Chapter 1 Globalization
1) As a result of globalization, we have been moving toward a world in which national economies are
relatively self-contained entities.
Answer: FALSE
2) To truly benefit from globalization, a firm needs to be a multinational conglomerate rather than
a small or mid-size company. Answer: FALSE
3) In today's marketplace, outsourcing efforts are confined to manufacturing activities.
Answer: FALSE
4) The World Trade Organization, the International Monetary Fund and its sister institution the
World Bank, and the United Nations were all created by voluntary agreement between individual
nation-states.
Answer: TRUE
5) The WTO polices the world trading system, and without this organization, the globalization of
markets might not be where it is today.
Answer: TRUE
6) Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside
its home country.
Answer: TRUE
7) The retaliatory trade policies of the 1920s and 1930s contributed to the Great Depression.
Answer: TRUE
8) The Uruguay Round extended GATT to cover services as well as manufactured goods. Answer:
TRUE
9) Enhanced protection for patents and trademarks was one focus of the Uruguay Round.
Answer: TRUE
10) The lowering of trade and investment barriers creates more opportunities for companies to
have the world as their market.
Answer: TRUE
11) In recent years, the economies of the world's nation-states have become less intertwined as a
result of international trade.
Answer: FALSE
12) The United Nations created the Millennium Development Goals to increase the number of
entrepreneurial activities around the world.
Answer: FALSE
13) Containerization has revolutionized the transportation business, significantly lowering the
costs of shipping goods over long distances. Answer: TRUE
14) Moore's law helps determine the most appropriate transportation method for a produced
good. Answer: FALSE15) During the 1960s, centrally planned economies associated with the
communist world became open to Western international businesses. Answer: FALSE
16) The stock of foreign direct investment refers to the total cumulative value of foreign
investments. Answer: TRUE
17) Throughout the 1990s, the amount of investment directed at both developed and developing
nations increased dramatically. Answer: TRUE
18) A domestic enterprise is any business that has productive activities in at least two countries.
Answer: FALSE
,19) Today, many of the former communist nations of Europe and Asia seem to share a
commitment to democratic policies and free market economies. Answer: TRUE20) The amount of
foreign direct investment in China has been decreasing since the 1980s.
Answer: FALSE
21) According to many influential economists, the increase in international trade and cross-
border investment will result in an increase in the prices of goods and services. Answer: FALSE
22) One criticism of globalization is that falling trade barriers encourage companies to locate
manufacturing activities in another country to take advantage of lower wage rates.
Answer: TRUE
Explanation: One concern frequently voiced by globalization opponents is that falling barriers to 23)
A firm has to become a multinational enterprise to engage in international business.
Answer: FALSE
24) The range of problems that a manager in an international business faces is typically more
complex than those faced by a manager in a domestic business.
Answer: TRUE
25) As a result of globalization, international businesses can avoid the haggle of currency
exchanges during cross-border transactions.
Answer: FALSE
26) Many believe that globalization has created a convergence in A) the volume of goods and
services produced.
B) foreign exchange transaction law.
C) environmental and labor laws.
D) consumer taste preferences.
E) the regulation of markets.
Answer: D
27) What is the shift toward a more integrated and interdependent world economy called? A)
international trade
B) foreign direct investment
C) globalization
D) Moore's Law
E) containerization
Answer: C
28) Fast food chain restaurants promote different menu choices in different countries depending on
a range of factors such as demographics, local taste, income levels, and cultural values. This
demonstrates that
A) significant differences still exist among national markets.
B) cultural diversity has been replaced by global uniformity.
C) the global market is less complex than national markets.
D) only multinational giants can benefit from the globalization of markets.
E) the social norms in a country do not affect purchase decisions of consumers.
Answer: A
29) What statement best supports the claim that greater uniformity replaces diversity in the context
of global markets?
A) Differences in business systems and legal regulations lead companies to customize their marketing
strategies, product features, and operating practices to best match conditions in a particular country.
