Business Test #2

18)_____ can be best defined as the act of a country or business selling products at less than what it costs to produce them. A. Dumping B. Offshoring C. Outsourcing D. Exporting E. Importing

A. Dumping Dumping is the act of a country or business selling products at less than what it costs to produce them.

5)Why has outsourcing become a controversial practice in the United States? A. Many jobs have moved overseas where those tasks can be accomplished for lower costs. B. Outsourcing empowers the outsourcing company with more managerial control. C. The losses incurred out of the hidden costs of outsourcing are making companies go bankrupt. D. Delegation of several processes leaves the outsourcing company with much less time to concentrate on its core business process. E. The outsourced products end up having sub-standard quality because their producers lack expertise.

A. Many jobs have moved overseas where those tasks can be accomplished for lower costs. Outsourcing has become a controversial practice in the United States because many jobs have moved overseas where those tasks can be accomplished for lower costs.

37)It has often been said that the greatest impediment to the success of a small business is the A. entrepreneur. B. government. C. competition. D. business environment. E. lack of funding.

A. entrepreneur. It has often been said that the greatest impediment to the success of a small business is the entrepreneur.

20)A sudden change in power can result in a regime that is hostile to foreign investment. This is a primary example of a(n) _______ barrier. A. political B. cultural C. exchange D. language E. geographic

A. political A sudden change in power can result in a regime that is hostile to foreign investment. This is a primary example of a political barrier.

16)Which of the following is a measure that does not yield revenue for the government of Malyia, but can effectively limit the quantity of a particular good being imported from Thetasia? A. quota B. value-added tax C. tariff D. embargo E. subsidy

A. quota A quota limits the number of units of a particular product that can be imported into a country.

22)The effective translation of product names can be crucial to the success in foreign markets because of A. politicalbarriers. B. cultural barriers. C. legal barriers. D. the presence of export quotas. E. the differences in body language.

B. cultural barriers. Cultural differences include differences in spoken and written language. Although it is certainly possible to translate words from one language to another, the true meaning is sometimes misinterpreted or lost.

30)Megha is a taekwondo expert who starts her own martial arts training academy. She conducts taekwondo classes for women and teaches them the art of self-defense. Megha can be regarded as a(n) A. shareholder. B. entrepreneur. C. investor. D. intrapreneur. E. inventor.

B. entrepreneur. Megha can be regarded as an entrepreneur. Entrepreneurs are people involved in entrepreneurship, which is the process of creating and managing a business to achieve desired objectives.

23)Which of the following were merged into one market by the North American Free Trade Agreement (NAFTA)? A. Canada and Alaska B. Brazil, Mexico, and the United States C. Chile, Brazil, and the United States D. Canada, Mexico, and the United States E. Canada and Chile

D. Canada, Mexico, and the United States The North American Free Trade Agreement (NAFTA) merged Canada, the United States, and Mexico into one market. NAFTA virtually eliminated all tariffs on goods produced and traded among Canada, Mexico, and the United States to create a free trade area.

24)Which of the following is true of the World Bank? A. It funds the member nations of the NAFTA and EU. B. It provides aid to industrialized nations in times of financial crisis. C. It acts as a global police force. D. It finances construction projects in underdeveloped and developing countries. E. It helps developed nations obtain money to start businesses.

D. It finances construction projects in underdeveloped and developing countries. The World Bank loans its own funds or borrows funds from member countries to finance projects ranging from road and factory construction to the building of medical and educational facilities. The World Bank and other multilateral development banks are the largest source of advice and assistance for developing nations.

19)Political concerns may lead a group of nations to form a(n) _______, a group of firms or nations that agrees to act as a monopoly and not compete with each other. A. embargo B. conglomerate C. economic sanction D. cartel E. franchise

D. cartel

27)_____ can be best defined as the sharing of the costs and operations of a business between a foreign company and a local partner. A. Exporting B. Licensing C. A direct investment D. Contract manufacturing E. A joint venture

E. A joint venture The sharing of the costs and operation of a business between a foreign company and a local partner is called a joint venture.

11)Which of the following is an industrialized nation? A. Iraq B. Myanmar C. Pakistan D. North Korea E. Japan

E. Japan Industrialized nations are economically advanced countries such as the United States, Japan, Great Britain, and Canada. Many countries in Africa, Asia, and South America, for example, are in general poorer and less economically advanced than those in North America and Europe; they are often called less-developed countries (LDCs).

3)Malyia can produce sugar more efficiently than it can produce other items, giving it a(n) _____ advantage. A. absolute B. competitive C. domestic D. marginal E. comparative

E. comparative This is an example of comparative advantage, which occurs when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items.

26)Which of the following can be best defined as a form of licensing in which a company agrees to provide another company with its name, logo, methods of operation, advertising, products, and other elements associated with it in return for a financial commitment and the agreement to conduct business in accordance with its standard of operations? A. franchising B. outsourcing C. joint venture D. strategic alliance E. direct investment

A. franchising Franchising is a form of licensing in which a company—the franchiser—agrees to provide a franchisee the name, logo, methods of operation, advertising, products, and other elements associated with a franchiser's business, in return for a financial commitment and the agreement to conduct business in accordance with the franchiser's standard of operations.

