Deck 2: The Evolution of International Business

Question 1

Competitive industrial structures are unlikely to create innovative or dynamic firms willing to compete abroad. However, a monopolistic industry will foster innovative, cost efficient, aggressive firms that can adjust to changing economic conditions at home and will be well prepared to compete abroad.

Answer 1

False

Question 2

Porter exemplifies China as a powerhouse for consumer electronics because of the quality and quantity of its engineers, and the ability and willingness of Chinese consumers to try out new electronic products that are perfected and later exported.

Answer 2

False

Question 3

Mercantilists believed that for a nation to become wealthy, that nation must export as much as possible and, in turn, import as little as possible.

Answer 3

True

Question 4

The growth trends in China and India today illustrate the impact that international business has on blue-collar and white-collar workers in wealthy countries as relatively low-skill factory jobs as well as high-skill service profession jobs migrate overseas.

Question 5

Factor price equalization theory, states that when factors are allowed to move freely among trading nations, efficiency increases, which leads to equality of factor prices among these countries.

Question 6

In the 3,000 B.C., Sumerian farmers realized that the grain surplus they produced could be used as barter for things they did not have. Therefore, the Sumerians obtained copper from Sinai Desert traders who were located several hundred miles to the west in order to make weapons and repel nomadic raiders. The Sumerians engaged in _____

A) international business
B) in-border business
C) environmental business
D) national business
E) domestic business

Question 7

Developed countries often resort to managed trade for reasons of unethical labor practices and violation of basic human rights.

Question 8

Analysts believe that by 2020 _____will become the world's largest economy, followed by _____ and _____.

A) India; the United States and China
B) China; the United States and India
C) Japan; China and Mexico
D) India; Japan and Canada
E) the United States; Mexico and Canada

Question 9

An export taxes refers to a negative tariff or tax aimed at boosting exports by lowering export prices. On the other hand, export subsidy is meant to discourage exports and to keep production at home.

Question 10

Foreign direct investment (FDI)in a country brings funds and business culture from abroad, creates new well-paying jobs, introduces innovative technologies, and enhances the skills of domestic workers.

Question 11

Managed trade aims to replace global market or economic forces with government actions to determine trade outcomes.

Question 12

An ad valorem tariff describes a tax on imports levied as a constant percentage of the monetary value of one unit of the imported good.

Question 13

The two-way flow of exports and imports of goods and services is known as _____.

A) a partnership
B) a sole proprietorship
C) angel investing
D) a joint venture
E) trade

Question 14

Porter stresses the importance of domestic demand for goods and services when determining a nation's competitive advantage. When domestic demand remains high, the number of suppliers will also be high.

Question 15

Dubai, a regional center for global companies, continues to attract sizable amounts of foreign investment given its strategic location, world-class infrastructure, and productive workforce.

Question 16

Of the following statements about trade, which is NOT true?

A) Trade generates jobs in both export and import sectors of an economy.
B) The gains from open trade are always greater than the losses.
C) Open trade and investment does create winners and losers.
D) Trade does not influence culture.
E) Trade is the two-way flow of exports and imports of goods and services.

Question 17

One way international trade benefits consumers is by providing lower living standards.

Question 18

Emerging countries like Brazil, Russia, India, and China (BRIC)that have large populations, an expanding middle class, and a combination of relatively low wage-rates and rapidly growing economies tend to attract sizable less amounts of foreign investment.

Question 19

It is estimated that for every billion dollars worth of exports from the United States, 100,000 domestic jobs are created.

Question 20

The world's two largest economies in terms of national income in the early-19ᵗʰ century were _____.

A) China and India
B) the United States and Canada
C) Japan and China
D) India and Japan
E) the United States and Mexico

Question 21

When was mercantilism practiced?

A) 1300-1400
B) 1500-1750
C) 1820-1875
D) 1900-1975
E) 1990-2010

Question 22

Of the following statements about foreign direct investment, which is NOT true?

A) FDI in a country brings funds and business culture from abroad.
B) Governments all over the world try to create a business-friendly environment to attract such investments.
C) FDI creates new well-paying jobs.
D) Foreign investors have little faith in high-income economies such as Canada.
E) Foreign investment flows are generally based on long-term global or country outlook.

Question 23

Historically, the main instrument of trade policy has been _____.

A) export subsidy
B) export taxes
C) corporate duties
D) import tariff
E) special tariff

Question 24

Of the following statements about mercantilism, which is NOT true?

A) It was practiced as Europe emerged from the feudal systems of the Middle Ages and moved toward nationalism
B) Mercantilists believed that for a nation to become wealthy, that nation must export as much as possible and, in turn, import as little as possible.
C) During the time it was practiced, wealth was largely determined by the amount of land one had access to.
D) Mercantilists did not want, or care, to see the big picture.
E) Mercantilists encouraged their people to produce large families.

