BUSMHR 2000 Exam 2 | Questions and Answers

BUSMHR 2000 Exam 2 | Questions and Answers In order to encourage the agricultural industry, the French government provided low-interest loans for the purchase of seeds and fertilizers. The government also gave cash grants and made tax reductions. Which instrument of trade policy is being used by the French government? tariffs voluntary export restraints subsidies local content requirements import quotas A(n) ________ refers to the extra profit that producers make when supply is artificially limited by an import quota. profit margin net profit import profit trade surplus quota rent Italy has a direct restriction on the amount of metal products that may be imported into the country. Which instrument of trade policy does this reflect? voluntary import restraint tariff rate quota export ban import quota quota rent How did the Smoot-Hawley Act affect employment? It created more jobs domestically and abroad. It decreased the overall wage rate. It boosted job rates around the world. It did not have any effect on employment. It had a damaging effect on employment abroad. ________ is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value. Circular trade Subsidy Barter Countertrade Dumping A tax of 32 cents is levied for each pair of eyeglasses imported into a nation. This is an example of a(n) quota rent. specific tariff. ad valorem tariff. import quota. local content requirement. High tariff barriers and subsidies in the agricultural industry ultimately lead to the lack of overproduction of products. an increased volume of agricultural trade. increased prices for consumers. stronger competition from foreign suppliers. lower overall prices for the end-user. A tariff rate quota provides a lower tariff rate to all imports in a specific industry. imports within the quota. only domestic producers. agricultural products. imports that are over the quota. A foreign government was not enforcing its intellectual property rights, which resulted in massive copyright infringements. In turn, this was costing U.S. companies millions of dollars in lost sales revenues. To force the country to play by the rules, the United States threatened to impose trade sanctions on a range of imports from the country's businesses. The underlying motive for intervention by the U.S government was to protect national security. to further support foreign policy objectives. retaliation. to increase the trade surplus of the United States. to protect human rights. An implication of trade barriers for business practice is that they reduce the cost of importing products to a country. put a foreign firm at a competitive advantage to indigenous competitors in that country. allow for efficient allocation of production functions. limit a firm's ability to serve a country from locations outside of that country. encourage governments to engage in foreign direct investment. Foreign producers agree to ________ imposed by an exporting country because they fear more damaging punitive tariffs or import quotas might follow if they do not. voluntary export restraints tariff rate quotas quota rents export bans Dumping One focus of strategic trade policy is to help domestic companies gain more competition to lower prices. less competition to raise prices. monopoly status. a first-mover advantage. exclusive intellectual property rights. The ________ argument was proposed by Alexander Hamilton in 1792 and is by far the oldest economic argument for government intervention. infant industry strategic trade policy consumer protection national security Retaliation Paul Krugman characterizes strategic trade policy as being similar to the infant industry argument. a boost to national income at the expense of other countries. the closest that countries can get to free trade. a way to reduce the possibility of retaliatory actions by other governments. a way to reduce administrative barriers to trade. Subsidies and quotas are examples of ________ barriers a county might impose. antidumping tariff Nontariff content requirements export restraint When the management team reviewed its government contract on office furnishings, they noticed that in order to bid on the project, at least 44 percent of the value of the office furniture had to be produced in the United States. This stipulation is an example of a(n) antidumping policy. voluntary export restraint. administrative trade policy. local content requirement. ad valorem tariff. Which organization was created to implement the GATT agreement? World Trade Organization United Nations World Bank International Monetary Fund Department of Justice The stock of FDI refers to the total accumulated value of foreign-owned assets at a given time. the net position of FDI flows after comparing inflows and outflows during a period. the outflows of FDI from a country. amount of FDI undertaken over a given time period. the inflows of FDI into a country. According to ________, location-specific advantages are of considerable importance in explaining both the rationale for and the direction of foreign direct investment. the infant industry argument Knickerbocker's theory the eclectic paradigm internalization theory market imperfections theory A country that imports more goods than it exports experiences a first-mover advantage. current account surplus. trade deficit. factor endowment. late-mover advantage. One example of a(n) ________ effect of foreign direct investment is when a foreign MNE employs a number of host-country citizens. indirect first-mover advantage monopoly direct late-mover advantage Ownership restraint is a method of encouraging inward FDI by a host country. restricting inward FDI by a host country. encouraging outward FDI by a home country. restricting outward FDI by a home country. restricting outward FDI by a host country. A firm might justify a preference for licensing over FDI because licensing results in the licensor retaining control over technical know-how. gives the licensor tight control over the operations of the licensee in the foreign nation. allows the firm to take advantage of differences in factor costs across countries. reduces the potential risks of creating a future competitor. results in the licensee bearing the costs and risks. Burger King licenses its brand name to foreign firms as long as they agree to run their restaurants on exactly the same lines as Burger King restaurants elsewhere in the world. In return, the foreign firms