Deck 3: A: Exploring Global Business

Question 1

What might be inferred if a nation has a continual deficit in its balance of payments?

Answer 1

Answer not provided.

Question 2

Describe the world economic outlook for international trade.

Answer 2

Answer not provided.

Question 3

How was the World Trade Organization (WTO) created? Why was it established?

Answer 3

Answer not provided.

Question 4

What does it mean for a country to have an absolute advantage? Compare that to having a comparative advantage.

Question 5

What are the most frequently cited reasons for restricting trade? How valid are these reasons? Explain.

Question 6

What are the arguments against trade restrictions? Are these arguments valid? Explain.

Question 7

What is the Doha Round? What was the focus of this round of negotiations?

Question 8

What are the Kennedy, the Tokyo, Uruguay, and the Doha Rounds? How fruitful were these rounds of negotiations?

Question 9

"Devaluation increases the cost of foreign goods, while it decreases the cost of domestic goods of foreign firms." Explain with an example.

Question 10

What is a national balance of trade? What does someone mean when he or she says that the balance of trade is favorable? Unfavorable?

Question 11

What is an embargo? When might it be used?

Question 12

How do trade restrictions affect consumers, workers, and the domestic producers of restricted goods?

Question 13

What are nontariff barriers? How do nontariff barriers restrict international trade?

Question 14

Define tariff. What effect does a tariff have on the price of a product in the country imposing the tariff? Why would a tariff be used?

Question 15

What is the difference between an absolute advantage and a comparative advantage?

Question 16

What was the General Agreement on Tariffs and Trade (GATT)? What was its primary objective?

Question 17

Why is balance of payments a much broader concept than balance of trade?

Question 18

What does it mean for a country to have an absolute advantage? Compare that to having a comparative advantage.

Question 19

What is dumping? Why do domestic manufacturers obtain antidumping duty through the government?

Question 20

Why is foreign economic growth important to the export success of U.S. companies?

Question 21

Landing Service
Landing Service is a lawn furniture company that has been around for many years. It is known for its ability to produce furniture more efficiently than any other company in the nation. In truth, no other companies in any other nation come close. Landing Service has shipped many of its products internationally. In fact, 80 percent of its profits come from international sales. However, the Italian government has imposed a tax on imported furniture items to protect local companies. The Brazilian government, on the other hand, has imposed taxes on Landing Service products due to the government wanting a piece of the pie.
Landing Service initially thought that these taxes were unfair because it was being singled out. However, after Landing Service contacted the organization that had the power to mediate this situation, the furniture company realized that the taxation it was subjected to was legal and that there was nothing it could do about it.
Refer to Landing Service. Landing Service must have contacted which of these organizations to mediate regarding unfair treatment by foreign governments?

A) MDB
B) GATT
C) WTO
D) EU
E) OPEC

Question 22

What are some advantages of licensing as a method of entering international business?

Question 23

What is meant by a multinational enterprise?

Question 24

Describe the major steps in entering international markets.

Question 25

What are the major sources of export assistance from the federal government?

Question 26

What is an economic community? Describe major international economic communities.

Question 27

What does the International Monetary Fund (IMF) do for nations with an unfavorable balance of trade?

Question 28

What is countertrade? Give examples of companies that are engaged in it.

Question 29

Identify the role of the Export-Import Bank of the United States in fostering international business.

Question 30

What are multilateral development banks? What is their purpose? Who supports these banks?

Question 31

Landing Service
Landing Service is a lawn furniture company that has been around for many years. It is known for its ability to produce furniture more efficiently than any other company in the nation. In truth, no other companies in any other nation come close. Landing Service has shipped many of its products internationally. In fact, 80 percent of its profits come from international sales. However, the Italian government has imposed a tax on imported furniture items to protect local companies. The Brazilian government, on the other hand, has imposed taxes on Landing Service products due to the government wanting a piece of the pie.
Landing Service initially thought that these taxes were unfair because it was being singled out. However, after Landing Service contacted the organization that had the power to mediate this situation, the furniture company realized that the taxation it was subjected to was legal and that there was nothing it could do about it.
Refer to Landing Service. Because the company is known for its ability to produce lawn furniture more efficiently than any other company in the world, the company must have a(n) ____ advantage.

