Chapter 03: Global Business

22. The World Trade Organization (WTO) was established by General Agreement on Tariffs and Trade (GATT) during the Uruguay Round of trade negotiations. a. True b. False

True

24. An important and practical issue for domestic firms dealing with foreign customers is securing payment. a. True b. False

True

26. A firm's direct investment in international business involves building a new plant or buying an existing plant in a foreign country to produce its own products, or it may involve buying an existing firm in a foreign country. a. True b. False

True

27. Strategic alliances are partnerships formed to create competitive advantage on a worldwide basis. a. True b. False

True

3. By definition, every country has a comparative advantage in some product. a. True b. False

True

30. Countertrade is essentially an international barter transaction in which goods and services are exchanged for different goods and services. a. True b. False

True

32. The International Trade Administration (ITA) and Small Business Administration offer assistance and information to help exporters. a. True b. False

True

33. The International Monetary Fund (IMF) makes short-term loans to developing countries experiencing balance-of-payment deficits. a. True b. False

True

5. Purchasing raw materials or products in other nations and bringing them into one's own country is known as importing. a. True b. False

True

9. A tariff is a tax levied on a particular foreign product entering a country. a. True b. False

True

1. International business includes all business activities that involve exchanges across state boundaries. a. True b. False

False

12. Privacy rules in Europe are less strict than in the United States, as are rules related to advertising to children. a. True b. False

False

14. A restriction on the amount of a particular foreign product that can be purchased or sold is called currency devaluation. a. True b. False

False

15. Revenue tariffs and protective tariffs both have the effect of lowering the price of the product in the importing nations. a. True b. False

False

16. Devaluation decreases the cost of foreign goods and increases the cost of domestic goods to foreign firms. a. True b. False

False

18. Trade restrictions limit consumer choices but have no effect on product prices. a. True b. False

False

19. Least-favored-nation (LFN) status was the famous principle of GATT. a. True b. False

False

20. From 1947 to 1994, GATT was unable to sponsor any round of negotiations to reduce trade restrictions. a. True b. False

False

23. One of the problems with licensing as a method of entering international business is that it is more expensive than the other methods. a. True b. False

False

25. Joint venture agreements generally require a very low level of commitment from all the parties involved. a. True b. False

False

28. Most trading companies are involved in manufacturing or owning assets related to manufacturing. a. True b. False

False

29. Trading companies do not take title to products. a. True b. False

False

31. A firm that has no ties to a specific nation or region and operates on a worldwide scale is called a national corporation. a. True b. False

False

4. Comparative advantage is the ability to produce a specific product more efficiently than any other nation. a. True b. False

False

6. A country has a favorable balance of trade if it imports more than it exports. a. True b. False

False

7. The total flow of money into a country minus the total flow of money out of the country over some period of time is called the nation's balance of trade. a. True b. False

False

8. The total value of a nation's exports minus the total value of its imports is known as the balance of payments. a. True b. False

False

21. An international organization that includes the United States and many other countries and whose goal is to reduce or eliminate tariffs and other barriers to world trade is commonly referred to as GATT. a. True b. False

True

10. A limit on the amount of a particular good that may be imported into a country during a given period of time is called an import quota. a. True b. False

True

11. A complete halt to trading with a particular nation or in a particular product is called an embargo. a. True b. False

True

13. Businesspeople are often interested in per capita gross domestic product (GDP) as this gives insight into a nation's standard of living and market potential. a. True b. False

True

17. Cultural barriers can impede acceptance of products in foreign countries. a. True b. False

True

2. Absolute advantage is the ability to produce a specific product more efficiently than any other nation. a. True b. False

True

177. International trade is a major growth vehicle for the United States, with about _______ of jobs depending on international trade. a. 20 percent b. 25 percent c. 33 percent d. 50 percent e. 65 percent

a. 20 percent

72. In the United States, what percent of gross domestic product does international trade account for? a. 25 percent b. 12.5 percent c. 75 percent d. 50 percent e. 90 percent

a. 25 percent

166. _______ is an internationally supported bank that provides loans to developing countries to help them grow. a. A multilateral development bank b. The International Development Bank c. An international bank d. The Federal Reserve e. The International Monetary Fund

a. A multilateral development bank

40. Refer to Ashley Sonoma, Inc. Which of the following options is not one of the steps Ashley Sonoma needs to do to enter an international market? a. Contact local government to see if taxes on trade can be waived b. Establish an overseas distribution network c. Set export prices and payment terms, methods, and techniques d. Identify key foreign markets for the product e. Identify exportable products

a. Contact local government to see if taxes on trade can be waived

148. When it built production lines for pickup trucks in the United States, Toyota engaged in what type of international expansion? a. Direct investment b. Joint venture c. Strategic alliance d. Outsourcing e. Exporting

a. Direct investment

74. Which of the following is most likely to be imposed for political reasons? a. Embargo b. Import quota c. Devaluation d. Exchange control e. Protective tariff

a. Embargo

176. Belize is considering instituting trade restrictions in order to balance its payments, protect new businesses, and protect domestic jobs. What may be some of the reasons it would not want to institute trade restrictions? a. Higher consumer prices, restricted consumer choice, misallocation of international resources, and loss of jobs b. Lower consumer prices, greater consumer choice, better allocation of international resources, and job gains c. Sluggish market improvements, high retail prices, and lack of international resources d. Loss of jobs, lack of national innovation, and high interest rates e. Higher consumer prices, greater consumer choice, job gains, misallocation of international resources

a. Higher consumer prices, restricted consumer choice, misallocation of international resources, and loss of jobs

139. Which of the following is a potential drawback of licensing? a. If the licensor's product quality is compromised, it may reflect poorly on the company providing the license. b. Licensing will provide the licensor with much foreign marketing experience. c. It is a relatively inexpensive way to market your product internationally. d. It is an extremely expensive and highly involved method of international expansion. e. It provides no compensation for the original company.

a. If the licensor's product quality is compromised, it may reflect poorly on the company providing the license.

