Deck 5: The Global Context of Business

Question 1

Which of the following is an example of importing a service?

A) A Canadian purchases a ticket to see a performance by a Spanish singer
B) A Toronto taxi driver takes an American from Pearson airport to a downtown Toronto hotel
C) A Canadian engineer designs a bridge to be built in Australia
D) An accountant does financial statements for a Mexican company
E) A Canadian lawyer goes to California to work on a litigation case

Answer 1

A

Question 2

The absolute advantage form of competitive advantage means

A) that a country does not belong to any free trade agreements.
B) that a country can produce everything better or more cheaply than any other country.
C) that a country can produce some products better or more cheaply than it can others.
D) that a country is the sole supplier of a product or service.
E) that a country can produce something better or more cheaply than any other country.

Answer 2

E

Question 3

According to the World Bank, ________ is considered an upper middle-income country.

A) Singapore
B) Hong Kong
C) South Korea
D) Argentina
E) United Arab Emirates

Answer 3

D

Question 4

Which organization created the classification of countries based on per capita income?

A) The World Bank
B) The World Trade Organization
C) The International Monetary Fund
D) The European Union
E) The North American Free Trade Agreement

Question 5

The country that has economically dominated Western Europe is

A) Germany.
B) Russia.
C) Finland.
D) Poland.
E) Spain.

Question 6

The annual volume of world trade is about

A) $100 billion.
B) $3 trillion.
C) $875 billion.
D) $19 trillion.
E) $8 trillion.

Question 7

Farmer Sal grows strawberries. The berries are shipped to a local manufacturing plant where they are made into jam, labeled "Country Recipe Strawberry Jam," and boxed for shipment overseas. This product of Ontario is also referred to as a(n)

A) export.
B) import.
C) trade product.
D) absolute product.
E) competitive advantage.

Question 8

Which of the following constitutes the best evidence for globalization?

A) Diamonds that are mined in Country X are sold on the diamond market in Country Y and the money is used to fund a rebel group trying to overthrow the government in Country X.
B) A flood in country X causes factories to shut down temporarily and they cannot deliver computer chips to foreign buyers. Company Y (in another country) has to reduce its output, and it also raises the price of its products.
C) Farmers in Country X lose most of their wheat crops because of a drought. The price of wheat triples and the government of country X reimburses farmers for some of their losses.
D) Country X has almost exhausted all of its available natural energy sources. The government has been investing in alternative energy research for many years and has developed an efficient synthetic energy source.
E) Country X has raised the tax on gasoline and, as a result, more of its citizens are taking public transportation and cutting back on car travel.

Question 9

Your television set, your shoes, even the roast lamb on your dinner table is likely to be the result of

A) importing.
B) subsidies.
C) foreign exchange.
D) a trade deficit.
E) exporting.

Question 10

Imports are

A) services that are created in Canada and sold abroad.
B) products that are made or grown abroad and sold in Canada; services cannot be imported.
C) goods and services that are made or grown in Canada and sold abroad.
D) products that are made or grown in Canada and sold abroad; services cannot be imported.
E) goods and services that are made or grown abroad and sold in Canada.

Question 11

With regard to the BRIC countries, it is correct to say that

A) they all emphasize the export of raw materials.
B) they all have a low level of industrialization at the moment, but are progressing rapidly.
C) Russia is the strongest in terms of manufacturing.
D) Brazil is strong in agriculture and commodities.
E) All of these statements are correct.

Question 12

According to the World Bank, high income countries include all of the following except

A) Japan.
B) the United States.
C) Canada.
D) South Korea.
E) South Africa.

Question 13

According to the World Bank, ________ are high-income countries, while ________ are upper middle income countries.

A) Australia, Japan, and Israel; China, Argentina, and South Africa
B) China, Colombia, and Lebanon; Armenia, Guatemala, and Vietnam
C) Argentina and South Africa; Colombia, Lebanon, and Turkey
D) Colombia, Lebanon, and Turkey; Australia, Japan, South Korea;
E) Canada, the United States, and most countries in Europe; Kuwait, the United Arab Emirates and Oman.

