Deck 3: The World Marketplace: Business Without Borders

Question 1

In recent years, the rate of economic growth for both India and China has lagged well behind that of the United States.

Answer 1

False

Question 2

International trade can offer companies an invaluable source of new ideas.

Answer 2

True

Question 3

One drawback of global trade is that it increases the risk to firms who must do business in many different countries.

Answer 3

False

Question 4

Companies engage in global trade because of the benefits such as better access to factors of production, reduced risk, and an inflow of new ideas.

Question 5

One of the factors limiting the economic development of nations like China and India is that they are tied down by old technologies like conventional landline telephone networks.

Question 6

Businesses that are actively involved in foreign markets often discover leading­edge trends that can give them a jump on the competition in other markets around the world.

Question 7

The United States is known to offer plentiful capital, which is less available in other parts of the world.

Question 8

Compared to the U.S., the nations of China and India have larger populations but lower rates of economic growth.

Question 9

Global trade increases dependence on one economy, increasing the economic risk for multinational firms.

Question 10

Access to technology has led individual economies around the world to become more interdependent than ever before.

Question 11

Despite their huge populations, China and India offer very limited market opportunities to foreign producers, because they refuse to open their economies to foreign investment.

Question 12

International trade helps even out some of the resource imbalances among nations.

Question 13

One major risk of engaging in global trade is that as national economies continue to integrate, an economic meltdown in one part of the world can have far­reaching impact.

Question 14

The GDP rate has been shown to grow in relation to an increase in cell phone ownership.

Question 15

As access to technology rises and barriers to trade fall, individual economies around the world have become more independent than ever before.

Question 16

International trade helps to ease some of the resource imbalance among nations around the world.

Question 17

The markets in China and India are attractive to American firms due to both the huge populations of these nations and because both nations are experiencing rapid economic growth.

Question 18

International trade stimulates competition as it encourages innovation and creativity for new products.

Question 19

When resources are limited, producing more of one good means producing less of something else. The opportunity cost of producing more of a good is the value given up by not producing the second­best choice.

Question 20

The United States's economy lags behind other highly­populated countries, because a lower population in the U.S. puts a drag on economic growth.

Question 21

A country has an absolute advantage when it can produce more of a good than other nations, using the same amount of resources.

Question 22

A country has a comparative advantage in the production of a good or service when it can produce that good or service at the lowest opportunity cost compared to other countries.

Question 23

In the context of international markets, industries in areas where their country has an absolute advantage tend to be more successful than industries in areas where their nation has a comparative advantage.

Question 24

When the total value of imports is higher than the total value of exports, a country experiences a trade deficit.

Question 25

A country experiences a trade surplus when the total value of exports is higher than the total value of imports.

Question 26

A balance of payments surplus means that more money flows out than in.

Question 27

In American firms with Japanese operations, a strong dollar versus a Japanese yen results in a higher operating cost.

Question 28

The exchange rate expresses the value of one nation's currency in terms of another nation's currency.

Question 29

Comparative advantage always remains static.

Question 30

The balance of trade is a measure of the difference between a nation's exports and imports.

Question 31

China and India have invested in creating stronger infrastructure and institutions of higher education in an effort to build a comparative advantage versus other nations in technology production.

Question 32

Balance of payments includes foreign borrowing and lending, foreign aid payments and receipts, and foreign investments.

Question 33

A nation's balance of trade is minimally related to that nation's balance of payments.

Question 34

The United States has had an overall trade deficit since 1976, and as the American appetite for foreign goods has grown, the trade deficit has increased.

Question 35

The United States has consistently experienced trade surpluses over the past 30 years.

Question 36

With a given amount of labor and other resources, producers in the nation of Germany can produce either 100 SUVs or 50 sedans. Thus, two SUVs must be given up to produce each sedan. Using the same amount of labor and resources, producers in Japan can produce 40 SUVs or 40 sedans­so one SUV must be given up for each sedan produced. Based on this information, Japan has a comparative advantage in the production of sedans.

Question 37

The balance of trade includes the value of services as well as the value of goods.

Question 38

The United States boasts a comparative advantage versus most countries in the production of electronics.