183. Geoffrey would like to start a business with a strong growth potential. He would like the trade partner to be an Asian democracy with great economic growth potential, and a large population of potential consumers. Which nation would should he consider to be his trading partner? a. India b. China c. Japan d. Thailand e. Korea

a. India

47. Although it lacks sources of timber and oil, Chateau Miraval has a plentiful supply of grapes for its many wineries. Which statement about Chateau Miraval is true? a. It has a comparative advantage in wine production. b. It has a comparative advantage in timber and oil production. c. It has an absolute advantage in the production of wine. d. It has an absolute advantage in timber and oil production. e. It has no comparative or absolute advantages.

a. It has a comparative advantage in wine production.

137. _______ is a contractual agreement where one firm gives another permission to produce and market its product and brand name in exchange for a fee. a. Licensing b. Exporting c. Joint venture d. Countertrade e. Strategic alliance

a. Licensing

118. Which of the following is the United States a member of? a. The Dominican Republic-Central America Free Trade Agreement b. European Union c. The Commonwealth of Independent States d. The Association of Southeast Asian Nations e. Comprehensive and Progressive Agreement for Trans-Pacific Partnership

a. The Dominican Republic-Central America Free Trade Agreement

171. Suppose India is trying to develop its international trade in electronic components, but it lacks the money to be successful. From whom should India seek assistance? a. The International Monetary Fund b. The Inter-American Development Bank c. The United States d. The Federal Reserve e. The Development Bank for Emerging Economies

a. The International Monetary Fund

173. Which bank's main goals include promoting exchange rate stability and assisting in establishing a multilateral system of payments? a. The International Monetary Fund b. The Asian Development Bank c. The Export-Import Bank of the United States d. The Inter-American Development Bank e. The Multilateral Development Bank

a. The International Monetary Fund

85. Which of the following is not an argument for imposing trade restrictions? a. To protect strong domestic industries b. To protect new or weak domestic industries c. To equalize a nation's balance of payments d. To protect the health of citizens e. To protect national security

a. To protect strong domestic industries

127. What would have been the world's largest free trade agreement until the United States withdrew? a. Trans-Pacific Partnership b. European Union c. Common Market of the Southern Cone d. Comprehensive and Progressive Agreement for Trans-Pacific Partnership e. Commonwealth of Independent States

a. Trans-Pacific Partnership

95. When the U.S. dollar is strong relative to other currencies, which of the following is true? a. U.S. exports cost more when purchased with Japanese yen. b. U.S. imports cost more when purchased with Japanese yen. c. Japanese exports cost more when purchased with U.S. dollars. d. U.S. imports cost more when purchased with Chinese renminbi. e. U.S. exports cost less when purchased with Japanese yen.

a. U.S. exports cost more when purchased with Japanese yen.

53. Platinum is a very rare element that is increasingly being used in the manufacture of technology and jewelry products. Because it controls the most of the world's platinum deposits, South Africa has a(n) _______. a. absolute advantage b. comparative advantage c. advantage based on efficient production d. trade deficit e. lot of diamonds

a. absolute advantage

105. Trey complained that it took some time to locate a distributor of an imported light bulb that he had to replace. He was further annoyed that he had to pay an artificially high price. When asked for his opinion, Trey would probably argue _______. a. against trade restrictions b. for the trade deficit c. for exports d. for tourism e. against international free trade associations

a. against trade restrictions

175. Which of the following statements is true? The Export-Import Bank of the United States _______. a. assists in financing the exports of American firms b. is an example of a multilateral development bank c. provides loans to U.S. importers d. was created in 1960 by major U.S. banks e. provides low-interest loans, interest-free credits, and grants to developing countries

a. assists in financing the exports of American firms

42. Refer to Ashley Sonoma, Inc. When the transport carriers need to provide Ashley Sonoma or its customers with evidence that the product has been shipped, they use a _______. a. bill of lading b. receipt c. letter of credit d. draft e. shipping verification

a. bill of lading

122. Cameroon, Egypt, Ethiopia, Nigeria, and many other countries decided to form the African Continental Free Trade Area (AfCFTA) to increase trade and movement of resources and products among these nations. This would be an example of a(n) _______. a. economic community b. peace agreement c. world trade agreement d. global treaty e. regional partnership

a. economic community

56. Selling and shipping raw materials or products to other nations is called _______. a. exporting b. alien trading c. importing d. tariffing e. deficit trading