A) total
B) relative
C) comparative
D) proportional
E) absolute

Question 32

Landing Service
Landing Service is a lawn furniture company that has been around for many years. It is known for its ability to produce furniture more efficiently than any other company in the nation. In truth, no other companies in any other nation come close. Landing Service has shipped many of its products internationally. In fact, 80 percent of its profits come from international sales. However, the Italian government has imposed a tax on imported furniture items to protect local companies. The Brazilian government, on the other hand, has imposed taxes on Landing Service products due to the government wanting a piece of the pie.
Landing Service initially thought that these taxes were unfair because it was being singled out. However, after Landing Service contacted the organization that had the power to mediate this situation, the furniture company realized that the taxation it was subjected to was legal and that there was nothing it could do about it.
Refer to Landing Service. What type of tax has the Brazilian government imposed on the company?

A) Import duty
B) Embargo
C) Revenue tariff
D) Protective tariff
E) Nontariff barrier

Question 33

Landing Service
Landing Service is a lawn furniture company that has been around for many years. It is known for its ability to produce furniture more efficiently than any other company in the nation. In truth, no other companies in any other nation come close. Landing Service has shipped many of its products internationally. In fact, 80 percent of its profits come from international sales. However, the Italian government has imposed a tax on imported furniture items to protect local companies. The Brazilian government, on the other hand, has imposed taxes on Landing Service products due to the government wanting a piece of the pie.
Landing Service initially thought that these taxes were unfair because it was being singled out. However, after Landing Service contacted the organization that had the power to mediate this situation, the furniture company realized that the taxation it was subjected to was legal and that there was nothing it could do about it.
Refer to Landing Service. What type of tax has the Italian government imposed on the company?

A) Export duty
B) Embargo
C) Revenue tariff
D) Protective tariff
E) Nontariff barrier

Question 34

What are different methods of entering international markets? Which methods require the least and the most degree of involvement in international business?

Question 35

How does a joint venture help a U.S. firm enter international markets?

Question 36

What is a strategic alliance? What is its major advantage?

Question 37

Lynn Bernerd, Inc.
Lynn Bernerd, Inc., manufactures and sells reclining furniture. The company currently operates in the United States but wishes to expand overseas. The company managers have been contemplating the best way to enter the foreign market. At first, the management felt it would be in the company's best interest to let a foreign company use its product and brand in exchange for a royalty. The managers recognized, however, that before the company decided on its foreign strategy it needed to think through all the steps required to enter an international market. As such, the managers believed they needed to consult with some type of agency to help their firm compete more effectively in the global marketplace.
After all the research was completed, the senior managers realized that they wanted to export their product. The managers decided that the transport carrier would notify them when the merchandise was shipped. This would avoid any confusion about lost shipments and ensure better communication with the receiving parties.
Refer to Lynn Bernerd, Inc. Initially, the managers believed that ____ would be the best option for entering the foreign market.

A) exporting
B) creating a joint venture
C) licensing
D) establishing a strategic alliance
E) a merger

Question 38

Describe trading companies. What is an important function of trading companies?

Question 39

Landing Service
Landing Service is a lawn furniture company that has been around for many years. It is known for its ability to produce furniture more efficiently than any other company in the nation. In truth, no other companies in any other nation come close. Landing Service has shipped many of its products internationally. In fact, 80 percent of its profits come from international sales. However, the Italian government has imposed a tax on imported furniture items to protect local companies. The Brazilian government, on the other hand, has imposed taxes on Landing Service products due to the government wanting a piece of the pie.
Landing Service initially thought that these taxes were unfair because it was being singled out. However, after Landing Service contacted the organization that had the power to mediate this situation, the furniture company realized that the taxation it was subjected to was legal and that there was nothing it could do about it.
Refer to Landing Service. The Landing Service does mostly

A) mediating.
B) domestic sales.
C) importing.
D) exporting.
E) currency devaluation.

Question 40

What is the euro? How many nations have adopted the new currency? Are there countries that have chosen not to participate?

Question 41

Purchasing products or materials in other nations and bringing them into one's own country is

A) trading.
B) balancing.
C) exporting.
D) importing.
E) dumping.

Question 42

General Motors and Ford products produced in the United States can be found in many countries around the world. The United States is ____ these automobiles.

