Deck 3: The Global Marketplace

Question 1

The legal systems in the United States and the United Kingdom are based on civil law.

Answer 1

False
Explanation: The legal systems in the United States and the United Kingdom are based on common law whereas legal systems in countries such as France and Germany are based on civil law.

Question 2

Comparative advantage theory states that countries should produce and sell to other countries those things it can produce most efficiently.

Answer 2

True
Explanation: The classic theory of comparative advantage suggests that each country should specialize in those areas where it can produce more efficiently than other countries, and it should trade for goods and services that it can't produce as economically.

Question 3

The World Bank is an agency of the U.S.federal government.

Answer 3

False
Explanation: The World Bank is a United Nations agency owned by its 187 member nations.

Question 4

Theocratic law is law based on religious principles.

Question 5

The number of units of one currency that must be exchanged for a unit of the second currency is known as the exchange rate between the currencies.

Question 6

Tariffs are politically motivated restrictions that revoke a company's normal trade relations status.

Question 7

An embargo is a complete ban on the import or export of certain products or even all trade between certain countries.

Question 8

The North American Free Trade Agreement was formed by twelve North American countries.

Question 9

The European Union has created a currency of its own.

Question 10

Ethnocentrism is the tendency to assign a wide range of generalized attributes to an individual.

Question 11

International travel would be more expensive for U.S.residents if the dollar is strong.

Question 12

Economies of scale are savings from not buying too much of any one thing.

Question 13

A country that imports more than it exports would have a trade surplus.

Question 14

Export subsidies are a form of financial assistance given to exporters.

Question 15

A country's balance of trade is the total value of its imports less the total value of its exports.

Question 16

The World Trade Organization is a permanent forum for negotiating,implementing,and monitoring international trade procedures.

Question 17

Providing short-term loans to countries that are unable to meet their financial obligations is a primary function of the International Monetary Fund.

Question 18

Strong dollar will lower the cost of goods that the U.S.exports.

Question 19

Trade that takes place without interferences is known as free trade.

Question 20

Culture is a shared system of symbols,beliefs,attitudes,values,expectations,and norms for behavior.

Question 21

The classic theory of comparative advantage suggests that each country should ________.

A) attempt to maintain a trade surplus by exporting more than what it imports
B) attempt to maintain a trade deficit by importing more than what it exports
C) produce all goods and services it requires for domestic consumption
D) specialize in those areas where it can produce more efficiently than other countries
E) produce a wide range of products to maintain an attractive international portfolio

Question 22

Joint ventures are short-term partnerships between two or more companies to jointly develop,produce,or sell products.

Question 23

On a vacation to Italy,you exchange $100 to get 70 Euros in return.This amount is significantly lower than what you received last year.This indicates that the ________.

A) U.S. has a trade surplus against Italy
B) Euro has depreciated in value recently
C) U.S. dollar has weakened in the past year
D) U.S. has a trade deficit against Italy
E) balance of payment between U.S. and Europe is unfavorable

Question 24

Brazil is said to have a(n)________ in coffee beans because it can produce coffee beans more efficiently than other countries.

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

Question 25

Charles Associates is a U.S.company and has a central production plant in the U.S.(Currency: U.S.dollar).It imports capital equipment and raw materials from Italy and Germany (Currency: Euro).The company exports its products to China (Currency: Renminbi),Japan (Currency: Yen),and India (Currency: Rupee).Which of the following changes in the exchange market is disadvantageous to Charles Associates?

A) The U.S. dollar has weakened against the Renminbi.
B) The U.S. dollar has strengthened against the Rupee.
C) The U.S. dollar has strengthened against the Euro.
D) The Yen has become strong against U.S. dollars.
E) The Euro became weaker against most major currencies.

Question 26

Which of the following is an objective of protectionism?

A) reducing the purchasing power of individuals
B) guard specific industries in a nation
C) enhancing trade between nations
D) increasing foreign direct investment
E) helping developing nations engage in global trade

Question 27

Exporting is the least risky form of international business activity.

Question 28

A country has a trade deficit when the ________.

A) exchange rate of its currency with other currencies is fixed
B) exchange rate of its currency with other currencies is variable
C) value of its exports exceeds the value of its imports
D) total flow of money into the country equals the total flow of money out of the country
E) value of its imports exceeds the value of its exports

Question 29

A company creates highly independent operating units in each new country when using the multidomestic strategy.

Question 30

A country has a trade surplus when the ________.

