Deck 3: B: Exploring Global Business

Question 1

A tariff is a tax levied on a particular foreign product entering a country.

Answer 1

True

Question 2

By definition, every country has a comparative advantage in some product.

Answer 2

True

Question 3

A restriction on the amount of a particular foreign product that can be purchased or sold is called a foreign-exchange control.

Answer 3

False

Question 4

Purchasing raw materials or products in other nations and bringing them into one's own country is known as importing.

Question 5

A complete halt to trading with a particular nation or in a particular product is called an embargo.

Question 6

When the United States recently imported $2,661 billion in merchandise and services and exported $2,103 billion, it had a trade deficit.

Question 7

Balance of payments is a much broader concept than balance of trade.

Question 8

International business includes all business activities that involve exchanges across state boundaries.

Question 9

The United States has consistently enjoyed a trade surplus.

Question 10

If a country imports more than it exports, its balance of trade is said to be favorable.

Question 11

Selling and shipping raw materials or products to other nations is known as exporting.

Question 12

Absolute advantage is the ability to produce a specific product more efficiently than any other nation.

Question 13

The total flow of money into a country less the total flow of money out of the country over some period of time is called the nation's balance of trade.

Question 14

Exportation of large quantities of a product at a price lower than that of the same product in the home market is called dumping.

Question 15

The total value of a nation's exports less the total value of its imports is known as the balance of payments.

Question 16

A limit on the amount of a particular good that may be imported into a country during a given period of time is called an import quota.

Question 17

Political considerations usually are involved in a country's decision to impose a trade embargo.

Question 18

Quotas may be set on worldwide imports or on imports from a specific country.

Question 19

Comparative advantage is the ability to produce a specific product more efficiently than any other nation.

Question 20

A tax that is levied on a foreign product entering a country is called an export tariff.

Question 21

The World Trade Organization (WTO) was established by GATT to oversee the provisions of the Uruguay Round.

Question 22

Devaluation decreases the cost of foreign goods and increases the cost of domestic goods to foreign firms.

Question 23

From 1947 to 1994, GATT was unable to sponsor any round of negotiations to reduce trade restrictions.

Question 24

Trade restrictions limit choices for consumers but have no effect on the prices charged for the products.

Question 25

A reduction of the value of a nation's currency relative to the currencies of other countries is called a currency devaluation.

Question 26

The Doha Round of negotiations focuses on industrial and nontariff barriers, agriculture, services, and easing trade rules.

Question 27

Trade restrictions usually have no immediate or long-term economic consequences.

Question 28

Cultural barriers can impede acceptance of products in foreign countries.

Question 29

Least-favored-nation (LFN) status was the famous principle of GATT.

Question 30

Decreases in trade barriers create more choices for consumers and new opportunities for job seekers.

Question 31

The participants in the Kennedy Round have succeeded in reducing tariffs by less than 20 percent.

Question 32

MERCOSUR is the third-largest trading block behind NAFTA and the EU.

Question 33

One of the consequences of trade restrictions is misallocation of international resources.

Question 34

An international organization that includes the United States and several other countries and whose goal is to reduce or eliminate tariffs and other barriers to world trade is commonly referred to as GATT.

Question 35

Devaluation increases the cost of foreign goods, while it decreases the cost of domestic goods to foreign firms.

Question 36

The Organization of Petroleum Exporting Countries is a group that was formed in 1960 in response to reductions in the prices that oil companies were willing to pay for crude oil.

Question 37

Due to worldwide trade restrictions, international business is declining in volume.

Question 38

U.S. trade restrictions benefit only a few industries while harming many others.

Question 39

It is appropriate for a country to impose trade restrictions on exports that might endanger its national security.

Question 40

An organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies is called an economic community.

Question 41

Most trading companies are involved in manufacturing or owning assets related to manufacturing.

Question 42

An international bank that makes short-term loans to countries experiencing balance of payment deficits is called a multilateral development bank.

Question 43

An important and practical issue for domestic firms dealing with foreign customers is securing payment.

Question 44

All five multilateral development banks are supported by the industrialized nations, including the United States.

Question 45

Joint venture agreements generally require a very low level of commitment from all the parties involved.

Question 46

The TPP was agreed upon in the 1970s by a small group of Central American countries.

Question 47

A trading company provides a link between buyers and sellers in different countries.

Question 48

Critics of NAFTA maintain that is has resulted in job losses and has done nothing to help the environment.

Question 49

A letter of credit is issued in favor of the importer.

Question 50

A letter of credit is issued by the transport carrier to the exporter to prove that merchandise has been shipped.

Question 51

One of the problems with licensing as a method of achieving international business is that it is a much more difficult procedure to implement than the other methods.

Question 52

Trading companies do not take title to products.

Question 53

The International Trade Administration (ITA) offers assistance and information to help exporters.

Question 54

A draft is issued by the exporter's bank, ordering the importer's bank to pay for the merchandise and thus guaranteeing payment once it is accepted by the importer's bank.

Question 55

A bill of lading is issued by the transport carrier to the exporter to prove that merchandise has been shipped.

Question 56

Countertrade is losing its importance in international trade.

Question 57

A firm's direct investment in international business involves building a new plant or buying an existing plant in a foreign country to produce its own products, or it may involve buying an existing firm in a foreign country.

Question 58

A firm that has no ties to a specific nation or region and operates on a worldwide scale is called a national enterprise.

Question 59

Licensing and exporting can be considered relatively low-risk methods of entering foreign markets.

Question 60

Strategic alliances are partnerships formed to create competitive advantage on a worldwide basis.

Question 61

The International Monetary Fund (IMF) makes short-term loans to developing countries experiencing balance-of-payment deficits.