KNAUFF BUS. MGMT. MIDTERM EXAM
QUESTIONS AND ANSWERS. VERIFIED
2026.
What is domestic business? - ANS The making, buying, and selling of goods and services
within a country.
What is international business? - ANS Business activities necessary for creating, shipping, and
selling goods and services across national borders.
How many countries does the USA conduct trade with? - ANS More than 200 countries.
What is absolute advantage? - ANS When a country can produce a good or service at a lower
cost than other countries.
Which region has an absolute advantage in oil production? - ANS Middle Eastern countries.
Which region has an absolute advantage in coffee production? - ANS South American
countries.
What is comparative advantage? - ANS When a country specializes in the production of a
good or service at which it is relatively more efficient.
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,What are exports? - ANS Goods and services that we sell to other countries.
What is the balance of trade? - ANS The difference between the total amount imported and
exported.
What is a trade surplus? - ANS When a country sells more than it buys.
What is a trade deficit? - ANS When a country buys more than it sells.
What is foreign debt? - ANS The amount a country owes to other countries.
What is the balance of payments? - ANS The difference between the amount of money going
into and out of a country.
What is the foreign exchange market? - ANS A market consisting of banks that buy and sell
different currencies.
What is an exchange rate? - ANS The value of one currency compared to the value of
another.
What factors affect currency values? - ANS Balance of payments, economic conditions,
political stability.
What is a quota? - ANS A limit on imports or exports.
What is protectionism? - ANS Shielding domestic industries from foreign competition.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What is a tariff? - ANS A tax that the government places on imports.
What is an embargo? - ANS When the government stops the import or export of a product.
What is a free trade zone? - ANS A selected area where products can be imported tariff-free.
What is the USMCA? - ANS United States-Mexico-Canada Agreement.
What is offshore outsourcing? - ANS The practice of hiring organizations or employees to
perform company tasks overseas.
What are some pros of offshore outsourcing? - ANS Lowers costs and can create jobs by
making the economy more efficient.
What are some cons of offshore outsourcing? - ANS Lower wages and decreased quality,
especially in customer service.
Which countries does the US have a trade embargo against? - ANS Iran and North Korea.
Why do companies outsource? - ANS Because it is cheaper to hire workers in different
countries and it provides support for third-world countries.
How has Bangalore Americanized? - ANS They have many large shopping malls with
American products and at call centers they have to test for an American accent.
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
QUESTIONS AND ANSWERS. VERIFIED
2026.
What is domestic business? - ANS The making, buying, and selling of goods and services
within a country.
What is international business? - ANS Business activities necessary for creating, shipping, and
selling goods and services across national borders.
How many countries does the USA conduct trade with? - ANS More than 200 countries.
What is absolute advantage? - ANS When a country can produce a good or service at a lower
cost than other countries.
Which region has an absolute advantage in oil production? - ANS Middle Eastern countries.
Which region has an absolute advantage in coffee production? - ANS South American
countries.
What is comparative advantage? - ANS When a country specializes in the production of a
good or service at which it is relatively more efficient.
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
,What are exports? - ANS Goods and services that we sell to other countries.
What is the balance of trade? - ANS The difference between the total amount imported and
exported.
What is a trade surplus? - ANS When a country sells more than it buys.
What is a trade deficit? - ANS When a country buys more than it sells.
What is foreign debt? - ANS The amount a country owes to other countries.
What is the balance of payments? - ANS The difference between the amount of money going
into and out of a country.
What is the foreign exchange market? - ANS A market consisting of banks that buy and sell
different currencies.
What is an exchange rate? - ANS The value of one currency compared to the value of
another.
What factors affect currency values? - ANS Balance of payments, economic conditions,
political stability.
What is a quota? - ANS A limit on imports or exports.
What is protectionism? - ANS Shielding domestic industries from foreign competition.
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
, What is a tariff? - ANS A tax that the government places on imports.
What is an embargo? - ANS When the government stops the import or export of a product.
What is a free trade zone? - ANS A selected area where products can be imported tariff-free.
What is the USMCA? - ANS United States-Mexico-Canada Agreement.
What is offshore outsourcing? - ANS The practice of hiring organizations or employees to
perform company tasks overseas.
What are some pros of offshore outsourcing? - ANS Lowers costs and can create jobs by
making the economy more efficient.
What are some cons of offshore outsourcing? - ANS Lower wages and decreased quality,
especially in customer service.
Which countries does the US have a trade embargo against? - ANS Iran and North Korea.
Why do companies outsource? - ANS Because it is cheaper to hire workers in different
countries and it provides support for third-world countries.
How has Bangalore Americanized? - ANS They have many large shopping malls with
American products and at call centers they have to test for an American accent.
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED.
