Deck 3: Doing Business in Global Markets

Question 1

Free trade is the movement of goods and services between nations without political or economic barriers.

Answer 1

True

Question 2

According to the theory of comparative advantage, a country should buy from other countries those goods it produces most efficiently.

Answer 2

False
Explanation:The theory of comparative advantage states that a country should produce and sell to other countries those products that it produces most effectively and efficiently. Conversely, a country should buy those products produced more efficiently by other countries.

Question 3

The United States imports more products and services than any nation in the world.

Answer 3

True

Question 4

Global trade is the exchange of goods and services between countries.

Question 5

Absolute advantage is the basis for most global trade today.

Question 6

A country has an absolute advantage if the production of a specific product is more efficient than all other nations.

Question 7

In order to enjoy the highest standard of living possible, comparative advantage theory states that all nations should strive to become self-sufficient.

Question 8

Today, over 90% of the companies doing business globally believe it is important for their employees to have experience working in other countries.

Question 9

Opportunities for college graduates in international business continue to decrease, since it is too expensive to travel abroad.

Question 10

An example of a U.S. import would be the purchase of oil by U.S. companies from Saudi Arabia.

Question 11

One reason countries trade with other countries is that even technologically advanced nations cannot produce all the products their people want and need.

Question 12

Exporting is the selling of products to another country.

Question 13

Importing is the selling of products to another country.

Question 14

The United States is the largest exporter in the world.

Question 15

Comparative advantage theory states that a country should sell to other countries those products that it produces most efficiently and buy from other countries those products it cannot produce as efficiently.

Question 16

Competition among exporting nations is mild.

Question 17

Free trade results in a mutually beneficial exchange between and among nations.

Question 18

Today, there are more countries that have some form of absolute advantage in a product or service, than years ago.

Question 19

With respect to free trade, many American citizens prefer "fair trade, not free trade."

Question 20

Global trade includes the exchange of art, sports, and cultural events.

Question 21

The United States enjoys a trade surplus in the global market.

Question 22

Products made in Canada are sold in the U.S. because these two nations agree to eliminate economic and political barriers between nations. They participate in free trade.

Question 23

The United States currently enjoys a favorable balance of trade with the rest of the world.

Question 24

If your business has an outstanding product, exporting offers a quick, easy, no-hassle way to improve your profitability.

Question 25

The United States' highest trade deficit is with China.

Question 26

Banana plantations in Hawaii cannot produce nearly enough of all the bananas consumed by Americans. The fact that the U.S. grows and sells bananas gives it a comparative advantage in bananas. It is not an absolute advantage and that is why we choose to import bananas from South America, as well.

Question 27

Foreign travel can help in identifying global business opportunities.

Question 28

In order to prevent dumping, U.S. law stipulates that foreign firms selling similar products as domestic firms to U.S. customers must charge at least 10% more than what U.S. firms charge.

Question 29

International trade is not limited to multinational corporations. Small businesses do about 30% of all exporting out of the U.S.

Question 30

Dumping is the practice of selling products in foreign markets at lower prices than what domestic firms are charging for the same product.

Question 31

U.S. exports boost the U.S. economy.

Question 32

Many students in studying abroad programs at U.S. colleges and universities have discovered profitable opportunities by importing goods from their home countries into the United States.

Question 33

Small businesses are less involved in global trade today than in the past.

Question 34

Shortly after graduating college, Roberto took his place in his family's company in Miami. Roberto's father and uncle started a company that buys bauxite, copper, and other minerals from Chile, and brings them into the U.S. Every day, Roberto brokers trades with mines in Chile. The company is in the export business.

Question 35

A favorable balance of trade occurs when the value of a country's imports exceeds the value of its exports.

Question 36

Even though the U.S. exports a vast amount of goods globally, it exports a much lower percentage of its products than other countries do.

Question 37

The balance of payments measures the inflows and outflows of money from tourism, foreign aid, military expenditures, and foreign investments as well as flows resulting from exports and imports.

Question 38

A favorable balance of trade occurs when the value of a country's exports exceeds the value of its exports.

Question 39

A trade deficit is the same as an unfavorable balance of trade.

Question 40

Just about anything that can be sold in the United States can also be sold to buyers in other countries.

