Deck 4: Business in a Global Economy

Question 1

The value of a country's imports exceeds the value of its exports; therefore, the country has a trade deficit.

Answer 1

True

Question 2

Exchange rates are the rates at which currencies are converted into another currency.

Answer 2

True

Question 3

Exchange rates can be manipulated or fixed by governments.

Answer 3

True

Question 4

One way for a country to improve its competitiveness is to invest in worker training.

Question 5

A quota is a total restriction on an import or export.

Question 6

The assigning of certain tasks, such as production or accounting, to an outside company or organization is called outsourcing.

Question 7

By differentiating its products to meet unique local needs, tastes, or preferences, a company follows a multidomestic strategy.

Question 8

Tariffs are a type of trade barrier.

Question 9

Contract manufacturing occurs when a firm pays another firm to produce part or all of its goods as an alternative to the payer owning and operating its own production facility.

Question 10

Even though the nation of Lambda lost in the arbitration of a WTO trade dispute, Lambda can ignore the result because the WTO has no enforcement power.

Question 11

Companies that sell a single product throughout the entire world follow a transnational strategy.

Question 12

When all countries focus on producing those products for which they have a comparative advantage, collectively, they will produce more products.

Question 13

The president of the nation of Gamma asks you if the benefits of international trade are greater than the costs. You should answer that it depends on one's perspective.

Question 14

The U.S. total ban on importing Cuban cigars is an example of an embargo.

Question 15

The EU is currently the world's largest single market.

Question 16

When a country drops its rule preventing the imports of foreign-made cars, it is increasing globalization through technological innovation.

Question 17

Localization is the movement toward a more interconnected and interdependent world economy.

Question 18

The purchasing of property and businesses in foreign nations is called globalization of markets.

Question 19

A free trade area is a compact abolishing trade barriers among member countries.

Question 20

If a restaurant chain sells the use of its brand name to a Singaporean investor in exchange for a fee and a percentage of sales, the restaurant is entering a foreign market through exporting.

Question 21

Since consumers simply want to purchase the best product at the lowest prices, companies need not worry about aesthetics when working internationally.

Question 22

According to the theory of comparative advantage, if the U.S. and Mexico increase their trade with each other, the two countries will experience ________ standards of living.

A)no change in
B)higher
C)rapidly decreasing
D)slightly lower

Question 23

Apple's selling iPhones to customers in Africa, Asia, and Europe is an example of the globalization of ________.

A)production
B)markets
C)offshoring
D)manufacturing

Question 24

All of the following contribute to accelerating globalization EXCEPT ________.

A)a growing role for developing nations
B)a rise in non-U.S. foreign direct investment
C)an increase in democratization
D)a rise in non-U.S. small, local businesses

Question 25

A business can create a competitive or comparative advantage by doing all of the following EXCEPT ________.

A)shifting funding from worker training in order to increase profits
B)promoting innovation throughout their organization
C)accessing cheap raw materials
D)purchasing state-of-the-art capital

Question 26

Brazil has experienced rapid economic growth and increased sales of its products to other countries. This is an example of a(n)________.

A)increase in democratization
B)growing role for developing nations
C)rise in non-U.S. multinational enterprises
D)rise in non-U.S. foreign direct investment

Question 27

A country's launching of a government-owned telecommunications satellite is an example of investing in ________.

A)labor
B)natural resources
C)infrastructure
D)private capital

Question 28

The nation of Baa-Baa raises sheep relatively more efficiently than the nation of Snuggle. Snuggle weaves woolen blankets relatively more efficiently than Baa-Baa. Baa-Baa decides to specialize in sheep raising, to sell wool to Snuggle, and to buy blankets from Snuggle. Snuggle decides to specialize in blanket weaving, to sell blankets to Baa-Baa, and to buy wool from Baa-Baa. This international trade illustrates ________ advantage.

A)international
B)comparative
C)globalization
D)absolute

Question 29

If the U.S. has the ability to produce more steel than any other country in the world, the U.S. has a(n)________ advantage in steel production.

A)relative
B)globalized
C)absolute
D)comparative

Question 30

Culture is the complex set of values, behaviors, lifestyles, arts, beliefs, and institutions of a population that are passed on from generation to generation.

Question 31

The link between labor costs in China and the price of MP3 music players in the U.S. is an example of ________.

A)localization
B)monetization
C)globalization
D)nationalization

Question 32

The growing demand for biofuels in the U.S. that has led to a growing supply of soybeans from Brazil is an example of all of the following EXCEPT ________ economies.

A)localized
B)globalized
C)interconnected
D)interdependent

Question 33

Which of the following is contributing to the acceleration of globalization?