A) tariffing
B) importing
C) exporting
D) releasing
E) dumping

Question 43

Lynn Bernerd, Inc.
Lynn Bernerd, Inc., manufactures and sells reclining furniture. The company currently operates in the United States but wishes to expand overseas. The company managers have been contemplating the best way to enter the foreign market. At first, the management felt it would be in the company's best interest to let a foreign company use its product and brand in exchange for a royalty. The managers recognized, however, that before the company decided on its foreign strategy it needed to think through all the steps required to enter an international market. As such, the managers believed they needed to consult with some type of agency to help their firm compete more effectively in the global marketplace.
After all the research was completed, the senior managers realized that they wanted to export their product. The managers decided that the transport carrier would notify them when the merchandise was shipped. This would avoid any confusion about lost shipments and ensure better communication with the receiving parties.
Refer to Lynn Bernerd, Inc. Which of the following alternatives could have worked as a link between the managers at Lynn Bernerd, Inc. and the buyer from a different country?

A) International barter
B) Counter trade
C) Trading company
D) Comparative trader
E) Foreign-exchange control

Question 44

Lynn Bernerd, Inc.
Lynn Bernerd, Inc., manufactures and sells reclining furniture. The company currently operates in the United States but wishes to expand overseas. The company managers have been contemplating the best way to enter the foreign market. At first, the management felt it would be in the company's best interest to let a foreign company use its product and brand in exchange for a royalty. The managers recognized, however, that before the company decided on its foreign strategy it needed to think through all the steps required to enter an international market. As such, the managers believed they needed to consult with some type of agency to help their firm compete more effectively in the global marketplace.
After all the research was completed, the senior managers realized that they wanted to export their product. The managers decided that the transport carrier would notify them when the merchandise was shipped. This would avoid any confusion about lost shipments and ensure better communication with the receiving parties.
Refer to Lynn Bernerd, Inc. Which agency should the managers at Lynn Bernerd, Inc. seek assistance from?

A) GATT
B) Trade Information Center
C) World Trade Organization
D) U.S. Export Assistance Centers
E) U.S. and Foreign Commercial Services

Question 45

A new country is formed in central Africa. It has no absolute advantage in crude oil, diamonds, or wool. However, it does manufacture high-quality bows and arrows for specialized safari adventures. Which of the following statement is true?

A) The new country should try to produce its own crude oil, diamonds, and wool.
B) The new country has a comparative advantage in the production of bows and arrows.
C) The new country has an unqualified advantage in the production of bows and arrows.
D) The new country has a determined advantage in the production of arrows.
E) The new country is engaged in dumping bows and arrows.

Question 46

Selling and shipping raw materials or products to other nations is called

A) exporting.
B) alien trading.
C) importing.
D) tariffing.
E) deficit trading.

Question 47

Because it controls the world's diamond deposits, the DeBeers Consolidated Mines, Ltd., has a(n)

A) absolute advantage.
B) comparative advantage.
C) advantage based on efficient production.
D) trade deficit.
E) lot of diamonds.

Question 48

Buyers that purchase dresses in Europe or calculators in Taiwan and have them shipped back to the United States for resale are engaging in

A) exporting.
B) shipping.
C) importing.
D) expelling.
E) dumping.

Question 49

Nordstrom sells designer suits made in Italy in its stores in the United States. Nordstrom is ____ suits.

A) exporting
B) importing
C) trading
D) dumping
E) taxing

Question 50

If Japan were regarded as the best electronics manufacturer in the world, what would be true?

A) Japan would have a comparative advantage in electronics manufacturing.
B) Japan would have a positive balance of trade.
C) The United States would have a comparative advantage in electronics.
D) Japan would have an absolute advantage in electronics production.
E) Japan would have a trade deficit with the United States.

Question 51

Because Saudi Arabia and Australia have ____, Saudi Arabia can specialize in the production of crude oil and petroleum products, and Australia can specialize in the production of wool.

A) a company advantage
B) an absolute advantage
C) a comparative advantage
D) an effective manufacturing system
E) very low labor costs

Question 52

____ is the ability to produce a specific product more efficiently than any other product.

A) Absolute advantage
B) Specialization
C) Relative advantage
D) Dominant advantage
E) Comparative advantage

Question 53

How has international trade changed since the end of World War II?

A) Trade across national borders has decreased since its peak during the early to mid-1900s.
B) International trade has increased steadily since this period of time.
C) The amount of international trading has remained relatively stable since this time.
D) International trade has become completely unrestricted.
E) International trading has become much more heavily regulated and restricted by all countries.

Question 54

By definition, every country has a(n) ____ advantage in some product.

