, CHAPTER ONE
RISKS OF INTERNATIONAL BUSINESS TRANSACTIONS
TRUE/FALSE
1. Globalization in trade is likely to be accelerated through increased regionalization.
ANS: True
2. Direct foreign investment measures the degree of trade in goods between two nations.
ANS: False
3. Private individuals may use the International Court of Justice to settle commercial
disputes.
ANS: False
4. Under U.S. law, treaties are not binding on state and local governments.
ANS: False
5. Lex Mercotoria refers to the process by which day-to-day practices become codified
into international customary law.
ANS: True
6. International harmonization in the area of contract law will have the effect of
increasing costs in international contract formation.
ANS: False
7. The United Nations Convention on Contracts for the International Sale of Goods
(CISG) requires a written document as proof that a contract has been formed.
ANS: False
8. An Export Trading Company (ETC) is a type of Export Management Company (EMC)
that takes title to a product.
ANS: True
9. Soft currency refers to the currency of a country that may be exchanged for another
without restriction.
ANS: False
10. Some countries block the repatriation of money earned or invested in their countries.
ANS: True
11. A forward contract gives a party the right, but not the obligation, to buy or sell a
currency at a fixed rate in the future.
ANS: False
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,12. In the area of sale of goods, the civil law concept of Nachfrist Notice dictates that
contractual delivery dates should not be strictly enforced unless the non-breaching party
can give a commercially viable reason for not granting the extension.
ANS: True
13. Evergreen statutes limit an employer’s ability to terminate an employee or agent.
ANS: True
14. Import quotas are a type of non-tariff trade barrier.
ANS: True
15. The threat of foreign governments nationalizing industries or expropriating a foreign
company’s assets has been the dominant trend over the past few decades.
ANS: False
16. Political risk assessment is difficult because of the scarcity of research materials.
ANS: False
17. Countertrade often is used to overcome currency convertibility or repatriation
problems.
ANS: True
18. Customs brokers act as the seller’s or exporter’s agent.
ANS: False
19. Non-tariff barriers do not significantly influence a firm’s trade and investment
decision-making.
ANS: False
20. The four types of international business transactions are importing, exporting, trade in
services, and countertrade.
ANS: False
21. Trade in goods and direct foreign investment are good measures of globalization.
ANS: True
22. Currency exchange risk cannot be minimized because of the unpredictability of
currency fluctuations.
ANS: False
23. There are no United Nations Agencies that are active in issues pertaining to
international business transactions.
ANS: False
24. Copyrights, patents, and real estate are all forms of intellectual property.
ANS: False
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, 25. Protection of domestic industries is a reason nations impose trade barriers.
ANS: True
MULTIPLE CHOICE
1. Which of the following geographic regions has not significantly contributed to an
increase in world direct foreign investment.
A. The Americas
B. Africa
C. East Asia
D. Europe
ANS: B
2. In order of superiority, the sources of law that guide the International Court of Justice’s
decisions are:
A. (1) International custom or general practice, (2) general principles of law
recognized by civilized nations, (3) judicial decisions and scholarly writings, (4)
international conventions and treaties.
B. (1) International conventions and treaties, (2) international custom or general
practice, (3) judicial decisions and scholarly writings, (4) general principles of
law recognized by civilized nations.
C. (1) International conventions and treaties, (2) international custom or general
practice, (3) general principles of law recognized by civilized nations, (4) judicial
decisions and scholarly writings.
D. (1) General principles of law recognized by civilized nations, (2) international
conventions and treaties, (3) general principles of law recognized by civilized
nations, (4) judicial decisions and scholarly writings.
ANS: C
3. Which of the following is not a service of the International Chamber of Commerce:
A. International Court of Arbitration
B. UCP 500
C. Incoterms 2000
D. Convention on Contracts for the International Sale of Goods (CISG)
ANS: D
4. __________ is a form of exporting used to overcome local restrictions against the
repatriation of capital, profits, or hard currency.
