Deck 4: The Global Context of Business

Question 1

The World Trade Organization (WTO) was created to encourage international trade.

Answer 1

True
Explanation:The WTO encourages international trade by encouraging fair trade practices, breaking down trade barriers, and establishing fair procedures for dispute resolution.

Question 2

If you have given another company in another country the right to produce your company's product, you are engaging in a licensing arrangement.

Answer 2

True
Explanation:A licensing arrangement is a means whereby a company sells its products in another country by licensing another company to produce that product.

Question 3

In a licensing arrangement, firms choose foreign organizations to manufacture their products in another country in return for a fee plus royalties.

Answer 3

True
Explanation:Franchising is an increasingly popular example of licensing.

Question 4

A subsidy is a tax designed to help companies who import products.

Question 5

NAFTA regulates trade between the United States, Europe, and Japan.

Question 6

Saudi Arabian oil is an example of an absolute advantage.

Question 7

Local content laws guarantee that products sold in a country are at least partly made there.

Question 8

South Africa produces diamonds more cheaply and of higher quality than any other country; this is an example of absolute advantage.

Question 9

An import is a product made or grown abroad but sold domestically.

Question 10

Today, fixed exchange rates are the norm for most major nations of the world.

Question 11

Free market economies often establish some system of quotas and/or tariffs.

Question 12

A comparative advantage exists when a country can produce something more cheaply and/or of higher quality than any other country.

Question 13

Low-income countries have an annual per capita income of $2,500 or less.

Question 14

Transportation costs have relatively little impact on a domestic firm's decision to go international, compared to other possible factors.

Question 15

Globalization refers to the process by which countries around the world are becoming more self-sufficient.

Question 16

Strategic alliances give firms greater control over foreign activities than do agents and licensees.

Question 17

The purpose of the General Agreement on Tariffs and Trade is to reduce trade barriers.

Question 18

International firms conduct a good deal of their business abroad and may even maintain overseas manufacturing facilities.

Question 19

The primary purpose of the World Trade Organization is to impose tariffs on imported products.

Question 20

If the United States exports more to the Netherlands than it imports from the Netherlands, the United States has a trade deficit with the Netherlands.

Question 21

What are products that are created abroad and then transported and sold domestically?

A) dumped goods
B) exports
C) imports
D) buy backs
E) domestic goods

Question 22

A Chinese steel company cannot charge less for its product in the United States than the cost of production.

Question 23

Which of the following is the name for the economic value of all of the products that a country exports minus the economic value of its imports?

A) balance of foreign competition
B) balance of domestic competition
C) balance of trade
D) balance of payments
E) balance of supply and demand

Question 24

The number of strategic alliances among major companies has decreased significantly over the last decade.

Question 25

When the value of one country's currency relative to that of another varies with market conditions, which of the following exists?

A) floating exchange rate
B) fixed exchange rate
C) indexed exchange rate
D) flat exchange rate
E) balanced exchange rate

Question 26

Which country is the world's largest marketplace and most stable economy?

A) the United States
B) Canada
C) Germany
D) Japan
E) China

Question 27

What are products that are created domestically and transported for sale abroad?

A) dumped goods
B) exports
C) imports
D) buy backs
E) domestic goods

Question 28

The single largest trading partner of the United States is China.

Question 29

Which country dominates the Pacific Asia region economically?

A) South Korea
B) China
C) Indonesia
D) Japan
E) Taiwan

Question 30

Which organization most likely has the greatest impact on Asian countries?

A) ASEAN
B) UAS
C) EU
D) NAFTA
E) ECOWAS

Question 31

Revenue tariffs are primarily designed to discourage the importation of foreign products.

Question 32

Which of the following refers to the situation when a country's imports exceed its exports?

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

Question 33

With what type of exchange rate does the value of a country's currency remain constant relative to that of another country?

A) floating
B) indexed
C) fixed
D) adjusted
E) deflated

Question 34

A company with high demand for its product in a particular foreign market that is associated with high transportation costs would tend to arrange a strategic alliance over any other international organization structure.

Question 35

The United States has large trade deficits with Japan, China, and Mexico; this means that the United States has imported more from them than what they have purchased from us.

Question 36

Currently, a majority of U.S. imports come from Canada, Japan, Mexico, and China.