a. exporting

65. When a Caribou Coffee, in Minneapolis, purchases coffee beans from Colombia, South America, it _______. a. is importing the coffee b. is exporting the coffee c. has an absolute advantage d. is decreasing the balance-of-trade deficit e. is contract manufacturing

a. is importing the coffee

156. When a business such as Coca-Cola has bottling plants and other facilities located in several foreign countries and operates on a worldwide scale, it is called a(n) _______. a. multinational corporation b. joint venture c. exporting business d. licensing firm e. trading company

a. multinational corporation

101. The United States does not sell fighter jets, such as F-35s, to Iran. The rationale for this restriction is most likely to _______. a. protect national security b. protect domestic jobs c. protect the health of its citizens d. retaliate for Iran's trade restrictions e. protect domestic manufacturers

a. protect national security

77. The U.S. government imposes a tax on automobiles imported from Japan, South Korea, and Germany to help American automakers. This is best described as a(n) _______. a. protective tariff b. revenue tariff c. dumping duty d. import quota e. excise tax

a. protective tariff

78. Suppose Paraguay imposes a tax on agricultural products from the United States to increase government funds. This describes a(n) _______. a. revenue tariff b. preservation tariff c. embargo d. nontariff barrier e. protective tariff

a. revenue tariff

99. Yelena is involved in package design for a new product that will be sold in Indonesia and potentially other Southeast Asian countries. She had chosen a lovely green for the package's background color until a colleague informed her that green symbolizes conflict in Indonesia and therefore could stifle sales of the product. Yelena would be advised to spend more time researching _______. a. social and cultural barriers b. the legal climate c. the political climate d. the economic environment e. trade restrictions

a. social and cultural barriers

46. The land of Anchuria has very infertile soil but a large supply of oil. What action should Anchuria take? Anchuria should _______. a. specialize in the production of crude oil and trade this for grain and other needed products b. grow food anyway because its people will need it for survival c. focus on attracting tourists to its country and thus purchase the needed supplies of food d. specialize in the production of food products such as cereals and bread e. import oil to satisfy the country's need for gasoline

a. specialize in the production of crude oil and trade this for grain and other needed products

155. Ford Motor Company and Volkswagen are discussing how they can collaborate to develop and market technologically advanced commercial electric vehicles. This would be an example of a(n) _______. a. strategic alliance b. licensing agreement c. exporting agency d. trading company e. countertrade

a. strategic alliance

178. When importers and exporters do not trust one another and want to ensure that the importer receives the promised merchandise and the exporter gets paid, the go-between representative they employ is/are typically _______. a. the local domestic banks involved in international business b. sales agents c. international trade organizations d. the World Bank e. a trading company

a. the local domestic banks involved in international business

180. Arthur Wu would like to start a wholesale furniture business in the United States. He has contacts in the furniture production business in China and feels he can leverage these contacts to purchase inexpensive, high-quality furniture in China to sell in stores in the United States. He calls one of his contacts and after extensive negotiations, makes a deal: he will buy the Chinese furniture to sell wholesale in the United States to retail furniture businesses. What is the business relationship between Arthur and his Chinese contact? a. Arthur is the licensee and the contact is the licensor. b. Arthur is an importer and the contact is an exporter. c. Arthur and his contact have a joint venture. d. Arthur and his contact have a strategic alliance. e. Arthur is engaging in contract manufacturing with a Chinese manufacturer.

b. Arthur is an importer and the contact is an exporter.

98. Which of the following is an example of a nation's infrastructure? a. Language b. Communications networks c. GDP per capita d. Legal system e. Social systems

b. Communications networks

128. In addition to the USMCA, what agreement are Mexico and Canada party to, but not the United States? a. European Union b. Comprehensive and Progressive Agreement for Trans-Pacific Partnership c. Dominican Republic-Central America Free Trade Agreement d. Commonwealth of Independent States e. Common Market of the Northern Cone

b. Comprehensive and Progressive Agreement for Trans-Pacific Partnership

71. Diego makes surfboards in California that are very popular with professional surfers. He would like to expand his business and therefore has begun researching surfboard markets around the world. He is looking in particular for countries with growing economies and younger populations with growing disposable incomes. Where should he look? a. Sudan b. Ghana c. Iran d. Syria e. Russia

b. Ghana

83. Which of the following is not a consequence of trade restrictions? a. Misallocation of international resources b. Greater consumer choice c. Reduced consumer choice d. Loss of jobs e. Higher prices for consumers

b. Greater consumer choice

162. Which of the following federal government agencies promotes trade and investment and enforces U.S. trade laws and agreements? a. U.S. Export Assistance Centers b. International Trade Administration c. Ex-Im Bank d. U.S. Department of Commerce e. U.S. Department of Transportation

b. International Trade Administration

158. Which of the following functions is not performed by a trading company? a. Taking title to products b. Manufacturing products for foreign trading c. Linking buyers and sellers in different countries d. Buying products at the lowest price consistent with quality e. Performing activities necessary to move goods to the foreign country

b. Manufacturing products for foreign trading

112. What were the Kennedy Round, the Tokyo Round, and the Uruguay Round? a. Amendments to the General Agreement on Tariffs and Trade (GATT) b. Negotiations sponsored by GATT to reduce trade restrictions c. A series of disagreements among the members of GATT d. World Trade Organization meetings to encourage trade e. Political negotiations among many of the world's nations

