 98. A _____ strategy can be best defined as a plan, used by international companies, that involves customizing products, promotion, and distribution according to cultural, technological, regional, and national differences. A. global B. standardization C. normalization D. multinational E. domestic 99. All of the following are examples of multinational strategy EXCEPT A. in Vietnam, McDonald's offered its traditional menu items as well as McPork sandwiches targeted toward Vietnam consumers. B. soap and detergent manufactures have adapted their products to local water conditions, washing equipment, and washing habits. C. Colgate-Palmolive Co. has developed an inexpensive, plastic, hand-powered washing machine for households without electricity. D. American clothing companies use social media sites to connect with global customers. E. companies have modified their advertising to adapt to language and cultural differences. 100. More and more companies are moving from the multinational strategy to a global strategy that involves _________ products. A. customizing B. standardizing C. promoting D. normalizing E. generalizing 101. When a firm's products are standardized in all countries A. advertising cannot be used. B. only publicity can be used for promotion. C. using different advertisement content is illegal. D. distribution is more expensive. E. advertising may still need modification. 102. Which of the following is true of the Commercial Service of the U.S. Department of Commerce? A. It focuses on large businesses. B. It is a local business solutions unit. C. It offers U.S. firms a unique global network. D. It offers U.S. firms practical knowledge of national markets and industries. E. It doesn't use information technology. 103. Which of the following is true about managing the challenges of global business? A. The network of CIBERs consists of a wide variety of U.S. firms, especially for small and medium-sized firms. B. The network of CIBERs can provide small-sized firms knowledge of the internationalization process. C. The Commercial Service conducts its work through leading business schools in the United States. D. More and more companies are moving from the global strategy to a multinational strategy. E. Companies doing business internationally have traditionally used a standardized strategy. Essay Questions 104. In international trade, what is the difference between an absolute advantage and a comparative advantage? 105. Explain the terms balance of trade, trade deficit, and trade surplus in the context of the United States. 106. What are the different international barriers to trade? Give an example of each barrier. 107. Briefly explain the economic barriers to trade and the important factors involved in it. 108. Describe some of the ethical, legal, and political barriers to international trade. 109. What social and cultural issues should a manager consider before doing business in a foreign country? 110. Discuss the organizations and agreements, such as the General Agreement on Tariffs and Trade, the World Trade Organization, the World Bank, and the International Monetary Fund, that foster international trade and can help companies succeed in global markets. 111. Discuss the various regional trade agreements, such as the North American Free Trade Agreement, the European Union, the Asia-Pacific Economic Cooperation, and the Association of Southeast Asian Nations. 112. Explain the different levels of organizational involvement in international trade. 113. Explain why a company may opt for a joint venture or a strategic alliance. 114. Why does direct investment have a greater degree of commitment than a countertrade agreement? 115. What is the difference between a multinational and a globalization strategy? Chapter 03 Business in a Borderless World Answer Key True / False Questions 1. International business involves the buying, selling, and trading of goods and services across national boundaries. TRUE International business refers to the buying, selling, and trading of goods and services across national boundaries. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Definition of Business 2. 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. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 3. Importing is the sale of goods and services to foreign markets. FALSE Importing is the purchase of goods and services from foreign sources. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 4. When a nation imports more than it exports, it has a positive balance of trade. FALSE When a nation imports more than it exports, it has a negative balance of trade, or trade deficit. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 5. Trade deficits can help businesses succeed, create more jobs, and improve the 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. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 3 Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 6. The Webb-Pomerene Export Trade Act allows selected U.S. firms to form monopolies to compete with foreign monopolistic organizations and also to operate as monopolies within the United States. FALSE The Webb-Pomerene Export Trade Act of 1918 allows selected U.S. firms to form monopolies to compete with foreign monopolistic organizations, but they are not allowed to limit free trade and competition within the United States or to use unfair methods of competition in international trade. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 2 Medium Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 7. A common reason for establishing quotas or tariffs is to encourage dumping. FALSE One common reason for setting quotas or tariffs is to prohibit dumping, which occurs when a country or business sells products at less than what it costs to produce them. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 8. Political unrest in countries often creates a hostile environment for foreign businesses and can act as a barrier to international trade. TRUE Businesses engaged in international trade must consider the relative stability of countries. Political unrest in countries may create a hostile or even dangerous environment for foreign businesses. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 9. Sociocultural differences, such as variations in body language and personal space, usually have almost negligible impact on international business. FALSE Sociocultural differences, such as variations in body language and personal space, have an impact on international business. These cultural differences may generate uncomfortable feelings or misunderstandings when business people of different countries negotiate with each other. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 10. The General Agreement on Tariffs and Trade provided a forum for tariff negotiations and a place where international trade problems could be resolved. TRUE The General Agreement on Tariffs and Trade provided a forum for tariff negotiations and a place where international trade problems could be discussed and resolved. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: International Trade Agreements and the Organizations that Facilitate Trade 11. The World Trade Organization agreements were rejected by most of the world's trading nations. FALSE Key to the World Trade Organization are the WTO agreements, which are the legal ground rules for international commerce. The agreements were negotiated and signed by most of the world's trading nations and ratified by their parliaments. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: International Trade Agreements and the Organizations that Facilitate Trade 12. Many U.S. companies have taken advantage of Mexico's low labor costs and proximity to the United States to set up maquiladoras. TRUE As a result of the North American Free Trade Agreement (NAFTA), many U.S. companies have taken advantage of Mexico's low labor costs and proximity to the United States to set up production facilities, called maquiladoras. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: International Trade Agreements and the Organizations that Facilitate Trade 13. The Association of Southeast Asian Nations (ASEAN) effectively united Singapore, Britain, and Japan into one market. FALSE The Association of Southeast Asian Nations (ASEAN), established in 1967, promotes trade and economic integration among member nations in Southeast Asia, including Malaysia, the Philippines, Singapore, Thailand, Brunei Darussalam, Vietnam, Laos, Indonesia, Myanmar, and Cambodia. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 2 Medium Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: International Trade Agreements and the Organizations that Facilitate Trade 14. 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. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-03 Specify some of the agreements, alliances, and organizations that may encourage trade across international boundaries. Topic: International Trade Agreements and the Organizations that Facilitate Trade 15. Only large businesses get involved in exporting. FALSE A business may get involved in exporting when it is called upon to supply a foreign company with a particular product. Such exporting enables enterprises of all sizes to participate in international business. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 2 Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: Trade Strategies Used in Reaching Global Markets 16. Licensing allows a company to enter 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. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: Trade Strategies Used in Reaching Global Markets 17. A strategic alliance is a partnership formed to create competitive advantage on a worldwide basis. TRUE A strategic alliance is a partnership formed to create competitive advantage on a worldwide basis. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 1 Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: Trade Strategies Used in Reaching Global Markets 18. Direct investment gives lesser power and is the least expensive way to participate in foreign trade. FALSE Companies that want more control and are willing to invest considerable resources in international business may consider direct investment, the ownership of overseas facilities. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: Trade Strategies Used in Reaching Global Markets 19. Multinational corporations (MNCs) rarely get targeted by activists because they provide so many benefits to the countries in which they do business. FALSE Multinational corporations (MNCs) have been targeted by antiglobalization activists at global business forums, and some protests have turned violent. MNCs are criticized on the grounds that they increase the gap between rich and poor nations, misuse and misallocate scarce resources, exploit the labor markets in less-developed countries (LDCs), and harm their natural environments. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 2 Medium Learning Objective: 03-04 Summarize the different levels of organizational involvement in international trade. Topic: Trade Strategies Used in Reaching Global Markets 20. Companies doing business internationally have traditionally used a globalization strategy. FALSE Companies doing business internationally have traditionally used a multinational strategy, customizing their products, promotion, and distribution according to cultural, technological, regional, and national differences. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 2 Medium Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: Trade Strategies Used in Reaching Global Markets 21. A global strategy involves standardizing products for the whole world. TRUE A 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. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: Trade Strategies Used in Reaching Global Markets 22. Even when products are standardized, advertising often has to be modified to adapt to local cultures. TRUE Even when products are standardized, advertising often has to be modified to adapt to language and cultural differences. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 2 Medium Learning Objective: 03-05 Contrast two basic strategies used in international business. Topic: Trade Strategies Used in Reaching Global Markets Multiple Choice Questions 23. A(n) _____ exists when a country is the most efficient producer of an item. A. comparative advantage B. comparative disadvantage C. absolute advantage D. absolute disadvantage E. domestic advantage Some nations have a monopoly on the production of a particular resource or product. Such a monopoly, or absolute advantage, 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. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Competition 24. A mining company in Malyia that possesses the only mine where a specialty ruby can be found has a(n) A. comparative advantage. B. comparative disadvantage. C. absolute advantage. D. absolute disadvantage. E. domestic advantage. This is an example of absolute advantage, which 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. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Bloom's: Apply Difficulty: 3 Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Competition 25. Malyia can produce sugar more efficiently than it can produce other items, giving it a(n) _____ advantage. A. absolute B. competitive C. domestic D. marginal E. comparative This is an example of comparative advantage, which occurs when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Bloom's: Apply Difficulty: 3 Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Competition 26. _____ is the transferring of manufacturing or other tasks—such as data processing—to countries where labor and supplies are less expensive. A. Importing B. Exporting C. Outsourcing D. Dumping E. Insourcing Outsourcing is the transferring of manufacturing or other tasks—such as data processing—to countries where labor and supplies are less expensive. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 27. Why has outsourcing become a controversial practice in the United States? A. Many jobs have moved overseas where those tasks can be accomplished for lower costs. B. Outsourcing empowers the outsourcing company with more managerial control. C. The losses incurred out of the hidden costs of outsourcing are making companies go bankrupt. D. Delegation of several processes leaves the outsourcing company with much less time to concentrate on its core business process. E. The outsourced products end up having sub-standard quality because their producers lack expertise. Outsourcing has become a controversial practice in the United States because many jobs have moved overseas where those tasks can be accomplished for lower costs. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 3 Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 28. _____ is best described as the sale of goods and services to foreign markets. A. Franchising B. Offshoring C. Outsourcing D. Exporting E. Importing To obtain needed goods and services and the funds to pay for them, nations trade by exporting and importing. Exporting is the sale of goods and services to foreign markets. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 29. Sarah bought a new shirt at a U.S. boutique. When she checked the tag, she saw that her shirt was made in China. This means her shirt is a(n) _______ good. A. exported B. outsourced C. absolute D. imported E. domestic This is an example of an imported good. Importing is the purchase of goods and services from foreign sources. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Bloom's: Apply Difficulty: 3 Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 30. A nation's _____ can be best defined as the difference in value between its exports and imports. A. balance of import B. balance of export C. balance of trade D. trade surplus E. trade deficit A nation's balance of trade is the difference in value between its exports and imports. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 31. U.S. exports to China have been rapidly increasing but not fast enough to offset the imports from China. This means that the United States has a(n) A. domestic gain. B. trade surplus. C. trade deficit. D. absolute advantage. E. comparative advantage. U.S. exports to China have been rapidly increasing but not fast enough to offset the imports from China, meaning that the United States has a trade deficit. A trade deficit is defined as a nation's negative balance of trade, which exists when that country imports more products than it exports. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 2 Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 32. Which of the following is one of the implications of trade deficits? A. the success of businesses B. the import of more products C. the loss of jobs D. the export of more services E. a higher standard of living A trade deficit is defined as a nation's negative balance of trade, which exists when that country imports more products than it exports. Trade deficits are harmful because they can mean the failure of businesses, the loss of jobs, and a lowered standard of living. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 33. A favorable balance of trade exists when a country A. imports more than it exports. B. exports more than it imports. C. has more debt liabilities than assets. D. spends more than it saves. E. saves more than it spends. When a nation exports more goods than it imports, it has a favorable balance of trade, or trade surplus. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 34. Which of the following is most likely to cause a trade surplus? A. inefficient manufacturing systems B. plentiful imports from other countries C. insufficient natural resources D. an abundance of natural resources E. healthy economies in other countries Until about 1970, the United States had a trade surplus due to an abundance of natural resources and the relative efficiency of its manufacturing systems. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 2 Medium Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 35. The difference between the flow of money into and out of a country is called its A. balance of trade. B. domestic gain. C. balance of payments. D. credit balance. E. exchange rate. The difference between the flow of money into and out of a country is called its balance of payments. A country's balance of trade, foreign investment, foreign aid, loans, military expenditures, and money spent by tourists comprise its balance of payments. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 36. Thelisia has a trade deficit, and it is receiving less money from trade with foreign countries than it is paying out in foreign investments, loans, and military expenditures. This means Thelisia may experience A. declining production and higher unemployment. B. increasing production and employment. C. increasing production and higher unemployment. D. declining production and higher employment. E. no change in production or employment. When a country has a trade deficit, more money flows out of the country than into it. As a result, the country may experience declining production and higher unemployment because there is less money available for spending. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Bloom's: Apply Difficulty: 3 Hard Learning Objective: 03-01 Explore some of the factors within the international trade environment that influence business. Topic: Trade Strategies Used in Reaching Global Markets 37. Which of the following is an industrialized nation? A. Iraq B. Myanmar C. Pakistan D. North Korea E. Japan Industrialized nations are economically advanced countries such as the United States, Japan, Great Britain, and Canada. Many countries in Africa, Asia, and South America, for example, are in general poorer and less economically advanced than those in North America and Europe; they are often called less-developed countries (LDCs). AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 38. Which of the following statements is true about less-developed countries (LDCs)? A. Many countries in Europe are LDCs. B. In LDCs, consumers tend to purchase more nonessential products. C. Many businesses avoid doing business in LDCs. D. LDCs represent a potentially huge and profitable market for many businesses. E. LDCs are characterized by high per-capita income. Many countries in Africa, Asia, and South America are less economically advanced than those in North America and Europe. These less-developed countries (LDCs) are characterized by low per-capita income, which means consumers are less likely to purchase nonessential items. 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. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 2 Medium Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 39. Thelisia has abundant railroads, highways, ports, airfields, utilities and power plants, schools, hospitals, communication systems, and commercial distribution systems to support its economic activities. This means Thelisia has a strong A. business structure. B. economic structure. C. infrastructure. D. exchange rate. E. consumer base. A country's level of development is determined in part by its infrastructure, the physical facilities that support its economic activities, such as railroads, highways, ports, airfields, utilities and power plants, schools, hospitals, communication systems, and commercial and distribution systems. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Bloom's: Apply Difficulty: 3 Hard Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 40. _____ can be best defined as the ratio at which one nation's currency can be exchanged for another nation's currency. A. Exchange rate B. National rate C. Exchange ratio D. Value ratio E. Currency ratio The ratio at which one nation's currency can be exchanged for another nation's currency is the exchange rate. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 41. If the United States were to devalue its currency, the most likely result would be A. a decrease in the number of foreign tourists to the United States. B. a decrease in the sale of domestic goods abroad. C. an increase in the cost of American goods abroad. D. an increase in its imports. E. an increase in its exports. Devaluation decreases the value of currency in relation to other currencies. Devaluation encourages the sale of domestic goods and tourism, causing an increase in exports. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 2 Medium Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 42. Which of the following is likely to be an impact of a decrease in the value of the U.S. dollar in relation to the euro? A. Imports from Europe would be more expensive. B. U.S. exports would become relatively expensive for international markets. C. Trips to the United States would become more expensive for foreign tourists. D. The price of imports would become more economical for U.S. consumers. E. The U.S. dollar would be used less frequently in international trade. When the value of the U.S. dollar declines relative to other currencies, such as the euro, the price of imports becomes more economical for U.S. consumers. In this scenario, imports from Europe would be less expensive and U.S. exports would become relatively inexpensive for international markets. This would also make trips to the United States less expensive for foreign tourists. The U.S. dollar is most frequently used in international trade, with 81 percent of trade finance conducted in U.S. dollars. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Bloom's: Apply Difficulty: 3 Hard Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 43. Which of the following is a true statement about barriers to international business? A. Devaluation discourages the sale of domestic goods and tourism. B. Revaluations occur daily because of the daily changes in exchange rates. C. Legal and ethical requirements for successful business are decreasing globally. D. Many of the legal rights that Americans take for granted do not exist in other countries. E. The Webb-Pomerene Export Trade Act of 1918 allows selected U.S. firms to limit free trade within the United States. Many of the legal rights that Americans take for granted do not exist in other countries, and a firm doing business abroad must understand and obey the laws of the host country. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Understand Difficulty: 2 Medium Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 44. AgroKing, a U.S. firm that produces agricultural products, relocated to Malyia to avoid having to pay the high U.S. tax rate. AgroKing prefers Malyia's low tax rate, low wages, and sufficient infrastructure. This is an example of tax A. evasion. B. avoidance. C. loopholes. D. outsourcing. E. inversion. This is an example of tax inversion, which occurs when companies relocate their headquarters to countries with a lower tax rate. AACSB: Reflective Thinking Accessibility: Keyboard Navigation Bloom's: Apply Difficulty: 3 Hard Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 45. A specific amount of money levied on each unit of a product brought into a country is termed as a(n) _______ tariff. A. ad valorem B. value-added C. fixed D. prohibitive E. zero A fixed tariff is a specific amount of money levied on each unit of a product brought into a country, while an ad valorem tariff is based on the value of the item. Most countries allow citizens traveling abroad to bring home a certain amount of merchandise without paying an import tariff. AACSB: Analytical Thinking Accessibility: Keyboard Navigation Bloom's: Remember Difficulty: 1 Easy Learning Objective: 03-02 Investigate some of the economic, legal, political, social, cultural, and technological barriers to international business. Topic: Barriers to International Trade 46. A fixed tariff differs from an ad valorem tariff becau