Deck 3: Business in a Borderless World

Question 1

Fit Rite Fasteners, a firm based in the United States, buys metal parts from China to manufacture its fasteners. In doing so, the company is engaged in exporting.

Answer 1

False

Question 2

Trade deficits can help businesses succeed, create more jobs, and improve the standard of living.

Answer 2

False

Question 3

A business that is engaging in importing and exporting must be familiar with the ratio at which one nation's currency can be exchanged for another. In other words, the business must be familiar with the balance of trade.

Answer 3

False

Question 4

Sociocultural differences, such as variations in body language and personal space, rarely have an impact on international business.

Question 5

The General Agreement on Tariffs and Trade (GATT) provided a forum for tariff negotiations and a place where international trade problems could be resolved.

Question 6

The World Trade Organization agreements were rejected by most of the world's trading nations.

Question 7

Many U.S. companies have taken advantage of Mexico's low labor costs and proximity to the United States to set up maquiladoras.

Question 8

The Asia-Pacific Economic Cooperation (APEC) is a trade agreement between Asian countries and does not include the United States.

Question 9

Export agents either purchase products outright or take them on consignment but are not responsible for storage and transportation of the product.

Question 10

Licensing is a good option for small manufacturers wanting to launch a well-known brand internationally.

Question 11

As an international business opportunity, direct investment provides the least amount of control but is also the least expensive way to participate in foreign trade.

Question 12

Multinational corporations (MNCs) are rarely targeted by activists because they provide so many benefits to the countries in which they do business.

Question 13

A global strategy involves standardizing products for the whole world.

Question 14

If a company in the United States buys, sells, and trades goods and services with several other countries, it is engaged in

A) international business.
B) contract manufacturing.
C) outsourcing.
D) direct investment.
E) the balance of trade.

Question 15

Bolivia, South America is the only country in the world that is able to grow a rare plant that is used to produce a healing ointment for arthritis patients. Because Bolivia is the only country with access to this plant, it has a(n)

A) comparative advantage.
B) comparative disadvantage.
C) absolute advantage.
D) absolute disadvantage.
E) domestic advantage.

Question 16

Suppose there are several countries that are efficient at producing coffee beans and Brazil is one of those countries. While Brazil is efficient at producing coffee beans, it is inefficient at producing electronics. Because of this, Brazil sells its coffee beans to other countries and buys electronics from other countries. This scenario exemplifies the concept of

A) supply and demand.
B) absolute advantage.
C) a monopoly.
D) exchange controls.
E) comparative advantage.

Question 17

Why has outsourcing become a controversial practice in the United States?

A) Outsourcing takes away jobs that could be accomplished by workers in the United States.
B) Outsourcing takes away a company's ability to develop a comparative advantage.
C) Outsourcing has made U.S.-based products significantly more expensive.
D) Outsourcing increases the cost of labor and supplies needed to get the job done.
E) The outsourced products end up having sub-standard quality because their producers lack expertise.

Question 18

Ann bought a new shirt from a retailer in the United States. When she checked the tag, she saw that her shirt was made in Vietnam. This means her shirt is a(n) ________ good.

A) exported
B) outsourced
C) absolute
D) imported
E) domestic

Question 19

U.S. exports to China have been rapidly increasing but not fast enough to offset the imports from China. This means that the United States has a(n)

A) domestic gain.
B) trade surplus.
C) trade deficit.
D) absolute advantage.
E) comparative advantage.

Question 20

One of the outcomes of a country continually operating with a trade deficit is

A) an increase in successful businesses.
B) an increase in the number of exported products.
C) an increase in unemployment.
D) a decrease in the number of imported products.
E) a higher standard of living.

Question 21

Until 1970, the United States experienced a trade surplus. What factor contributed to this surplus?

A) inefficient manufacturing systems
B) plentiful imports from other countries
C) a negative balance of payments
D) an abundance of natural resources
E) healthy economies in other countries

Question 22

A U.S. firm is considering doing business in a foreign country. What economic factor should the business consider regarding the country in which it will conduct its business?

A) whether the country is part of a cartel
B) any tariffs the country might impose
C) the political climate of the country
D) cultural differences between the two countries
E) the infrastructure of the country

Question 23

Which statement about less-developed countries (LDCs) is true?

A) Almost all countries in Europe are LDCs.
B) In LDCs, consumers tend to purchase more nonessential products.
C) LDCs are characterized by solid infrastructures.
D) LDCs represent a potentially huge and profitable market for many businesses.
E) LDCs are characterized by high per-capita income.

Question 24

Physical facilities such as railroads, highways, airfields, hospitals, and distribution systems all support a country's economic activities and are referred to as the country's

A) absolute advantage.
B) strategic alliance.
C) infrastructure.
D) exchange rate.
E) exchange controls.

Question 25

If the United States were to devalue its currency, the most likely result would be

A) an increase in foreign tourists to the United States.
B) a decrease in the number of foreign tourists to the United States.
C) a decrease in the sale of domestic goods.
D) an increase in its imports.
E) an increase in the cost of American goods abroad.