b. Negotiations sponsored by GATT to reduce trade restrictions

114. United States-Mexico-Canada Agreement renegotiated the ______ to address numerous criticisms. a. Foreign Corrupt Practices Act b. North American Free Trade Agreement c. World Trade Organization d. Comprehensive and Progressive Agreement for Trans-Pacific Partnership e. Common Market of the Southern Cone

b. North American Free Trade Agreement

181. Jaleesa works in the school gym's snack shop. Profits from the snack shop go to support the school's teams. Because of the snack shop's success, other school clubs would like to sell items through the snack shop as well. Jaleesa talks to the managers of the snack shop about the possibility of other school clubs selling items through the shop. They decide that other clubs can sell items through the shop, but not food items; in addition, every club will have to pay the snack shop 20 percent of its profits. This seems to discourage more organizations from selling items through the snack shop. Later, as Jaleesa is sitting in her business class, the instructor explains trade restrictions placed on imports to limit particular foreign products from entering a country. As she thinks about the lesson, she realizes that if you compared the snack shop to a government, the snack shop has not acted to keep other items from being sold through the shop, but merely to raise revenue. Which of the following best describes the kind of trade restriction that Jaleesa is comparing the shop's actions to? a. Protective tariffs b. Revenue tariff c. Nontariff barriers d. Embargo e. Import quota

b. Revenue tariff

163. Floyd-Taylor Industries, a small manufacturing company in Minnesota, wants to explore commercial opportunities overseas but isn't sure how or where to start the process. Floyd-Taylor Industries should consider seeking assistance from the _______. a. Ex-Im Bank b. SBA's Office of International Trade c. SBA's Export Assistance Centers d. ITA's Advocacy Center e. World Bank

b. SBA's Office of International Trade

115. The European Union (EU) is one of the world's oldest economic communities, and few countries leave it once admitted. Which of the following is no longer a member of the EU? a. The United States b. The United Kingdom c. The Kingdom of Brunei d. Switzerland e. France

b. The United Kingdom

44. Which of the following is a reason why trade deficits are potentially harmful? a. Consumers at home have the benefit of a wider variety of products at competitive prices. b. The country must export money to pay for its excess imports. c. Lower prices at home help stifle the threat of inflation. d. They result in more jobs remaining in the home country. e. They spur job creation in the home country.

b. The country must export money to pay for its excess imports.

50. A new country has formed in central Africa. It has no absolute advantage in crude oil, diamonds, or wool. However, it does manufacture high-quality bows and arrows for specialized safari adventures. Which of the following statements is true? a. The new country should try to produce its own crude oil, diamonds, and wool. b. The new country has a comparative advantage in the production of bows and arrows. c. The new country has an unqualified advantage in the production of bows and arrows. d. The new country has a determined advantage in the production of arrows. e. The new country is engaged in dumping bows and arrows.

b. The new country has a comparative advantage in the production of bows and arrows.

94. A currency devaluation raises the cost of foreign goods and _______ the cost of domestic goods to foreign firms. a. devalues b. reduces c. balances d. raises e. restricts

b. reduces

129. Soomin is studying business and learning about the effects of the strong U.S. dollar. He has learned that the strength of a nation's currency best relates to _______. a. trade restrictions b. the economic environment c. the political climate d. social and cultural barriers e. the legal environment

b. the economic environment

62. Which of the following best defines balance of trade? a. Purchasing products in other countries and bringing them into one's own country. b. The total value of a nation's exports minus the total value of its imports over some period of time. c. The total flow of money into the country minus the total flow of money out of the country over some period of time. d. The ability to specialize in the production of a specific product and trade it for other needed products. e. The ability to produce a certain product more efficiently than any other nation.

b. The total value of a nation's exports minus the total value of its imports over some period of time.

51. Because Canada and New Zealand have _______, Canada can specialize in the production of wheat, and New Zealand can specialize in the production of wool. a. company advantages b. absolute advantages c. comparative advantages d. effective manufacturing systems e. very low labor costs

b. absolute advantages

159. If China were to trade low-cost computer chips to Canada in exchange for wheat, these countries would execute a(n) _______. a. auction agreement b. countertrade agreement c. strategic transaction d. licensing agreement e. free-trade agreement

b. countertrade agreement

132. China unexpectedly reduced the value of its yuan renminbi, not once but three times in a short period. This is best described as _______. a. imposing exchange controls b. currency devaluation c. renminbizone d. infrastructure e. countertrade

b. currency devaluation

123. An organization of nations formed to promote the free movement of resources and products among its members and to create common economic policies is called a(n) _______. a. free trade association b. economic community c. common market d. international alliance e. global alliance

b. economic community

100. Arguments for imposing trade restrictions include _______. a. the misallocation of international resources b. equalizing a nation's balance of payments c. higher prices for consumers d. restriction of consumers' choices e. loss of jobs

b. equalizing a nation's balance of payments

93. The United Kingdom wants to limit the amount of pounds sterling that another country can obtain. The best way to accomplish this is to _______. a. impose an import duty b. establish an exchange control c. declare an embargo d. set an import quota e. impose an export duty

b. establish an exchange control

92. When a Pakistani importing firm wants to import U.S.-made products, it must first secure permission and dollars from the State Bank of Pakistan. This type of restriction is known as a(n) _______. a. currency devaluation b. exchange control c. negative foreign exchange d. trade embargo e. quota