Question 39

A nation's balance of trade is a major component of its balance of payments.

Question 40

A trade deficit signals the wealth of an economy.

Question 41

During the holiday season of 2007, many Europeans flew to New York and Boston to shop for gifts, claiming that their money seemed to go much further in the United States than it did in their own countries. This suggests that the dollar was weak relative to the Euro in late 2007.

Question 42

All firms use the same strategy to seize the opportunities in global markets.

Question 43

Exporting involves shipping goods abroad that have been produced domestically.

Question 44

Imported products carry the brand name of the importer, and they also carry as much risk.

Question 45

Foreign outsourcing has increased in popularity with U.S. business owners because foreign workers take more personal pride in their work than their counterparts in the United States.

Question 46

Countertrade involves the barter of products for products rather than for foreign currency.

Question 47

Even though Polly Pockets toys made in China posed a choking hazard, the U.S. continues to import them because the American consumer wants them.

Question 48

In regard to global markets, smaller firms do not contract with foreign manufacturers.

Question 49

When firms approach international markets, profit opportunity and risk do not vary significantly along with cost and control.

Question 50

A large chunk of international commerce involves the barter of products for products rather than for currency.

Question 51

Barter opportunities tend to increase during economic upsurges.

Question 52

Due to the risk involved with exporting, only large companies have had success employing this strategy for reaching global markets.

Question 53

Contracting with foreign suppliers to manufacture products at lower costs than domestic production discourages global competition.

Question 54

Importing is the buying of products from overseas markets that have already been produced.

Question 55

Foreign licensing and franchising is one way to engage small businesses in global competition.

Question 56

Companies that choose to export products to a foreign country spend more to enter that market than companies that choose to build their own factories.

Question 57

Foreign outsourcing means contracting with foreign suppliers to produce products.

Question 58

Quality control forms a key risk of exporting.

Question 59

A key advantage to U.S. firms of contracting with China to produce products is China's unsurpassed attention to quality.

Question 60

Foreign outsourcing can cut production costs to a fraction of the cost of domestic production.

Question 61

A formal, long­term agreement is usually called a strategic alliance, while a less formal, less encompassing agreement is usually called a partnership.

Question 62

Infrastructure refers to a country's physical facilities supporting economic activity, including transportation, power generation, and banking.

Question 63

Foreign direct investment tends to be inexpensive, but it gives companies very little control of business operations in a foreign country.

Question 64

In the context of international trade, conducting consumer research is one of the ways for businesses to jump over sociocultural barriers.

Question 65

A key difference between franchising and licensing is that franchisees use the identity of the franchisor.

Question 66

Foreign franchising is a specialized type of licensing.

Question 67

In terms of international trade, bribery and corruption are technically legal in every major country.

Question 68

In the context of international trade, countries with the highest trade barriers often have the least competition.

Question 69

According to Harvard finance professor Mihir Desai, joint ventures tend to be most useful in countries that require local political and cultural knowledge in order to successfully do business.

Question 70

Although credit card purchases are still relatively low in much of the world, particularly in Asia, recent growth has been explosive and will probably continue for the next few years.

Question 71

Protectionism is the use of national policies designed to restrict international trade while protecting interests of domestic businesses.

Question 72

All businesses encounter some barriers in their operations, whether they have foreign trade or not.

Question 73

Nonverbal communication and religious celebration are examples of sociocultural differences that must be understood when conducting international trade.

Question 74

Foreign licensing involves a domestic firm granting a foreign firm the rights to produce and market its product or use its trademark in a defined geographic area.

Question 75

Joint ventures involve the merging of two or more companies.

Question 76

In the context of international trade, international companies must comply with international legal standards, but not necessarily with the laws of their host country.

Question 77

In the context of global market, the licensee is a foreign company buying the right to produce or market its product in another geographic area.

Question 78

A franchisor offers other businesses the right to produce and market its products within specific operating requirements.

Question 79

Currency exchange rate is one of the key sociocultural factors that a company should consider before entering a foreign market.

Question 80

In the context of global market, the licensee is a company granting the right to produce and market its product overseas.