Deck 5: The Global Context of Business

Question 1

Due to its capital-intensive and efficient land use,Canada has a(n)________ in farming.

A) export advantage
B) import advantage
C) comparative advantage
D) relative advantage
E) absolute advantage

Answer 1

C
comparative advantage

Question 2

Saudi oil and Canadian timber are examples of

A) relative advantage.
B) comparative advantage.
C) import advantage.
D) export advantage.
E) absolute advantage.

Answer 2

E
absolute advantage.

Question 3

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.

Answer 3

D
All countries have a comparative advantage in some products.

Question 4

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.

Question 5

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

A) Japan.
B) U.S.
C) Canada.
D) South Korea.
E) Poland.

Question 6

Upper middle-income countries are defined as

A) those with per capita income of less than US$21 345 but more than US$205.
B) those with per capita income between US$5210 and US$8210.
C) those with per capita income of less than US$21 345 but more than US$765.
D) those with per capita income between US$3976 to US$12 275.
E) those with per capita income of less than US$9386 but more than US$205.

Question 7

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 8

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 9

The annual volume of world trade is about

A) $100 billion.
B) $3 trillion.
C) $875 billion.
D) $15 trillion.
E) $8 trillion.

Question 10

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 11

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 12

The world economy is fast becoming a single interdependent system.This process is called

A) multinational exchange.
B) globalization.
C) international exchange.
D) balance of trade.
E) privatization.

Question 13

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 14

Farmer Sal grows strawberries.The berries are shipped to a local processing 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 15

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.

Question 16

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 at the front of the pack in terms of optimism and opportunity.
E) all of these statements are correct.

Question 17

The major reasons why Mexico is a major manufacturing centre is

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 18

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 19

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 20

The three major world marketplaces are

A) Europe,Asia-Pacific,United States.
B) South America,North America,Asia-Pacific.
C) Japan,United States,Europe.
D) North America,Europe,Asia-Pacific.
E) North America,Europe,Japan.

Question 21

Canada's most important export is _________,while our most important import is ________.

A) machinery and equipment; machinery and equipment
B) motor vehicles; machinery and equipment
C) industrial goods; consumer goods
D) energy products; energy products
E) oil; motor vehicles

Question 22

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 23

The ________ is the currency for EU members.

A) oreo
B) pound
C) euro
D) franc
E) peso

Question 24

An absolute advantage exists when

A) a country has a superior political system.
B) a country can produce a product more cheaply and/or of higher quality than any other country.
C) a country has more natural resources than all other countries.
D) a country has lower labour costs than all other countries.
E) a country can make almost all products more efficiently than other countries.

Question 25

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 26

Canada's multi-year balance of payments pattern has been caused by all of the following except

A) foreigners making great earnings from their investments in Canada.
B) few foreign investments in Canada.
C) Canadians leaving Canada to work in the United States.
D) tourists travelling out of Canada for vacations.
E) grand investments made by Canadian firms abroad.

Question 27

When the value of one country's currency relative to that of another varies with market conditions,it has a(n)

A) international exchange rate.
B) pegged exchange rate.
C) floating exchange rate.
D) various exchange rate.
E) fixed exchange rate.

Question 28

Which of the following is not included in the balance of payments?

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 29

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 30

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 absolute difference between money flowing into and out of a country.
E) the difference in exchange rates between two countries.

Question 31

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 32

Which of the following is likely to happen if the demand for Canadian goods increases?

A) The value of the dollar will decrease.
B) The demand for the dollar will decrease.
C) The demand for goods will have little or no effect on the dollar.
D) The demand for the dollar will increase.
E) It is not possible to say.

Question 33

The balance of merchandise 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 thirty years.
D) unfavourable for the last thirty years.
E) favourable since Confederation.

Question 34

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 35

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 36

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 37

According to the World Economic Forum's global competitiveness ranking,the top three countries in 2011-2012 were

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

Question 38

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 39

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 thirty years.
E) unfavourable since Confederation.

Question 40

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 41

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 42

Companies with international operations are concerned about exchange rate fluctuations because

A) they may change international demand.
B) they may change domestic demand.
C) profit margins of international sales may be changed.
D) the cost of overseas operations may be changed.
E) all of these.

Question 43

What is an expected result when the value of a nation's currency falls?

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

Question 44

________ 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 45

Algoma Treasures,a gift-wrap manufacturer,is considering expanding its business into the international market.What key question must have a positive answer before it 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 46

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 47

Beta Corp.has determined that there is international demand for its product.Its next step is to

A) determine if the product needs 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 level of competition will be encountered.

Question 48

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 49

Walmart is an example of a(n)

A) exporter.
B) international firm.
C) government agency.
D) multinational firm.
E) strategic alliance.

Question 50

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 its products have international demand.
E) check the exchange rates to see if they are favourable.

Question 51

Which of the following is not an example of adapting to customer needs?

A) McDonald's selling wine in France
B) McDonald's selling Big Macs in India
C) Ford products having steering wheels mounted on the right in England
D) Movies being dubbed in another language
E) All of these are examples of adapting to customer needs

Question 52

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 53

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 had a favourable balance of trade for most of the last 30 years.

