Deck 3: The World Marketplace: Business Without Borders

Question 1

In foreign licensing, licensors run the risk that unethical licensees may become their competitors, using information that they gained from the licensing agreement.

Answer 1

True

Question 2

In the context of the strategies for reaching global markets, importing is a strategy to seek foreign customers.

Answer 2

False

Question 3

Companies that choose to export products to a foreign country spend more to enter that market than companies that choose to build their own factories.

Answer 3

False

Question 4

Balance of payments includes financial flows such as foreign investments.

Question 5

Foreign licensing helps circumvent government restrictions on importing in closed markets.

Question 6

In the context of foreign direct investment, a joint venture involves the merger of companies.

Question 7

A country has an absolute advantage when it can produce more of a good than other nations, using the same amount of resources.

Question 8

A firm that expands through foreign franchising is called a franchisee.

Question 9

Despite the growth rates in many high-population countries being weak, most of these nations remain ahead of the United States in terms of development and prosperity.

Question 10

Although a trade deficit signals the wealth of an economy that can afford to buy huge amounts of foreign products, a large deficit can be destabilizing.

Question 11

Balance of trade incorporates trade with all foreign nations.

Question 12

A firm that contracts with foreign producers has an obligation to ensure that those factories adhere to ethical standards.

Question 13

In the context of the strategies for reaching global markets, franchising is a strategy to seek foreign suppliers.

Question 14

In the context of competitive advantage, the value of the first-best choice represents the opportunity cost of producing a second product.

Question 15

Despite their huge populations, China and India represent a much smaller opportunity in terms of size and economic growth.

Question 16

The balance of trade is also referred to as countertrade.

Question 17

In the context of global trade, the exchange rate can directly measure global commerce.

Question 18

The key disadvantage of foreign outsourcing is dramatically higher labor wages.

Question 19

The balance of trade plays a central role in determining the balance of payments.

Question 20

In the context of foreign direct investment, a partnership typically involves a less formal, less encompassing agreement than a strategic alliance.

Question 21

Grettzee, a musical instruments manufacturing company, imports high-quality maple wood from Resumbro, a South Asian country where maple is found in abundance. Which of the following is most likely to have influenced Grettzee's decision to import raw materials from Resumbro?

A) Reduced risk
B) Access to factors of production
C) Inflow of innovation
D) Establishment of new industries

Question 22

Prost was the first automobile company in the world to introduce child safety locks in its vehicles. This feature soon became a major selling point for consumers all over the world. As a result, other automobile companies began providing a similar feature in their vehicles. In this scenario, which of the following is most likely to have influenced other companies to install child safety locks?

A) Reduced risk
B) Establishment of new industries
C) Inflow of innovation
D) Access to factors of production

Question 23

Luchen Modo, a software development firm in Asia, launched a new software for smartphones that allowed users to remotely control certain functions and features of their vehicles, such as ignition, windshields, and headlights. The success of this technology prompted other companies across the world to produce similar software. In this scenario, which of the following is most likely to have influenced other companies to produce similar software?

A) Establishment of new industries
B) Inflow of innovation
C) Access to factors of production
D) Reduced risk

Question 24

Revia and Bramin are European nations that signed a trade agreement with each other. The agreement stated that Revia would supply sugarcane to Bramin and Bramin would supply cloves to Revia. The agreement would benefit both nations and would even out some of the resource imbalances in the two nations. In this scenario, which of the following is most likely to have influenced the trade agreement between Revia and Bramin?

A) Reduced risk
B) Ease of storage of goods
C) Access to factors of production
D) Inflow of innovation

Question 25

In the context of emerging economies, which of the following statements is true of the BRIC countries?

A) India's subscriber base for cell phones has grown explosively over the past five years.
B) Brazil has a high employment rate and stands out to be the lone bright spot among the BRIC countries.
C) China is the only BRIC country that has an economy larger than the United States.
D) Over the past few years, China has seen a rapid growth in the number of low-wage manufacturing jobs.