Question 14

Exports are

A) services that are created in Canada and sold abroad.
B) goods and services that are made or grown abroad and sold in Canada.
C) products that are made or grown in Canada and sold abroad; services cannot be exported.
D) goods and services that are made or grown in Canada and sold abroad.
E) products that are made or grown abroad and sold in Canada; services cannot be exported.

Question 15

According to the World Bank, upper middle-income countries are defined as

A) those with per capita income between US$4126 and US$12 745.
B) those with per capita income between US$5210 and US$8210.
C) those with per capita income between US$765 and US$21 345.
D) those with per capita income between US$3595 and US$11 115.
E) those with per capita income between US$205 and US$9386.

Question 16

Which areas represent the three major market places for international business?

A) North America, South America, and Asia-Pacific
B) North America, Europe, and Asia-Pacific
C) South America, Africa, and Asia-Pacific
D) South America, Europe, and Africa
E) Asia-Pacific, Europe, and Africa

Question 17

Which of the following is correct with respect to the BRIC countries?

A) Russia is the dominant country in the group.
B) There is very little coordination between the BRIC countries, and they do not act like a unit.
C) All of the BRIC countries put a heavy emphasis on exporting commodities.
D) India is a leading service provider.
E) Brazil is the most corrupt of the BRIC nations.

Question 18

Susie lives in Vancouver and has noticed that there seems to be a rising interest in goods from the Chinese culture. To take advantage of this she should explore

A) subsidies.
B) exporting.
C) a trade deficit.
D) foreign exchange.
E) importing.

Question 19

According to the World Bank, lower middle-income countries are defined as

A) those with per capita income between US$4126 and US$12 475.
B) those with per capita income between US$5210 and US$8210.
C) those with per capita income between US$765 and US$21 345.
D) those with per capita income between US$3595 and US$11 115.
E) those with per capita income between US$1046 and US$4125.

Question 20

The major reasons why Mexico has recently become a major manufacturing centre are

A) cheap labour and low transportation costs.
B) elimination of quotas and tariffs and low tax rates.
C) low tax rates and cheap labour.
D) cheap labour and elimination of quotas and tariffs.
E) low transportation costs and low tax rates.

Question 21

If Japan's total exports are $12 billion and total imports are $4 billion, then this is called

A) a trade deficit.
B) a positive balance of trade.
C) an absolute advantage.
D) a negative balance of payments.
E) negative capital mobility.

Question 22

Which of the following is correct with regard to Canada's balance of trade?

A) Canada had a trade surplus of $4.6 billion in 2014.
B) The United Kingdom is Canada's largest trading partner.
C) Canada's generally favourable trade balance over the years has occurred because our unfavourable balance of trade with the United States is offset by our favourable balance of trade with most other countries.
D) Canada has generally had an unfavourable balance of trade.
E) None of these.

Question 23

The theory of national competitive advantage derives from all of the following conditions except

A) demand conditions.
B) supply conditions.
C) strategies, structures, and rivalries.
D) related and supporting industries.
E) factor conditions.

Question 24

According to the World Economic Forum's global competitiveness ranking, the top three countries in 2015 were

A) China, India, and Ireland.
B) Switzerland, Singapore, and the United States.
C) the United States, Canada, and Australia.
D) Ireland, Iceland, and Sweden.
E) China, Singapore, and Japan.

Question 25

Country Z can produce pig iron more efficiently than any other product. Which type of advantage in pig iron does Country Z have?

A) Absolute advantage
B) National competitive advantage
C) Comparative advantage
D) Trade balance advantage
E) Resource advantage

Question 26

The Congo imported $150 billion worth of goods and services while exporting $175 billion to other countries. It has a

A) negative balance of payments.
B) comparative advantage.
C) positive balance of payments.
D) trade surplus.
E) trade deficit.

Question 27

As the value of a country's currency rises

A) domestic companies will have a harder time selling their products in foreign markets.
B) foreign companies will find it harder to sell their products in local markets.
C) imports and exports will remain relatively constant.
D) domestic companies will shift from the production of consumer goods to the production of industrial goods.
E) all of these will happen.

Question 28

A nation's balance of trade is

A) the relative difference between money flowing into and out of a country.
B) the difference in value between a country's total exports and its total imports.
C) the relative difference in value between a country's total exports and its total imports.
D) the difference between money flowing into and out of a country.
E) the difference in exchange rates between two countries.

