BUSI 1301 Exam 1

The predictable decline in the average cost of producing each unit of output as a production facility gets larger and output increases is known as

Economy of Scale

If Ecuador has an absolute advantage in coffee and Argentina in wheat, then, according to trade theory

Ecuador should focus production on coffee and trade for other goods

The monopolistic advantage theory states that

FDI is made by firms in oligopolistic industries possessing technical advantages over local companies.

Britain was the world's leading manufacturing country for about 1,800 years, until it was replaced by the United States in the 1800s.

False

The 17th and 18th centuries have frequently been termed the age of industrialism because this was the period when industrialization was advanced to the masses

False

The international environment refers to all the uncontrollable forces originating outside the home country that surround and influence the firm.

False

What is the second stage in the international product life cycle theory?

Foreign production begins.

What is an example of an external force that represents financial factors affecting a business?

Interest rates

Foreign Business

The operations of a company outside its home or domestic market

Why would companies that don't have any foreign operations still need to acquire a global perspective?

This would help the companies be more aware of new foreign competitors.

Currency devaluation helps a nation avoid losing markets and regain competitiveness in world markets.

True

Currently, China is the largest exporter in the world.

True

Opponents of free trade point out that globalization has contributed to a decline in environmental and health conditions.

True

The plague known as the Black Death moved west and affected more people as the international trading system expanded

True

The proportion of the outstanding stock of foreign direct investment accounted for by the United States declined by one-thirds over the past 20 years.

True

The capability of one nation to produce more of a good or service than another country for the same or lower cost of inputs is a(n) EX: The United States can produce more wheat for the same or lower costs than many other countries

absolute advantage.

Supporters of mercantilism would agree that

accumulation of precious metals is an activity essential to a nation's welfare.

Foreign environmental forces often operate differently than domestic environmental forces because

the forces are interrelated.

Domestic Business

the making, buying, and selling of goods and services within a country.

International Business

business activities needed for creating, shipping, and selling goods and services across national borders.

The automobile manufacturer decided it had to enter the European market because if it didn't, then all of the other car companies that were already there would get the business. Which driver is indicating internationalization for the manufacturer?

competitive

A company that decides to go abroad as a way to increase economies of scale is basing this decision on which driver of international business activity?

cost

The purchase of an existing business in another nation is known as a

cross-border acquisition.

The theory that for a firm to successfully invest overseas, it must have not only ownership of unique knowledge or resources, but also the ability to dynamically create, sustain, and exploit these capabilities over time, is known as

dynamic capabilities theory

According to Porter, the four variables he believes influence a firm's ability to gain a competitive advantage create a

virtuous circle

According to opponents of the globalization of trade and investment,

globalization has contributed to a decline in environmental and health conditions

According to the text, personnel working in a foreign subsidiary are working in the international environment

if they are responsible for the subsidiary's exports.

The construction industry has joined the ranks of other industries and now carries out business across national borders. In other words, the construction industry has become a(n)

international business.

State-owned transnationals currently account for ________ of all transnational corporations.

less than 1 percent

Estimates show there are ________ transnational corporations with hundreds of thousands of foreign affiliates.

more than 100,000

Compared to 1980, service exports in 2017 can best be described as

more than thirteen times larger.

The 17th and 18th centuries have frequently been termed the "Age of Mercantilism" because

national power depended on the sponsorship and control of merchant capital.

The level of merchandise exports worldwide were ________ larger in 2017 than they were in 1980.

nine times

Dunning's eclectic theory of international production states that if a firm is going to invest in production facilities abroad, it must have the following kinds of advantages:

ownership-specific, location-specific, and internalization

What percentage of global output is now bound for international trade?

60 percent

The three largest markets for American exports of goods in 2017 were

Canada, Mexico, and China

Which country ranked the highest in 2016 in terms of merchandise exports?

China

The three nations that exported the largest amount of goods to the United States in 2017 were

China, Canada, and Mexico.

5 major drivers of Internationalization of Business

Political Technology Market Cost Competitive

Relatively inexpensive international communication enables firms to "body shop," that is, transmit computer-oriented tasks worldwide to a cheap but skilled labor force. This is an example of a ________ driver of international business activity.

technological

Sanjay is the director of operations for Fresh Farm Produce Corp. and is now able to sell his product to the international market thanks to a new computer system that is specifically designed for businesses in the fresh food industry. Which driver helped Sanjay's company internationalize?

technological

The theory of resource endowment explains

that a nation will trade goods that can be produced with the production factor that is most abundant

Firms from __________ had the largest total outstanding stock of direct overseas investment at the beginning of 2018.

the United States

Worlds Economic Center of Gravity

the average location of the planet's economic activity measured by GDP generated across nearly 700 identifiable locations on the Earth's surface