Deck 3: Business in a Borderless World

Question 1

Define Balance of Trade and Balance of Payments.What is the different between these two terms? Why are they important measures?

Answer 1

A nation's balance of trade is the difference in value between its exports and imports.The difference between the flow of money into and out of a country is called its balance of payments.The balance of payments is a much broader measure because it also takes into account foreign investments,foreign aid,loans,military expenditures,and money spent by tourists.It is important for nations to pay attention to both of these measures,as they can indicate economic health or weaknesses.A country with a highly negative balance of trade or of payments may be concerned about liquidity issues and the health of its overall economy.

Question 2

The primary problem with a trade deficit is

A)that a country is exporting more than it is importing.
B)that more cash is leaving the country than is entering.
C)that a country is spending more than saving.
D)that a country is saving more than spending.
E)export taxes.

Answer 2

B
Explanation: A trade deficit may be harmful to a country's economy through failed businesses,loss of jobs and a lower standard of living.

Question 3

In international trade,what is the difference between an absolute advantage and a comparative advantage?

Answer 3

An absolute advantage in trade exists when a nation is the only source of an item or,in some cases,when it can produce the item much more efficiently than any other nation.Most international trade is based on comparative advantage,which occurs when a country specializes in products that it can supply more efficiently or more cheaply than it can other products.

Question 4

When Madison flies to Italy from the United States on a British airline,stays in Italian hotels,and buys clothing in Milan to bring home after her trip,she

A)decreases the trade deficit.
B)is disloyal and unpatriotic.
C)contributes to the negative balance of payments.
D)buys American-made goods.
E)does all of the above.

Question 5

A favorable balance of trade exists when a country

A)imports more than it exports.
B)exports more than it imports.
C)sends out more cash than it takes in.
D)spends more than it saves.
E)saves more than it spends.

Question 6

The balance of payments includes all the following except

A)a country's balance of trade.
B)foreign investments.
C)domestic investments.
D)tourist expenditures.
E)foreign aid and military expenditures.

Question 7

When Solar Tech,Inc. ,of Taos,New Mexico,sells thin film solar panels to a firm in Tokyo,Japan,Solar Tech

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

Question 8

Protective tariffs raise the price of foreign goods to allow competition with more expensive domestic goods.

Question 9

International business involves the buying,selling,and trading of goods and services across national boundaries.

Question 10

A balance of trade refers to the buying,selling,and trading of goods and services across national boundaries.

Question 11

When a nation imports more than it exports,it has a positive balance of trade.

Question 12

Because it virtually controls the world's deposits of gem-quality diamonds,DeBeers Consolidated Mines,Ltd.has a(n)

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

Question 13

The Webb-Pomerene Export Trade Act allows selected American firms desiring international trade to form monopolies to compete with foreign cartels.

Question 14

A trade advantage with the best chance of surviving is one based on

A)worker know-how.
B)technology.
C)a monopoly of a resource.
D)production efficiency.
E)lack of a resource.

Question 15

Exporting is the purchase of products from another nation.

Question 16

Because Colombia can produce coffee so much more efficiently than other items produced there,it has which of the following advantages?

A)Absolute
B)Positive
C)Negative
D)Marginal
E)Comparative

Question 17

An absolute advantage exists when a country has a monopoly on a natural resource.

Question 18

The difference between the flow of money into and out of a country is called its

A)balance of trade.
B)imbalance of trade.
C)balance of payments.
D)trade payment balance.
E)exchange rate.

Question 19

Nations trade with other nations to obtain resources that would otherwise be unavailable to them.

Question 20

The U.S.has a trade deficit because

A)American companies sell more goods to other countries than foreign companies sell here.
B)China stopped exporting goods to the United States.
C)America imports more products than it exports.
D)American consumers stopped buying Chinese goods and services.
E)American consumers buy far more domestic goods and services than foreign goods and services.

Question 21

When a company decides to do business outside its own country,it must research several factors,including potential barriers to international trade.Which of the following is not a potential barrier cited in your text?

A)Legal
B)Political
C)Cultural
D)Economic
E)Scientific

Question 22

Not all countries trading in international markets package goods in the same units.Unlike the United States,most countries rely on

A)currency.
B)gold.
C)the metric system.
D)daylight savings.
E)color coding.

Question 23

A common reason for establishing quotas or tariffs is to prohibit dumping.

Question 24

A group of nations or companies that band together to act as a monopoly is known as a

A)conglomerate.
B)licensor.
C)cartel.
D)multinational.
E)licensee.

Question 25

The International Monetary Fund promotes trade among member nations by eliminating trade barriers and fostering financial cooperation.

Question 26

Sociocultural differences,such as variations in spoken language and body language,have no impact on international business.

Question 27

When a country devalues its currency,this encourages the sale of its

A)imports.
B)domestic goods to foreign countries.
C)international goods.
D)international services.
E)debts.

Question 28

Understanding that Arab businessmen tend to stand face to face when holding a conversation reveals the importance of knowing another culture's use of

A)language.
B)dialect.
C)religious practices.
D)manners.
E)body language.

Question 29

The translation of product names can be crucial in the success of a foreign marketing effort because of

A)political barriers.
B)cultural barriers.
C)legal barriers.
D)export quotas.
E)body language.

Question 30

The World Bank and other multilateral development banks are the largest sources of advice and assistance for developing nations.

Question 31

To reduce dollars flowing out of the country,the United States can take measures like limit the number of foreign cars from Japan that are imported by imposing a(n)

A)quota.
B)exchange control.
C)trade deficit.
D)embargo.
E)free trade zone.

Question 32

A change in administration in a foreign government that is hostile to foreign trade is an example of a

A)political barrier.
B)cultural barrier.
C)exchange barrier.
D)export quota.
E)body language.

Question 33

GATT was a precursor to the WTO and provided a forum for tariff negotiations.

Question 34

The law that allows selected American firms desiring international trade to form monopolies to compete with foreign cartels is the

A)Webb-Pomerene Export Trade Act.
B)Bretton Woods Agreement.
C)GATT.
D)Foreign Corrupt Practices Act.
E)Sherman Antitrust Act.

Question 35

Political considerations change slowly,while laws change rapidly.

Question 36

What cultural issues should a manager consider before doing business in a foreign country?

Question 37

The Free Trade Area of the Americas effectively united Ireland,Britain,and France into one market.

Question 38

What are the different international barriers to trade? Give an example of each one.

Question 39

Around the globe,completely free trade is common.

Question 40

A specific amount of money levied on each unit of a product brought into the country is a(n)

A)ad valorem tariff.
B)value-added tariff.
C)fixed tariff.
D)protective tariff.
E)duty-free tariff.

Question 41

Why was the World Bank formed?

A)Because developed nations realized that developing nations do not have any banks
B)Because national banks do not have large enough cash reserves sometimes
C)To act as a global policing service
D)To loan money to underdeveloped and developing countries
E)To help developed nations obtain money to start businesses

Question 42

Which of the following countries was an original member nation of APEC?

A)Belgium
B)Mexico
C)China
D)Japan
E)Chile

Question 43

A strategic alliance is a partnership formed to create competitive advantage on a worldwide basis.

Question 44

Maquiladoras are possible under the Asia-Pacific Economic Cooperation.

Question 45

What does the WTO stand for and what does it do?

Question 46

All multinationals are American firms.

Question 47

Licensing is a way of entering the international marketplace without spending large amounts of money abroad.

Question 48

Direct investment is the least risky and least expensive way to participate in foreign trade.

Question 49

Which of the following is formally called the International Bank for Reconstruction and Development?

A)World Bank
B)International Monetary Fund
C)European Union
D)North American Free Trade Agreement
E)World Trade Organization

Question 50

Only small firms are mobile enough to engage in international business.

Question 51

The WTO agreements are the optional ground rules for international commerce.

Question 52

Exporting is available only to large corporations.

Question 53

To facilitate free trade among members,the European Union is working toward all of the following except

A)the standardization of business regulations.
B)the standardization of import duties.
C)the elimination of customs checks.
D)the creation of opportunities to trade with countries in South America.
E)the creation of a standardized currency.

Question 54

A forum to discuss trade problems and negotiate a reduction of trade barriers was first provided by

A)the General Agreement on Tariffs and Trade.
B)a free trade zone.
C)the World Bank.
D)the Eximbank.
E)the International Monetary Fund.

