Question 1

The World Trade Organization agreements are the optional ground rules for international commerce.

Accepted Answer

The World Trade Organization (WTO) agreements are not optional but rather mandatory rules for its members, governing international trade practices.

Question 2

A common reason for establishing quotas or tariffs is to encourage dumping.

Accepted Answer

Quotas and tariffs are typically established to protect domestic industries from foreign competition, not to encourage dumping, which is the practice of selling goods in a foreign market at a price below their cost of production.

Question 3

In most countries,participation in international business is restricted to large corporations.

Accepted Answer

Many countries allow businesses of all sizes, including small and medium-sized enterprises (SMEs), to participate in international business through exports, imports, and other forms of international partnerships.

Question 4

When a nation imports more than it exports,it has a positive balance of trade.

Accepted Answer

When a nation imports more than it exports, it has a negative balance of trade, also known as a trade deficit.

Question 5

A strategic alliance is a partnership formed to create competitive advantage on a worldwide basis.

Accepted Answer

A strategic alliance involves two or more companies coming together to share resources and expertise in order to achieve a specific goal or create a competitive advantage in the global marketplace.

Question 6

The Association of Southeast Asian Nations (ASEAN)effectively united Singapore,Britain,and Japan into one market.

Accepted Answer

While Singapore, Britain, and Japan are involved in trade and economic relations with ASEAN, ASEAN did not unite them into one market. ASEAN is a regional organization that aims to promote economic cooperation and integration among the ten member states in Southeast Asia.

Question 7

Absolute advantage exists when a country is the only source of an item.

Accepted Answer

The answer of Absolute advantage exists when a country is...

Question 8

The Webb-Pomerene Export Trade Act allows selected U.S.firms willing to enter international trade to form monopolies to compete with foreign monopolistic organizations and also to operate as monopolies within the United States.

Accepted Answer

The Webb-Pomerene Export Trade Act allows U.S. firms to form export trade associations (effectively acting as monopolies) for international trade purposes, but it does not permit them to operate as monopolies within the United States.

Question 9

The U.S.set up maquiladoras in China.

Accepted Answer

Maquiladoras are manufacturing operations located in Mexico, not China, set up primarily by U.S. companies to take advantage of lower labor costs.

Question 10

The General Agreement on Tariffs and Trade was a precursor to the World Trade Organization and provided a forum for tariff negotiations.

Accepted Answer

The statement is correct. The General Agreement on Tariffs and Trade (GATT) was signed in 1947 and provided a forum for negotiations and reductions of tariffs and trade barriers among its member countries. It was replaced by the World Trade Organization (WTO) in 1995, which continues to facilitate trade negotiations and dispute settlement among its member countries.

Question 11

International business involves the buying,selling,and trading of goods and services across national boundaries.

Accepted Answer

International business refers to business activities that involve transactions across national boundaries, including the buying, selling, and trading of goods and services.

Question 12

Protective tariffs raise the price of foreign goods to allow expensive domestic goods to compete with foreign ones.

Accepted Answer

Protective tariffs are taxes imposed on imported goods to make them more expensive, thereby allowing domestically produced goods, which might be more expensive to produce, to compete more effectively in the domestic market.

Question 13

A consistent increase in a country's imports has a favorable impact on its production and employment.

Accepted Answer

An increase in imports can lead to a decrease in domestic production and employment if the country is importing goods that could be produced domestically, as this can lead to a reduction in demand for locally produced goods and services.

Question 14

Licensing allows a company to enter the international marketplace without spending large amounts of money abroad.

Accepted Answer

Licensing involves granting a foreign company the right to produce and sell one's product in return for a fee, which allows the licensing company to enter international markets with lower upfront investment compared to establishing new production facilities or a direct market presence abroad.

Question 15

Political unrest in countries often creates a hostile environment for foreign businesses and can act as a barrier to international trade.

Accepted Answer

Political unrest can lead to instability, making it difficult for foreign businesses to operate safely and efficiently, thereby acting as a barrier to international trade by increasing risks and costs.

Question 16

Nations trade with other nations to obtain resources that would otherwise be unavailable to them.

Accepted Answer

Nations engage in international trade to acquire resources that are not available in their own country or are available at a higher cost. This could be because of differences in climate, natural resources, or technological capabilities. Through trade, countries can specialize in producing goods and services in which they have a comparative advantage and import goods and services that they cannot efficiently produce.

Question 17

Direct investment gives lesser power and is the least expensive way to participate in foreign trade.

Accepted Answer

Direct investment involves owning and controlling foreign business operations and typically requires significant financial resources, giving investors greater control but at a higher cost compared to other forms of participating in foreign trade like exporting or licensing.

Question 18

Exporting is the purchase of products from another nation.

Accepted Answer

Exporting is the sale of products to another nation, not the purchase.

Question 19

Sociocultural differences,such as variations in body language and personal space,usually have almost negligible impact on international business.

Accepted Answer

Sociocultural differences, including variations in body language and personal space, can significantly impact international business by affecting communication, negotiations, and partnerships across cultures.

Question 20

The International Monetary Fund promotes trade among member nations by eliminating trade barriers and fostering financial cooperation.

Accepted Answer

The International Monetary Fund (IMF) works to promote trade among member nations by eliminating trade barriers, facilitating financial cooperation, and providing technical assistance to help countries build their economic capacity. This includes measures such as promoting free trade agreements, encouraging cross-border investment, and providing financial support to countries experiencing economic difficulties.

Quiz 3: Business in a Borderless World