Question 54

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 55

Clement has found that there is definitely overseas demand for his fruit wine.Now he must consider

A) when he can travel overseas to assess his competition in person.
B) the balance of payments in the overseas market.
C) how other Canadian firms have done in the overseas market.
D) how to adapt the product to meet the special demands of foreigners.
E) the amount of royalty fees.

Question 56

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 57

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

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

Question 58

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 59

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 60

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 61

When Manulife Financial entered the Chinese market it made an agreement with Sinochem,a state-owned trading company.This is an example of

A) a strategic alliance.
B) world product mandating.
C) a licensing arrangement.
D) a branch office.
E) an independent agent.

Question 62

Licensing arrangements are arrangements

A) by a creator of a musical or artistic work to allow another person to use,produce,distribute,or market it for a fee or royalty.
B) by a supplier to allow another company the right to install or modify products produced by the supplier for a fee or royalty.
C) by a general contractor to allow international subcontractors to build a building for a fee or royalty.
D) by an owner of a process or product to allow another business to produce,distribute,or market it for a fee or royalty.
E) by an owner of a patent to allow another business to produce,distribute,or market the product covered by the patent for a fee or royalty.

Question 63

All of the following characteristics describe an independent agent except

A) often sells the exporter's products.
B) often makes sure that customers are happy.
C) often represents only one firm.
D) often collects payments.
E) is a foreign individual or organization.

Question 64

A foreign individual or organization that agrees to represent an exporter's interest in foreign markets is called a(n)

A) headquarters arrangement.
B) licensing arrangement.
C) independent agent.
D) strategic alliance.
E) branch office.

Question 65

Levi Strauss has an organization in a foreign country who has agreed to sell its products,to collect payments from the buyers,and to make sure that the buyers are satisfied.The organization is not part of Levi Strauss and may represent several non-competing firms at the same time.The organizational structure that Levi Strauss has selected is called

A) strategic alliance.
B) independent agent.
C) branch office.
D) licensing agreement.
E) direct investment.

Question 66

Computers-B-Us sent some of its managers abroad to gain more control over its operations and provide a more visible public presence.This type of organizational structure is known as a(n)

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

Question 67

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 68

Can-Eng Manufacturing,Canada's largest supplier of industrial furnaces,exports its furnaces to companies in Japan,Brazil,Germany,Korea,Taiwan,and Mexico.Can-Eng has an agreement with foreign companies in these countries called a(n)

A) international mandate.
B) licensing arrangement.
C) independent agency.
D) export agreement.
E) strategic alliance.

Question 69

Mega Computers has decided to expand operations overseas.In order to give foreign customers a sense of security,Mega has chosen to send several of its own managers and technicians to the country as part of the start-up operations.In addition,this will give Mega more control over making sure that top quality service is given to the new customers.Mega has chosen the organizational strategy known as

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

Question 70

Bob's Barbecue has expanded its operations to include several foreign countries.Bob has given individuals or organizations in those countries exclusive rights to market Bob's products.He has shared his secret recipe and trade secrets on how to produce the products.In return for this Bob will receive a percentage of the revenues generated in each of the countries.Bob's arrangements are best described as a(n)

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

Question 71

Michael is going to sell his baby products abroad,and he is interested in having someone in the foreign country sell the product for him.Michael is most interested in working with a(n)

A) franchisee.
B) multinational firm.
C) branch office.
D) international firm.
E) independent agent.

Question 72

Which of the following international organizational strategies means buying or establishing tangible assets in another country?

A) Independent agency
B) Opening branch offices
C) Providing licensing arrangements
D) Forming strategic alliances
E) Foreign direct investment

Question 73

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

A) Quantity discounts
B) Royalties
C) Agent fees
D) Direct investments
E) Flat fees

Question 74

Greencorp Ltd.sold the rights for production of 4 Star Soil to Soil X of Italy who now produces the special mix of fertilized soil and sells it in Italy.This arrangement is called a(n)

A) independent agent.
B) licensing arrangement.
C) strategic alliance.
D) branch office.
E) equality relationship.

Question 75

Lack of knowledge of foreign customs has lead most Canadian companies doing business in Japan to select what form of international organization?

A) Strategic alliances
B) Licensing arrangements
C) Independent agents
D) Direct investments
E) Branch offices

Question 76

Laura's Lights,Inc.has decided to expand business into Vietnam.Laura is looking for help with funding the operation and to share in the risk.She knows little about the customs and how to get things done in Vietnam.The best international structure for her is probably

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

Question 77

Toyota's opening of a major manufacturing plant in Georgetown,Kentucky,Exxon's expansion of an oil refinery in Thailand,and Texas Instruments' building of a semiconductor plant in Italy are good examples of

A) foreign direct investments.
B) independent agents.
C) strategic alliances.
D) licensing arrangements.
E) branch offices.

Question 78

BBX represents several firms at once and usually does not specialize in a particular product or market.It is a(n)

A) independent agent.
B) royalty company.
C) licensing company.
D) branch office.
E) strategic alliance.

Question 79

Lingo Media has an arrangement with the state-owned People's Education Press in China,the market leader in providing textbooks to Chinese schools.Lingo has chosen the ____________ form of international organizational structure.

A) independent agent
B) licensing agreement
C) multinational
D) branch office
E) strategic alliance

Question 80

Royalties would 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.