Question 1

Restrictive standards that detail exactly how a product must be sold in a country are examples of protective tariffs.

Accepted Answer

Restrictive standards that dictate how a product must be sold in a country are known as non-tariff barriers, which are different from protective tariffs. Protective tariffs are taxes that are imposed on imported goods to make them more expensive and less competitive with domestic products.

Question 2

An import quota is a complete ban on the import or export of certain products.

Accepted Answer

An import quota is a limit on the amount of a certain product that can be imported into a country, not a complete ban.

Question 3

The main goal of the General Agreement on Tariffs and Trade (GATT) was to reduce trade restrictions among world nations.

Accepted Answer

The main purpose of GATT was to promote free trade by reducing or eliminating tariff and non-tariff barriers between member countries.

Question 4

Since patent and copyright laws are the same in all nations, they are not of much impact to firms that compete globally.

Accepted Answer

This statement is false. While patent and copyright laws may be similar in different nations, the enforcement and application of these laws can vary greatly. Firms that compete globally must navigate different legal systems, local regulations, and cultural norms to protect their intellectual property, making patent and copyright laws a significant factor in their success.

Question 5

Idle Time Gaming, Inc., needed silicon wafers that it knew could be mass-produced efficiently by Silicon City, Inc., a start-up firm in India. The Indian company needed MSG (metallurgical grade silicon) in order to make the wafers, which it knew it could get from a Chinese firm. The Chinese firm (mostly owned by the Chinese government) agreed to supply the silicon to the Indian company if it could get a certain quantity of gaming hardware from Idle Time. This beneficial exchange is described as countertrading.

Accepted Answer

This scenario describes a form of countertrading where two parties agree to exchange goods or services rather than using traditional currency payments.

Question 6

Protective tariffs are designed to raise money for the government.

Accepted Answer

Protective tariffs are designed to protect domestic industries by placing taxes on imported goods, not to raise money for the government directly. However, the revenue collected from these tariffs can go towards government funds.

Question 7

A few years ago, a well-known celebrity who promoted a line of clothing was accused of supporting child labor in a Honduras manufacturing site where the clothes were made. Although the celebrity's image was tarnished, he immediately was able to close down the operation due to a violation of international law.

Accepted Answer

The answer of A few years ago, a well-known celebrity...

Question 8

Nontariff barriers can be just as detrimental to free trade as tariffs.

Accepted Answer

Nontariff barriers, such as quotas, subsidies, and regulations, can limit competition and increase the cost of imports, making free trade more difficult to achieve. Just like tariffs, they can also lead to trade disputes and retaliatory actions between countries.

Question 9

Recently a news article described the bootlegging of music originally recorded by popular celebrities in the U.S. It seems that a recording made in the U.S. can be copied within a couple of hours and sold abroad. The U.S. government is able to readily prosecute foreign companies involved in these illegal actions.

Accepted Answer

The answer of Recently a news article described the bootlegging...

Question 10

A complete ban on the import or export of a specific good is called an embargo.

Accepted Answer

That is correct. An embargo is a total ban on trade in goods or services imposed by one country on another country. It is a complete ban on imports or exports of a specific good or all goods from a specific country.

Question 11

A United States firm recently won a large contract with a company in Bangladesh by providing government officials and company officials with American cars and promises to provide monetary gifts in exchange for the business. Fortunately, U.S. law, under the Foreign Corrupt Practices Act, permits U.S. companies to operate in this manner.

Accepted Answer

The Foreign Corrupt Practices Act prohibits U.S. companies from providing bribes or other illegal payments to foreign officials in exchange for business. The provision of American cars and promises of monetary gifts could be considered bribes, and therefore would be illegal under the Act.

Question 12

Trade protectionism is the use of government regulations to encourage the import of goods and services.

Accepted Answer

Trade protectionism is the use of government regulations to restrict the import of goods and services in order to protect domestic industries and jobs.

Question 13

Johanna Breese, a graduate student from Carnegie Mellon, connected with the culture of Madagascar when she created lamba hoany (a native garment) with artful messages to save the more than 150 rare species of animals that inhabit Madagascar. In contrast to many Americans trying to do business abroad, Johanna successfully adapted her message to the native culture when she imprinted it on the native garment.

Accepted Answer

The passage states that Johanna Breese was able to connect with the culture of Madagascar and successfully adapted her message to the native culture by imprinting it on the native garment, therefore the statement is true.

Question 14

Differences in electrical systems throughout the world can impair a U.S. firm's ability to sell its products to other countries.

Accepted Answer

This is true because different countries have different electrical systems and voltages, which can affect the compatibility of U.S. products with local electrical standards. This can create barriers to entry for U.S. firms in international markets.

Question 15

Under mercantilism, the basic economic idea was to achieve a favorable balance of trade.

Accepted Answer

Mercantilism focused on maximizing exports and minimizing imports in order to achieve a positive balance of trade, which was seen as crucial for a nation's economic success.

Question 16

If you travel to Mexico and the exchange rate is 12 pesos for one U.S. dollar, the peso is said to have strength against the dollar because you can get so many more pesos than you can dollars.

Accepted Answer

If the exchange rate is 12 pesos for one U.S. dollar, it means that the dollar is strong and the peso is weak. This is because it takes 12 pesos to buy one dollar. If the peso were strong against the dollar, the exchange rate would be lower, such as 1 peso for one dollar.

Question 17

When studying abroad last year, Reilly found that his U.S. dollars did not stretch as far as he had hoped. Each time he exchanged U.S. dollars for euros, he gave up more U.S. dollars in exchange for less euros. Obviously, the dollar had strength against the euro.

Accepted Answer

If each time Reilly exchanged U.S. dollars for euros, he received fewer euros in exchange for the same amount of dollars, then the dollar was weaker against the euro.

Question 18

Countries often use trade protectionism measures to protect their domestic industries from foreign competition.

Accepted Answer

Trade protectionism measures, such as tariffs, quotas, and subsidies, are often employed by countries to shield their domestic industries from the competition of foreign companies. These measures aim to limit the imports of goods and services from other countries and promote the sales of domestic products, creating jobs and boosting the economy. However, trade protectionism can also lead to higher prices for consumers, reduced overall economic growth, and retaliation from foreign governments.

Question 19

The Ozark Bike Company recently entered into an agreement with a large Japanese retailer to distribute its bicycles in Japan. Ozark Bike Company sees itself in a favorable position because the yen is gaining strength compared to the U.S. dollar making it cheaper for Japanese customers to buy U.S. products.

Accepted Answer

A stronger yen makes it cheaper for Japanese customers to buy U.S. products, which puts Ozark Bike Company in a favorable position for distributing their bicycles in Japan.

Question 20

American businesspersons often fail to adapt to foreign markets because they feel that American culture is superior to other cultures in the world.

Accepted Answer

This attitude of cultural superiority is commonly referred to as ethnocentrism and it can lead to a lack of understanding and appreciation for the customs and preferences of consumers in foreign markets, ultimately hindering business success.

Quiz 3: Doing Business in Global Markets