Question 1

Reviewing the recent experience of the United States in global markets reveals that the U.S has:
A) a merchandise trade surplus with the rest of the world.
B) a large trade deficit with China.
C) avoided becoming a debtor nation.
D) attracted very little foreign direct investment.

Accepted Answer

The United States has had a large trade deficit with China in recent years, meaning that it imports more goods and services from China than it exports to China. This has been a significant issue in U.S.-China trade relations and has led to a variety of trade policy measures aimed at reducing the deficit. However, the United States has not had a trade surplus in merchandise with the rest of the world and has also been a debtor nation with a significant amount of foreign debt. The United States has attracted foreign direct investment, although the amount has varied over time.

Question 2

A major advantage of licensing is:
A) these arrangements almost always lead to a joint venture.
B) the bulk of the revenues gained by the licensee come back to the licensor.
C) your company name does not need to be associated with the product in a foreign country.
D) very little cost to the licensor.

Accepted Answer

Licensing arrangements typically involve the licensee paying royalties to the licensor in exchange for the right to use the licensor's intellectual property or technology. This means that the licensor can generate revenue without significant investment or risk, which is a major advantage. The other options are not necessarily true or advantageous in all cases.

Question 3

Export trading companies:
A) enter into joint ventures with firms wanting to export goods and services.
B) are government-owned businesses that help companies go global.
C) connect sellers in the U.S. with buyers in other nations, and help with customs, documentation and payments.
D) are similar to a corporation that sells franchises.

Accepted Answer

Export trading companies specialize in connecting sellers in the U.S. with buyers in other countries, while providing assistance with customs, documentation, and payment. They are not government-owned and do not typically enter into joint ventures or sell franchises.

Question 4

The fee paid to a firm in a licensing agreement that gives another firm the right to manufacture their product or use its trademark is called:
A) a joint venture.
B) a royalty.
C) a licensee.
D) an outsource agreement.

Accepted Answer

The fee paid in a licensing agreement is known as a royalty. A royalty is usually calculated as a percentage of the revenue generated by the licensed product or trademark. Joint venture refers to a business arrangement between two or more companies to work together and share the risks and rewards of an enterprise. A licensee is the party that receives a license to use the product or trademark. An outsource agreement is a contract between companies where one company hires another company to perform a specific service or function.

Question 5

Current trade data indicates that the nation of Bogusland exports more to other nations than it imports. Bogusland has:
A) an unfavorable balance of trade.
B) a trade surplus.
C) a trade deficit.
D) a low balance of trade.

Accepted Answer

Bogusland has a trade surplus because it is exporting more than it is importing, resulting in a positive balance of trade.

Question 6

The president of Auto Parts of America testified before Congress, urging them to limit the flow of imported automobile parts into the United States. He contended that these imports were priced lower than foreign producers were charging for them in their own countries. He believes foreign producers are:
A) dumping.
B) exercising trade deficits.
C) promoting free trade.
D) exhibiting ethnocentricity.

Accepted Answer

Dumping refers to the practice of exporting goods at a lower price than they are sold in the domestic market. The president is alleging that foreign producers are engaging in this practice, which harms domestic producers.

Question 7

The value of goods imported into France exceeds the value of French exports. This indicates that France:
A) has an exchange rate decrease.
B) utilizes high tariffs.
C) has a budget deficit.
D) has a trade deficit.

Accepted Answer

When the value of goods imported into a country exceeds the value of its exports, the country is said to have a trade deficit. This indicates that France is importing more goods than it is exporting and is therefore experiencing a trade deficit.

Question 8

Monique's Unique Tile Boutique offers decorative tile from around the world. The owner regularly travels overseas to locate the best and most unusual tile that foreign producers have to offer. Monique participates in _____________.
A) importing
B) licensing
C) dumping
D) exporting

Accepted Answer

Monique's Unique Tile Boutique imports decorative tile from around the world, as stated in the description. The other options, such as licensing and dumping, do not apply to the business model described. While exporting may occur if Monique wants to sell tiles to other countries, the primary activity described is importing.