Question 29

As the value of a country's currency falls, its balance of trade should

A) decline.
B) remain the same.
C) improve.
D) either increase or decrease.
E) none of these.

Question 30

Which of the following best explains why a nation exports specific products and services?

A) Whether the nation has international companies
B) Whether a nation has a trade surplus
C) Whether a nation has an absolute advantage
D) Whether a nation has a balance of trade
E) The level of the country's GNP

Question 31

The balance of trade that Canada has experienced has been

A) changing between favourable and unfavourable with about a seven year cycle.
B) unfavourable since Confederation.
C) favourable for most of the last 30 years.
D) unfavourable for the last 30 years.
E) favourable since Confederation.

Question 32

Which of the following best describes a positive trade balance?

A) The economic condition in which a country's exports exceed its imports
B) The economic condition in which a country's imports exceed its exports
C) The economic condition in which a country's inflow of money exceeds its outflow
D) The economic condition in which a country's outflow of money exceeds its inflow
E) The economic condition in which a country's natural resources exceed its human resources

Question 33

Which of the following best explains why a nation like Canada or Japan would export a particular product or service?

A) That nation has multinational companies
B) That nation has an absolute advantage
C) That nation has a positive balance of trade
D) That nation has a negative balance of trade
E) All of these

Question 34

Canada has a(n) ________ in farming due to its fertile land, while South Korea has a(n) ________ in electronics manufacturing.

A) absolute advantage; absolute advantage
B) absolute advantage; comparative advantage
C) comparative advantage: absolute advantage
D) comparative advantage; comparative advantage
E) none of these

Question 35

Which of the following is correct with respect to absolute and comparative advantage?

A) Brazilian coffee beans are a good example of comparative advantage.
B) Absolute advantage exists when a country can produce something more cheaply and/or of higher quality than the next three most efficient countries.
C) A country has a comparative advantage when it can produce a product more efficiently or better than most (but not all) other countries.
D) All countries have a comparative advantage in some products.
E) All of these are correct.

Question 36

The comparative advantage form of competitive advantage means

A) that a country does not belong to any free trade agreements.
B) that a country is the sole supplier of a product or service.
C) that a country can produce everything better or more cheaply than any other country.
D) that a country can produce some products better or more cheaply than it can other products.
E) that a country can produce something better or more cheaply than any other country.

Question 37

Country Z can produce pig iron more efficiently than any other country. Which type of advantage in pig iron does Country Z have?

A) Absolute advantage
B) National competitive advantage
C) Comparative advantage
D) Trade balance advantage
E) Resource advantage

Question 38

All of the following are included in the balance of payments except

A) money paid for imports.
B) money paid by domestic corporations for taxes.
C) money spent by tourists.
D) money spent on foreign aid.
E) money paid for exports.

Question 39

The difference between absolute and comparative advantages is that absolute advantage is relative to ________, while comparative advantage is relative to ________.

A) other nations; activity inside the country
B) similar industries; dissimilar industries
C) similar products; dissimilar products
D) activity inside the country; other nations
E) dissimilar products; similar products

Question 40

In the World Economic Forum's 2015 global competitiveness ranking, Canada ranked

A) first.
B) second.
C) fourth.
D) sixth.
E) fifteenth.

Question 41

With regard to exchange rates, it is correct to say that

A) they affect trade balances.
B) they typically vary substantially on a daily basis.
C) they do not vary with market conditions.
D) changes affect only narrow product lines, not all products.
E) as the value of a country's currency falls, foreign companies have less incentive to ship products into that country.

Question 42

How will a business firm know if there is a demand for its product in another nation?

A) The company is willing to discuss royalty fees with other international firms.
B) There is a positive balance of payments.
C) A firm cannot know if such a demand exists.
D) The product is very successful in the company's home nation.
E) Due to the successful prior entry of a competitor firm with a similar product in the international market.

Question 43

What is an expected result when a nation devalues its currency?

A) Export sales of its products decline.
B) The number of independent agents declines.
C) Export sales of its products increase.
D) No result is more likely than any other.
E) Export sales of its products will be unchanged.