Question 26

Which situation encourages the sale of domestic goods and tourism?

A) inflation
B) dumping
C) outsourcing
D) devaluation
E) tariffs

Question 27

Janie took a vacation to Italy and bought $1,000 worth of jewelry in Florence. The United States will allow Janie to bring $800 back into the country duty free. What happens to the other $200 that is part of her total expenditure?

A) Janie does not have to account for the extra $200; the U.S. government will pay a duty tax on it.
B) Janie cannot bring home more than $800 worth of goods, so she must return $200 worth of merchandise.
C) Janie must pay an ad valorem tariff on the extra $200.
D) Janie must pay a fixed tariff on the extra $200.
E) Janie must claim the $200 as an export tariff.

Question 28

What is the primary purpose of a protective tariff?

A) to allow more expensive domestic goods to compete with foreign ones
B) to completely ban certain goods from entering a country
C) to limit the number of products in a certain category from entering a country
D) to standardize the number of items that can be brought into a country duty free
E) to makeup for variances in currency exchange rates.

Question 29

If Thailand wants to limit the amount of sugar that the United States imports into its country, it would do so by imposing a(n)

A) quota.
B) value-added tax.
C) export tariff.
D) embargo.
E) subsidy.

Question 30

A(n) ________ is best defined as a prohibition on trade in a particular product.

A) ad valorem tariff
B) excise tax
C) cartel
D) quota
E) embargo

Question 31

Because it goes against their religious beliefs, some Muslim nations forbid the importation of alcoholic beverages into their countries. This is an example of a(n)

A) trade tariff.
B) trade embargo.
C) quota limit.
D) fixed tariff.
E) ad valorem tariff.

Question 32

All of the following nations have been subject to economic sanctions for political reasons in recent years EXCEPT

A) the United States.
B) Cuba.
C) Iran.
D) Syria.
E) North Korea.

Question 33

A country that imposes an embargo in response to some political event is attempting to

A) restrict trade with other nations.
B) increase trade with other nations.
C) encourage dumping into the country.
D) increase the amount of currency that can be brought into the country.
E) increase the potential for countries to engage in dumping.

Question 34

A catastrophic flood crippled a country's government. In an effort to help local businesses rebuild, the government forced foreign businesses out of the country. This is an example of a(n) ________ barrier to trade.

A) political
B) social
C) economic
D) ethical
E) legal

Question 35

Differences in spoken and written language represent a(n) ________ barrier to international trade.

A) technological
B) political
C) legal
D) cultural
E) economic

Question 36

At the conclusion of a business meeting in Brazil, David gave the A-OK sign to the people in the room. This hand gesture in America means OK, however, the Brazilians were embarrassed because in their culture the gesture is perceived as rude. This situation exemplifies how even simple differences in ________ can cause misunderstandings in international relationships.

A) laws
B) family roles
C) body language
D) gender
E) written language

Question 37

Schweppes Tonic Water discovered during an ad campaign in Italy that its name was translated to read "Schweppes Toilet Water." Effective translations of product names are an example of a(n) ________ barrier to international trade.

A) political
B) cultural
C) legal
D) ethical
E) demographic

Question 38

Americans value promptness in business meetings, while it is common in Mexico and Spain for a meeting to start thirty minutes late. This exemplifies how the perceptions of ________ differ among nations.

A) space
B) time
C) language
D) ethics
E) respect

Question 39

Which statement about the General Agreement on Tariffs and Trade (GATT) is true?

A) More than 100 nations abided by its rules.
B) It was originally signed by 30 nations in 1947.
C) It sponsored rounds of negotiations aimed at increasing trade restrictions.
D) The Uruguay Round promoted dumping.
E) The most recent round was the Paraguay Round (2001-2005).

Question 40

What is "Brexit"?

A) the new currency adopted by the European Union
B) the United Kingdom's decision to leave the European Union
C) a set of sanctions imposed on EU members that trade outside of the union
D) the unilateral decision to remove the United Kingdom and France from the union
E) the term used for tariffs the EU has imposed on other nations

Question 41

Which organization was established by the industrialized nations in 1946 to loan money to underdeveloped and developing countries?

A) the Foreign Credit Insurance Association
B) the Exim Bank
C) the World Bank
D) the World Trade Organization
E) the International Monetary Fund

Question 42

What is true of the World Bank?

A) It funds the member nations of the NAFTA and EU.
B) It provides aid to industrialized nations in times of financial crisis.
C) It acts as a global police force.
D) It finances construction projects in underdeveloped and developing countries.
E) It helps developed nations obtain money to start businesses.

Question 43

Stuart handles international transactions for other firms. He buys goods on consignment and stores them until they are purchased by a buyer in the international marketplace. After the goods are purchased, Stuart is also responsible for transporting the goods. Stuart is acting as a(n)

A) licensing agent.
B) franchising agent.
C) export agent.
D) contract manufacturer.
E) direct investor.