A) relative
B) absolute
C) comparative
D) superior
E) inferior

Question 55

Which of the following scenarios would not be considered international business?

A) A Chinese manufacturer sells toys to a large toy retailer in the United States.
B) Intel sells its processors to a computer manufacturer in Korea.
C) A large jewelry store in England purchases its diamonds from DeBeers in South Africa.
D) A bearing manufacturer in South Carolina sells its parts to a Toyota plant in Kentucky.
E) French companies purchase crude oil from Saudi Arabia.

Question 56

The United Kingdom sells industrial supplies and materials to many nations around the world. The United Kingdom thus engages in

A) dumping.
B) tariffing.
C) importing.
D) exporting.
E) deficit trading.

Question 57

Although it lacks sources of timber and oil, Chablis has a plentiful supply of grapes for its many wineries. Which statement about Chablis is true?

A) It has a comparative advantage in wine production.
B) It has a comparative advantage in timber and oil production.
C) It has an absolute advantage in the production of wine.
D) It has an absolute advantage in timber and oil production.
E) It has no comparative or absolute advantages.

Question 58

Lynn Bernerd, Inc.
Lynn Bernerd, Inc., manufactures and sells reclining furniture. The company currently operates in the United States but wishes to expand overseas. The company managers have been contemplating the best way to enter the foreign market. At first, the management felt it would be in the company's best interest to let a foreign company use its product and brand in exchange for a royalty. The managers recognized, however, that before the company decided on its foreign strategy it needed to think through all the steps required to enter an international market. As such, the managers believed they needed to consult with some type of agency to help their firm compete more effectively in the global marketplace.
After all the research was completed, the senior managers realized that they wanted to export their product. The managers decided that the transport carrier would notify them when the merchandise was shipped. This would avoid any confusion about lost shipments and ensure better communication with the receiving parties.
Refer to Lynn Bernerd, Inc. When the transport carriers notify the exporter that the product has been shipped, they use a

A) bill of lading.
B) receipt.
C) letter of credit.
D) draft.
E) shipping verification.

Question 59

Lynn Bernerd, Inc.
Lynn Bernerd, Inc., manufactures and sells reclining furniture. The company currently operates in the United States but wishes to expand overseas. The company managers have been contemplating the best way to enter the foreign market. At first, the management felt it would be in the company's best interest to let a foreign company use its product and brand in exchange for a royalty. The managers recognized, however, that before the company decided on its foreign strategy it needed to think through all the steps required to enter an international market. As such, the managers believed they needed to consult with some type of agency to help their firm compete more effectively in the global marketplace.
After all the research was completed, the senior managers realized that they wanted to export their product. The managers decided that the transport carrier would notify them when the merchandise was shipped. This would avoid any confusion about lost shipments and ensure better communication with the receiving parties.
Refer to Lynn Bernerd, Inc. Which of the following options is not one of the steps needed for entering an international market?

A) Contact local government to see if taxes on trade can be waived.
B) Establish an overseas distribution network.
C) Set export prices and payment terms, methods, and techniques.
D) Identify key foreign markets for the product.
E) Identify exportable products.

Question 60

The land of Narnack has very infertile soil but a large supply of oil. What action should Narnack take? Narnack should

A) specialize in the production of crude oil and trade this for grain and other food products.
B) grow food anyway because its people will need it for survival.
C) focus on attracting tourists to its country and thus purchase the needed supplies of food.
D) specialize in the production of food products such as cereals and bread.
E) import oil to satisfy the country's need for gasoline.

Question 61

When a country exports more than it imports, it has a(n)

A) trade deficit.
B) favorable balance of trade.
C) unfavorable exchange rate.
D) unfavorable balance of trade.
E) unfavorable balance of payments.

Question 62

The United States sells industrial supplies and materials to many nations around the world. The United States thus engages in

A) dumping.
B) tariffing.
C) importing.
D) exporting.
E) deficit trading.

Question 63

If the Republic of Trinidad and Tobago had total exports of $150 billion and total imports of $234 billion, the country had a

A) comparative advantage.
B) trade deficit.
C) balance of payments.
D) negative output.
E) positive balance of trade.

Question 64

Which of the following best defines balance of trade?