Question 44

Which of the following items is least likely to impact a nation's balance of payments?

A) Gains or losses in exchanges of international currencies
B) An increase in the GDP
C) Money spent by tourists
D) Trade deficits or surpluses
E) Foreign aid programs

Question 45

If the Canadian dollar becomes weak compared to the Japanese yen, which of the following is likely to occur?

A) Demand for goods would be unaffected by currency changes
B) Japanese products would become cheaper in Canada
C) It would take fewer dollars to buy the same number of yen
D) Canadian products would become less expensive in Japan
E) Japanese demand for goods from Canada would fall

Question 46

Algoma Treasures, a gift-wrap manufacturer, is considering expanding its business into the international market. What key question must have a positive answer before a company begins international operations?

A) Is there a demand for its products abroad?
B) Is there a favourable balance of trade?
C) What is the currency exchange rate?
D) Is there a favourable balance of payments?
E) Is local culture compatible?

Question 47

The balance of payments refers to

A) the relative difference between money flowing into and out of a country.
B) the difference in value between a country's total exports and its total imports.
C) the relative difference in value between a country's total exports and its total imports.
D) the difference between money flowing into and out of a country as a result of trade and other transactions.
E) the difference in exchange rates between two countries.

Question 48

If there is a favourable balance of payments, it means that

A) a country exports manufactured goods and imports raw materials.
B) a country imports more than it exports for each country with which it trades.
C) a country exports more than it imports for each country with which it trades.
D) the country has more money flowing into it than out as a result of trade and other transactions.
E) a country exports raw materials and imports manufactured goods.

Question 49

When the value of the Canadian dollar drops

A) both our imports and our exports become more expensive.
B) our imports become cheaper and our exports become more expensive.
C) our imports become more expensive and our exports become cheaper.
D) both our imports and our exports become cheaper.
E) there is no change in the price of our imports and our exports.

Question 50

If the Canadian dollar becomes stronger in relation to the Japanese yen

A) the prices of all Canadian-made products would rise in Japan and the prices of all Japanese-made products would fall in Canada.
B) there would be no effect on the prices of Canadian-made products sold in Japan.
C) the prices of all Canadian-made products would fall in Japan and the prices of all Japanese-made products would rise in Canada.
D) the prices of all Canadian-made products would fall in Japan and the prices of all Japanese-made products would fall in Canada.
E) the prices of all Canadian-made products would rise in Japan and the prices of all Japanese-made products would rise in Canada.

Question 51

Which of the following is correct with respect to exchange rates?

A) The value of one country's currency relative to another varies with changes in GDP, but not as a response to market conditions.
B) The value of the Canadian dollar falls as the foreign demand for Canadian goods rises.
C) Exchange rates typically fluctuate by very small amounts on a daily basis.
D) Fluctuation in exchange rates have little impact on the balance of trade.
E) All of these are correct.

Question 52

Marina Corp. wants to "go international," and has already determined that there is international demand for its products. What should the company do next?

A) Determine if their products need to be modified to fit the foreign market
B) Assess the business climate for reaction to foreign products
C) Locate a local business to form a joint venture
D) Conduct market research to determine potential sales
E) Determine what competition would be encountered

Question 53

With respect to exchange rates and competition, it is correct to say that

A) companies that conduct international operations do not have to worry about the effect of exchange-rate fluctuations on competition because the accounting department does the conversions.
B) as the value of a country's currency falls, its balance of trade becomes less favourable.
C) as the value of a country's currency falls, there is an increased incentive for foreign companies to ship products into the domestic market.
D) Canadian firms can deal with a stronger Canadian dollar by increasing the efficiency their operations.
E) all of these are correct.

Question 54

Beta Corp. is trying to decide whether to market its products internationally. Its first decision is to

A) determine what the costs would be.
B) check the business climate to see if the foreign country would be positive.
C) check the competition to see what its situation would be.
D) determine whether there is international demand for its products.
E) check the exchange rates to see if they are favourable.

Question 55

The balance of payments that Canada has experienced has been

A) unfavourable for many years.
B) favourable since Confederation.
C) changing between favourable and unfavourable with about a seven year cycle.
D) favourable for the last 30 years.
E) unfavourable since Confederation.