A) value of its exports exceeds the value of its imports
B) exchange rate of its currency with other currencies is variable
C) exchange rate of its currency with other currencies is fixed
D) value of its imports exceeds the value of its exports
E) total flow of money into the country equals the total flow of money out of the country

Question 31

All U.S.companies are bound by the Foreign Corrupt Practices Act.

Question 32

A company benefits from economies of scale when it ________.

A) does not use centralization of production and distribution
B) produces goods or services in multiple locations
C) adopts a highly differentiated marketing strategy
D) engages in the production of personalized products
E) manufactures and distributes products in higher quantities

Question 33

Charles Associates is a U.S.company and has a central production plant in the U.S.(Currency: U.S.dollar).It imports capital equipment and raw materials from Italy and Germany (Currency: Euro).The company exports its products to China (Currency: Renminbi),Japan (Currency: Yen),and India (Currency: Rupee).Which of the following changes in the exchange market is beneficial to Charles Associates?

A) The U.S. dollar has strengthened against the Rupee.
B) The U.S. dollar has strengthened against the Renminbi.
C) The U.S. dollar has strengthened against the Euro.
D) The Yen has become weak against U.S. dollars.
E) The Euro has become strong against U.S. dollars

Question 34

When the U.S.dollar is strong,U.S.exports will likely ________.

A) become more competitive in foreign markets
B) cost more in other countries
C) be limited by the U.S. government
D) face embargoes in developing nations
E) be restricted by governments across the world

Question 35

Managerial control with the global strategy is highly decentralized.

Question 36

Trade that takes place without governmental interferences is known as ________.

A) subsidized trade
B) protected trade
C) illegal trade
D) free trade
E) moderated trade

Question 37

The exchange rate of Euro and Yen,in two consecutive years,against U.S.dollars is given below: $$\begin{array} { | l | l | l | } \hline \text { Year } & \begin{array} { l } 1 \text { dollar } \\\text { equaled: }\end{array} & \begin{array} { l } 1 \text { dollar } \\\text { equaled: }\end{array} \\\hline 2012 & 0.68 \text { Euro } & 81 \text { Yen } \\\hline 2013 & 0.77 \text { Euro } & 75 \text { Yen } \\\hline\end{array}$$ Which of the following is a valid conclusion that you can derive from this information?

A) The U.S. dollar weakened against the Euro in 2011.
B) The U.S. dollar was stronger against the Euro in 2010.
C) The Euro has strengthened against the Yen in 2011.
D) The U.S. dollar weakened in 2011 against the Yen.
E) The U.S. dollar was weaker against the Yen in 2010.

Question 38

Which of the following arguments supports the idea of free trade?

A) Dumping rules and tariffs should be stricter in developing countries.
B) International trade must take place without any interference.
C) Organizations should prefer local workers to foreign workers.
D) Local businesses should obtain help from governments.
E) Governments should subsidize exporters to promote global trade.

Question 39

The number of units of one currency that must be exchanged for a unit of the second currency is known as the ________ between the currencies.

A) balance payment
B) trading bloc
C) tariff rate
D) exchange rate
E) trade balance

Question 40

A country's balance of payment equals the ________.

A) money spent on procuring services minus money spent on procuring goods
B) total flow of money into the country minus the total flow of money out of the country
C) gross domestic product of the country minus the gross national product of the country
D) money spent on producing services minus money spent on producing goods
E) money spent on buying goods minus money spent on producing goods

Question 41

________ limit the amount of particular goods that countries allow to be imported during a given year.

A) Import subsidies
B) Embargoes
C) Import quotas
D) Import tariffs
E) Restrictive import standards

Question 42

A country can assist its domestic producers by implementing ________ such as special business licenses and limiting foreign companies' access to them.

A) export subsidies
B) embargos
C) import quotas
D) tariffs
E) restrictive import standards

Question 43

An embargo is a ________.

A) quantity restriction on the import of particular goods or services
B) surcharge imposed on import of certain products
C) subsidy offered to products exported from a country
D) complete ban on the import or export of certain products
E) form of financial assistance extended to domestic producers

Question 44

Which of the following statements is TRUE of the European Union (EU)?

A) The EU has imposed hundreds of local regulations and variations in product standards for its member nations.
B) The European Union's membership now encompasses more than 150 countries.
C) Viewed as a whole, the EU now constitutes the world's largest economy.
D) The EU adopts protectionist measures to regulate trade among member countries.
E) The EU was formed primarily to monitor global financial developments and to alleviate poverty in developing economies.

