Question 1

Grand Metropolitan, a British company, purchased North American-based Pillsbury Co. in order to expand its product line and the market for its existing consumer products. Metropolitan's purchase was an example of which of the following?

Accepted Answer

The purchase of a company in another country to expand market share and product lines is an example of direct foreign investment.

Question 2

U.S. plane manufacturer McDonnell-Douglas has authorized Mitsubishi Heavy Industries, a Japanese company, to use its trademarks, patents, and other proprietary knowledge to manufacture F-15 fighter planes. Mitsubishi Heavy Industries pays McDonnell-Douglas. This is an example of which of the following activities?

Accepted Answer

This is an example of licensing as McDonnell-Douglas has given permission to Mitsubishi Heavy Industries to use its intellectual property in exchange for payment. Contract manufacturing would involve Mitsubishi Heavy Industries actually producing the F-15 fighter planes themselves and importing would involve the physical movement of goods across national borders, whereas franchising involves a more comprehensive transfer of knowledge and business systems, including ongoing support and guidance.

Question 3

Which of the following is a form of trading arrangement in which part or all of the payment for purchased goods or services is in the form of other goods and services?

Accepted Answer

A countertrade is a form of trading arrangement in which part or all of the payment for purchased goods or services is in the form of other goods and services. This can include bartering, offset agreements, and other non-cash forms of payment. Counteroffers and counteractions are not related to this type of trading arrangement, and a nonfinancial exchange may involve the transfer of goods or services but not necessarily as a form of payment.

Question 4

Pierre Cardin gives technical advice on textile manufacturing to China and in exchange receives silk and cashmere. This is an example of which of the following?

Accepted Answer

This is an example of countertrade, which involves exchanging goods or services instead of traditional currency payments. In this case, Pierre Cardin is providing technical advice and receiving silk and cashmere in exchange. Choice A (counteroffer) is incorrect as it involves a negotiation tactic to respond to an initial offer, while B (joint venture) and D (contra-deal) do not accurately describe the exchange of goods and services in this situation.

Question 5

The Uruguay Round of trade negotiations is best described as which of the following?

Accepted Answer

The Uruguay Round of trade negotiations was the most ambitious global trade agreement ever negotiated. It involved 123 countries and resulted in the creation of the World Trade Organization (WTO) and the lowering of trade barriers worldwide.

Question 6

When a French company brings its patents on digital telephone switches, and Bell Canada provides the marketing know-how to a business relationship, which of the following arrangements is occurring?

Accepted Answer

The arrangement described is a joint venture, where the two companies are combining their resources and expertise to create a new entity or product.

Question 7

Reducing trade barriers and opening markets is the role of which of the following organizations?

Accepted Answer

The World Trade Organization (WTO) is the only organization among the options given that is responsible for reducing trade barriers and opening markets. The IMF focuses on international monetary cooperation and exchange rate stability, while the other two options (World Trade Improvement Foundation and Global Trade Organization) are not actual organizations.

Question 8

Active ownership of a foreign company, with direct investors having either a controlling or a large minority interest in the company, is best described as which of the following?

Accepted Answer

Active ownership of a foreign company with a controlling or large minority interest is referred to as direct foreign investment. An international corporation involves the establishment of a business in multiple countries, a limited partnership involves a partnership between investors, and an international cooperative involves the collaboration of multiple firms in different countries.

Question 9

Capital Radio PLC, the United Kingdom's biggest commercial radio company, announced in 2002 that it would cooperate with Walt Disney Co. to create a radio network for children under the age of 16. The company will broadcast to a potential audience of 25 million under the name Capital Disney. This new radio network will be created as the result of which of the following arrangements?

Accepted Answer

The best choice is a joint venture, which involves the cooperation of two or more companies to create a new business entity. This is evident in the announcement that Capital Radio PLC and Walt Disney Co. will work together to create the Capital Disney radio network. It is not an international partnership, as both companies are based in the United Kingdom, nor is it a joint cooperative or an oligopoly, as these terms do not accurately describe the arrangement between the two companies.

Question 10

The BC Cherry Growers sells much of its locally grown produce to Taiwan. Which of the following would be the easiest and least expensive way for the growers' association to sell to global markets?

Accepted Answer

Exporting would be the easiest and least expensive way for the BC Cherry Growers to sell to global markets as it involves directly selling their locally grown produce to customers in other countries without the need for a middleman or additional fees associated with licensing or contract manufacturing. Importing would not be applicable in this case as the question is asking about selling products to global markets.