A) Purchasing products in other countries and bringing them into one's own country
B) The total value of a nation's exports minus the total value of its imports over some period of time
C) The total flow of money into the country minus the total flow of money out of the country over some period of time
D) The ability to specialize in the production of a specific product and trade it for other needed products
E) The ability to produce a certain product more efficiently than any other nation

Question 65

The payments portion of the balance of payments―that is, payments made by the United States―does not include

A) exports.
B) imports.
C) military spending.
D) foreign aid.
E) investments.

Question 66

A favorable balance of payments means that

A) exports exceed imports.
B) imports exceed exports.
C) payments exceed trade.
D) exports and other payments exceed imports and other receipts.
E) total receipts exceed total payments.

Question 67

A small country is just beginning its international trade activities. In so doing, it wants to ____ and to develop a favorable balance of trade.

A) provide markets for its products
B) have its name in the Wall Street Journal
C) have its exports taxed
D) be involved in international politics
E) control the governments of other countries

Question 68

When Serena from the United States flies to Scotland on a Canadian airline, stays in an Edinburgh hotel, and buys many wool sweaters from Scotland to bring home, she is

A) decreasing the trade deficit of the United States.
B) contributing to the positive balance of payments of the United States.
C) contributing to the negative balance of payments of the United States.
D) buying imported goods.
E) contributing to the GDP of the United States.

Question 69

Sangeeta purchases a Turkish rug from a local rug gallery in Dallas, Texas. Which of the following best describes this transaction?

A) Sangeeta is a consumer, and the retailer imported the rug from Turkey.
B) Sangeeta is a consumer, and the retailer exported the rug from Turkey.
C) The original rug manufacturer from Turkey imported the materials to make the rug.
D) Sangeeta is a direct importer in this situation because she is purchasing a product made in Turkey.
E) Sangeeta is a direct exporter in this situation because the money she is spending will go to manufacturers in Turkey.

Question 70

When chain of organic coffee shops in Portland purchases coffee from Colombia, it

A) is importing the coffee.
B) is exporting the coffee.
C) has an absolute advantage.
D) is decreasing the balance-of-trade deficit.
E) is making a big mistake.

Question 71

An unfavorable balance of trade occurs when

A) exports are greater than imports.
B) imports are greater than exports.
C) the total outflow of money is greater than the total inflow of money.
D) the total outflow of money is less than the total inflow of money.
E) exports equal imports.

Question 72

The United States buys automobiles from Japan and Germany and petroleum products from many OPEC nations. The United States thus engages in

A) dumping.
B) tariffing.
C) importing.
D) exporting.
E) deficit trading.

Question 73

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 country's

A) trade deficit.
B) balance of payments.
C) unfavorable balance.
D) balance of trade.
E) favorable balance.

Question 74

An unfavorable trade balance is called a(n)

A) balance of trade.
B) trade deficit.
C) currency devaluation.
D) balance of payments.
E) import balance.

Question 75

If Germany exports $100,000 of sauerkraut to Jamaica and purchases $100,000 of Blue Mountain coffee beans from Jamaica, Germany has

A) an overall favorable balance of trade.
B) an overall unfavorable balance of trade.
C) a favorable balance of trade with Jamaica.
D) neither a favorable nor an unfavorable balance of trade with Jamaica.
E) an unfavorable balance of trade with Jamaica.

Question 76

When Johnson & Johnson Vision Care, Inc., located in Jacksonville, Florida, sells its ACUVUE contact lenses to people in London, England, the company

A) is importing the lenses.
B) is exporting the lenses.
C) has an absolute advantage.
D) is increasing the balance-of-trade deficit.
E) is making a big mistake.

Question 77

Balance of payments is a ____ concept than balance of trade.

A) more difficult
B) less difficult
C) nearly identical
D) broader
E) narrower

Question 78

If the United States exports $100 worth of timber to Nigeria and imports $80 worth of diamonds, the United States has a(n)

A) unfavorable balance of trade.
B) trade deficit.
C) trade surplus.
D) negative cash flow.
E) export slide.

Question 79

Japanese tourists come to experience the magic of Disney World and other attractions around Orlando, Florida. These tourists are

A) contributing to the United States' deficit balance of payments.
B) helping increase the balance of payments for Japan.
C) exporting products and services back to Japan.
D) further decreasing the United States' balance of payments.
E) helping the United States' balance of payments.

Question 80

When a country imports more than it exports, it has a(n)

A) trade surplus.
B) favorable balance of trade.
C) favorable exchange role.
D) unfavorable balance of trade.
E) favorable balance of payments.