34)Which of the following is an advantage of a small business? A. greater adaptability to changing market demands B. the support that an office provides C. more money available for wages and salaries, rent, utilities, and other expenses D. the opportunity to compete in the mass market or for large market segments E. multiple layers of management to help make difficult decisions

A. greater adaptability to changing market demands With small size comes the flexibility to adapt to changing market demands. Small businesses usually have only one layer of management—the owners. Decisions therefore can be made and executed quickly.

9)A favorable balance of trade exists when a country A. imports more than it exports. B. exports more than it imports. C. has more debt liabilities than assets. D. spends more than it saves. E. saves more than it spends.

B. exports more than it imports. When a nation exports more goods than it imports, it has a favorable balance of trade, or trade surplus.

29)GloboTron is headquartered in Argonia, and it operates over 500 factories around the world. It is one of the world's major producers of home entertainment equipment. Globotron is an example of a(n) A. simple corporation. B. multinational corporation. C. strategic alliance. D. joint venture. E. large company.

B. multinational corporation. This is an example of a multinational corporation. These corporations operate on a worldwide scale, and they often have greater assets than some of the countries in which they operate

33)Many service providers are considered retailers because they A. require a high initial start-up cost. B. provide their services directly to ultimate consumers. C. sell their services from a single store location. D. focus on large market segments and institutional buyers. E. employ only a small number of people.

B. provide their services directly to ultimate consumers. The service sector includes businesses that do not actually produce tangible goods. Many of these service providers are retailers who provide their services to ultimate consumers.

40)In businesses, _____ include the president and other top executives, such as the chief executive officer, chief financial officer, and chief operations officer, who have overall responsibility for an organization. A. first-line managers B. top managers C. trade creditors D. external auditors E. middle managers

B. top managers In businesses, top managers include the president and other top executives, such as the chief executive officer, chief financial officer, and chief operations officer, who have overall responsibility for an organization.

36)Which of the following is the shortest path to failure in business? A. inflexibility B. undercapitalization C. rent increases D. competition E. changing market demand

B. undercapitalization The shortest path to failure in business is undercapitalization, the lack of funds to operate a business normally and sustain it through slow initial sales and seasonal variations.

4)_____ is the transferring of manufacturing or other tasks—such as data processing—to countries where labor and supplies are less expensive. A. Importing B. Exporting C. Outsourcing D. Dumping E. Insourcing

C. Outsourcing Outsourcing is the transferring of manufacturing or other tasks—such as data processing—to countries where labor and supplies are less expensive.

35)Matt owns his own small bakery. In addition to being the owner, he also serves as the manager, sales force, head baker, shipping and receiving clerk, bookkeeper, and custodian. Matt is the first person to arrive at the bakery every morning and the last to leave every night. Which of the following is the most applicable challenge Matt faces? A. lack of funding B. pricing mistakes C. a high stress level D. underestimating the time commitment for success E. having poor business concepts

C. a high stress level In this scenario, Matt has to multitask, which can result in long hours and a high stress level. Many creative persons fail, not because of their business concepts, but rather because of difficulties in managing their business.

1)A(n) _____ exists when a country is the most efficient producer of an item. A. comparative advantage B. comparative disadvantage C. absolute advantage D. absolute disadvantage E. domestic advantage

C. absolute advantage Some nations have a monopoly on the production of a particular resource or product. Such a monopoly, or absolute advantage, exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item.

2)A mining company in Malyia that possesses the only mine where a specialty ruby can be found has a(n) A. comparative advantage. B. comparative disadvantage. C. absolute advantage. D. absolute disadvantage. E. domestic advantage.

C. absolute advantage. This is an example of absolute advantage, which exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item.

15)A U.S. citizen may bring $200 worth of merchandise into the United States duty free. After that, U.S. citizens must pay a(n) _______ based on the cost of the item and the country of origin. A. sales tax B. transactionaltax C. ad valorem tariff D. fixed tariff E. export tariff

C. ad valorem tariff A U.S. citizen may bring $200 worth of merchandise into the United States duty free. After that, U.S. citizens must pay an ad valorem tariff based on the cost of the item and the country of origin.

10)The difference between the flow of money into and out of a country is called its A. balance of trade. B. domestic gain. C. balance of payments. D. credit balance. E. exchange rate.

C. balance of payments. The difference between the flow of money into and out of a country is called its balance of payments. A country's balance of trade, foreign investment, foreign aid, loans, military expenditures, and money spent by tourists comprise its balance of payments.

7)A nation's _____ can be best defined as the difference in value between its exports and imports. A. balance of import B. balance of export C. balance of trade D. trade surplus E. trade deficit

C. balance of trade A nation's balance of trade is the difference in value between its exports and imports.

39)Securing a mortgage from a bank for a new business venture is an example of A. equity financing. B. venture capitalism. C. debt financing. D. trade credits. E. collaterals.