Question 11

A domestic company may decide to sign an agreement for the production of its goods by an established foreign manufacturer. Such private-label manufacturing by a foreign company is known as which of the following?

Accepted Answer

Contract manufacturing refers to the practice of outsourcing production to a third-party manufacturer, which in this case is a foreign company. The foreign company produces the goods on behalf of the domestic company under the domestic company's private label. The other options listed do not accurately describe this scenario.

Question 12

Japanese automobile manufacturer Mazda began production of the Premacy SUV in Haikou, China, at a plant it built in the Chinese province and expected to make 20,000 autos in 3 years. Mazda is using which action to engage in global trading?

Accepted Answer

Mazda is engaging in direct foreign investment by building a plant in China to produce the Premacy SUV. This involves a long-term investment in a foreign country to manufacture and sell goods or services, which is one of the forms of global trading.

Question 13

When a foreign company manufactures private label goods under a domestic company's brand this is referred to as which of the following?

Accepted Answer

The answer of When a foreign company manufactures private label...

Question 14

The Sara Lee Company sells the Hanes brand of hosiery in North America. The manufacturer of this hosiery brand in Great Britain sells it under the brand name of Pretty Polly. The Sara Lee Company is using which of the following activities to broaden its global marketing base without investing in overseas plants and equipment?

Accepted Answer

The answer of The Sara Lee Company sells the Hanes...

Question 15

Which of the following statements best describes dumping?

Accepted Answer

Dumping refers to the practice of exporting goods at a price lower than their domestic price, often with the aim of driving out competition in the importing country. Many industrialized countries, including the United States and the European Union, have anti-dumping laws to prevent this practice. Choice A is incorrect because government subsidies may contribute to dumping, but they do not make it legal. Choice C is incorrect because Canada has been a victim of dumping in the past. Choice D is incorrect because dumping is not a form of export quota, which involves limiting the amount of goods that can be exported.

Question 16

In 1997, Russia and Ukraine exported carbon steel plate into Canada at a price much lower than the countries charged for the identical steel in their home markets. Russia and Ukraine were engaged in which of the following activities?

Accepted Answer

The given scenario depicts the act of dumping, which refers to the practice of exporting goods at a price lower than their domestic market price. This practice is generally considered unfair as it displaces domestic producers and distorts the domestic market. Hence, option B is the correct choice. Option A, add-on pricing, refers to adding additional charges to the base price of a product, which is unrelated to this scenario. Option C, unloading, is not a term used in the context of international trade. Option D, export pricing, generally refers to setting a price for goods specifically for export, but it does not necessarily imply lower pricing than the domestic market, and hence, it is not the most suitable option in this case.

Question 17

An enterprise in which two or more companies or investors (including governments) share ownership of a business and its property rights is known as which of the following?

Accepted Answer

A joint venture is a business enterprise in which two or more companies or investors (including governments) share ownership of a business and its property rights. A cooperative involves a group of people working cooperatively, usually to sell products or services they produce. An international partnership may refer to any type of partnership between companies from different countries, not necessarily involving shared ownership. A cartel involves a group of companies or countries working together to control prices or limit competition in a particular market.

Question 18

By using split-run magazines (modifying the U.S. editions so they contain Canadian ads), U.S. magazine publishers can offer lower rates to advertisers and sell the magazines for less money than Canadian publishers can. According to the CMPA, the U.S. magazine publishers are engaged in which of the following?

Accepted Answer

Dumping refers to selling products in a foreign market at prices lower than those charged in the domestic market. In this case, U.S. magazine publishers are offering lower rates to advertisers and selling the magazines for less money than Canadian publishers. This can be seen as a form of dumping and is the most appropriate choice among the given options.

Question 19

The World Trade Organization (WTO) is best described by which of the following?

Accepted Answer

The WTO is an organization made up of member countries who have signed the Uruguay Round agreement, and it is not controlled by any one country. It is focused on reducing trade barriers and opening markets, and it currently has an effective dispute settlement procedure in place. There is no indication that there will be any changes to this procedure by the year 2018.

Question 20

Which of the following agreements dramatically lowered trade barriers worldwide and created the new World Trade Organization (WTO)?

Accepted Answer

The Uruguay Round, which took place from 1986 to 1994, resulted in the creation of the World Trade Organization (WTO) and dramatically lowered trade barriers worldwide. The Maastricht Treaty created the European Union, but did not have a significant impact on global trade. The North American Free Trade Agreement (NAFTA) and Mercosur only affected trade within specific regions, rather than worldwide trade.

Quiz 5: International Environment