A)increasing democratization
B)rising number of non-U.S. small, local businesses
C)restricting foreign direct investment
D)dominating U.S. economic system

Question 34

Different types of body language mean the same things throughout the world.

Question 35

A term that describes the movement of production away from a domestic production site to a foreign location is ________ outsourcing.

A)domestic
B)offshore
C)production
D)onshore

Question 36

The developing country of Alpha had a rule that none of its factories could be owned by companies from the developed country of Beta. If Alpha drops this rule, this would be an example of a(n)________.

A)decline in trade and investment barriers
B)globalization of markets
C)technological innovation
D)increase in tariffs

Question 37

Bribery is illegal all around the world.

Question 38

An engineering team has members from Egypt, Malaysia, Australia, Argentina, and the U.S. They communicate by email and videoconference. The work of this globalized team is made easier because of ________.

A)technological innovation
B)declines in trade barriers
C)increases in quotas
D)increases in democratization

Question 39

A measure that divides a worker's wages by the average productivity of that worker is unit labor cost.

Question 40

An example of globalization of ________ is Toyota opening a factory in Kentucky.

A)production
B)markets
C)retailing
D)selling

Question 41

Who benefits from trade barriers?

A)domestic consumers
B)domestic producers
C)foreign workers
D)foreign producers

Question 42

As a result of their influence on the quantity, variety, and quality of products, trade barriers ________ consumers.

A)give an absolute advantage to
B)hurt
C)have no effect on
D)help

Question 43

The country of Kappa sells pizza for $1.00 each within its borders. But Kappa exports pizzas at a price of $0.30. This is an example of a(n)________.

A)dumping
B)administrative trade barrier
C)embargo
D)local content requirement

Question 44

What is the term for the sale of a domestically produced good in a foreign market?

A)exporting
B)turnkey project
C)joint venture
D)licensing

Question 45

U.S. farmers export canned sweet corn to Germany, which lowers the price to a German consumer by a few cents. The benefits to Germany of this international trade deal are ________.

A)concentrated in the hands of a few German farmers
B)nonexistent
C)spread out among millions of German consumers
D)immeasurable

Question 46

A free trade area that includes 27 independent states is the ________.

A)European Union (EU)
B)MERCOSUR
C)North American Free Trade Agreement (NAFTA)
D)Association of Southeast Asian Nations (ASEAN)

Question 47

If the nation of Epsilon places a tax on all grapes imported from the nation of Zeta, Epsilon has imposed a ________.

A)quota
B)subsidy
C)embargo
D)tariff

Question 48

The nations of Tweedle-dee and Tweedle-dum do not trust each other. Tweedle-dee is convinced that if it lowers its trade barriers, Tweedle-dum will not lower its barriers. Therefore, Tweedle-dee keeps its trade barriers high. This is an example of the ________ argument in favor of protectionism.

A)threat of retaliation
B)infant-industry
C)national security
D)cheap foreign labor

Question 49

If Ecuador has a dispute with France over the importation of bananas, from which agency can Ecuador seek arbitration?

A)GATT
B)NAFTA
C)WTO
D)APEC

Question 50

The cheap foreign labor argument for protectionism relates to ________.

A)an undeveloped domestic industry's workers
B)a lower wage often earned by many foreign workers
C)a trading partner increasing trade barriers on work done by citizens
D)an industry critical to national security being protected from foreign workers

Question 51

Which of the following is an example of a local content requirement?

A)China requires that a specific percentage of its domestically manufactured wind turbines be sold in China.
B)China requires a specific percentage of foreign-manufactured wind turbines be produced in China.
C)China requires only a small percentage of foreign-manufactured wind turbines be bought in China.
D)China requires that a specific percentage of foreign-manufactured wind turbines be sold in China.

Question 52

As an economist, Susan Mukulu MOST LIKELY believes that over time the benefits of free trade ________ the costs.

A)are far outweighed by
B)far outweigh
C)are equal to
D)only slightly outweigh

Question 53

With a global strategy for conducting business internationally, a company competes ________.

A)primarily on the basis of price while selling a standardized product
B)primarily by customizing or differentiating its product to meet unique local needs, tastes, or preferences
C)primarily by offering a customized product while simultaneously selling at the lowest possible price
D)primarily by offering a homogeneous product while simultaneously selling at a high price

Question 54

Airbus competes on the basis of price while selling a standardized or homogeneous product. The company is using a ________ strategy.

A)transnational
B)global
C)multidomestic
D)domestic

Question 55

American Express competes around the world by offering a customized product while simultaneously selling at the lowest possible price. The company is using a ________ strategy.

A)transnational
B)global
C)multidomestic
D)domestic

Question 56

A consumer products company competes around the world primarily by customizing or differentiating its products to meet unique local needs, tastes, or preferences. The company is using a ________ strategy.

