Deck 3: Exploring Global Business

Question 1

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

Answer 1

False

Question 2

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

Answer 2

False

Question 3

Countertrade is losing its importance in international trade.

Answer 3

False

Question 4

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

Question 5

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

Question 6

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

Question 7

Trading companies do not take title to products.

Question 8

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

Question 9

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

Question 10

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

Question 11

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 12

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 13

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

Question 14

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

Question 15

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

Question 16

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 17

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

Question 18

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

Question 19

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 20

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

Question 21

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

Question 22

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

Question 23

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

Question 24

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

Question 25

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

Question 26

A reduction of the value of a nation's currency relative to the currencies of other countries is called a currency devaluation.

Question 27

The Doha Round of negotiations focuses on industrial and nontariff barriers, agriculture, services, and easing trade rules.

Question 28

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

Question 29

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

Question 30

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 31

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

Question 32

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

Question 33

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

Question 34

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

Question 35

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 36

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 37

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

Question 38

Cultural barriers can impede acceptance of products in foreign countries.

Question 39

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 40

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

Question 41

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

Question 42

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

Question 43

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

Question 44

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

Question 45

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

Question 46

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

Question 47

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

Question 48

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

Question 49

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

Question 50

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

Question 51

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

Question 52

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

Question 53

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 54

The ____ gave President Kennedy the authority to negotiate reciprocal trade agreements that could reduce U.S. tariffs by as much as 50 percent.

A)Foreign Corrupt Practices Act
B)Trade Expansion Act
C)Securities Exchange Act
D)Federal Trade Commission Act
E)Robinson-Patman Act

Question 55

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

Question 56

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

Question 57

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

Question 58

The Doha Round of negotiations is really not worth the effort.

Question 59

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

Question 60

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

Question 61

When an Indian importing firm wants to import U.S.-made products, it must first secure permission and dollars from the Reserve Bank of India. This type of restriction is known as a

A)currency devaluation.
B)foreign-exchange control.
C)negative foreign exchange.
D)trade embargo.
E)quota.

Question 62

Lynn Bernerd, Inc.
Lynn Bernerd, Inc., manufactures and sells reclining furnitur
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 63

The United States wants to limit the amount of dollars that another country can obtain. The best way to accomplish this is to

A)impose an import duty.
B)establish a foreign-exchange control.
C)declare an embargo.
D)set an import quota.
E)impose an export duty.

Question 64

Companies such as ExxonMobil and Mitsubishi operate on a worldwide scale without ties to any single country. These are examples of

A)members of the Dow Jones Industrial Average.
B)global trading companies.
C)internationally owned facilities.
D)multinational enterprises.
E)foreign-domestic corporations.

Question 65

Jacque owns a medium-sized business in the United States. Approximately how likely is it that her company exports?

A)It is extremely likely because almost all U.S.companies export their products and services to foreign countries.
B)It is quite likely because about 75 percent of all companies in the United States are now exporters due to the growth of the Internet.
C)Roughly half of U.S.companies export products and services, so there is about a 50 percent chance that Jacque's company exports.
D)About one-third of the companies in the United States export to foreign countries, therefore Jacque's company has about a 33 percent chance of being an exporter.
E)Despite use of the Internet, exporting is still mostly done by large corporations, so Jacque's company is unlikely to export.

Question 66

If the United States and Japan can't settle their trade disputes on their own, they probably should settle them through the

A)Tokyo Round.
B)Kennedy Round.
C)Uruguay Round.
D)WTO.
E)United Nations.

Question 67

CAFTA, NAFTA, OECD, and OPEC are all examples of

A)political organizations.
B)peace treaties.
C)international economic communities.
D)World Trade Organization members.
E)democratic organizations.

Question 68

A complete halt to trading with a particular nation or in a particular product is called a(n)

A)embargo.
B)stoppage.
C)stay.
D)closure.
E)barricade.

Question 69

The United States joined with Mexico and Canada to promote the movement of resources and products; it formed a(n)

A)WTO.
B)economic community.
C)cartel.
D)multinational.
E)orderly marketing agreement.

Question 70

When a coffee chain in Portland, Oregon purchases coffee from Colombia, South America, 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

ABC Company wants to be prepared for the ASEAN free trade area. The company plans to develop its own production and marketing facilities in one or more ASEAN countries. The best choice for ABC Company is

A)a joint venture.
B)a licensing agreement.
C)totally owned facilities.
D)exporting.
E)sales offices.

Question 72

Because it has not been around long enough to establish itself, the Russian automobile industry could be classified as a(n)

A)hopeless industry.
B)soft industry.
C)infant industry.
D)protected industry.
E)toddler industry.

Question 73

The four largest gold-producing countries in the world want to form a collective-bargaining unit to provide gold-producing nations with some control of gold prices. These nations will most likely model the unit after

A)EU.
B)OPEC.
C)NAFTA.
D)ASEAN.
E)GATT.

Question 74

During a stormy meeting of computer software firms, several company presidents said that without tariff cushions, many of them would go broke. They represent a new industry that needs protection until their firms grow to a size that will allow them to be competitive. Their comments are based on the

A)infant-industry argument.
B)goal of equalizing the nation's balance of payments.
C)national self-sufficiency argument.
D)goal of protecting the health of citizens.
E)goals of retaliating for another nation's trade restrictions.

Question 75

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 76

All of the following are reasons against having trade restrictions except

A)the loss of jobs.
B)the misallocation of international resources.
C)the restriction of consumers' choices.
D)higher prices for consumers.
E)the protection of the health of citizens.

Question 77

Which bank includes main goals of promoting exchange rate stability and assisting in establishing a multilateral system of panyments?

A)The Export-Import Bank of the United States
B)The Asian Development Bank
C)The International Monetary Fund
D)The Inter-American Development Bank
E)The Multilateral Development Bank

Question 78

When Sony Corporation of Japan purchased Columbia Pictures Entertainment, Inc. of the United States, Sony made a(n)

A)countertrade with Columbia Pictures.
B)indirect investment in the United States.
C)direct investment in the United States.
D)strategic alliance with Columbia Pictures.
E)exporting agreement with the United States.

Question 79

What are the Kennedy Round, the Tokyo Round, the Uruguay Round, and the Doha Round?

A)Amendments to the General Agreement on Tariffs and Trade
B)Negotiations sponsored by GATT to reduce trade restrictions
C)A series of disagreements among the members of GATT
D)World Trade Organization meetings to encourage trade
E)Political negotiations among many of the world's nations

Question 80

China is selling school supplies in the United States for very low prices, even lower than the prevailing prices in China, and thus making it extremely difficult for American manufacturers to compete. This is referred to as

A)exporting.
B)importing.
C)an embargo.
D)dropping.
E)dumping.