Question 44

Which scenario is an example of importing?

A) The National Football League enters into a contract with a German company allowing it to sell its hats and gloves with the NFL logo on them.
B) A Belgium firm invests in building a factory in Canada and moves its manufacturing operations there.
C) To meet the worldwide demand for oranges, orange growers in Florida have increased sales of the product to areas outside of the United States.
D) A computer software company located in the United States decides to have a firm in India handle its customer service.
E) A company in the United States buys clothing from a French clothier to sell in its retail store.

Question 45

What is true regarding trading companies?

A) They buy and sell goods in only one country.
B) They handle all activities required to move products from one country to another.
C) They rarely offer warehousing facilities.
D) They are very different from export agents.
E) They refrain from handling consulting activities.

Question 46

What type of company benefits the most from licensing?

A) a large manufacturer that wants to launch its own brand internationally
B) a small manufacturer that wants to launch a well-known brand internationally
C) a small manufacturer that wants to launch its own brand internationally
D) a large manufacturer that wants to transform a less-known brand into a well-known brand internationally
E) a small manufacturer that wants to launch a well-known brand locally

Question 47

An American company that manufactures coffee makers has a foreign firm assemble the water reservoir tanks for the machines but the final product carries the name of the American firm. This is an example of

A) contract manufacturing.
B) licensing.
C) direct investment.
D) exporting.
E) importing.

Question 48

A Swedish auto manufacturer has an American company produce its auto manuals. For the American firm, this is an example of

A) insourcing.
B) licensing.
C) franchising.
D) outsourcing.
E) offshoring.

Question 49

A company headquartered in Milan, has completely transferred its printing services to a company in Germany because the labor and supplies are less expensive there. This is an example of

A) licensing.
B) franchising.
C) offshoring.
D) insourcing.
E) outsourcing.

Question 50

An American firm decides to build another manufacturing plant in Poland to handle the demand for its products in that country. This is an example of

A) a strategic alliance.
B) a direct investment.
C) a joint venture.
D) licensing.
E) exporting.

Question 51

Suppose a company headquartered in Europe operates over 500 factories around the world but does not have any significant ties to any nation or region in which it operates. This company would be an example of a(n)

A) export agency.
B) multinational corporation.
C) strategic alliance.
D) joint venture.
E) trading company.

Question 52

On what grounds are multinational corporations (MNCs) often criticized by anti-globalization activists?

A) They increase unemployment in the host country.
B) They bring in technology that is unknown to the host country.
C) They use the capital-intensive mode of production.
D) They are liable to pay the taxes levied by the government of the host country.
E) They misuse and misallocate scarce resources.

Question 53

All of the following are examples of multinational strategy EXCEPT

A) in Vietnam, McDonald's offered its traditional menu items as well as McPork sandwiches targeted toward Vietnam consumers.
B) soap and detergent manufacturers have adapted their products to local water conditions, washing equipment, and washing habits.
C) Colgate-Palmolive Co. has developed an inexpensive, plastic, hand-powered washing machine for households without electricity.
D) American clothing companies use social media sites to connect with global customers.
E) companies have modified their advertising to adapt to language and cultural differences.

Question 54

More and more companies are moving from the multinational strategy to a global strategy that involves ________ products.

A) customizing
B) standardizing
C) promoting
D) normalizing
E) generalizing

Question 55

________ involves standardizing products, and their promotion and distribution if possible, for the whole world, as if it were a single entity.

A) Countertrading
B) Offshoring
C) Licensing
D) Dumping
E) Globalization

Question 56

Which statement is true of the Commercial Service of the U.S. Department of Commerce?

A) It focuses on large businesses.
B) It is a local business solutions unit.
C) It offers U.S. firms a unique global network.
D) It offers U.S. firms practical knowledge of national markets and industries.
E) It doesn't use information technology.

Question 57

Which statement is true about CIBERs?

A) The network of CIBERs consists of a wide variety of U.S. firms, especially for small and medium-sized firms.
B) The network of CIBERs can provide small-sized firms knowledge of the internationalization process.
C) CIBERs operate via the Chambers of Commerce of most major cities.
D) CIBERs are funded by local businesses with an interest in understanding internationalization processes.
E) CIBERs helps small-sized firms streamline domestic processes.

Question 58

Explain the terms balance of trade, trade deficit, and trade surplus in the context of the United States.

Question 59

Describe how economic barriers such as economic development, infrastructure, exchange rates, and devaluation affect international trade.

Question 60

Describe the types of tariffs that are imposed on products and the reasons for their use.

Question 61

Discuss the organizations and agreements, specifically the General Agreement on Tariffs and Trade, the World Trade Organization, the World Bank, and the International Monetary Fund, that foster international trade and can help companies succeed in global markets.

Question 62

Describe NAFTA as a trade agreement. What is its purpose? What has been advantageous about the agreement and what are its controversies?

Question 63

Explain why a company may opt for a joint venture or a strategic alliance.