Question 45

________ are politically motivated embargoes that revoke a country's normal trade relations status.

A) Subsidies
B) Tariffs
C) Sanctions
D) Quotas
E) Restrictive standards

Question 46

Taxes,surcharges,or duties levied against imported goods are known as ________.

A) import sanctions
B) embargoes
C) tariffs
D) import quotas
E) restrictive import standards

Question 47

Which of the following is an example of a trading bloc?

A) International Monetary Fund
B) United Nations
C) European Union
D) World Bank
E) World Trade Organization

Question 48

The United States has banned the export of super-computers and lasers to non-allies.This is an example of a(n)________.

A) export subsidy
B) export quota
C) tariff
D) embargo
E) restrictive import standard

Question 49

The Asia Pacific Economic Cooperation Council's long-term goal is ________.

A) imposing tariffs and quotas on imports to the land areas that surround the Pacific Ocean
B) protecting the pacific rim from the perils of international trade
C) liberalizing and simplifying trade and investment among member countries
D) preventing the trade of destructive goods such as arms and ammunition
E) preventing terror attacks and other organized crime in the land areas that surround the Pacific Ocean

Question 50

The ________ was established to foster international financial cooperation and its primary functions include providing short-term loans to countries that are unable to meet their financial obligations and working to alleviate poverty in developing economies.

A) World Trade Organization
B) World Commerce Center
C) European Union
D) North American Free Treaty
E) International Monetary Fund

Question 51

________ are a form of financial assistance in which producers receive enough money from the government to allow them to lower their prices.

A) Export subsidies
B) Embargoes
C) Tariffs
D) Sanctions
E) Export quotas

Question 52

________ is a permanent forum for negotiating,implementing,and monitoring international trade procedures and for mediating trade disputes among its more than 150 member countries.

A) International Monetary Fund
B) World Trade Organization
C) World Bank
D) European Union
E) International Labor Organization

Question 53

Dumping ________.

A) involves selling a product at a price lower than the cost of production
B) is a strategy used by firms to enter an industrialized nation
C) refers to the practice of selling products in small quantities
D) is a strategy used by organizations to enter a developed market
E) is typically prevented by providing export subsidies to local producers

Question 54

The U.S.restricts the import of peanuts to a maximum of 1.7 million pounds per year to protect the price that domestic producers can charge.This is an example of a(n)________.

A) import subsidy
B) embargo
C) import quota
D) import tariff
E) restrictive import standard

Question 55

Which of the following is a main feature of protectionism?

A) high levels of risks for domestic industries
B) increased risk for local workers
C) compromise on national security
D) governmental intervention in trade
E) formation of trade blocs between nations

Question 56

China imposes duties on automobiles imported to China.This is an example of a(n)________.

A) import sanction
B) tariff
C) import quota
D) embargo
E) restrictive import standard

Question 57

International companies can use ________ to shield some of their income from higher tax rates in their own countries or in other countries where they do business.

A) fiscal cloaks
B) investment schemas
C) exchange premiums
D) income shelters
E) tax havens

Question 58

The North American Free Trade Agreement (NAFTA)was formed by the United States,Canada,and ________.

A) Costa Rica
B) Jamaica
C) Cuba
D) Mexico
E) Honduras

Question 59

Which of the following is a principle that governs the world trade organization's work?

A) giving preference to trading partners who provide maximum business
B) protecting domestic industries by offering financial assistance
C) making trade policies more predictable and less arbitrary
D) establishing dumping procedures to prevent pollution in developed countries
E) implementing protectionist ideologies to establish fair trade between nations

Question 60

Trading blocs are ________.

A) international organizations that provide funds to advanced countries
B) regional organizations that promote protectionist principles
C) financial intermediaries that facilitate international transactions
D) regional organizations that promote trade among member nations
E) international organizations that provide funds to developing nations

Question 61

In the ________ strategy,a company creates highly independent operating units in each new country and gives local managers a great deal of freedom to run their operations almost as though they are independent companies.

A) integrated marketing
B) transnational
C) global
D) franchising
E) multidomestic

Question 62

________ refers to assigning a wide range of generalized (and often superficial or even false)attributes to an individual based on his or her membership in a particular culture or social group.