Question 26

Compared to the United States, China and India have:

A) smaller market size.
B) higher gross domestic product growth rates.
C) higher per capita gross domestic products.
D) lower population.

Question 27

In the context of international trade, India, China, and the Philippines attract multibillion-dollar investments because:

A) they are more developed than any other developed country in the world.
B) they have a large cohort of technically skilled university graduates who work for about one-fifth the pay of comparable American workers.
C) the value of euro is lower in the Asian market than in the American market.
D) the level of risk associated with establishing business relationships with firms belonging to the Asian market is minimal.

Question 28

Which of the following statements is true of international trade?

A) It increases a firm's dependence on its domestic economy.
B) It offers companies an invaluable source of new ideas.
C) It increases the economic risk for multinational companies.
D) It reduces a firm's opportunity to tap into growing new markets.

Question 29

In the context of international trade, often countries with the highest trade barriers have the least competition.

Question 30

Negacho, a food and beverage company, introduced a new flavor of potato chips called South Indian Chillis. It received a positive response from consumers, which prompted Brex Mex, another food company, to introduce its own Szechuan flavored chips. In this scenario, which of the following is most likely to have influenced Brex Mex to produce a product similar to Negacho's?

A) Establishment of new industries
B) Access to factors of production
C) Reduced risk
D) Inflow of innovation

Question 31

In the context of the barriers to international trade, the infrastructural differences between two countries fall into the category of economic differences.

Question 32

Vertiaplume, a drug manufacturing company, exports its products to more than 15 countries around the world. Regardless of reduced sales in one of these countries, Vertiaplume is able to maintain its overall profits. In the given scenario, which of the following is a reason behind Vertiaplume's ability to maintain its overall profits?

A) Access to factors of production
B) Ease of storage of goods
C) Inflow of innovation
D) Reduced risk

Question 33

Elision Inc., an American software development company, outsourced its support operations to Luzenza, an Asian nation, because it found that Luzenza has a large cohort of English-speaking college graduates who are ready to work for one-fourth the pay of comparable American workers. Which of the following is most likely to have influenced Elision Inc.'s decision to outsource its support operations to Luzenza?

A) Inflow of innovation
B) Growth of domestic industries
C) Reduced risk
D) Access to factors of production

Question 34

Merticao, a French textile company, supplied most of its products to its primary market in Hestonia, a North American nation. However, when Hestonia faced an economic downturn and its citizens began to reduce their expenditures, Merticao began to focus more on its domestic market. As a result, Merticao was able to survive the loss of its primary market because of _____ in global trade.

A) reduced risk
B) access to factors of production
C) ease of storage of goods
D) inflow of innovation

Question 35

The financial assistance offered by the World Bank usually comes in the form of high-interest loans.

Question 36

In the context of the barriers to international trade, per capita income is a key factor that determines the economic differences between two countries.

Question 37

Alice, the global marketing director of a multinational electronic goods manufacturing firm, is assigned the task of expanding her firm in new markets. She learns that hiring labor is expensive and that the required technical manufacturing equipment is unavailable in the international market. In this scenario, which of the following is most likely affecting the global trade of Alice's firm?

A) Lack of innovative ideas
B) Increased dependence on one economy
C) Limited access to factors of production
D) Absence of plentiful capital

Question 38

Quotas are taxes levied against imports.

Question 39

Regency Placade, a renowned European electronics company, wants to set up a subsidiary in Finim, an Asian country. After conducting a survey, the company finds that Finim lacks the resources required for production. Therefore, Regency Placade decides to abandon the idea. In this scenario, which of the following most likely affected Regency Placade's plan?

A) Lack of innovative ideas
B) Economic dependence in the international market
C) Limited access to factors of production
D) Absence of plentiful capital

Question 40

Nescat Autos, an automobile manufacturing company, developed a secondary market for its products in a foreign country. This allowed the company to minimize its losses when its primary market failed to generate enough revenue to benefit the company. In this scenario, which of the following is most likely to have influenced Nescat Autos's decision to set up a market in another country?