b. exchange control

142. Code Ninjas allows foreign individuals to use its name and methods of doing business in their own stores in other countries in return for fees and royalties. This is known as _______. a. exporting b. franchising c. direct investment d. licensing e. contract manufacturing

b. franchising

59. Bloomingdales sells designer suits made in Italy in its stores in the United States. Bloomingdales is _______ suits. a. exporting b. importing c. trading d. dumping e. taxing

b. importing

165. The Export-Import Bank _______. a. is owned and operated by Fortune 500 companies b. is an independent agency of the U.S. government c. aids foreign nations experiencing balance-of-payments problems d. guarantees credit to American buyers of foreign goods e. closed its operations after the creation of the WTO

b. is an independent agency of the U.S. government

64. When the McIlhenny Company, located in Louisiana, sells its Tabasco red pepper and other sauces to supermarkets in London, England, the company _______. a. is importing the sauces b. is exporting the sauces c. has an absolute advantage d. is increasing the balance-of-trade deficit e. is contract manufacturing

b. is exporting the sauces

125. All of the following were criticisms of the North American Free Trade Agreement (NAFTA) except _______. a. it resulted in the loss of American jobs to Mexico b. it benefited the United States more than Mexico c. it did nothing to help the environment d. it harmed workers by eroding labor standards e. it was unable to address technological changes that had occurred after implementation

b. it benefited the United States more than Mexico

145. Microsoft, which markets productivity software such as Office, and SAS, a data analytics firm, formed a _______ to develop a response system for natural disasters, such as flooding, that automates the dispatching of public services. a. sales branch b. joint venture c. strategic alliance d. licensing agreement e. trading company

b. joint venture

147. If Nike and Procter & Gamble form a partnership to develop and market a line of self-deodorizing athletic shoes, the partnership would be a(n) _______. a. corporation b. joint venture c. monopoly d. licensing agreement e. strategic alliance

b. joint venture

89. At present, the United States has an embargo against Cuba because _______. a. Cuban products are too difficult to use b. the two countries have extremely poor political relations c. Cuba has an embargo on American products d. Cuba will not adopt a capitalist government e. products from Cuba are in higher demand than American-made products

b. the two countries have extremely poor political relations

63. An unfavorable trade balance is called a(n) _______. a. balance of trade b. trade deficit c. currency devaluation d. balance of payments e. import balance

b. trade deficit

179. Ina has been reading about international trade and absolute and comparative advantages. She and her friend, Gina, have to create a PowerPoint presentation for their business class about international trade. Ina can create animated PowerPoint presentations that clearly and precisely convey the message they need to make, but in a light and entertaining fashion. However, she is not good at public speaking. Gina is an excellent public speaker and can create equally excellent PowerPoints. Both students have homework for other classes to do, so they agree to divide the work: Ina will create the PowerPoint and Gina will do the verbal and written part of the presentation. What advantage does Gina have over Ina in making presentations? a. Comparative deficit b. Absolute advantage c. Comparative advantage d. Relative advantage e. Economical advantage

c. Comparative advantage

79. _______ is the exportation of large quantities of a product at a price lower than that of the same product in the home market. a. Embargo b. Duty c. Dumping d. Export quota e. Dropping

c. Dumping

144. A medium-sized hardware manufacturer wants to become intensely involved in exporting, but it does not yet wish to actually manufacture any of its products overseas. The company wants to maintain control over its sales while gaining experience in foreign markets. Which option would be best for this company? a. Licensing its products for sale in foreign countries b. Selling its products outright to an export/import merchant c. Establishing its own sales offices in foreign countries d. Developing totally owned facilities in a foreign market e. Hiring an export/import agent to assist with foreign sales

c. Establishing its own sales offices in foreign countries

130. Which of the following statements is true about the United States-Mexico-Canada Agreement? a. It is a free trade agreement between Canada and the United States. b. It benefits the United States more than Canada or Mexico. c. It must be formally reviewed at least every six years to ensure that it remains beneficial to all three nations. d. It immediately eliminated all tariffs among the United States, Mexico, and Canada. e. It does not address technological issues such as intellectual property.

c. It must be formally reviewed at least every six years to ensure that it remains beneficial to all three nations.

164. The World Bank is an example of a(n) _______, supported by industrialized nations, including the United States. a. ADB b. IMF c. MDB d. EFTA e. LAFTA

c. MDB

108. Who are the top two export partners of the United States? a. Japan and China b. Canada and Germany c. Mexico and Canada d. Mexico and China e. The United Kingdom and South Korea

c. Mexico and Canada

160. Which of the following represents the highest level of involvement in international business? a. Strategic alliance b. Direct investment c. Multinational corporation d. Contract manufacturing e. Exporting

c. Multinational corporation

36. Refer to Garden Living. What type of tax has the Brazilian government imposed on the company? a. Import duty b. Embargo c. Revenue tariff d. Protective tariff e. Nontariff barrier

c. Revenue tariff

174. Which of the following is the largest and oldest regional multilateral development bank? a. European Bank for Reconstruction and Development b. African Development Bank c. The Inter-American Development Bank d. The Asian Development Bank e. The World Bank

c. The Inter-American Development Bank

113. Which of the following addressed trade related to intellectual property? a. The Mexico City Round b. The Tokyo Round c. The Uruguay Round d. The Kennedy Round e. The Biden Round

c. The Uruguay Round

82. French manufacturers are dumping tires in South Korea. What will happen to South Korean tire makers if the South Korean government allows this dumping to continue? a. They will be faced with the highest demand ever. b. They will become more competitive. c. They will be put out of business because they cannot compete with the prices. d. They will try to dump their tires in other countries. e. Their revenues will decrease, but their long-term success will not be affected.

c. They will be put out of business because they cannot compete with the prices.