B) As rival global firms follow each other across countries, they bring with them their brand names,
products, and marketing strategies from other national markets, thus creating some homogeneity across
markets.
C) Truly innovative companies succeed by developing products that serve specific needs of the local
markets.
,D) The volume of goods, services, and investment crossing national borders has expanded at a slower
rate than world output for more than half a century.
E) The most global of markets are not typically markets for consumer products, as significant
differences in consumer tastes and preferences still exist among national markets.
Answer: B
30) Agri-Corp manufactures large farm implements and currently sources component parts for
these large machines from fifteen different companies around globe. They use these sources to take
advantage of lower costs. This demonstrates the idea of A) globalization of markets.
B) containerization of production.
C) dispersal of production.
D) globalization of production.
E) industrialization of markets.
Answer: D
31) Which of these companies is taking advantage of the globalization of production?
A) Daily Diamonds, an American jewelry manufacturer, buys diamonds from South Africa and exports
them to India for the cutting process.
B) Evan Swan, a U.S.-based fashion designer, is planning to open a flagship store in China to serve the
Asian market.
C) Uncle Crab, a U.K. fast food chain, serves customers worldwide through its local franchises.
D) Silver Unicorn Inc. uses sales personnel from the respective host country to sell its products and
services.
E) Pizza Gallery, an Italian pizza chain, customizes its pizzas and pastas to suit the tastes of its American
and Australian customers.
Answer: A
32) West Electronic Corporation sources goods and services for its electronics products from
different locations around the globe in an attempt to take advantage of differences in the cost and
quality of labor and land. This practice is an example of the A) globalization of production.
B) globalization of markets.
C) dislocation of a developing nation's economy.
D) restriction on foreign direct investment.
E) regulation of the environment
Answer: A
33) The labor, energy, land, and capital a country relies on to source goods and services are known
as
A) trade tariffs.
B) the globalization of markets.
C) the marketing mix.
D) the globalization of production.
E) factors of production.
Answer: E
34) During early globalization efforts, outsourcing was typically confined to activities. A) marketing
B) financial
C) legal
D) manufacturing
E) service
Answer: D
35) Which global institution has focused on making low-interest loans to governments in poor
nations that want to make significant infrastructure investments such as building a road or a
bridge?A) World Trade Organization
B) World Bank
C) Peace Corps
D) International Monetary Fund
E) United Nations
Answer: B
, 36) zCountries zthat zreceive zloans zfrom zthe zIMF zare
zrequired zto zA) zbecome za zmember zof zthe zUnited zNations.
z
B) allow zdeveloped znations zto zcreate zbusinesses zin ztheir zcountry. z
C) enforce za zdemocratic zgovernment. z
D) use zthe zfunds zto zhelp zindividual zcitizens. z
E) adopt zspecific zeconomic zpolicies zto zattain zstabilization. z
Answer: zE z
37) zAccording zto zthe zUN zCharter, zone zof zthe zfour zpurposes zof zthe zUN zis zto z
A) be za zcenter zfor zharmonizing zthe zactions zof znations. z
B) encourage zhigh ztariffs zon zimports zof zmanufactured zgoods. z
C) provide zenhanced zprotection zfor zpatents. z
D) promote zthe zestablishment zof zmultinational ztreaties. z
E) facilitate zglobalization zof zproduction. z
Answer: zA z
38) zA zmacro zfactor zunderlying zthe ztrend ztoward zgreater zglobalization
zis zthe zA) zrise zof zcommunism zacross zthe zglobe. z
B) increase zin znationalization zof zprivate zorganizations. z
C) increase zin zdiversity zin zconsumer ztastes zand zpreferences. z
D) increase zin ztrade zregulations zacross zthe zglobe. z