Question 56

Which of the following is correct with regard to the balance of trade and the balance of payments?

A) If a country has a favourable balance of trade, it will also have a favourable balance of payments.
B) The balance of payments is computed by dividing the value of a country's currency by the number of currency transactions that took place in the previous year.
C) A country that imports more than it exports has a favourable balance of trade.
D) Countries used to strive to have a favourable balance of trade, but governments no longer worry about that issue because of globalization.
E) Canada has generally had a favourable balance of trade during the last few decades.

Question 57

McCain Foods developed single-sized portions of frozen vegetables to serve customers in South Africa that do not have proper refrigeration. This is an example of

A) determining whether there is international demand for a product.
B) modifying a product to fit a foreign market.
C) determining the receptivity of a foreign market for a company's product.
D) acquiring the necessary skills to do business abroad.
E) bootstrapping.

Question 58

Canada ranks ________ among the G8 countries in the proportion of production that is exported.

A) first
B) second
C) third
D) fourth
E) fifth

Question 59

If the Canadian dollar rises, our balance of trade will most likely ________ resulting in a ________ of jobs in the export industry.

A) rise; increase
B) decrease; decrease
C) decrease; increase
D) rise; decrease
E) none of these

Question 60

When the value of the Canadian dollar rises

A) both our imports and our exports become more expensive.
B) there is no change in the price of our imports and our exports.
C) our imports become more expensive and our exports become cheaper.
D) our imports become cheaper and our exports become more expensive.
E) both our imports and our exports become cheaper.

Question 61

Herald Inc., a French newsprint manufacturer, is geared towards international markets but does not have specific domestic and international divisions. This firm is a(n)

A) multinational firm.
B) exporter.
C) independent agent.
D) purely domestic firm.
E) customs broker.

Question 62

Biltmore Corp. is involved in a planning process for doing business internationally. They have already determined that their product can be modified to fit foreign markets. What should they do next?

A) Determine if the company has the skills necessary to do business abroad
B) Determine if there is international demand for the product
C) Assess the business climate for receptivity to imports
D) Determine if the product needs to be modified to fit the foreign market
E) Conduct market research to determine potential sales

Question 63

A firm that produces goods in one country and distributes and sells them in other countries is

A) a multinational firm.
B) an exporter.
C) an international firm.
D) a joint venture.
E) an importer.

Question 64

Clement is the owner of Dills Distillery, which makes and bottles fruit wine. In his planning to export the wine, Clement should consider all of the following except

A) the target country's balance of trade.
B) demand for the wine.
C) legal aspects of the target country.
D) cultural aspects of the target country.
E) economic road blocks.

Question 65

The global business environment encompasses many international forces that influence the outcomes of companies doing business in foreign countries. Which of the following scenarios would best count as evidence of globalization?

A) Diamonds mined in Country X are sold on the markets in Country Y. The proceeds are then used to fund a coup against the government in Country X.
B) A natural disaster disables factories in Country X that produce computer chips for Company Y. Company Y reduces the number of employee shifts and raises the price of its products.
C) Farmers in Country X have lost most of their wheat crops due to a drought. The market price for wheat triples and the government pays the farmers for a percentage of the lost wheat.
D) Country X has almost mined all of its available natural energy sources. The government has been investing in alternative energy research for years and now an efficient synthetic energy source has been developed.
E) Country X has raised the tax on oil products. As a result more people are taking public transportation and reducing unnecessary car travel.

Question 66

In France, McDonald's restaurants sell wine. This is a classic example of

A) adapting to customer needs.
B) importing.
C) foreign exchange.
D) misreading demand for the product.
E) balance of payments.

Question 67

A firm that conducts a significant portion of its business abroad, that has some facilities overseas, and that imports a significant portion of goods from other countries is best described as

A) an importer.
B) an international firm.
C) mininational.
D) an exporter.
E) a multinational firm.

Question 68

Which of the following types of firms have planning and decision-making functions that are geared to international markets?