A) Inflow of innovation
B) Reduced risk
C) Access to factors of production
D) Growth of domestic industries

Question 41

Romernia, an Asian country, imported goods and services worth $700 million in the last fiscal year. It exported goods worth $400 million in the same year. The difference in the value of Romernia's imports and exports is known as _____.

A) an absolute advantage
B) the balance of trade
C) a comparative advantage
D) the balance of payments

Question 42

Resorto, a European country, exported sugar worth $600 million between 2015 and 2016 and imported tea worth $750 million during the same period. In this scenario, Resorto most likely had a _____ between 2015 and 2016.

A) trade deficit
B) balance of payments surplus
C) trade surplus
D) balance of payments deficit

Question 43

Sloimekia can manufacture more of a certain kind of cloth than its neighboring countries, although they all have the same amount of resources for the cloth's production. In this scenario, which of the following statements is true of Sloimekia?

A) It has a higher trade surplus than its neighboring countries.
B) It enjoys an absolute advantage in terms of the particular cloth it produces.
C) It enjoys the highest balance of trade among its neighboring countries.
D) It has a lower balance of payments and a lower trade deficit for the particular cloth produced.

Question 44

Which of the following countries exemplifies the concept of opportunity cost?

A) An African country that produces electronic goods on a large scale without compromising on any other produce
B) A South American country that expands its trade relations to neighboring countries
C) A European country that produces more cotton than a North American country despite having equal resources
D) An Asian country that increases its production of sugar by decreasing its production of cocoa

Question 45

Wichasha, an African country, exports barley and cotton worth $100 million to Illema, a European country, and it imports sugarcane worth $25 million from Illema. As such, the total value of Wichasha's exports is higher than the total value of its imports. This difference between the value of Wichasha's exports and imports is known as _____.

A) a comparative advantage
B) the balance of payments
C) an absolute advantage
D) the balance of trade

Question 46

In the context of international trade, which of the following statements is true of comparative advantage?

A) It is the tendency of a country to choose goods that have a higher opportunity cost compared to other countries.
B) As technology changes, nations may gain or lose comparative advantage in various industries.
C) It is subjected to the industries in developing countries facing major trade barriers.
D) Despite evolving workforces, developing countries maintain a static comparative advantage.

Question 47

Mewpeth, an Asian nation, is the world's largest producer of cotton. The country was able to achieve this status by increasing the production of cotton and compromising on the production of wheat. The given scenario exemplifies the concept of _____.

A) an absolute advantage
B) opportunity cost
C) balance of payments
D) a strategic alliance

Question 48

When the total value of a nation's exports is higher than the total value of its imports, that country has a(n) _____.

A) absolute advantage
B) trade surplus
C) trade deficit
D) comparative advantage

Question 49

The term _____ refers to the shortfall that occurs when the total value of a nation's imports is higher than the total value of its exports.

A) exchange rate
B) balance of payments surplus
C) trade deficit
D) positive balance

Question 50

Which of the following countries has a trade deficit?

A) An Asian country that does not engage in trade with other countries
B) A European country that has a higher total value of imports than exports
C) An African country that produces all products domestically
D) A North American country that exports goods but does not import goods

Question 51

When the industries in a country tend to produce products that have the lowest opportunity cost relative to other countries, the country most likely has a _____.

A) comparative advantage
B) balance of payments surplus
C) positive balance
D) trade surplus

Question 52

Which of the following countries has a trade surplus?

A) A South American country whose total value of exports and imports is equal
B) An Asian country whose total value of exports exceeds its total value of imports
C) An African country that imports most of its products from other countries
D) A European country whose total value of imports exceeds its total value of exports

Question 53

The total value of the goods exported by Maulini, a South American country, in the last fiscal year was lower in comparison to the total value of the goods imported by it. Given this information, Maulini had a _____ in the last fiscal year.

A) trade surplus
B) balance of payments surplus
C) trade deficit
D) balance of payments deficit

Question 54

Unless they face major trade barriers, the industries in any country tend to produce products for which they have a _____, which means that they tend to turn out those goods that have the lowest opportunity cost compared to other countries.