Question 25

The _____ theory attributes the comparative advantage of a nation to its factor endowments.

A) absolute advantage
B) comparative advantage
C) factor price
D) Heckscher-Ohlin
E) mercantilism

Question 26

Until January 1, 2012, the price for ethanol consumers in the United States was higher than world free-market price by $0.54 per gallon because of the $0.54 per gallon tariff imposed by the U.S. government on ethanol imports. This is an example of a(n)_____ tariff.

A) custom
B) ad valorem
C) specific
D) preferential
E) generalized

Question 27

When Poland entered the European Union -where there is free movement of labor across member countries -some of the abundant Polish plumbers migrated to the United Kingdom to fill the shortage there. The net result was that wages for plumbers in the U.K. stabilized or softened and wage rates for plumbers in Poland increased. As the U.K. consumer of plumbing services benefited from this development, one could argue that the real income of the British consumer was, therefore, enhanced. This is an example of the _____.

A) factor-price equalization theory
B) diamond theory
C) trade policy theory
D) managed trade theory
E) trade deficit theory

Question 28

Assume that because of soil and climatic conditions, Columbia is more efficient in the production of coffee than India. At the same time India is more efficient in the production of wheat than Columbia. Each of these countries can be said to have a(n)_____.

A) absolute advantage
B) comparative advantage
C) factor endowment destruction in land
D) bartering disadvantage
E) mercantile disadvantage

Question 29

Which of the following was NOT one of the top exporting nations in 2010?

A) The United States
B) South Korea
C) Italy
D) Australia
E) Belgium

Question 30

During the mid-18ᵗʰ century, British economist ________, who came to be known as the father of free market and open trade systems, recognized the absurdity of Mercantilism.

A) Bertil Ohlin
B) Eli Heckscher
C) Adam Smith
D) Henry Ford
E) John Locke

Question 31

The corporate practice of acquiring or producing quality goods or services at a lower cost abroad thereby eliminating domestic production is called _____.

A) outsourcing
B) exporting
C) importing
D) foreign investment
E) trading

Question 32

The _____ states that when factors are allowed to move freely among trading nations, efficiency increases, which leads to price of factors becoming equal among countries.

A) factor-price equalization theory
B) diamond theory
C) trade policy theory
D) managed trade theory
E) trade deficit theory

Question 33

The ability of one country to produce a good or service more efficiently than another is called a(n)_____.

A) absolute advantage
B) comparative advantage
C) barter trade
D) inorganic advantage
E) equalization efficiency

Question 34

The oldest form of trade theory is called _____.

A) mercantilism
B) factor equalization
C) Machiavellianism
D) absolute advantage
E) comparative advantage

Question 35

It is estimated that for every billion dollars worth of exports from the United States _____ domestic jobs are created.

A) 5,000
B) 20,000
C) 100,000
D) 500,000
E) 1,000,000

Question 36

Endowments used to produce goods and services are called _____.

A) factor equalizations
B) imports
C) outputs
D) factors of production
E) mercantilism

Question 37

Who authored The Competitive Advantage of Nations?

A) Bertil Ohlin
B) Eli Heckscher
C) Michael Porter
D) Henry Ford
E) John Locke

Question 38

How does Porter's model of national competitive advantage differ from the Heckscher-Ohlin theory?

A) It looks more closely at the quality of factor endowments.
B) It examines only a country's imports.
C) It examines only a country's exports.
D) It does not encourage trade.
E) It does not explain why there are "winners" and "losers" in international trade.

Question 39

The key assumptions for the H-O theory to work are: 1)perfect competition in the marketplace; and (2)_____.

A) perfect immobility of factors of production among countries
B) superior allocation of production of goods and services
C) very small labor force
D) the existence of a trade surplus
E) the acceleration of a trade deficit

Question 40

The ability of one country that has an absolute advantage in the production of two or more goods (or services)to produce one of them relatively more efficiently than the other is called a(n)_____.

A) absolute advantage
B) comparative advantage
C) factor price
D) competitive advantage
E) equalization

Question 41

An agreement among WTO countries in which any tariff concession granted by one member to any other country will automatically be extended to all other countries of WTO is called the _____ principle.

A) absolute advantage
B) comparative advantage
C) most favored nation
D) voluntary export
E) shared wealth

Question 42

All commercial transactions, both private and public between nations of the world refers to _________.

Question 43

The ability of one country that has an absolute advantage in the production of two or more goods (or services)to produce one of them relatively more efficiently than the other refers to ______.

Question 44

When the value of exports exceeds the value of imports, this refers to ______.