43. Refer to Ashley Sonoma, Inc. Which of the following alternatives could have worked as a link between Ashley Sonoma, Inc. and a buyer from a different country? a. International barter b. Countertrade c. Trading company d. Comparative trader e. Exchange control

c. Trading company

131. Ahmed operates a small trading company in Seattle that capitalizes on his old family connections in Saudi Arabia. A major headache in his business is the constantly changing value of the U.S. dollar versus the Saudi riyal, which affects how much profit he makes on each transaction. When the value of the U.S. dollar is rising relative to the riyal, it means that _______. a. U.S. exports cost less when purchased using euros in Saudi Arabia b. U.S. exports cost less when purchased using riyal in Saudi Arabia c. U.S. exports cost more when purchased using riyal in Saudi Arabia d. Saudi imports cost more when purchased with U.S. dollars e. U.S. exports cost the same regardless of what currency is used

c. U.S. exports cost more when purchased using riyal in Saudi Arabia

38. Refer to Garden Living. Which of the following organizations would Garden Living have contacted to mediate regarding unfair treatment by foreign governments? a. COPPA b. GATT c. WTO d. EU e. USMCA

c. WTO

52. Although it may be difficult to identify, every country has a(n) _______ advantage in some product. a. relative b. absolute c. comparative d. superior e. inferior

c. comparative

68. When Senfronia, a U.S. citizen, flies to New Zealand on an Australian airline, stays in a Christchurch hotel, and buys many wool sweaters from New Zealand to bring home, she is _______. a. decreasing the trade deficit b. being disloyal and unpatriotic c. contributing to the negative balance of payments d. buying American-made exports e. buying American-produced imports

c. contributing to the negative balance of payments

150. LQ Company wants to be prepared for the United States to rejoin Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) free trade area. The company plans to develop its own production and marketing facilities in one or more CPTPP countries. The best choice for LQ Company is _______. a. a joint venture b. contract manufacturing c. direct investment d. exporting e. sales offices

c. direct investment

153. When Chinese-based Tencent announced that it would acquire UK-based gamer Sumo Group, Tencent intended to make a(n) _______. a. countertrade with Sumo Group b. indirect investment in the United Kingdom c. direct investment in the United Kingdom d. strategic alliance with Sumo Group e. exporting agreement with the United Kingdom

c. direct investment in the United Kingdom

58. Jeep and Tesla vehicles produced in the United States are found in dealerships and on roads around the world. The United States is _______ these automobiles. a. tariffing b. importing c. exporting d. releasing e. dumping

c. exporting

76. The United States wishes to restrict imports of fresh fruit from Haiti to less than 100 million tons in any given year. The type of import restriction it should impose is a(n) _______. a. import duty b. foreign exchange control c. import quota d. embargo e. export duty

c. import quota

90. U.S. automakers are concerned about the availability of so many foreign cars to U.S. consumers and that their chances to sell their own cars are limited. To directly correct the situation, they asked Congress to impose a(n) _______. a. export quota b. export duty c. import quota d. embargo e. currency devaluation

c. import quota

57. Buyers that purchase dresses in Vietnam or shoes in Italy and have them shipped back to the United States for resale are engaging in _______. a. exporting b. shipping c. importing d. expelling e. dumping

c. importing

124. CAFTA-DR, USMCA, OECD, and ASEAN are all examples of _______. a. political organizations b. peace treaties c. international economic communities d. World Trade Organization members e. democratic organizations

c. international economic communities

138. Soccer Zone, a small business, is interested in expanding internationally but does not want to make a large financial commitment. Therefore, it decides to allow a Brazilian company to manufacture and distribute products in South America under the Soccer Zone name. Soccer Zone is using a _______ agreement. a. joint venture b. strategic alliance c. licensing d. countertrade e. contract manufacturing

c. licensing

39. Refer to Ashley Sonoma, Inc. Initially, the managers believed that _______ would be the best option for entering the foreign market. a. exporting b. creating a joint venture c. licensing d. establishing a strategic alliance e. a merger

c. licensing

96. Suppose a set of Italian glassware costing €1,000 costs $3,000 in the United States. After devaluation, the set of glassware costs $1,000. This change _______. a. shows that to foreigner purchasers, the price of the glassware is the same before and after the devaluation b. makes the glassware less attractive to foreigner purchasers c. makes the glassware more attractive to foreign purchasers d. is irrelevant to foreign purchasers e. proves that foreign purchasers would prefer devaluation of the euro so that it would be worth $2. That way, they could get even more for their dollars

