Question 1

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

Accepted Answer

Trading companies primarily focus on buying and selling goods. They do not typically engage in manufacturing or own manufacturing assets; instead, they act as intermediaries between manufacturers and buyers.

Question 2

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

Accepted Answer

A multilateral development bank primarily focuses on financing long-term development projects in various sectors such as infrastructure, health, and education. The International Monetary Fund (IMF) is the institution that typically provides short-term loans to countries facing balance of payment deficits.

Question 3

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

Accepted Answer

Securing payment is an important and practical issue for domestic firms dealing with foreign customers as it involves various risks, such as currency exchange rate fluctuations, political instability, and default by the buyers. Therefore, it is essential for firms to have appropriate payment methods and mechanisms in place to ensure timely and secure payment for their goods and services.

Question 4

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

Accepted Answer

The five multilateral development banks, including the World Bank and the Asian Development Bank, are supported by industrialized nations, including the United States.

Question 5

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

Accepted Answer

Joint venture agreements usually involve significant commitment, resources, and investments from all parties involved, as they are formed to pursue a common business goal or project.

Question 6

The TPP was agreed upon in the 1970s by a small group of Central American countries.

Accepted Answer

The answer of The TPP was agreed upon in the...

Question 7

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

Accepted Answer

A trading company serves as an intermediary between buyers and sellers in different countries, facilitating trade transactions and negotiations between the two parties.

Question 8

Critics of NAFTA maintain that is has resulted in job losses and has done nothing to help the environment.

Accepted Answer

Many critics argue that NAFTA has resulted in job losses, particularly in the manufacturing sector, as companies have moved operations to Mexico where labor is cheaper. Additionally, some critics argue that NAFTA has not done enough to address environmental issues and may have even contributed to environmental degradation.

Question 9

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

Accepted Answer

A letter of credit is issued in favor of the exporter (or seller) to guarantee payment for goods or services provided the terms of the letter are met.

Question 10

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

Accepted Answer

A letter of credit is issued by a bank to guarantee payment to the exporter once certain conditions have been met, such as receiving the correct documents or delivering the goods to the agreed-upon destination. The transport carrier is not responsible for issuing a letter of credit.

Question 11

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.

Accepted Answer

Licensing is actually one of the easiest methods to implement for international business as it involves granting rights to use a company's intellectual property or products to another company in exchange for a fee or royalty. The other methods such as direct investment or joint ventures may involve more complex procedures and legal regulations.

Question 12

Trading companies do not take title to products.

Accepted Answer

Trading companies often take title to the products they deal in, which means they take legal ownership of the goods before selling them to the next buyer.

Question 13

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

Accepted Answer

The International Trade Administration (ITA) is an agency within the U.S. Department of Commerce that provides guidance and support to U.S. companies looking to export their products or services. This includes assistance with market research, finding potential business partners, navigating regulations and tariffs, and more.

Question 14

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.

Accepted Answer

A draft, also known as a bill of exchange, is a type of payment instrument used in international trade. It is issued by the exporter's bank and contains an order for the importer's bank to pay for the merchandise. Once accepted by the importer's bank, the draft becomes a legally binding obligation to pay and guarantees payment to the exporter.

Question 15

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

Accepted Answer

A bill of lading is a legal document issued by the carrier to the exporter as proof of receipt of goods for shipment. It verifies that goods have been loaded onto a carrier for transportation to their destination.

Question 16

Countertrade is losing its importance in international trade.

Accepted Answer

Countertrade continues to be a significant aspect of international trade, especially in transactions involving countries with limited foreign exchange or those seeking to stabilize their trade balances. It allows countries to obtain goods and services even in the absence of hard currency, maintaining its relevance in global commerce.

Question 17

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.

Accepted Answer

This statement is true. Direct investment in international business involves building or buying a plant in a foreign country to produce the company's own products or buying an existing firm in a foreign country.

Question 18

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

Accepted Answer

A firm that has no ties to a specific nation or region and operates on a worldwide scale is called a multinational enterprise, not a national enterprise.

Question 19

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

Accepted Answer

Licensing and exporting typically involve fewer financial, legal, and operational risks compared to other market entry methods such as foreign direct investment or joint ventures. Licensing allows a company to grant permission to a foreign entity to use their intellectual property or technology, while exporting involves simply selling products to customers in overseas markets. Although there are still some risks involved, these methods generally require less investment and offer more control over the company's operations compared to other market entry methods.

Question 20

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

Accepted Answer

Strategic alliances are formed between companies to leverage their resources and capabilities for mutual benefit and competitive advantage in a global marketplace. They may involve joint ventures, cross-licensing agreements, technology transfer, and other collaborative initiatives. The goal is to capture new markets, share risks, reduce costs, and build a strategic position that is difficult for competitors to replicate.

Quiz 3: B: Exploring Global Business