C. debt financing. Banks are the main suppliers of external financing or debt financing to small businesses. A small- business owner may have to provide personal property as collateral when borrowing money from a bank, in which case the loan is called a mortgage.

14)A specific amount of money levied on each unit of a product brought into a country is termed as a(n) _______ tariff. A. ad valorem B. value-added C. fixed D. prohibitive E. zero

C. fixed A fixed tariff is a specific amount of money levied on each unit of a product brought into a country, while an ad valorem tariff is based on the value of the item. Most countries allow citizens traveling abroad to bring home a certain amount of merchandise without paying an import tariff.

12)Thelisia has abundant railroads, highways, ports, airfields, utilities and power plants, schools, hospitals, communication systems, and commercial distribution systems to support its economic activities. This means Thelisia has a strong A. business structure. B. economic structure. C. infrastructure. D. exchange rate. E. consumer base.

C. infrastructure. A country's level of development is determined in part by its infrastructure, the physical facilities that support its economic activities, such as railroads, highways, ports, airfields, utilities and power plants, schools, hospitals, communication systems, and commercial and distribution systems.

31)A _____ is best described as any independently owned and operated business that is not dominant in its competitive area and does not employ more than 500 people. A. publicly owned business B. limited liability company C. small business D. publicly traded company E. conglomerate

C. small business A small business is defined as any independently owned and operated business that is not dominant in its competitive area and does not employ more than 500 people. A local Mexican restaurant may be the most patronized Mexican restaurant in your community, but because it does not dominate the restaurant industry as a whole, the restaurant can be considered a small business.

32)Which of the following businesses has created a majority of net new jobs annually? A. multinationalcorporations B. publicly traded companies C. small businesses D. conglomerates E. public sector holdings

C. small businesses More than 99 percent of all U.S. firms are classified as small businesses, and they employ about half of private workers. About 63 percent of net new jobs annually were created by small businesses. 33)Many service providers are considered retailers because they

8)U.S. exports to China have been rapidly increasing but not fast enough to offset the imports from China. This means that the United States has a(n) A. domestic gain. B. trade surplus. C. trade deficit. D. absolute advantage. E. comparative advantage.

C. trade deficit. U.S. exports to China have been rapidly increasing but not fast enough to offset the imports from China, meaning that the United States has a trade deficit. A trade deficit is defined as a nation's negative balance of trade, which exists when that country imports more products than it exports.

6)Sarah bought a new shirt at a U.S. boutique. When she checked the tag, she saw that her shirt was made in China. This means her shirt is a(n) _______ good. A. exported B. outsourced C. absolute D. imported E. domestic

D. imported This is an example of an imported good. Importing is the purchase of goods and services from foreign sources.

21)Auto Corp. learned that in order to sell more cars in Thelisia, it needed a bold and strategic advertising plan; while in Malyia, it needed more attentive customer service. This is an example of a(n) _____ barrier. A. technological B. political C. legal D. social E. economic

D. social The given scenario is an example of how Auto Corp. overcame a social barrier. Most businesspeople engaged in international trade underestimate the importance of social and cultural differences; but these differences can derail an important transaction.

13)If the United States were to devalue its currency, the most likely result would be A. a decrease in the number of foreign tourists to the United States. B. a decrease in the sale of domestic goods abroad. C. an increase in the cost of American goods abroad. D. an increase in its imports. E. an increase in its exports.

E. an increase in its exports. Devaluation decreases the value of currency in relation to other currencies. Devaluation encourages the sale of domestic goods and tourism, causing an increase in exports.

38)To make profits from a small business, the owner must first provide or obtain _____ to start the business and keep it running smoothly. A. products B. employees C. profits D. supplies E. capital

E. capital To make money from a small business, the owner must first provide or obtain money (capital) to get started and to keep it running smoothly. Often, the small-business owner has to put up a significant percentage of the necessary capital. Few new business owners have a large amount of their own capital and must look to other sources for additional financing.

17)A(n) _____ is best defined as a prohibition on trade in a particular product. A. ad valorem tariff B. excise C. cartel D. quota E. embargo

E. embargo An embargo is a prohibition on trade in a particular product.

25)Which of the following can be best defined as a trade agreement in which one company allows another company to use its company name, products, patents, brands, trademarks, raw materials, and/or production processes in exchange for a fee or royalty? A. direct investment B. strategic alliance C. joint venture D. outsourcing E. licensing

E. licensing Licensing is a trade agreement in which one company—the licensor—allows another company—the licensee—to use its company name, products, patents, brands, trademarks, raw materials, and/or production processes in exchange for a fee or royalty.

28)In industries where international competition is so fierce and the costs of competing on a global basis are so high that only a few firms have the resources to do it alone, they collaborate with other companies to form a A. direct investment. B. greenfield venture. C. franchise. D. joint venture. E. strategic alliance.

E. strategic alliance.