c. makes the glassware more attractive to foreign purchasers

121. The primary objective of the World Trade Organization is to _______. a. help underdeveloped nations increase their standard of living b. achieve world peace c. remove barriers to trade worldwide d. enforce worldwide political and trade regulations e. promote the invention of new technologies

c. remove barriers to trade worldwide

102. If the German government charged tariffs on Japanese automobiles and in turn the Japanese government put tariffs on German automobiles, Japan's major rationale for imposing these tariffs would be to _______. a. protect national security b. protect domestic jobs c. retaliate for Germany's tariffs d. lower prices for consumers e. protect an infant industry

c. retaliate for Germany's tariffs

73. The United States' trading relationships with Canada and Western European nations are likely to continue to thrive due to _______. a. their efficiency and integration b. their common language and currency c. their stability, comparable per capita incomes, and expanding economies d. their stability, integration, and stagnating economies e. their membership in the European Union

c. their stability, comparable per capita incomes, and expanding economies

66. If the Kingdom of Zamunda exports $100 million worth of gold to Buranda and imports $80 million worth of coffee beans, it has a(n) _______. a. unfavorable balance of trade b. trade deficit c. trade surplus d. negative cash flow e. export slide

c. trade surplus

45. Which of the following scenarios would not be considered international business? a. A Chinese manufacturer sells toys to a large toy retailer in the United States. b. AMD sells its processors to a computer manufacturer in Korea. c. A large jewelry store in England purchases diamonds from DeBeers in South Africa. d. A bearing manufacturer in South Carolina sells its parts to a Hyundai plant in Alabama. e. French companies purchase crude oil from Saudi Arabia.

d. A bearing manufacturer in South Carolina sells its parts to a Hyundai plant in Alabama.

182. Garnet operates a very successful cold storage business in the United States and would like to establish a similar business in a foreign country so he is able to offer shipping between the United States and the other country with storage for the goods once shipped. He has studied several countries and has a few possibilities in mind, but would like to work in one that will most likely result in the success of his business there. Which country has the most efficient, integrated, and dynamic economic relationship with the United States? a. Vietnam b. China c. Mexico d. Canada e. United Kingdom

d. Canada

104. Sayid believes that there should be no trade restrictions for any reason. What effect would Sayid say that trade restrictions have on prices? a. He would argue that by encouraging competition with trade restrictions, prices are likely to decrease. b. He would argue that restrictions would cause greater competition and therefore lead to higher prices. c. He would say that trade restrictions have no impact on prices, but they do restrict consumers' choices. d. He would say that restrictions reduce competition and therefore cause an increase in prices. e. He would argue that trade restrictions increase prices because they break up domestic monopolies.

d. He would say that restrictions reduce competition and therefore cause an increase in prices.

117. What types of products did GATT focus on during the Kennedy Round? a. Business services and textiles b. Agricultural products and textiles c. Industrial products and business services d. Industrial and agricultural products e. Textiles and intellectual property rights

d. Industrial and agricultural products

54. If Japan continually runs a trade surplus, what is likely to be going on? a. It discourages exports. b. It encourages imports. c. It limits exports with trade restrictions. d. It limits imports with trade restrictions. e. It is experiencing a depression.

d. It limits imports with trade restrictions

126. Which of the following is not one of the updates to NAFTA found in the USMCA? a. It strengthens labor laws and provides for greater enforcement of them. b. It has significant dispute resolution systems. c. It includes provisions related to digital technology and intellectual property. d. It requires all three nations to re-ratify the agreement every ten years. e. It includes funds to address environmental issues.

d. It requires all three nations to re-ratify the agreement every ten years.

170. Which of the following is false concerning the International Monetary Fund? a. It has more than 150-member nations. b. It makes short-term loans to developing countries. c. Its loans are primarily to fund international trade. d. Its loans to developing countries are interest free. e. It is an international bank.

d. Its loans to developing countries are interest free.

157. Which of the following is most similar to strategic alliances? a. Trading companies b. Franchising agreements c. Licensing agreements d. Joint ventures e. Outsourcing

d. Joint ventures

61. If the Kingdom of Arendelle had total exports of $150 billion and total imports of $234 billion, it had a _______. a. comparative advantage b. absolute advantage c. balance of payments d. trade surplus e. trade deficit

e. trade deficit

134. Suppose that Schick is seeking a manufacturer in Ethiopia that will produce and market Schick razors in that country under the Schick brand name. Schick expects a royalty from its partner in Ethiopia. Which arrangement will be the best choice for Schick? a. Trading company b. Export/import agent agreement c. Joint venture d. Licensing e. Contract manufacturing

d. Licensing

141. Which of the following best compares licensing and exporting as tools for entering foreign markets? a. Licensing and exporting are both low-risk methods, but licensing is not as simple as exporting. b. Licensing is riskier and more complicated than exporting. c. Exporting is much riskier and more complicated than licensing. d. Licensing and exporting are both low-risk, but exporting is more complicated. e. Licensing and exporting are both complicated and expensive methods.

d. Licensing and exporting are both low-risk, but exporting is more complicated.