A. Franchising
B. Countertrade
C. Direct exporting
D. Direct foreign investment
ANS: B
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RISKS OF INTERNATIONAL BUSINESS TRANSACTIONS
TRUE/FALSE
1. Globalization in trade is likely to be accelerated through increased regionalization.
ANS: True
2. Direct foreign investment measures the degree of trade in goods between two nations.
ANS: False
3. Private individuals may use the International Court of Justice to settle commercial
disputes.
ANS: False
4. Under U.S. law, treaties are not binding on state and local governments.
ANS: False
5. Lex Mercotoria refers to the process by which day-to-day practices become codified
into international customary law.
ANS: True
6. International harmonization in the area of contract law will have the effect of
increasing costs in international contract formation.
ANS: False
7. The United Nations Convention on Contracts for the International Sale of Goods
(CISG) requires a written document as proof that a contract has been formed.
ANS: False
8. An Export Trading Company (ETC) is a type of Export Management Company (EMC)
that takes title to a product.
ANS: True
9. Soft currency refers to the currency of a country that may be exchanged for another
without restriction.
ANS: False
10. Some countries block the repatriation of money earned or invested in their countries.
ANS: True
11. A forward contract gives a party the right, but not the obligation, to buy or sell a
currency at a fixed rate in the future.
ANS: False
292
,12. In the area of sale of goods, the civil law concept of Nachfrist Notice dictates that
contractual delivery dates should not be strictly enforced unless the non-breaching party
can give a commercially viable reason for not granting the extension.
ANS: True
13. Evergreen statutes limit an employer’s ability to terminate an employee or agent.
ANS: True
14. Import quotas are a type of non-tariff trade barrier.
ANS: True
15. The threat of foreign governments nationalizing industries or expropriating a foreign
company’s assets has been the dominant trend over the past few decades.
ANS: False
16. Political risk assessment is difficult because of the scarcity of research materials.
ANS: False
17. Countertrade often is used to overcome currency convertibility or repatriation
problems.
ANS: True
18. Customs brokers act as the seller’s or exporter’s agent.
ANS: False
19. Non-tariff barriers do not significantly influence a firm’s trade and investment
decision-making.
ANS: False
20. The four types of international business transactions are importing, exporting, trade in
services, and countertrade.
ANS: False
21. Trade in goods and direct foreign investment are good measures of globalization.
ANS: True
22. Currency exchange risk cannot be minimized because of the unpredictability of
currency fluctuations.
ANS: False
23. There are no United Nations Agencies that are active in issues pertaining to
international business transactions.
ANS: False
24. Copyrights, patents, and real estate are all forms of intellectual property.
ANS: False
293
, 25. Protection of domestic industries is a reason nations impose trade barriers.
ANS: True
MULTIPLE CHOICE
1. Which of the following geographic regions has not significantly contributed to an
increase in world direct foreign investment.
A. The Americas
B. Africa
C. East Asia
D. Europe
ANS: B
2. In order of superiority, the sources of law that guide the International Court of Justice’s
decisions are:
A. (1) International custom or general practice, (2) general principles of law
recognized by civilized nations, (3) judicial decisions and scholarly writings, (4)
international conventions and treaties.
B. (1) International conventions and treaties, (2) international custom or general
practice, (3) judicial decisions and scholarly writings, (4) general principles of
law recognized by civilized nations.
C. (1) International conventions and treaties, (2) international custom or general
practice, (3) general principles of law recognized by civilized nations, (4) judicial
decisions and scholarly writings.
D. (1) General principles of law recognized by civilized nations, (2) international
conventions and treaties, (3) general principles of law recognized by civilized
nations, (4) judicial decisions and scholarly writings.
ANS: C
3. Which of the following is not a service of the International Chamber of Commerce:
A. International Court of Arbitration
B. UCP 500
C. Incoterms 2000
D. Convention on Contracts for the International Sale of Goods (CISG)
ANS: D
4. __________ is a form of exporting used to overcome local restrictions against the
repatriation of capital, profits, or hard currency.
A. Franchising
B. Countertrade
C. Direct exporting
D. Direct foreign investment
ANS: B
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