Question 9

Last year, the nation of Kwansai reported that it had a favorable balance of trade even though it imported $11 billion worth of goods. This indicates that Kwansai:
A) exported $11 billion worth of goods.
B) exported more than $11 billion worth of goods.
C) overpriced the value of its exports.
D) exported less than $11 billion worth of goods.

Accepted Answer

A favorable balance of trade means that the value of exports exceeds the value of imports. Kwansai imported $11 billion worth of goods, but still had a favorable balance of trade, which means that it exported more than $11 billion worth of goods.

Question 10

Japanese automobile producers sold more of their Japanese production overseas than they sold in Japan. Their business strategy emphasizes:
A) importing.
B) licensing.
C) dumping.
D) exporting.

Accepted Answer

Japanese automobile producers emphasize exporting their Japanese production to other countries, rather than selling domestically in Japan. This strategy allows them to reach a larger market and take advantage of different market conditions and consumer preferences around the world.

Question 11

__________ is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell the parent company's product or service to others in a given territory in a specified manner.
A) Franchising
B) Contract manufacturing
C) Import trading
D) Export trading

Accepted Answer

Franchising is the only option listed that fits the description given. Contract manufacturing refers to the outsourcing of the manufacturing of a product to a third party, while import and export trading involve buying and selling goods between countries.

Question 12

When a company's strategy is __________, the firm makes arrangements for a foreign manufacturer to produce the product. The domestic company's label and/or trademark are attached to the completed product.
A) franchising
B) contract manufacturing
C) import sourcing
D) export trading

Accepted Answer

When a company's strategy is contract manufacturing, the firm makes arrangements for a foreign manufacturer to produce the product. The domestic company's label and/or trademark are attached to the completed product.

Question 13

Last year, the nation of Tigerland imported goods totaling $500 million and exported products totaling $386 million. Tigerland experienced a(n):
A) unfavorable balance of trade.
B) favorable balance of trade.
C) trade surplus.
D) benefit from membership in a free trade zone.

Accepted Answer

Tigerland had a trade deficit of $114 million, which means it imported more goods than it exported. This indicates an unfavorable balance of trade.

Question 14

The nation of Redland reported that its imports for the previous year were $4 billion greater than its exports. During the same period, Redland reported a favorable balance of payments. This information suggests:
A) Redland has made an error in their reporting. The nation must have had a balance of payments deficit since more money flowed out of Redland for imports than flowed into the country for its exports.
B) Redland's gold reserves have increased in value.
C) money inflows from tourism, foreign aid, foreign investment and other sources more than offset Redland's trade deficit.
D) Redland devalued their currency to obtain a more favorable exchange rate.

Accepted Answer

Redland's favorable balance of payments suggests that inflows from sources such as tourism, foreign aid, foreign investment, and remittances more than offset the trade deficit caused by imports being $4 billion greater than exports.

Question 15

_______________ are specialists that match buyers and sellers from different countries and provide services to ease the process of entering global markets.
A) Export trading companies
B) Licensees
C) Strategic alliances
D) Keiretsu

Accepted Answer

Export trading companies are specialists that match buyers and sellers from different countries and provide services to ease the process of entering global markets. Licensees are entities that acquire the rights to use a company's intellectual property in a specific market. Strategic alliances involve two or more companies collaborating for a shared goal. Keiretsu is a Japanese term used to describe a group of companies with interlocking business relationships and shareholdings.

Question 16

Granting a foreign company the right to manufacture your product or to use your firm's trademark in return for a fee is called:
A) joint venture.
B) foreign subsidiary.
C) licensing.
D) outsourcing.

Accepted Answer

Granting a foreign company the right to manufacture your product or use your company's trademark in return for a fee is called licensing. Joint venture is a partnership between two or more firms, foreign subsidiary is a company located in a foreign country that is owned by a parent company, and outsourcing involves hiring an external company to perform tasks or services that could be done in-house.