E) dramatic zdevelopments zin zinformation zprocessing zand zother ztechnologies. z
z
Answer: zE z
z
39) zWhich zscenario zbest zdemonstrates zforeign zdirect zinvestment? z
A) Pure zPearls, za zjewelry zstore zin zthe zUnited zStates, zimports zharvested zpearls zfrom
zIndonesia, zPhilippines, zand zAustralia. z
B) Chivalry, za zU.S.-based zphone zmanufacturing zcompany, zhas zset zup zits zown zassembly zplant
zin zJapan zto zcater zto zthe zneeds zof zthe zAsian zmarket. z
C) Delicate zLove, za zreputable zflorist zcompany zin zHolland, zexports ztulips zand zroses
zthroughout zthe zglobe. z
D) Samantha zstarted zan zItalian zrestaurant zin zher zhome zcountry, zthe zUnited zStates, zafter zshe
ztook zcooking zlessons zfrom za zwell-known zchef zin zItaly. z
E) Yin zand zYang zInc., za zChinese zfirm, zsupplies zbuttons zand zzippers zto zmajor zdenim zbrands
zin zthe zUnited zKingdom. z
Answer: zB z
40) zSavvy zSkin zCare, za zU.S.-based zbeauty zproducts zmanufacturer, zhas zset zup za
zmanufacturing zplant zin zHong zKong. zThis zis zan zexample zof zA) zforeign zdirect zinvestment.
z
B) international ztrade. z
C) exporting. z
D) global zrivalry. z
E) the zglobalization zof zmarkets. z
Answer: zA z
41) zMichelle, zan zItalian zfashion zdesigner, zsells zher zmerchandise zby zexporting zit zto zretail
zstores zin zthe zUnited zStates, zUnited zKingdom, zand zBrazil. zAccording zto zthis zinformation,
zMichelle zis zparticipating zinA) zforeign zdirect zinvestment. z
B) globalization zof zproduction. z
C) international ztrade. z
D) multinational zenterprise. z
E) outsourcing. z
Answer: zC z
1) As a result of globalization, we have been moving toward a world in which national economies are
relatively self-contained entities.
Answer: FALSE
2) To truly benefit from globalization, a firm needs to be a multinational conglomerate rather than
a small or mid-size company. Answer: FALSE
3) In today's marketplace, outsourcing efforts are confined to manufacturing activities.
Answer: FALSE
4) The World Trade Organization, the International Monetary Fund and its sister institution the
World Bank, and the United Nations were all created by voluntary agreement between individual
nation-states.
Answer: TRUE
5) The WTO polices the world trading system, and without this organization, the globalization of
markets might not be where it is today.
Answer: TRUE
6) Foreign direct investment (FDI) occurs when a firm invests resources in business activities outside
its home country.
Answer: TRUE
7) The retaliatory trade policies of the 1920s and 1930s contributed to the Great Depression.
Answer: TRUE
8) The Uruguay Round extended GATT to cover services as well as manufactured goods. Answer:
TRUE
9) Enhanced protection for patents and trademarks was one focus of the Uruguay Round.
Answer: TRUE
10) The lowering of trade and investment barriers creates more opportunities for companies to
have the world as their market.
Answer: TRUE
11) In recent years, the economies of the world's nation-states have become less intertwined as a
result of international trade.
Answer: FALSE
12) The United Nations created the Millennium Development Goals to increase the number of
entrepreneurial activities around the world.
Answer: FALSE
13) Containerization has revolutionized the transportation business, significantly lowering the
costs of shipping goods over long distances. Answer: TRUE
14) Moore's law helps determine the most appropriate transportation method for a produced
good. Answer: FALSE15) During the 1960s, centrally planned economies associated with the
communist world became open to Western international businesses. Answer: FALSE
16) The stock of foreign direct investment refers to the total cumulative value of foreign
investments. Answer: TRUE
17) Throughout the 1990s, the amount of investment directed at both developed and developing
nations increased dramatically. Answer: TRUE
18) A domestic enterprise is any business that has productive activities in at least two countries.
Answer: FALSE
,19) Today, many of the former communist nations of Europe and Asia seem to share a
commitment to democratic policies and free market economies. Answer: TRUE20) The amount of
foreign direct investment in China has been decreasing since the 1980s.
Answer: FALSE
21) According to many influential economists, the increase in international trade and cross-
border investment will result in an increase in the prices of goods and services. Answer: FALSE
22) One criticism of globalization is that falling trade barriers encourage companies to locate
manufacturing activities in another country to take advantage of lower wage rates.
Answer: TRUE
Explanation: One concern frequently voiced by globalization opponents is that falling barriers to 23)
A firm has to become a multinational enterprise to engage in international business.
Answer: FALSE
24) The range of problems that a manager in an international business faces is typically more
complex than those faced by a manager in a domestic business.
Answer: TRUE
25) As a result of globalization, international businesses can avoid the haggle of currency
exchanges during cross-border transactions.
Answer: FALSE
26) Many believe that globalization has created a convergence in A) the volume of goods and
services produced.
B) foreign exchange transaction law.
C) environmental and labor laws.
D) consumer taste preferences.
E) the regulation of markets.
Answer: D
27) What is the shift toward a more integrated and interdependent world economy called? A)
international trade
B) foreign direct investment
C) globalization
D) Moore's Law
E) containerization
Answer: C
28) Fast food chain restaurants promote different menu choices in different countries depending on
a range of factors such as demographics, local taste, income levels, and cultural values. This
demonstrates that
A) significant differences still exist among national markets.
B) cultural diversity has been replaced by global uniformity.
C) the global market is less complex than national markets.
D) only multinational giants can benefit from the globalization of markets.
E) the social norms in a country do not affect purchase decisions of consumers.
Answer: A
29) What statement best supports the claim that greater uniformity replaces diversity in the context
of global markets?
A) Differences in business systems and legal regulations lead companies to customize their marketing
strategies, product features, and operating practices to best match conditions in a particular country.
B) As rival global firms follow each other across countries, they bring with them their brand names,
products, and marketing strategies from other national markets, thus creating some homogeneity across
markets.
C) Truly innovative companies succeed by developing products that serve specific needs of the local
markets.
,D) The volume of goods, services, and investment crossing national borders has expanded at a slower
rate than world output for more than half a century.
E) The most global of markets are not typically markets for consumer products, as significant
differences in consumer tastes and preferences still exist among national markets.
Answer: B
30) Agri-Corp manufactures large farm implements and currently sources component parts for
these large machines from fifteen different companies around globe. They use these sources to take
advantage of lower costs. This demonstrates the idea of A) globalization of markets.
B) containerization of production.
C) dispersal of production.
D) globalization of production.
E) industrialization of markets.
Answer: D
31) Which of these companies is taking advantage of the globalization of production?
A) Daily Diamonds, an American jewelry manufacturer, buys diamonds from South Africa and exports
them to India for the cutting process.
B) Evan Swan, a U.S.-based fashion designer, is planning to open a flagship store in China to serve the
Asian market.
C) Uncle Crab, a U.K. fast food chain, serves customers worldwide through its local franchises.
D) Silver Unicorn Inc. uses sales personnel from the respective host country to sell its products and
services.
E) Pizza Gallery, an Italian pizza chain, customizes its pizzas and pastas to suit the tastes of its American
and Australian customers.
Answer: A
32) West Electronic Corporation sources goods and services for its electronics products from
different locations around the globe in an attempt to take advantage of differences in the cost and
quality of labor and land. This practice is an example of the A) globalization of production.
B) globalization of markets.
C) dislocation of a developing nation's economy.
D) restriction on foreign direct investment.
E) regulation of the environment
Answer: A
33) The labor, energy, land, and capital a country relies on to source goods and services are known
as
A) trade tariffs.