Question 45

_____ refers to agreements, sometimes temporary, between countries (or a group of countries)that aim at achieving certain trade outcomes.

A) Quantitative agreements
B) Qualitative agreements
C) Managed trade agreements
D) Voluntary export agreements
E) Domestic content provision agreements

Question 46

During the Soviet days, the government of India imported Soviet fighter jets and other defense hardware in exchange for Indian-made consumer goods such as soaps, detergents, and copy machines. This is an example of _____.

A) countertrade
B) illegal trade
C) an export cartel
D) an embargo
E) managed trade

Question 47

An agreement where a large number of developed counties permit duty-free imports of a selected list of products that originate from specific countries is known as _____.

A) a custom duty
B) an ad valorem agreement
C) an export agreement
D) the generalized system of preferences
E) an import agreement

Question 48

Of the following, which is NOT in the geo-political category of managed trade?

A) Ethics and safety
B) National security
C) Strategic industries
D) Embargoes
E) Protection of critical industries

Question 49

_______ refers to a theory of international trade that supports the premise that a nation could only gain from trade if it had a trade surplus.

Question 50

Of the following, which is NOT in the socio-economic category of managed trade?

A) Ethics and safety
B) The infant industry argument
C) Countertrade
D) National security
E) Export cartels

Question 51

All government actions that seek to alter the size of merchandise and/or service flows from and to a country refers to ______.

Question 52

_______ refers to inflows of capital from abroad for investing in domestic plant and equipment for the production of goods and/or services as well as for buying domestic companies.

Question 53

_______ refers to the corporate practice of acquiring or producing quality goods or services abroad at a lower cost thereby eliminating domestic production.

Question 54

A group of countries that could effectively control export volume to keep their export prices, revenues, and economic growth stable or high is known as a(n)_____.

A) alliance
B) joint venture
C) export cartel
D) embargo
E) managed trade agreement

Question 55

The United States has maintained a trade embargo for almost 50 years with _____ in an attempt to put pressure on the country to move toward democracy.

A) the Ukraine
B) the Netherlands
C) Turkey
D) Italy
E) Cuba

Question 56

Endowments used to produce goods and services are called ______.

Question 57

The U.S. government may require that apparel imported into the United States should use U.S. cotton, or use a certain amount of American labor. This is an example of a(n)_____.

A) quantitative restrictions
B) qualitative restrictions
C) domestic content import
D) voluntary export restriction
E) domestic content provision

Question 58

_______ refers to the ability of one country to produce a good or service more efficiently than another.

Question 59

Taxes on imports that are collected by a designated government agency responsible for regulating imports are called _____.

A) custom duties
B) ad valorem tariffs
C) specific tariffs
D) preferential tariffs
E) generalized tariffs

Question 60

The two-way flow of exports and imports of goods is called ______.

Question 61

_______ refers to a non-tariff barrier in which an efficient exporting nation agrees to limit exports of a product to another country for a temporary period.

Question 62

Differentiate between H-O theory and factor price equalization theory.

Question 63

______ refers to an import tax that assigns a fixed dollar amount per physical unit.

Question 64

A tax on imports levied as a constant percentage of the monetary value of one unit of the imported good refers to ______.

Question 65

_______ refers to a group of countries that could effectively control export volume to keep their export prices, revenues, and economic growth stable or high.

Question 66

Agreement in which an exporter of goods or services to another country commits to import goods or services of corresponding value from that country is called ______.

Question 67

______ refers to an agreement where a large number of developed countries permit duty-free imports of a selected list of products that originate from specific countries.

Question 68

______ refers to taxes on imports (also known as custom duties in some countries).

Question 69

Taxes meant to raise export cost and divert production for home consumption refers to _______.

Question 70

Regulations requiring that a certain percentage of the value of import be sourced domestically refers to _______.

Question 71

______ refers to a negative tariff or tax aimed at boosting exports.

Question 72

______ refers to an especially advantageous or low import tariff established by a nation for all or some goods of certain countries and not applied to the same goods of other countries.

Question 73

Trade sanctions which are imposed upon a nation to restrict trade with that country refers to _______.

Question 74

_______ refers to the temporary provision of protection to nascent industries that have good prospects of becoming globally competitive in the medium term.

Question 75

Compare and contrast theories of absolute and comparative advatages.

Question 76

Defend the following statement: Trade and foreign investment are good for society.

Question 77

_______ refers to regulations that limit the amount or number of units of products that can be imported to a country.

Question 78

Explain Porter's "Diamond" model of national competitive advantage.

Question 79

Agreements, sometimes temporary, between countries (or a group of countries)that aim at achieving certain trade outcomes refers to _______.

Question 80

______ refers to an agreement among WTO countries in which any tariff concession granted by one member to any other country will automatically be extended to all other countries of WTO.