A) Exporting firms
B) International firms
C) Multinational firms
D) Domestic firms
E) None of these

Question 69

________ is an example of an export of a service.

A) An advertising agency in Montreal making a TV commercial for a company in France
B) Obtaining information from a foreign database
C) Vacations taken by Canadians in a foreign country
D) Purchasing a camera made in Japan
E) A Canadian tourist having a camera repaired in Egypt

Question 70

What is the implication for a manufacturer of electrically powered equipment contemplating international operation upon learning of the wide variety of electric outlets around the world?

A) Modify the product to meet the standards of different countries
B) Deal with independent agents
C) Delay international operations until the currency exchange rate is favourable
D) Drop the idea of international operation
E) None of these

Question 71

A firm that buys products made in another country for distribution and sale in its own country is

A) a multinational firm.
B) a joint venture.
C) an exporter.
D) an international firm.
E) an importer.

Question 72

KFC's dishes in China come with a side order of rice and soy milk. This is an example of

A) over-expansion without support for repairing the product.
B) adapting to customer needs.
C) misreading demand for the product.
D) overpricing caused by exchange rate changes.
E) a poor business environment for foreign goods.

Question 73

Merritt Corp. is interested in doing business internationally. They have already determined that there is international demand for their product. What should they do next?

A) Determine if the company has the skills necessary to do business abroad
B) Contact a local business to form a joint venture
C) Assess the business climate for reaction to foreign products
D) Determine if the product needs to be modified to fit the foreign market
E) Conduct market research to determine potential sales

Question 74

Robert has established a start-up business manufacturing a range of outdoor wear for the leisure market. Which possible scenario would best show that Robert is positioning his business for the global business market?

A) Robert launched a website for his business and hired two new employees to handle national and international shipping.
B) Robert launched a website and filmed a commercial for television and recorded a radio version for local stations.
C) Robert created a page for his business on a networking site and offered store coupons to his first 100 friends.
D) Robert had his website translated into Korean in order to better serve the local Korean community.
E) Robert took a full-page ad out in the state's official tourism brochure.

Question 75

Which of the following companies may not find it profitable to go international?

A) A mining company
B) A company that buys and sells fresh produce and fish
C) A manufacturing firm specializing in bicycles
D) A financial investment firm
E) A newsprint company

Question 76

In which international structure would royalties likely be paid to the exporter?

A) By a branch office
B) Under a licensing arrangement
C) By a subsidiary manufacturing plant
D) In a joint venture
E) In a strategic alliance

Question 77

Which type of firm is one in which management doesn't think of itself as having domestic and international operations but rather as a firm that designs, makes, and markets products in many nations?

A) An exporter
B) An importer
C) An international firm
D) A multinational firm
E) Mininational

Question 78

The CEOs of Company A and B are investigating expansion into new markets, which will provide greater trade volume. Which scenario describes an economic environment that is most suitable for an importing-exporting opportunity?

A) Country X invests primarily in its textile industry, while Country Y focuses on producing high-yield crops.
B) Company A is willing to provide parts used in the production of equipment by Company B in exchange for discounts on manufacturing equipment.
C) The southern region of Country X over-produces a wide range of produce, while few crops can be efficiently grown in the northern region.
D) Company A and Company B are exploring the possibility of a joint venture to provide goods to Country X.
E) Country X is looking to invest in foreign markets and Country Y currently has a large trade deficit.

Question 79

Which of the following is correct regarding the levels of foreign involvement a business can exhibit?

A) Importing and exporting represent the highest level of involvement in international operations.
B) Exporters and importers tend to conduct most of their business in foreign markets.
C) Only large companies are exporters.
D) An international firm conducts a significant portion of its business abroad, and it usually manufactures the vast majority of its products in foreign countries.
E) For multinational firms, the location of its head office is largely irrelevant.

Question 80

What is a difference between an international firm and a multinational firm?

A) Multinational firms design, produce, and market products in many nations, whereas international firms are based primarily in one nation.
B) International firms design, produce, and market products in many nations, whereas multinational firms are based primarily in one nation.
C) There is very little difference between International and multinational firms.
D) Multinational firms are concerned primarily with foreign markets, whereas international firms are concerned primarily with the domestic market.
E) International firms are concerned primarily with foreign markets, whereas multinational firms are concerned primarily with the domestic market.