B) the globalization of markets.
C) the marketing mix.
D) the globalization of production.
E) factors of production.
Answer: E
34) During early globalization efforts, outsourcing was typically confined to activities. A) marketing
B) financial
C) legal
D) manufacturing
E) service
Answer: D
35) Which global institution has focused on making low-interest loans to governments in poor
nations that want to make significant infrastructure investments such as building a road or a
bridge?A) World Trade Organization
B) World Bank
C) Peace Corps
D) International Monetary Fund
E) United Nations
Answer: B
, 36) zCountries zthat zreceive zloans zfrom zthe zIMF zare
zrequired zto zA) zbecome za zmember zof zthe zUnited zNations.
z
B) allow zdeveloped znations zto zcreate zbusinesses zin ztheir zcountry. z
C) enforce za zdemocratic zgovernment. z
D) use zthe zfunds zto zhelp zindividual zcitizens. z
E) adopt zspecific zeconomic zpolicies zto zattain zstabilization. z
Answer: zE z
37) zAccording zto zthe zUN zCharter, zone zof zthe zfour zpurposes zof zthe zUN zis zto z
A) be za zcenter zfor zharmonizing zthe zactions zof znations. z
B) encourage zhigh ztariffs zon zimports zof zmanufactured zgoods. z
C) provide zenhanced zprotection zfor zpatents. z
D) promote zthe zestablishment zof zmultinational ztreaties. z
E) facilitate zglobalization zof zproduction. z
Answer: zA z
38) zA zmacro zfactor zunderlying zthe ztrend ztoward zgreater zglobalization
zis zthe zA) zrise zof zcommunism zacross zthe zglobe. z
B) increase zin znationalization zof zprivate zorganizations. z
C) increase zin zdiversity zin zconsumer ztastes zand zpreferences. z
D) increase zin ztrade zregulations zacross zthe zglobe. z
E) dramatic zdevelopments zin zinformation zprocessing zand zother ztechnologies. z
z
Answer: zE z
z
39) zWhich zscenario zbest zdemonstrates zforeign zdirect zinvestment? z
A) Pure zPearls, za zjewelry zstore zin zthe zUnited zStates, zimports zharvested zpearls zfrom
zIndonesia, zPhilippines, zand zAustralia. z
B) Chivalry, za zU.S.-based zphone zmanufacturing zcompany, zhas zset zup zits zown zassembly zplant
zin zJapan zto zcater zto zthe zneeds zof zthe zAsian zmarket. z
C) Delicate zLove, za zreputable zflorist zcompany zin zHolland, zexports ztulips zand zroses
zthroughout zthe zglobe. z
D) Samantha zstarted zan zItalian zrestaurant zin zher zhome zcountry, zthe zUnited zStates, zafter zshe
ztook zcooking zlessons zfrom za zwell-known zchef zin zItaly. z
E) Yin zand zYang zInc., za zChinese zfirm, zsupplies zbuttons zand zzippers zto zmajor zdenim zbrands
zin zthe zUnited zKingdom. z
Answer: zB z
40) zSavvy zSkin zCare, za zU.S.-based zbeauty zproducts zmanufacturer, zhas zset zup za
zmanufacturing zplant zin zHong zKong. zThis zis zan zexample zof zA) zforeign zdirect zinvestment.
z
B) international ztrade. z
C) exporting. z
D) global zrivalry. z
E) the zglobalization zof zmarkets. z
Answer: zA z
41) zMichelle, zan zItalian zfashion zdesigner, zsells zher zmerchandise zby zexporting zit zto zretail
zstores zin zthe zUnited zStates, zUnited zKingdom, zand zBrazil. zAccording zto zthis zinformation,
zMichelle zis zparticipating zinA) zforeign zdirect zinvestment. z
B) globalization zof zproduction. z
C) international ztrade. z
D) multinational zenterprise. z
E) outsourcing. z
Answer: zC z
