Deck 3: Global Business

Question 1

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

Answer 1

True

Question 2

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

Answer 2

False

Question 3

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

Answer 3

False

Question 4

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

Question 5

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

Question 6

The United States has enjoyed a trade surplus during the last two decades.

Question 7

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

Question 8

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 9

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

Question 10

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

Question 11

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

Question 12

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

Question 13

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

Question 14

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

Question 15

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 16

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

Question 17

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

Question 18

When the United States recently imported $1,933 billion in merchandise and services and exported $1,555 billion,it had a trade deficit.

Question 19

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

Question 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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

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

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

Question 27

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

Question 28

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 29

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

Question 30

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

Question 31

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

Question 32

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

Question 33

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

Question 34

Cultural barriers can impede acceptance of products in foreign countries.

Question 35

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

Question 36

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

Question 37

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

Question 38

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 39

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 40

OPEC 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 41

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

Question 42

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

Question 43

Landfall Service Landfall 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.Landfall 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 Landfall Service products due to the government wanting a piece of the pie.Landfall Service initially thought that these taxes were unfair because it was being singled out.However,after Landfall 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 Landfall 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 44

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

Question 45

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 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

Trading companies do not take title to products.

Question 51

Countertrade is losing its importance in international trade.

Question 52

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

Question 53

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

Question 54

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

Question 55

Landfall Service Landfall 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.Landfall 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 Landfall Service products due to the government wanting a piece of the pie.Landfall Service initially thought that these taxes were unfair because it was being singled out.However,after Landfall 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 Landfall 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 56

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 57

Landfall Service Landfall 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.Landfall 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 Landfall Service products due to the government wanting a piece of the pie.Landfall Service initially thought that these taxes were unfair because it was being singled out.However,after Landfall 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 Landfall 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 58

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

Question 59

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

Question 60

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

Question 61

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 62

____ 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 63

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 64

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

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

Question 65

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 66

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 67

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 68

Thomas Bernerd,Inc.Thomas 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 Thomas 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 69

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 statements 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 70

Thomas Bernerd,Inc.Thomas 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 Thomas 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 71

Landfall Service Landfall 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.Landfall 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 Landfall Service products due to the government wanting a piece of the pie.Landfall Service initially thought that these taxes were unfair because it was being singled out.However,after Landfall 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 Landfall Service.The Landfall Service does mostly

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

Question 72

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 73

Thomas Bernerd,Inc.Thomas 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 Thomas Bernerd,Inc.Which agency should the managers at Thomas Bernerd,Inc.seek assistance from?

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

Question 74

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 75

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 76

Landfall Service Landfall 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.Landfall 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 Landfall Service products due to the government wanting a piece of the pie.Landfall Service initially thought that these taxes were unfair because it was being singled out.However,after Landfall 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 Landfall Service.Landfall Service must have contacted which of these organizations to mediate regarding unfair treatment by foreign governments?

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

Question 77

Thomas Bernerd,Inc.Thomas 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 Thomas Bernerd,Inc.Which of the following alternatives could have worked as a link between the managers at Thomas 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 78

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 79

Thomas Bernerd,Inc.Thomas 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 Thomas 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 80

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.