Deck 12: Pricing for International and Global Markets

Question 1

Price controls are enforced to combat inflation.

Answer 1

True

Question 2

Cell phone penetration in rural India was stymied by unreliable mail service.

Answer 2

True

Question 3

Foreign exchange fluctuations can affect a firm's profitability forcing it to lower or raise prices to maintain margins.

Answer 3

True

Question 4

Many companies charge higher prices in foreign markets than in their domestic markets because of transportation costs.

Question 5

Across-the-board price controls are more common than industry-specific price controls.

Question 6

A firm acting as the sole supplier of a product in a given market enjoys greater pricing flexibility.

Question 7

Inflation can be managed by lowering interest rates whenever the economy starts to heat up,keeping inflation at 0 to 2 percent.

Question 8

Price controls are usually temporary.

Question 9

Ro-ro carriers have made exporters more competitive with local manufacturers.

Question 10

In 2002,the EU and the United States agreed on a standard tax for digitally downloadable goods of virtual products from the Internet.

Question 11

Countries with high-income levels often display lower price elasticities for necessities such as food,shelter,and medical care.

Question 12

High tariffs make exporters more competitive with local manufacturers.

Question 13

The WTO works with member countries to raise tariffs to protect their local industries.

Question 14

In a market with few large buyers,prices are usually higher than in markets with many small buyers.

Question 15

Variable costs change directly with the volume of output.

Question 16

In a market with few large buyers,prices are usually lower than in markets with many small buyers.

Question 17

Antidumping actions are allowed against firms if they sell at less than fair value and cause material injury to a domestic industry.

Question 18

Many antidumping cases brought to the WTO are brought by developing countries against developed countries.

Question 19

Outside of the United States,many countries have longer distribution channels thereby increasing channel costs.

Question 20

Websites in China encourage consumers to form buying teams to bargain for quantity discount from retailers.

Question 21

National exhaustion provides that once a firm has sold its trademarked product in a specific country,it cannot restrict the further distribution of that product in that country.

Question 22

Governments often examine transfer prices carefully as they are often aimed at supporting parallel imports.

Question 23

CIF refers to credit,insurance,and freight.

Question 24

Free on board (FOB)designates that the seller is responsible for the costs of shipping and insuring a purchased product.

Question 25

Parallel imports are the import of illegal products through legal channels.

Question 26

Countertrade is popular among customers who prefer to pay with hard currency.

Question 27

CIF refers to cost,insurance,and freight.

Question 28

CFR refers to cost,freight and return.

Question 29

A South African law requires parallel importers to alert consumers to the fact that authorized dealers are under no obligation to honor the manufacturer warranty of a parallel import.

Question 30

Parallel imports are commonly used by MNCs to optimize global pricing.

Question 31

Free on board (FOB)designates that the buyer is responsible for the costs of shipping and insuring a purchased product.

Question 32

Companies try to accumulate more profits in a high-tax country in order to help governments increase tax revenue.

Question 33

An international transfer price is the price paid by the importing or buying unit of a firm to the exporting unit of the same firm.

Question 34

Firms can control parallel imports by reducing prices in higher priced markets and limiting supplies to wholesalers in lower priced markets.

Question 35

Parallel imports hurt governments because they do not pay taxes.

Question 36

When two currencies are involved,there is the risk that a change in exchange rates may occur between the invoicing date and the settlement date for the transaction.

Question 37

Compensation transactions are typical for large governmental purchases,such as defense projects,especially when a country wants to obtain some extra exports in exchange for the awarding of a contract.

Question 38

Parallel imports are often supported by governments because they increase tax revenues considerably.

Question 39

A South African law requires parallel importers to alert consumers to the fact that their products might be counterfeit.

Question 40

CIF refers to classified industrial freight.

Question 41

Chinese vitamin producers defended their cartel by arguing

A)their costs were very high.
B)they raised prices to avoid accusations of dumping.
C)they were incompliance with U.S.law.
D)All of the above

Question 42

General Motors developed a Farmers Car because

A)rural Chinese have less income than urban Chinese.
B)farmers in India required a different product from urban Indians.
C)the World Bank subsidized the project.
D)the Indonesian government subsidized the project.

Question 43

Mexico is attractive to U.S.candy manufacturers because

A)its youthful market like sweets.
B)wage rates are relatively low.
C)sugar is cheaper there than in the Untied States.
D)All of the above.

Question 44

Sweden's joining of the EU helped to undermine its

A)alcohol taxes.
B)cigarette taxes.
C)VAT on digital products.
D)surtax on computers.

Question 45

When the value of the euro drops against the U.S.dollar,

A)European products become cheaper in the U.S.market.
B)European products become more expensive to sell in the U.S.market.
C)there are no changes in the prices.
D)European product quality decreases.

Question 46

The offset deal is the most basic type of countertrade.

Question 47

In China,McDonald's originally priced its hamburger below full costs in order to

A)compete with Burger King.
B)attract more customers.
C)comply with Chinese controls.
D)All of the above.

Question 48

Channel costs are a function of

A)cost of raw materials.
B)sales taxes.
C)channel length and distribution margin.
D)All of the above.

Question 49

Tariffs are

A)levied on locally made products.
B)the same as sales taxes.
C)levied on the landed costs of an imported product.
D)levied on the final selling price of an imported product.

Question 50

Thai consumers are more likely than Americans to infer product quality from price because

A)Thais rate themselves lower on product knowledge.
B)Thais have less money to spend.
C)Thais belong to a collectivist culture.
D)All of the above

Question 51

Sometimes firms attempt to avoid or lessen the cost effects of tariffs by

A)reclassifying their product.
B)increasing the VAT of their product.
C)parallel importing.
D)All of the above.

Question 52

Costs that do not vary over a given range of output are referred to as ____ costs.

A)variable
B)fixed
C)incremental
D)marginal

Question 53

Payment for new textile machinery with the output produced by the new machinery is an example of a cooperation agreement.

Question 54

Price levels in the United States are

A)set by cartels.
B)determined by agreements among competitors.
C)set by the U.S.Justice department.
D)set by the respective companies.

Question 55

Countertrade is complex and time consuming,and it is sometimes difficult to find a buyer for the merchandise accepted as a part of a transaction.

Question 56

The European VAT is a form of

A)tariff.
B)quota.
C)sales tax.
D)"sin" tax.

Question 57

Reclassifying a product may be a way to

A)discourage parallel imports.
B)lessen tariffs costs.
C)lessen transportation costs.
D)encourage cartelling.

Question 58

The ____ of 20-somethings in Asia is increased because most still live with their parents.

A)income
B)discretionary income
C)income taxes
D)None of the above

Question 59

Young populations of Southeast Asia are an attractive target for companies because of their ____ income.

A)low discretionary
B)high per-capita
C)low per-capita
D)high discretionary

Question 60

In Southeast Asia,consumers in their twenties have a very high discretionary income as a percentage of total income compared to their U.S.counterparts because

A)they go to work in their teens.
B)they save more money.
C)they marry younger.
D)many still live with their parents.

Question 61

My Dollarstores charged higher prices in India than in the USA because of

A)transportation costs.
B)tariffs.
C)an affluent target market.
D)All of the above

Question 62

Governments examine international transfer prices because transfer prices can

A)lower tax revenues.
B)lower GDP.
C)lower exchange rates.
D)increase political risk.

Question 63

Most developing countries have adopted which principle for dealing with parallel imports?

A)National exhaustion
B)Regional exhaustion
C)International exhaustion
D)International exhaustion

Question 64

A law in South Africa requires parallel importers to alert consumers to the fact that

A)the product they sell can be purchased cheaper elsewhere.
B)the product they sell might be counterfeit.
C)authorized dealers need not honor the manufacturer warranty on a parallel import.
D)authorized dealers could sue the purchaser of a parallel import.

Question 65

The main reason governments impose price control is to

A)raise taxes.
B)encourage local businesses.
C)combat inflation.
D)discourage hedging.

Question 66

The practice of selling a product at a price below actual costs is referred to as

A)cartelling.
B)economies of scale.
C)hedging.
D)dumping.

Question 67

The EU has adopted which principle for dealing with parallel imports?

A)National exhaustion
B)Regional exhaustion
C)International exhaustion
D)International exhaustion

Question 68

Paris Pharmaceuticals entered Middle East markets 20 years ago targeting the urban elites.What should Paris Pharmaceuticals consider concerning its pricing in the region?

A)Raise prices because the population has increased
B)Lower prices to avoid dumping charges
C)Raise prices to avoid dumping charges
D)Lower prices to target middle classes

Question 69

Global price fixing is encouraged by

A)variable tariffs.
B)government price controls.
C)global segments.
D)intense competition.

Question 70

Karavel Foods entered the Latin American market 20 years ago targeting the urban elites.What should Karavel Foods consider concerning its pricing in the region?

A)Raise prices because Latin America's GDP has increased
B)Lower prices to discourage parallel imports across the region
C)Lower prices to avoid dumping charges
D)Lower prices to target middle classes

Question 71

LeBlanc Enterprises markets high-end purses and scarves.When determining a pricing policy for its Latin American markets,the firm should consider

A)income of buyers.
B)discretionary income of buyers.
C)independent income of buyers.
D)variable income of buyers.

Question 72

ABC Automobiles entered Asian markets 20 years ago targeting the urban elites.What should ABC consider concerning its pricing in the region?

A)Lower prices because Asia's GDP has increased
B)Raise prices because Latin America's GDP has increased
C)Lower prices to target middle classes
D)Raise prices to discourage parallel imports across the region

Question 73

Canada,Japan,and many European states have price controls on

A)alcohol.
B)cigarettes.
C)pharmaceuticals.
D)accounting firms.

Question 74

The problem with countertrade is that

A)it is complex and time consuming.
B)it leads to a shortage of hard currency.
C)there may be difficulties in finding a buyer.
D)Both a and c

Question 75

The price paid by an importing or buying unit of a multinational firm to an exporting unit of the same firm is known as

A)marginal price.
B)international transfer price.
C)transaction risk.
D)fixed price.

Question 76

Sellers can protect themselves against transaction risks through

A)spot pricing.
B)forward pricing.
C)hedging.
D)All of the above.

Question 77

Parallel imports exist due to

A)inflation.
B)differences in prices across markets.
C)uniform pricing.
D)government price controls.

Question 78

Fluctuating currency values contribute to

A)transaction risk.
B)parallel imports.
C)Both a and b
D)None of the above.

Question 79

Latin Shoes markets high-end footwear.When determining a pricing policy for its Asian markets,the firm should consider

A)income of buyers.
B)variable income of buyers.
C)independent income of buyers.
D)discretionary income of buyers.

Question 80

What differences prevent a company from setting a uniform global pricing strategy?

A)Tax rates
B)Trade margins
C)Customs duties
D)All of the above