Deck 1: Introduction to International Business Transactions

Question 1

Globalization in trade is likely to be accelerated through increased regionalization.

Answer 1

True

Question 2

Direct foreign investment measures the degree of trade in goods between two nations.

Answer 2

False

Question 3

Private individuals may use the International Court of Justice to settle commercial disputes.

Answer 3

False

Question 4

Under U.S. law, treaties are not binding on state and local governments.

Question 5

Lex Mercatoria refers to the process by which day-to-day practices become codified into international customary law.

Question 6

International harmonization in the area of contract law will have the effect of increasing costs in international contract formation.

Question 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.

Question 8

An Export Trading Company (ETC) is a type of Export Management Company (EMC) that takes title to a product.

Question 9

Soft currency refers to the currency of a country that may be exchanged for the currency another country without restriction.

Question 10

Some countries block the repatriation of money earned or invested in their countries.

Question 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.

Question 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.

Question 13

Evergreen statutes limit an employer's ability to terminate an employee or agent.

Question 14

Import quotas are a type of non-tariff trade barrier.

Question 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.

Question 16

Political risk assessment is difficult because of the scarcity of research materials.

Question 17

Countertrade often is used to overcome currency convertibility or repatriation problems.

Question 18

Customs brokers act as the seller's or exporter's agent.

Question 19

The four types of international business transactions are importing, exporting, trade in services, and countertrade.

Question 20

Trade in goods and direct foreign investment are good measures of globalization.

Question 21

Currency exchange risk cannot be minimized because of the unpredictability of currency fluctuations.

Question 22

There are no United Nations Agencies that are active in issues pertaining to international business transactions.

Question 23

Copyrights, patents, and real estate are all forms of intellectual property.

Question 24

Protection of domestic industries is often a reason by countries in imposing trade barriers.

Question 25

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

Question 26

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.

Question 27

Which of the following is not a service of the International Chamber of Commerce:

A) International Court of Arbitration
B) UCP 600
C) Incoterms 2020
D) Convention on Contracts for the International Sale of Goods (CISG)

Question 28

__________ 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

Question 29

The advantage of indirect exporting as opposed to direct exporting is:

A) Higher profits
B) More control over the export process
C) Minimized risk
D) None of the above

Question 30

Management consulting would generally fall under which category for conducting international business:

A) Sale of services
B) Licensing
C) Direct foreign investment
D) Exporting/Importing

Question 31

In general, __________ is the riskiest of international business transactions:

A) Indirect exporting
B) Licensing
C) Direct foreign investment
D) Sale of services

Question 32

Convertibility, repatriation, and rate fluctuation are all types of:

A) Currency risk
B) Legal risk
C) Economic risk
D) Political risk

Question 33

Two types of countertrade include:

A) Repatriation; convertibility
B) Barter; counterpurchase
C) Joint venture; technology transfer
D) None of the above

Question 34

Local participation requirements refer to:

A) The host country restricts currency repatriation
B) Local employees must be host country nationals.
C) The host country retains all intellectual property of a foreign investment.
D) Limits on the amount of foreign equity ownership in a host country firm.

Question 35

Trade barriers, expropriation, and nationalization are all forms of:

A) Political risk
B) Legal risk
C) Economic risk
D) Currency risk

Question 36

__________ is a complicated form of barter, comprising a chain of buyers and sellers in different markets:

A) Counterpurchase
B) Buy-back
C) Protocol agreement
D) Switch trading

Question 37

In order to reduce the political risk of expropriation or non-repatriation of currency, countries have entered into:

A) Reciprocal trade agreements
B) Agreements on technical barriers
C) Agreements on import licensing
D) Bilateral investment treaties

Question 38

The method by which a firm can move profits and costs from a high tax to a low tax country is:

A) Transfer pricing
B) Offset agreements
C) Competitive trade
D) Barter

Question 39

Technology or intellectual property transfer is characterized as which type of international business transaction:

A) Exporting and importing
B) Sale of services
C) Direct foreign investment
D) None of the above

Question 40

Import quotas, customs charges, export subsidies, and discriminatory labeling are all examples of:

A) Value-added taxes
B) Non-tariff barriers
C) Local participation requirements
D) Indemnity charges

Question 41

The process of purchasing goods from a foreign supplier and shipping them to the firm's home country is known as:

A) Foreign exchange
B) Exporting
C) Importing
D) None of the above

Question 42

A government corporation that assists U.S. investments in developing countries by providing loans, investment services, and political risk insurance is:

A) OPIC
B) MIGA
C) WTO
D) GATT

Question 43

Export Management Companies work with individual exporters by acting as:

A) Freight forwarders
B) Customs brokers
C) Accountants
D) Consultants

Question 44

The simultaneous buying and selling of a foreign currency in two or more markets in order to take advantage of price differences:

A) Foreign exchange options
B) Futures contract
C) Arbitrage
D) Forward contract

Question 45

The risks of exporting, licensing, and direct foreign investment can be reduced through the use of:

A) International bankers
B) Commercial insurance companies
C) Freight forwarders
D) All of the above

Question 46

An agreement by a foreign seller to include as part of the sale in the foreign nation the use of parts or services from local suppliers in order to satisfy local content requirements is known as:

A) Buy-back agreement
B) Offset agreement
C) Switch agreement
D) Protocol agreement

Question 47

Countertrade arrangements between and among sovereign nations are known as:

A) Clearing agreements
B) Framework agreements
C) Performance agreements
D) Import entitlement agreements

Question 48

Differences in the rules and remedies in the civil, common, and socialist legal systems that can give rise to unexpected liabilities in international business transactions is known as:

A) Political risk
B) Cultural risk
C) Country risk
D) Legal risk

Question 49

Describe the general methods of conducting international business (exporting, etc.) and discuss The risks associated with each method.

Question 50

Describe why the risks to a firm increase as the level of penetration into a foreign market increase.

Question 51

Describe the difference between indirect and direct exporting and the advantages of each. Discuss the various third parties available to exporters that help facilitate the export process and minimize a firm's risks.

Question 52

Discuss the three types of currency risk and describe how an international businessperson might minimize or overcome those risks.

Question 53

Discuss the various political risks facing the international businessperson and how one might minimize those risks.