A) comparative advantage
B) balance of payments surplus
C) positive balance
D) trade surplus

Question 55

Which of the following countries most likely has a comparative advantage?

A) A South American country that produces more coffee compared to an Asian country despite having equal resources
B) An Asian country that manufactures more textile products than most countries by decreasing its production of tea
C) An Asian country that produces quality automobiles with little opportunity cost compared to other countries
D) A North American country that expands its trade relations to a neighboring country to share resources

Question 56

Openi, an island nation, is able to increase its textile production without having to compromise on the production of other materials. This is in contrast to other nations that need to lower the production of other materials to increase their textile production. In this scenario, Openi has a _____ in textile production.

A) comparative advantage
B) balance of payments surplus
C) positive balance
D) trade surplus

Question 57

Nersina, a European country, exports petroleum and imports cotton and jute. In the current fiscal year, the total value of Nersina's exports is higher than the total value of its imports. In this scenario, Nersina most likely has a _____.

A) balance of payments surplus
B) trade deficit
C) balance of payments deficit
D) trade surplus

Question 58

Ithilium, a European country, is able to produce more electronics than Kilim, a North American country, even though both countries use the same amount of resources. Given this information, it can be deduced that Ithilium has a(n):

A) comparative advantage over Kilim.
B) higher trade surplus than Kilim.
C) absolute advantage over Kilim.
D) higher balance of payments surplus than Kilim.

Question 59

When a country produces more of one good, it must produce less of another good (assuming that resources are finite). The value of the second-best choice-the value of the production that a country gives up in order to produce the first product-represents the _____ of producing the first product.

A) money cost
B) opportunity cost
C) sunk cost
D) differential cost

Question 60

Chechinko, an African country, and Herito, an Asian country, use the same amount of resources to produce alcohol. Despite this, Chechinko is able to manufacture a higher quantity of alcohol than Herito. In this context, which of the following statements is definitely true of Chechinko?

A) Chechinko has a higher trade surplus than Herito.
B) Chechinko enjoys an absolute advantage in terms of alcohol production, relative to Herito.
C) Chechinko has a higher balance of trade than Herito.
D) Chechinko can produce alcohol at a lower opportunity cost compared to Herito.

Question 61

In the context of global trade, a balance of payments deficit means that:

A) foreign borrowing and lending are excluded from calculating the balance of payments.
B) more money flows in than out.
C) more money flows out than in.
D) foreign payments and receipts are excluded from calculating the balance of payments.

Question 62

Who among the following is most likely to benefit when the dollar is strong and the euro is weak?

A) Hailinser who is an American exports goods to Europe.
B) Fieolia Corp. is a European firm that imports goods from America.
C) Joinieker Inc. is a European firm with American operations.
D) Ron is an American who is touring Europe.

Question 63

In the fiscal year 2015-2016, Nescarto, an African country, imported goods worth $18 million and exported goods worth $20 million. It also borrowed $40 million from other countries. In this scenario, Nescarto had a _____ during 2015-2016.

A) balance of payments surplus
B) balance of payments decumulation
C) negative balance
D) trade deficit

Question 64

Which of the following countries is involved in countertrade?

A) An Asian country that imports cotton from an African country and resells it to other countries
B) A North American country that experiences more cash outflow than inflow
C) An Asian country that provides sugarcane to an African country in exchange for jute
D) A European country whose total value of exports is higher than its imports

Question 65

Nipennie and Mirasa, two developing countries, bartered cotton for jute rather than for currency. In this scenario, the two countries engaged in _____.

A) foreign franchising
B) fair trade
C) arbitrage
D) countertrade

Question 66

Which of the following statements best supports the concept of countertrade?

A) Barter opportunities tend to increase during economic downturns.
B) Outsourcing and importing are ways to seek foreign customers.
C) Licensing and franchising are ways to seek foreign suppliers.
D) Countries with the lowest trade barriers have the most competition.

Question 67

Which of the following statements is true of foreign outsourcing?