Question 17

The federal government created ___________ to help small and medium-sized businesses get involved in exporting.
A) the World Trade Organization
B) Federal Export Loan Banks
C) Export Assistance Centers
D) the Federal Trade Promotion Commission

Accepted Answer

Export Assistance Centers were created by the federal government to help small and medium-sized businesses get involved in exporting. The centers provide counseling and assistance on export-related matters, including market research, trade leads, and financial assistance. The other options listed are not specific programs created by the federal government for this purpose. The World Trade Organization is an international organization that deals with global trade rules, and the Federal Trade Promotion Commission is not a real entity. Federal Export Loan Banks could be a helpful resource for businesses looking to finance their export activities, but it is not a program specifically designed to help businesses get involved in exporting.

Question 18

As a business strategy, the strategy behind "dumping" is to ____________.
A) gain a foothold in a new market
B) better utilize e-commerce opportunities
C) avoid trade protectionist laws
D) achieve eligibility for foreign aid

Accepted Answer

The answer of As a business strategy, the strategy behind...

Question 19

Nikkei Bike Parts testified before Congress defending the company against an accusation that it was dumping parts on the U.S. market. In her testimony, the president claimed _________________. Using traditional guidelines, Congress determined that Nikkei was not dumping.
A) Nikkei includes 10% overhead costs and an 8% profit margin in the price of all the parts they export to the U.S.
B) Japan runs a trade deficit with the U.S. in bike parts.
C) Nikkei is a staunch supporter of free trade.
D) Nikkei sells more bike parts in Europe than it does in the U.S.

Accepted Answer

The president of Nikkei Bike Parts claimed that the company includes 10% overhead costs and an 8% profit margin in the price of all the parts they export to the U.S. This implies that Nikkei is not selling their parts at a price lower than their cost of production, which is the basis of the accusation of dumping. Congress determined that Nikkei was not dumping based on this information.

Question 20

A disadvantage of licensing is:
A) it's very costly for the licensor.
B) the licensee can decide to end the contract at a moment's notice.
C) your company's image is never permitted to be associated with the product, even though you are the developer.
D) the licensee may decide to use the expertise you have developed, break the agreement, and begin producing the product on his/her own.

Accepted Answer

The answer of A disadvantage of licensing is:
A) it's very...

Quiz 3: Doing Business in Global Markets

Reviewing the recent experience of the United States in global markets reveals that the U.S has:

A major advantage of licensing is:

Export trading companies:

The fee paid to a firm in a licensing agreement that gives another firm the right to manufacture their product or use its trademark is called:

Current trade data indicates that the nation of Bogusland exports more to other nations than it imports. Bogusland has:

The value of goods imported into France exceeds the value of French exports. This indicates that France:

Monique's Unique Tile Boutique offers decorative tile from around the world. The owner regularly travels overseas to locate the best and most unusual tile that foreign producers have to offer. Monique participates in _____________.

Last year, the nation of Kwansai reported that it had a favorable balance of trade even though it imported $11 billion worth of goods. This indicates that Kwansai:

Japanese automobile producers sold more of their Japanese production overseas than they sold in Japan. Their business strategy emphasizes:

__________ is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell the parent company's product or service to others in a given territory in a specified manner.

When a company's strategy is __________, the firm makes arrangements for a foreign manufacturer to produce the product. The domestic company's label and/or trademark are attached to the completed product.

Last year, the nation of Tigerland imported goods totaling $500 million and exported products totaling $386 million. Tigerland experienced a(n) :

The nation of Redland reported that its imports for the previous year were $4 billion greater than its exports. During the same period, Redland reported a favorable balance of payments. This information suggests:

_______________ are specialists that match buyers and sellers from different countries and provide services to ease the process of entering global markets.

Granting a foreign company the right to manufacture your product or to use your firm's trademark in return for a fee is called:

The federal government created ___________ to help small and medium-sized businesses get involved in exporting.

As a business strategy, the strategy behind "dumping" is to ____________.

Nikkei Bike Parts testified before Congress defending the company against an accusation that it was dumping parts on the U.S. market. In her testimony, the president claimed _________________. Using traditional guidelines, Congress determined that Nikkei was not dumping.

A disadvantage of licensing is: