Deck 1: Introduction

Question 1

One of the most serious negative consequences of globalization is that it:

A)leads to the destruction of rainforests.
B)results in global warming.
C)makes nations dependent on each other so that they cannot continue to exist alone.
D)causes nations to be interconnected so that regional economic disruptions spread quickly.

Answer 1

causes nations to be interconnected so that regional economic disruptions spread quickly.

Question 2

______________________________ make(s)loading of ships easier and facilitates transfer of cargo from ships to others transportation.

A)Standardization of cargo
B)Containerization
C)Improvements in cargo handling equipment
D)Better trained stevedores

Answer 2

Containerization

Question 3

In international trade matters,_____________________ is joint,coordinated action by all countries involved in or affected by a matter to resolve the matter.

A)multilateralism
B)unilateralism
C)socialism
D)capitalism

Answer 3

multilateralism

Question 4

Many economists agree that globalization:

A)will continue indefinitely.
B)is good for some nations but bad for many more nations.
C)is good because it raises the standard of living for all global citizens.
D)is good because it allows firms to earn maximum profits.

Question 5

The global business environment is much more ________________ than the domestic business environment.

A)profitable
B)difficult
C)political
D)dynamic

Question 6

The neoclassical theory that seeks to explain comparative advantage in terms of factor abundance is the:

A)Gravity Theory.
B)Imperfect Market Theory.
C)New Trade Theory.
D)Hecksher and Ohlin model.

Question 7

Key trade issues that remain unresolved include agricultural subsidies in _____________ and market access for _______________________________.

A)developing countries;industrialized countries
B)industrialized countries;developing countries
C)land-rich countries;land-locked countries
D)Western countries;Eastern countries

Question 8

Unilateral actions by individual nations in trade matters:

A)is authorized by most international trade agreements.
B)is preferred in resolving trade disputes since the actions can be taken quickly.
C)often mean that international trade organizations have failed to resolve trade conflicts.
D)often result in a cycle of retaliation against each other which interferes with international trade.

Question 9

In the HO model,countries with relatively more capital than other countries will concentrate on ________________________ production.

A)labor-intensive
B)profitable
C)capital-intensive
D)import-replacement

Question 10

Global corporations are often referred to as:

A)multinational corporations.
B)international corporations.
C)global enterprises.
D)international consortiums.

Question 11

In terms of international trade,BRIC refers to:

A)the international trade agreement that is recognized as the beginning of the age of globalization.
B)a specialized process for moving cargo by sea.
C)the centralization of communications technology in Middle Eastern countries.
D)the emerging economies of Brazil,Russia,India and China.

Question 12

In David Ricardo's theory of trade,_______________ is assumed to be the primary input for production.

A)labor
B)capital
C)land
D)raw materials

Question 13

Most goods are shipped by sea because:

A)it is easier to ship bulk cargo by sea than by other means.
B)shipping by sea costs significantly less than other means of shipping.
C)shipping by sea is generally safer than by other shipping means.
D)most purchasers prefer that their goods be shipped by sea.

Question 14

The general objectives of both the WTO and NAFTA include:

A)enabling the movement of goods and services across borders by eliminating tariffs and other restrictions.
B)providing a forum where trade disputes can be resolved and where nations that violate trade laws can be punished.
C)protecting domestic industries in member countries from competition for foreign companies.
D)encouraging the creation of new international companies that will increase international trade.

Question 15

How did World War II affect the progress of globalization?

A)It was aided since the United States became more involved in European and world affairs.
B)It was adversely affected because so many resources were used in the war effort.
C)It was not affected since trade continued despite the war.
D)The results have not yet been determined since the economic upheaval caused by the war was so great.

Question 16

What was the Silk Road?

A)An international trade route that connected East and West Asia as long as 2,000 years ago
B)An East Asia trade route that connected Japan and China in the 5^th century CE
C)A Mediterranean trade route that connected ancient civilizations
D)One of the routes that lead to the expansion of the Roman Empire

Question 17

Risks that are unique to international business include:

A)economic risks and business risks.
B)currency risks and country risks.
C)economic risks and political risks.
D)economic risks and currency risks.

Question 18

An example of the widespread belief that political freedom is necessary for economic freedom and economic growth can be found in:

A)the emergence of Japan as an international economic force in the latter part of the 20^th century.
B)the widespread availability of technical education in India.
C)the rise of Brazil as an economic powerhouse in the Southern Hemisphere.
D)the demise of the Soviet Union and the rise of an entrepreneurial class in Russia.

Question 19

Countries generally believe that international trade has what affect on them?

A)It encourages the creation of new businesses which pay more taxes to the countries where they are created.
B)It improves the welfare of their citizens by creating jobs and allowing more variety in goods available.
C)It benefits developed countries the most because they have the most money to spend on international trade.
D)It benefits developing countries the most because they have the most to gain from international trade.

Question 20

The movement of goods across national borders is the definition of ________________________.

A)importation
B)exportation
C)globalization
D)international trade

Question 21

When a country exports and imports the same product to satisfy consumer demands for product variety,that country is engaged in:

A)deceptive trade.
B)duplicate trade.
C)intra-industry trade.
D)agglomeration.

Question 22

Positive externalities that can cause firms in an industry to locate in the same area include:

A)industry-friendly environmental and labor policies.
B)favorable tax rates and economic incentives.
C)exchange of ideas and shared labor pools.
D)closeness to markets and low cost power supplies.

Question 23

When a nation's products are first introduced into global markets,that country has a competitive advantage that is not easily overcome in the short-term.This expresses the basis of the _____________________________ of international trade.

A)Product Life Cycle Theory
B)Gravity Theory
C)Comparative Advantage Theory
D)New Trade Theory

Question 24

Because setting up a foreign operation can involve significant costs,MNCs must:

A)borrow the money necessary for the foreign operation from foreign banks.
B)borrow the money necessary for the foreign operation from domestic banks.
C)weigh the benefits of the foreign operation against the costs of the operation.
D)involve foreign investors in the foreign operation.

Question 25

The effect of the risks faced by MNCs is to:

A)decrease the firm's profit potential.
B)increase the need for new sources of foreign capital.
C)decrease the firm's ability to develop a strategy for addressing risks.
D)increase the volatility of cash flow.

Question 26

If a firm conducts transactions in a foreign currency and the value of that currency declines,the firm's revenues will

A)increase.
B)not be affected.
C)be reduced.
D)increase or decrease depending on the value of the firm's domestic currency.

Question 27

The international trade theory that focuses on consumer demands and preferences is the _________________________________________.

A)Supply and Demand Theory
B)New Trade Theory
C)Product Life Cycle Theory
D)Gravity Theory

Question 28

Internalization advantages for MNCs refers to:

A)the benefits firms gain by not disclosing important information or processes to contracting parties.
B)contributing confidential information to contracting parties as part of a firm's collaboration.
C)charging for the use of secret information by other firms.
D)buying technology from others and then internalizing or keeping that technology away from competitors.

Question 29

___________________________ identifies factors that explain why certain nations have advantages in producing certain products.

A)Economic Development Theory
B)Industry Agglomeration Theory
C)Externality Theory
D)Porter's Diamond Theory

Question 30

Macroeconomic conditions that can give rise to affect a firm's cash flow include:

A)economic growth and inflation.
B)political unrest and recession.
C)economic growth and political unrest.
D)competition and interest rates.

Question 31

One impediment to the free flow of some factors of production,especially in the case of raw materials,is:

A)political restrictions.
B)currency risks.
C)competition.
D)high transaction costs.

Question 32

The core competency that explains FDI activity is:

A)the free flow of financial resources across national borders.
B)the ability of MNCs to make skilled investments in foreign real and financial assets.
C)the ability of MNCs to evaluate political and currency risks.
D)the willingness of investors to take chances on risky investments.

Question 33

If a firm's financial performance responds to changes in currency value:

A)the firm faces a currency risk.
B)additional investment of funds in the firm is necessary.
C)the firm's risk management strategy is flawed.
D)the firm should abandon its foreign operations.

Question 34

Firms that initially sell their products in the domestic market before eventually exporting products to take advantage of economies of scale are exhibiting the ___________________ of international trade.

A)Product Life Cycle Theory
B)Gravity Theory
C)Long-Term Theory
D)Firm-Level Product Cycle Theory

Question 35

The Gravity Theory of international trade says that the quantity of trade between two countries is positively related to __________________ and negatively related to _________________________.

A)the value of the products produced by each country;the political leanings of each country.
B)the countries' GNP;the distance between the countries.
C)the status of the world economy;the economy of each country.
D)whether each country is a developed country or a developing country;the political leanings of each country.

Question 36

Compared to _________________,______________________ can be easily transmitted to foreign locations for use there.

A)physical capital,knowledge capital
B)knowledge capital,physical capital
C)physical capital,financial capital
D)intellectual properties,knowledge capital

Question 37

What recent developments have made the classical theory of comparative advantage less relevant?

A)Improved production technology
B)Increased movement of factors of production across borders
C)International access to financial resources
D)The Internet

Question 38

___________________________ says that firms in an industry tend to locate in the same areas because of positive externalities.

A)Industry Agglomeration Theory
B)Industry Cluster Theory
C)Externality Theory
D)Economic Development Theory

Question 39

The changes in a firm's cash flow that result from changes in macroeconomic conditions are called:

A)business risk.
B)country risk.
C)currency risk.
D)economic risk.

Question 40

An MNC acquiring ownership in a foreign branch or subsidiary is an example of:

A)globalization.
B)foreign direct investment.
C)international trade.
D)political risk.

Question 41

The Imperfect Markets Theory is a relatively new theory to explain international trade.What does the Imperfect Markets Theory say about why international trade happens?

Question 42

The risk that a foreign country where an MNC does business might take action that would adversely affect the MNC is called:

A)political risk.
B)nationalization.
C)privatization.
D)economic risk.

Question 43

How have advances in telecommunications advanced the pace of globalization?

Question 44

What is an effective way for MNCs to address the risk that a country where it is going to do business has different rules and regulations than other countries?

A)It can buy insurance to cover unexpected expenses and losses.
B)It can set up a limited operation in that country to learn about its regulatory climate before expanding operations.
C)It can form a joint venture with another firm to spread the risks.
D)It can make significant investments in the country so that it can gain influence there.

Question 45

The conflict between principals and agents arises because:

A)agents often do not know the extent of their authority.
B)agents act without specific authority form their principals.
C)agents prefer actions that will increase their own welfare instead of the welfare of their principals.
D)principals are not willing to give agents the authority that the need to protect the welfare of their principals.

Question 46

Classical theories of trade rely on the theory of comparative advantage as developed by David Ricardo.What is comparative advantage and how does it affect trade?

Question 47

What is the future of globalization?

Question 48

How does the "agency problem" affect the governance of MNCs?

Question 49

The primary goal of MNCs is to:

A)grow as large as possible.
B)expand into as many countries as is possible.
C)gain as much market share for its products as possible.
D)maximize shareholder wealth.

Question 50

When decision-making in an organization is made the responsibility of top executives,the organization is said to be:

A)top-heavy.
B)centralized.
C)formalized.
D)regimented.