have to pay Burger King a percentage of their profits. This is an example of exporting. strategic alliance. franchising. a greenfield investment. offshoring. Internalization theory is used to explain why a company prefers FDI over ________ as a way to enter a foreign market. exporting franchising a greenfield investment licensing acquisitions Royal Chocolatier, a British manufacturer of chocolates, granted U.S. company American Candy Inc. the right to produce and sell Royal Chocolatier's products in the United States In return, American Candy Inc. has to pay a royalty fee on every unit sold. According to this information, what is being done by Royal Chocolatier? franchising outsourcing exporting licensing insourcing The ________ view argues that international production should be distributed among countries according to the theory of comparative advantage and countries should specialize in the production of goods they can produce most efficiently. free market mercantilist pragmatic nationalist conservatist Radical SmileBright, a dental products manufacturing company, has a market share of 30 percent in India. Three of its competitors together control 55 percent of the market. Whenever SmileBright raises or lowers the prices of its products, the other three companies quickly imitate its action. What is the market structure of this industry in India? fair market monopoly Oligopoly perfect competition pure competition One of the main benefits that FDI provides to the home country is the home country's balance of payments benefits from the inward flow of foreign earnings. FDI benefits the home country by substituting domestic production. FDI increases employment in the home country in the short run. the balance of payments position improves from the initial capital outflow required to finance the FDI. the demand for exports from the home country will reduce in the long run. It is one of Garrett's job responsibilities to report the amount of foreign direct investment undertaken by the government over a one-year time period. Garrett reports the ________ of FDI. stock bundle Flow portfolio ratio Which political ideology reflects the idea that a multinational enterprise is an instrument of imperialist domination? free market mercantilism pragmatic nationalism radical view planned economy Concrete Forms International needs immediate access to steel in order to produce a new product line. It cannot afford to wait and establish a new operation in a foreign country where steel is prevalent, so it decides to purchase an existing company instead. Why did Concrete Forms decide to make this purchase? A greenfield investment will provide quickest access to the steel forms. FDI flows are similar between developed and developing nations. Mergers and acquisitions are quicker to execute than greenfield investments The higher percentage of mergers and acquisitions in developing nations compared to developed nations indicate the low valuation of target firms in developing countries. It is easier and less risky for a firm to build up through a greenfield investment rather than through acquisitions. Licensing is a good option to enter a foreign market when transportation costs are minor. the technical know to be shared is extremely valuable. tight control of the foreign operation is not required. the competitive advantage of a firm is based upon managerial knowledge that is embedded in the routines of the firm. trade barriers between countries are trivial in nature. A country that relies on the pragmatic nationalist view would say that international production should be distributed among countries according to the theory of comparative advantage. FDI should be allowed so long as the benefits outweigh the costs no country should ever permit foreign corporations to undertake FDI. FDI is a benefit to both the source country and the host country. the multinational enterprise (MNE) is an instrument of imperialist domination. TickTock Inc., an American watchmaker, makes custom watches in California, which it then ships to Brazil for sale there. Based on this information, TickTock Inc. is involved in licensing. Exporting. franchising. outsourcing. using a greenfield investment. What is a political argument for regional economic integration? It reduces the potential for violent conflict. It creates opportunities for entrepreneurism. It tends to increase national sovereignty. It stimulates economic growth. It increases trade diversion. ________ is a pact among Argentina, Brazil, Paraguay, and Uruguay to establish a free trade area. Central America Free Trade Agreement Andean Community Central American Common Market CARICOM Mercosur Gear Electronics used to buy all of its component parts from a local plant in Cleveland, Ohio, but this year it has decided to buy the parts from a lower-cost facility located in Tijuana, Mexico. This is an example of retaliatory trade action. trade diversion. dumping strategic pricing. trade creation. The harmonization of member nations' tax rates is required to form a(n) customs union. free trade area. common market. economic union. planned economy. A(n) ________ has no barriers to trade among member countries, includes a common external trade policy, and allows factors of production to move freely among members, but does not have a common currency. common market economic union free trade area customs union political union The creation of a single market increases price competition for business. In other words, it creates a(n) opportunity. threat. strength. dynamism. Weakness. The Single European Act was put in place in an attempt to convince Great Britain to remain in the EU. determine the viability of a common currency. expand the role of the EU into northern Africa. remove all impediments to the formation of a single market. create a planned economy. The European Community was established by the Maastricht Treaty. Treaty of Lisbon. Treaty of Rome. Single European Act. Treaty of Paris. A country that wants to create the highest level of economic integration would enter into a(n) common market. free trade area. economic union. political union. customs union. Agri-Cor sells farm equipment throughout the euro zone. The company has noticed that some customers travel to countries where equipment sells for less to obtain a better deal. What implication of adopting the euro as a common currency does this situation demonstrate? It makes it easier to compare prices across Europe.