Question 37

If 1 euro = $1.35 on June 4 and $1.40 on June 5, the value of the dollar has risen.

Question 38

Critics of protectionism charge that it drives up prices by reducing competition.

Question 39

Which of the following is the name for the overall flow of money into or out of a country?

A) exchange rate
B) trade rate
C) balance of exchange
D) balance of payments
E) balance of trade

Question 40

The ultimate form of a quota is a tariff.

Question 41

Many governments require that products sold in their particular country be at least partly made there. This policy involves what type of laws?

A) quota laws
B) local content laws
C) business practice laws
D) free trade laws
E) subsidy laws

Question 42

ABC Company in the United States has given exclusive rights to XYZ Company in Switzerland to manufacture its products. What is this is an example of?

A) a foreign direct investment
B) a licensing arrangement
C) a branch office setup
D) a strategic alliance
E) an import-export relationship

Question 43

Which of the following is a government payment to help a domestic business compete with foreign firms?

A) revenue tariff
B) protectionist tariff
C) import buy-back
D) export rebate
E) subsidy

Question 44

Which of the following denotes the practice of protecting domestic business at the expense of free market competition?

A) fair trade
B) balanced trade
C) free trade
D) market liberalism
E) protectionism

Question 45

Which of the following nations is NOT contained within a major world economic marketplace?

A) Canada
B) Greece
C) Taiwan
D) Singapore
E) Honduras

Question 46

Which of the following countries is the world's third largest economy, behind that of the United States and Japan?

A) China
B) India
C) Brazil
D) Germany
E) Russia

Question 47

What organization was founded in Pacific Asia in 1967 for economic, political, social, and cultural cooperation?

A) SEATO
B) ASEAN
C) CENTO
D) OAS
E) WTO

Question 48

Under which of the following treaties are Canada, the United States, and Mexico gradually eliminating tariffs and all other trade barriers?

A) the EURO Agreement
B) the Pan-American Agreement
C) the North American Free Trade Agreement
D) the General Agreement on Tariffs and Trade
E) the G-3 Free Trade Agreement

Question 49

Which of the following denotes a government order forbidding exportation and/or importation of a particular product from a particular country?

A) tariff
B) embargo
C) subsidy
D) local content law
E) business practice law

Question 50

Which of the following treaties sought to eliminate trade barriers such as tariffs and quotas?

A) United Nations Development Assistant Plan
B) Fair Labor Standards Act
C) General Agreement on Tariffs and Trade
D) General Agreement on Trade in Services
E) European Union Stability and Growth Pact

Question 51

Which of the following organizations is a firm that makes products in one country and then distributes and sells them in others?

A) importer
B) exporter
C) multinational firm
D) international firm
E) direct foreign investor

Question 52

The ABC Paint Company in the United States has joined forces with the 1-2-3 Plastics Company in Italy to create a nonpeeling, plastics-based paint. Both companies intend to share the research costs and any profits. What is this an example of?

A) a licensing arrangement
B) a branch office setup
C) a strategic alliance
D) a foreign direct investment
E) an import-export relationship

Question 53

Which of the following refers to associations of producers that control supply and prices?

A) independent agencies
B) cartels
C) trade alliances
D) multinational firms
E) trade monopolies

Question 54

Ford, an American car company, purchased Volvo, which is based in Sweden. What is this an example of?

A) a multinational firm
B) a independent agency
C) a licensing arrangement
D) a foreign direct investment
E) a strategic alliance

Question 55

Which of the following denotes the international organization strategy of finding a partner in the country in which a company would like to conduct business?

A) opening a branch office
B) developing a strategic alliance
C) forming an independent agency
D) outsourcing
E) investing directly in a foreign venture

Question 56

Which of the following refers to the practice of selling a product abroad for less than the cost of production?

A) exporting
B) importing
C) dumping
D) safeguarding
E) offshoring

Question 57

Which of the following buys products in foreign markets and then sells them for resale in its home country?

A) importer
B) exporter
C) multinational firm
D) international firm
E) direct foreign investor

Question 58

What is it called when a company sends some of its own managers overseas to conduct business in a local office?