A)global
B)multidomestic
C)transnational
D)domestic

Question 57

A free trade area that includes Canada and the U.S., but not Japan, is the ________.

A)North American Free Trade Agreement (NAFTA)
B)Association of Southeast Asian Nations (ASEAN)
C)MERCOSUR
D)European Union (EU)

Question 58

The country of Theta restricts the activities of foreign insurance companies in order to give Theta's insurance industry a chance to grow and develop. Theta's actions are an example of the ________ argument in favor of protectionism.

A)cheap foreign labor
B)national security
C)threat of retaliation
D)infant-industry

Question 59

GATT stands for ________ on Tariffs and Trade.

A)General Agreement
B)General Argument
C)Global Agreement
D)Global Argument

Question 60

A U.S. consumer electronics company has to shut down because it cannot compete against foreign manufacturers. For the U.S., this is an example of a(n)________ of international trade.

A)benefit
B)cost
C)theory
D)cause

Question 61

If the value of the nation of Nu's exports is greater than the value of its imports, Nu has a trade ________.

A)balance
B)currency
C)surplus
D)deficit

Question 62

Most countries operate under a(n)________ exchange rate system.

A)fixed
B)freely floating
C)stable
D)immeasurable

Question 63

International businesses prefer ________ economies to ________ economies because the bureaucratic hassles associated with government intervention drive costs up.

A)state-run; free market
B)free market; state-run
C)socialized; free market
D)state-run; socialized

Question 64

An example of currency ________ would be if the value of the U.S dollar rises against the Malagasy ariary (the currency of Madagascar).

A)internalization
B)globalization
C)appreciation
D)depreciation

Question 65

The nation of North Xi has a ________ currency that cannot be exchanged in a foreign exchange market.

A)countertrade
B)nonconvertible
C)flexible
D)fixed

Question 66

What would prompt a nation to invest in a sovereign wealth fund (SWF)?

A)trade deficit
B)trade surplus
C)trade balance
D)trade growth

Question 67

An agreement in which a domestic company's intangible property may be sold or made available to a foreign company in exchange for a royalty fee is called a(n)________.

A)strategic alliance
B)franchise
C)license
D)wholly-owned subsidiary

Question 68

The nation of South Pi is experiencing rapid increases in business activity, but still lacks sufficient infrastructure and modern communication systems. Which challenge to conducting international business is the PRIMARY one faced by exporters to Pi?

A)nonconvertible currency
B)government economic policies
C)economic growth and development
D)socioeconomic factors

Question 69

The ratio at which Australian dollars are converted into Indonesian rupiah is known as the ________ rate.

A)interest
B)exchange
C)international
D)export

Question 70

In order to enter the Spanish market, a Moroccan firm establishes a store that is entirely owned by the Moroccan firm. This is an example of a(n)________.

A)strategic alliance
B)wholly-owned subsidiary
C)exporting agreement
D)joint venture

Question 71

What is the opposite of nonconvertible currency?

A)countertrade currency
B)freely floating currency
C)gold coin currency
D)unregulated currency

Question 72

U.S. exporters prefer a(n)________ dollar.

A)strong
B)appreciating
C)exchange
D)weak

Question 73

Global companies can still do business with countries that have nonconvertible currencies through the use of ________.

A)appreciation
B)countertrade
C)depreciation
D)currency

Question 74

Socioeconomic factors that must be considered by international companies include all of the following EXCEPT ________.

A)cultural behaviors
B)income distribution
C)birthrates
D)atypical behaviors

Question 75

A U.S. company exports products to Russia. The prices of the U.S. products in Russia are going up because the value of the dollar has ________ against Russia's currency.

A)depreciated
B)stabilized
C)risen
D)fallen

Question 76

U.S importers prefer a(n)________ dollar.

A)international
B)weak
C)depreciating
D)strong

Question 77

An American company enters the Mexican market by sharing ownership of a subsidiary firm with a Mexican company. This is an example of a(n)________.

A)contract manufacturing arrangement
B)joint venture
C)strategic alliance
D)export agreement

Question 78

What is a valid explanation as to why some nations retain nonconvertible currency?

A)desire to work with other countries
B)increased academic achievement
C)fear of capital flight
D)reliance on foreign loans

Question 79

When Mu Manufacturing Co. exports their technological know-how in exchange for a fee, they are entering foreign markets through a ________.

A)strategic alliance
B)turnkey project
C)franchise
D)wholly-owned subsidiary

Question 80

Cooperative arrangements between actual or potential competitors in which each partner retains its business independence are known as ________.

A)contract manufacturing
B)licensing agreements
C)turnkey projects
D)strategic alliances