A) Ethnocentrism
B) Stereotyping
C) Protectionism
D) Discerning
E) Culture shock

Question 63

Almex is a U.S.based transportation company.In order to enter the Brazilian transportation market,the company purchases one of the leading transporters in Brazil.This strategy is known as ________.

A) operational licensing
B) service exporting
C) foreign direct investing
D) brand licensing
E) outstation franchising

Question 64

McDonald's has sold individual owners the rights to use its trademark and business system.Furthermore,McDonalds's has used this approach to open restaurants in more than 100 foreign countries.This is an example of ________.

A) a strategic alliance
B) export licensing
C) franchising
D) joint venturing
E) a foreign direct investment

Question 65

France and Germany rely on a legal system known as ________,in which legal parameters are specified in detailed legal codes.

A) theocratic law
B) case law
C) common law
D) precedent law
E) civil law

Question 66

A firm wants to enter foreign markets to expand its business.However,it does not want to make significant investments before assessing foreign conditions.Which of the following strategies is best suited to enter a foreign market slowly and then design the firm's product offerings?

A) foreign direct investment
B) exporting
C) business merger
D) joint venture
E) franchising

Question 67

Drobex Technologies is a manufacturer of electronic home appliances.The company has operations in 17 countries.The company operates as an independent unit in each of these countries and the head of operations in each unit makes decisions themselves.Drobex is following a(n)________ strategy.

A) transnational
B) global
C) multidomestic
D) franchising
E) integrated marketing

Question 68

________ is the tendency to judge all other groups according to standards,behaviors,and customs that prevail in one's own group.

A) Stereotyping
B) Protectionism
C) Discerning
D) Culture shock
E) Ethnocentrism

Question 69

________ refers to buying goods or services from a supplier in another country.

A) Franchising
B) Importing
C) Licensing
D) Partnering
E) Intermediating

Question 70

Foreign direct investment (FDI)________.

A) usually does not receive support from domestic governments
B) carries much lesser political risk
C) typically gives companies greater control
D) carries much lesser economic risk
E) is less complex than any other form of global entry

Question 71

Theocratic law is found in Iran and Pakistan and is based on ________.

A) traditions and customs
B) religious principles
C) detailed legal codes
D) legal parameters
E) judicial interpretations

Question 72

________ are long-term partnerships between two or more companies to jointly develop,produce,or sell products.

A) Strategic alliances
B) Global franchises
C) Joint ventures
D) Strategic mergers
E) Incorporated partnerships

Question 73

Multinational corporations are companies that ________.

A) export to multiple countries from a central location
B) have formed strategic alliances with companies across the world
C) have formed operational alliances with companies across the world
D) procure supplies from multiple countries to improve their production
E) establish a physical presence in multiple countries through FDI

Question 74

________ agreements entitle one company to use some or all of another firm's intellectual property in exchange for a royalty payment.

A) Joint venture
B) Exporting
C) Franchising
D) Licensing
E) Strategic alliance

Question 75

Electrobox is a firm that manufactures commercial kitchen equipment.The firm decides to enter China and bonds with a Chinese firm to form a new company named Electrokitchen.This is an example of a(n)________.

A) transactional alliance
B) operational partnership
C) strategic alliance
D) joint venture
E) international franchise

Question 76

Legal systems in Great Britain and the U.S.are based on ________ law.

A) bifurcated
B) theocratic
C) common
D) civil
E) civilian

Question 77

Which of the following acts outlaws payments that are intended to get government officials to break the laws of their own countries or to secure "improper advantage" in gaining or retaining sales?

A) Mustering-out Payment Act
B) Export-Import Bank Act
C) Foreign Corrupt Practices Act
D) Special Payment Act
E) Federal Corrupt Practices Act

Question 78

Transparency International is a(n)________.

A) accounting agency that promotes the use of unified accounting systems across the world
B) watchdog group that works to reduce business-government corruption around the world
C) agency that works toward implementing protectionist regimes across the globe
D) agency of the United Nations that is formed to mediate international negotiations
E) agency of the United Nations that is formed to investigate transparency issues in international trade

Question 79

John,a jewelry maker in Montana,receives international orders through his website.He ships the products from the production plant at Montana after receiving confirmed orders.This scenario is an example of ________.

A) importing
B) exporting
C) licensing
D) FDI
E) franchising

Question 80

In a(n)________,two or more firms bond together to create a new business entity that is legally separate and distinct from its parents.

A) operational partnership
B) strategic alliance
C) joint venture
D) operational alliance
E) international franchise