Question 55

What is the International Monetary Fund (IMF)and what does it do?

Question 56

Which of the following makes short-term loans to member countries with trade deficits and provides foreign currencies to member nations?

A)Foreign Credit Insurance Association
B)General Agreement on Tariffs and Trade
C)World Bank
D)Eximbank
E)International Monetary Fund

Question 57

Which of the following is not something that the International Monetary Fund does?

A)Provides short-term loans to member countries
B)Functions as a world central bank
C)Eliminates trade barriers between nations
D)Fosters international financial cooperation
E)Provides individual home and auto loans

Question 58

Which trade alliance/agreement,which represents 54 percent of world GDP,allows businesses to participate in a wide range of its activities?

A)General Agreement on Tariffs and Trade
B)Asia-Pacific Economic Cooperation
C)North American Free Trade Agreement
D)European Union
E)Free Trade Area of the Americas

Question 59

If Peru wants to purchase machine parts from a German company but does not have any euros,it will probably borrow the euros from which of the following institutions?

A)International Monetary Fund
B)World Bank
C)Citicorp Bank
D)International Bank
E)Eximbank

Question 60

Which countries were merged into one market by NAFTA?

A)Canada,the U.S. ,and Mexico
B)North America and South America
C)Mexico,the U.S. ,and Brazil
D)Canada and the U.S.
E)Canada and Mexico

Question 61

Explain the different levels of organizational involvement in international trade.

Question 62

A major advantage of utilizing an export agent is that the company does not have to deal with

A)a middleman.
B)raising prices.
C)foreign currencies and red tape.
D)discounts.
E)increasing volume.

Question 63

Globalization refers only to products,not promotion or distribution.

Question 64

An intermediary,or middleman,who markets goods in another country is acting as a(n)

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

Question 65

Globalization involves standardizing products for the whole world as if it were a single entity.

Question 66

When two computer companies joined together in hopes of obtaining a competitive advantage on a worldwide basis,this exemplifies a

A)direct investment.
B)contract manufacturing deal.
C)cartel.
D)joint venture.
E)strategic alliance.

Question 67

When Nike has its athletic shoes produced by companies in Asia,the Nike name still appears on the shoes.This illustrates

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

Question 68

More companies are moving away from _______ strategy to globalization.

A)personalization
B)customization
C)standardization
D)tailored
E)individualized

Question 69

Because many countries do not permit foreign companies to purchase and operate facilities in their countries,a company wishing to do business in such a country may share the business costs with the host country by forming a

A)direct investment.
B)contract manufacturing arrangement.
C)corporation.
D)joint venture.
E)sole proprietorship.

Question 70

Coca-Cola allows a Mexican firm to use its name,formula,and brands in return for a royalty.This arrangement is known as

A)exporting.
B)licensing.
C)direct investment.
D)contract manufacturing.
E)a joint venture.

Question 71

Companies doing business internationally have traditionally used a globalization strategy.

Question 72

The fact that the American company 3M owns a film-manufacturing facility in Italy is an example of

A)contract manufacturing.
B)a direct investment.
C)a trading company.
D)licensing.
E)exporting.

Question 73

Even when products are standardized,advertising often has to be modified.

Question 74

A corporation that operates in several countries but without significant ties to any of them is a(n)

A)joint venture.
B)exporter.
C)cartel.
D)multinational.
E)strategic alliance.

Question 75

The purchase of overseas production and marketing facilities is

A)licensing.
B)contract manufacturing.
C)using an export agent.
D)a direct investment.
E)exporting.

Question 76

An understanding of which of the following realities is not required for businesspeople to plan in a global economy?

A)Personal
B)Economic
C)Legal
D)Political
E)Sociocultural

Question 77

Why does direct investment have a high degree of commitment than a countertrade agreement?

Question 78

Many businesspeople today try to "think locally,act globally."

Question 79

A multinational strategy involves customizing products,promotion,and distribution according to cultural,technological,regional,and national differences.

Question 80

Trading companies offer all of the following services except

A)consulting.
B)advertising.
C)manufacturing.
D)warehousing.
E)foreign exchange.