A) It drives down the cost of production.
B) It is a specialized type of licensing.
C) It helps circumvent government restrictions on importing in closed markets.
D) It is the most basic level of international market development.

Question 68

Identify a true statement about balance of payments.

A) It measures the value of one nation's currency relative to the currency of other nations.
B) It is a basic measure of the difference between a nation's exports and imports.
C) It typically corresponds to the balance of trade.
D) It includes domestic borrowing and excludes foreign borrowing.

Question 69

In the context of global trade, which of the following statements is true of balance of payments?

A) It includes foreign borrowing and lending.
B) Its surplus indicates more money flowing out than in.
C) It excludes overseas investments.
D) Its deficit indicates more money flowing in than out.

Question 70

Who among the following is most likely to benefit in a case where there is a weak dollar against a euro?

A) John is an American who exports goods to Europe.
B) Nierin Corp. is an American firm that imports goods from Europe.
C) Joinieker Inc. is an American firm with European operations.
D) Elise is an American who is touring Europe.

Question 71

Consider an exchange rate situation in which 1 Indian rupee equals 0.40 Japanese yen. Given this information, which of the following statements is true?

A) The cost of operating an Indian firm in Japan is lower.
B) An Indian tourist in Japan can buy more goods and services in Japan.
C) A Japanese tourist can buy more goods and services in India.
D) The cost of operating a Japanese firm in India is lower.

Question 72

A _____ refers to the overage that occurs when more money flows into a nation than out of that nation.

A) balance of trade surplus
B) balance of trade deficit
C) balance of payments surplus
D) balance of payments deficit

Question 73

Brentia, an East Asian country, exported goods worth $50 million and imported goods worth $5 million in the last fiscal year. It also provided a loan of $25 million to another country. In this scenario, Brentia most likely had a _____ in the last fiscal year.

A) negative balance
B) balance of payments decumulation
C) trade deficit
D) balance of payments surplus

Question 74

Quezi, an East Asian country, borrows $300 million from Muranico, a North American country, to fund its infrastructure projects. Quezi exports petroleum worth $700 million to Muranico and other countries. Besides this, Quezi provides foreign aid worth $40 million. In this scenario, this flow of money into and out of Quezi can be measured by _____.

A) articles of organization
B) opportunity cost
C) the balance of payments
D) the balance of trade

Question 75

Quistor Inc., a company based in the country of Waltefa, contracts with a small-scale supplier in the country of Carlesna to manufacture its computers and tablets that are sold across the world. This strategy by Quistor Inc. illustrates _____.

A) joint venture
B) franchising
C) exporting
D) foreign outsourcing

Question 76

In the context of global trade, the _____ is a measurement of the value of one nation's currency relative to the currency of other nations.

A) liquidity ratio
B) exchange rate
C) countertrade ratio
D) discount rate

Question 77

Nakato, a South Asian country, exported goods worth $500 million and imported goods worth $400 million in the last fiscal year. The country also made foreign investments worth $300 million and provided foreign aid worth $100 million in disaster relief. Besides this, the country took a loan of $5 billion from the World Bank. This flow of money into and out of Nakato is measured by _____.

A) opportunity cost
B) the balance of trade
C) articles of organization
D) the balance of payments

Question 78

Companies typically engage in _____ to meet the needs of customers that don't have access to hard currency or credit.

A) countertrade
B) franchising
C) a strategic alliance
D) product churning

Question 79

_____ range from simple barter to a complex web of exchanges that end up meeting the needs of multiple parties.

A) Individual outsourcing agreements
B) Individual countertrade agreements
C) Individual direct selling agreements
D) Individual licensing agreements

Question 80

In the late 1970s, LarceCo, a tea manufacturing company, entered the market of a developing country called Fantesnia. As there was a lack of hard currency in Fantesnia, LarceCo was involved in a barter system. It exchanged its tea-based products for the local vodka of Fantesnia. This scenario illustrates that LarceCo had engaged in _____.

A) countertrade
B) foreign outsourcing
C) franchising
D) direct investment