Question 41

The value of German exports coming to the United States is greater than the value of the goods Germany buys from the U.S. This results in a U.S. trade deficit with Germany.

Question 42

An advantage of licensing is that licensors spend little or no money to produce and market their products. These costs are paid for by the licensees.

Question 43

Through licensing, domestic firms give foreign manufacturers/producers the right to produce their product and use their trademark in exchange for royalties.

Question 44

The island nation of Hasalot exports $350 of goods and services and imports $180 of goods and services. Hasalot has an unfavorable balance of trade of $170.

Question 45

The U.S. government is reducing Export Assistance Centers due to businesses' lack of interest in their support.

Question 46

Japanese auto manufacturers, such as Toyota and Nissan, have invested billions of dollars in the United States by building new factories, warehouses, and offices. These investments increase favorably the balance of payments for the United States.

Question 47

Though illegal in the United States, some firms will practice dumping in order to gain a foothold in a new market.

Question 48

One advantage of licensing is the relatively low cost of entering a foreign market.

Question 49

Franchising is popular both domestically and internationally.

Question 50

When a firm agrees to license its product, it gains notoriety but gives up all revenues.

Question 51

As the most powerful economy in the world, the United States does not need to concern itself with having an unfavorable balance of payments.

Question 52

In any given year, the United States' cash outflow to other nations exceeds its cash inflow from other nations.

Question 53

A favorable balance of trade occurs when the value of a nation's exports exceeds its imports.

Question 54

When competing in global markets, business organizations utilize a variety of strategies to reach foreign buyers.

Question 55

One advantage of licensing as a strategy to enter the global market is the sharing of trade secrets.

Question 56

While franchising is popular in the United States, it is not an accepted strategy for firms in the global market.

Question 57

A Brazilian steel manufacturer started selling certain categories of steel in the United States. However, the Brazilian manufacturer is selling the steel at a price significantly lower than it sells the same product back in Brazil. This practice may be a violation of U.S. law.

Question 58

When the U.S. provides foreign aid to countries abroad, a balance of payments outflow occurs.

Question 59

Export trading companies assist businesses in reaching buyers, and dealing with customs, documentation, and payment.

Question 60

If tourists from Norway spend money at Orlando's Island of Adventure theme park, it will increase the U.S.'s unfavorable balance of payments.

Question 61

One advantage of franchising is that the parent corporation does not need to concern itself with adapting to the culture of another country.

Question 62

Contract manufacturing is a form of outsourcing.

Question 63

When Nestlé, a Swiss company, purchased Ralston Purina, a U.S. company, Ralston Purina became a foreign licensee.

Question 64

Contract manufacturing is when a firm pays foreign manufacturers to produce its product. The foreign manufacturer places the domestic company's label on the products.

Question 65

Governments directly participate in global markets through sovereign wealth funds.

Question 66

A firm may export everything it produces overseas and still not be considered a multinational.

Question 67

The appeal of global marketing strategies is that they all involve the same amount of risk.

Question 68

Firms with a physical presence in several different nations are considered multinational corporations.

Question 69

Contract manufacturing requires heavy start-up costs by the domestic company.

Question 70

Sovereign wealth funds are investment funds controlled by governments that hold large stakes in foreign companies.

Question 71

A disadvantage of creating a foreign subsidiary is the loss of control over technology and expertise used in the production of the product.

Question 72

A corporation that manufactures or markets its products in many different countries and has multinational stock ownership and management can be classified as a multinational corporation.

Question 73

As a form of franchising, sovereign wealth funds are getting very little attention as a strategy for doing business in foreign markets.

Question 74

One characteristic of an international joint venture is all parties sharing the risk of a major project.

Question 75

Expropriation occurs when a host government takes over the assets of a foreign company.

Question 76

A firm looking to enter a foreign market with a limited investment should consider licensing.

Question 77

Strategic alliances almost always result in one company taking over the financial interests of another company.

Question 78

According to current U.S. laws, American firms are prohibited from participating in joint ventures with foreign firms.

Question 79

Foreign direct investment refers to the buying of goods produced in another country.

Question 80

A joint venture is a partnership in which two or more companies join to undertake a major project. All parties commit financing and risk to the project.