A) developing a strategic alliance
B) outsourcing
C) licensing products
D) investing directly in a foreign venture
E) opening a branch office

Question 59

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 United Nations Economic and Social Council

Question 60

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 61

Which statement is True regarding independent agents?

A) They represent one firm at a time.
B) They usually specialize in a particular product.
C) They act as sales representatives.
D) They are usually based at domestic offices.
E) They do not monitor or address customer satisfaction.

Question 62

Which of the following goals is a primary purpose of tariffs on imports?

A) maintain domestic competitiveness
B) decrease exports
C) increase imports
D) subsidize domestic industry
E) promote free trade

Question 63

Which of the following is illegal in the United States?

A) dumping but not cartels
B) cartels but not dumping
C) only certain kinds of dumping and cartels
D) neither dumping nor cartels
E) both dumping and cartels

Question 64

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

A) absolute advantage
B) national competitive advantage
C) comparative advantage
D) monopolistic advantage
E) resource advantage

Question 65

Which of the following is NOT considered an international organizational structure?

A) independent agents
B) licensing arrangements
C) foreign direct investments
D) branch office
E) exporters

Question 66

The U.S. government forbids the importation of cigars from Cuba. What is this practice called?

A) embargo
B) tariff
C) subsidy
D) business practice law
E) local content law

Question 67

Which of the following types of firms design, produce, and manufacture products in many nations?

A) multinational firms
B) importing firms
C) domestic firms
D) international firms
E) exporting firms

Question 68

In which international organization structure does a firm have greatest control over foreign activities?

A) exporting arrangements
B) strategic alliances
C) branch offices
D) licensing arrangements
E) independent agents

Question 69

Which of the following types of payments are usually received by an exporter as an ongoing payment calculated as a percentage of the license holder's sales?

A) flat fees
B) royalties
C) agent fees
D) subsidies
E) direct investments

Question 70

Which of the following types of tariff is meant to discourage the import of particular products?

A) revenue tariff
B) quota tariff
C) labor tariff
D) subsidy tariff
E) protectionist tariff

Question 71

U.S. imports of Canadian softwood timber are limited to 14.7 billion board feet per year. What is this practice called?

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

Question 72

In some South American countries, it is sometimes legal to bribe other businesses and government officials, while this practice is illegal in the United States. Which of the following refers to this type of policy?

A) protectionism
B) business practice laws
C) free trade agreements
D) fair trade agreements
E) local content laws

Question 73

In Germany, Wal-Mart has been required to buy existing retailers rather than open brand-new stores. What does this illustrate?

A) local content laws
B) fair trade agreements
C) free trade agreements
D) licensing arrangements
E) business practice laws

Question 74

Which of the following refers to tariffs that are imposed strictly to raise money for the government?

A) revenue tariffs
B) protectionist tariffs
C) quota tariffs
D) subsidy tariffs
E) labor tariffs

Question 75

China and India require that when foreign firms enter into joint ventures with local firms, the local partners must have the controlling ownership stake. What is this an example of?

A) local content laws
B) business practice laws
C) fair trade agreements
D) quotas
E) subsidies

Question 76

Which of the following exists when a country can produce something more cheaply and/or of higher quality than any other country can?

A) monopolistic advantage
B) national competitive advantage
C) resource advantage
D) absolute advantage
E) comparative advantage

Question 77

National competitive advantage derives from four conditions, one of which is factor conditions. What do factor conditions include?

A) customers, suppliers, and labor
B) government quotas and subsidies
C) product quality, productivity, and profits
D) labor, capital, entrepreneurs, and physical resources
E) strategies, structures, and rivalries

Question 78

To avoid transportation costs and tariffs, Apics Enterprises gave exclusive rights to Svenson AB in Finland to produce its product. What is this an example of?

A) licensing arrangement
B) strategic alliance
C) foreign direct investment
D) independent agent
E) branch office

Question 79

The value of the U.S. dollar relative to the value of the British pound fluctuates with market conditions. What is this type of exchange rate?

A) floating
B) fixed
C) indexed
D) adjusted
E) monitored

Question 80

Suppose that the United States requires that products sold here be at least 51 percent made here. Which of the following denotes this type of policy?

A) business practice law
B) deregulation law
C) business practice law
D) strategic alliance
E) local content law