35. Refer to Garden Living. What type of tax has the Italian government imposed on the company? a. Export duty b. Embargo c. Revenue tariff d. Protective tariff e. Nontariff barrier

d. Protective tariff

110. Which of the following statements is correct? a. Because of the trade restrictions, international business is shrinking. b. In the United States, international trade now accounts for over three-fourths of gross domestic product. c. As trade barriers increase, new competitors enter the global marketplace, creating more choices for consumers. d. Restrictions or not, international business is growing. e. Because of increased global competition, the U.S. businesses don't have great opportunities in the global marketplace.

d. Restrictions or not, international business is growing.

48. If South Korea were regarded as the best electronics manufacturer in the world, which of the following would most likely be true? a. South Korea would have a comparative advantage in electronics manufacturing. b. South Korea would have a positive balance of trade. c. The United States would have a comparative advantage in electronics. d. South Korea would have an absolute advantage in electronics production. e. South Korea would have a trade deficit with the United States.

d. South Korea would have an absolute advantage in electronics production.

41. Refer to Ashley Sonoma, Inc. What agency could Ashley Sonoma managers turn to for assistance in export marketing and trade finance? a. GATT b. European Union c. World Trade Organization d. U.S. Export Assistance Centers e. U.S. International Trade Administration

d. U.S. Export Assistance Centers

119. If the United States and China can't settle a trade dispute on their own, they probably should settle them through the _______. a. Association of Southeast Asian Nations b. United States-Mexico-Canada Agreement c. General Agreement on Tariffs and Trade d. World Trade Organization e. United Nations

d. World Trade Organization

84. The government of Brunei does not allow the consumption of alcoholic beverages within its country and prohibits imports of alcoholic beverages. Brunei is imposing a(n) _______. a. import quota b. currency devaluation c. prohibition d. embargo e. dumping restriction

d. embargo

143. A(n) _______ will, for a commission or fee, arrange the sale of a company's products to foreign intermediaries, whereas a(n) _______ assumes all the risks of product ownership, distribution, and sale. a. export-import merchant; export-import agent b. export-import merchant; international bank c. export-import agent; joint venture d. export-import agent; export-import merchant e. export-import agent; trading company

d. export-import agent; export-import merchant

37. Refer to Garden Living. Garden Living does mostly _______. a. dumping b. domestic sales c. importing d. exporting e. countertrade

d. exporting

55. Zimbabwe sells gold, metal alloys, cotton, and sugar to many nations around the world. In this case, Zimbabwe is engaging in _______. a. dumping b. franchising c. importing d. exporting e. contract manufacturing

d. exporting

152. The best method of learning from experience in international business is to _______. a. enter into a licensing agreement b. start exporting through an export-import merchant c. start exporting through a trading company d. invest directly in a foreign country e. enter into a contract manufacturing arrangement

d. invest directly in a foreign country

161. Companies such as Mondelez International and Royal Dutch Shell operate on a worldwide scale without ties to any single country. These are examples of _______. a. members of the Dow Jones Industrial Average b. franchises c. strategic alliances d. multinational corporations e. contract manufacturers

d. multinational corporations

60. If Germany exports $100,000 of sauerkraut to Jamaica and purchases $100,000 of coffee beans from Jamaica, Germany has _______. a. an overall favorable balance of trade b. an overall unfavorable balance of trade c. a favorable balance of trade with Jamaica d. neither a favorable nor an unfavorable balance of trade with Jamaica e. an unfavorable balance of trade with Jamaica

d. neither a favorable nor an unfavorable balance of trade with Jamaica

172. One way that the World Bank differs from the International Monetary Fund is that the World Bank _______. a. makes short-term loans to developing countries experiencing balance-of-payment deficits b. is an independent agency of the U.S. government c. guarantees credit to overseas buyers of American goods and services d. offers interest-free credits and grants to developing countries e. provides loans primarily to fund international trade

d. offers interest-free credits and grants to developing countries

75. When the United States levies a tax on textiles from Cambodia, this tax is a type of _______. a. export duty b. licensing fee c. import d. tariff e. countertrade

d. tariff

81. When the United States levies a tax on washing machines from South Korea, this type of tax is a(n) _______. a. export duty b. exchange control c. embargo d. tariff e. import quota

d. tariff

169. Greece is experiencing balance-of-payments deficits and is seeking financial support. Greece probably should seek assistance from _______. a. the Export-Import Bank of the United States b. a multilateral development bank c. the Export-Import Bank of the United States d. the IMF e. the World Bank

d. the IMF

167. The nations of _______ are attractive to exporters and multinational corporations due to their vast natural resources and growing per capita incomes. a. Sub-Saharan Africa b. Asia c. the former republics of the Soviet Union d. the Middle East and North Africa e. Oceania

d. the Middle East and North Africa

67. When a country brings in more goods and services than it sells abroad, it has a(n) _______. a. trade surplus b. favorable balance of trade c. favorable exchange role d. unfavorable balance of trade e. favorable balance of payments

d. unfavorable balance of trade

106. When countries alter their trade policies to include more tariffs, what may be the result? a. The importation of more products b. Fewer trade restrictions globally c. Lower prices d. Greater consumer choice e. A trade war

e. A trade war

69. Which of the following is not included in the balance of payments calculation? a. Imports b. Exports c. Money spent by foreign tourists d. Payments from foreign governments e. Aid to state governments

e. Aid to state governments

109. Which of the following is the largest emerging Asian market? a. Japan b. Indonesia c. Korea d. Malaysia e. China

e. China

133. Eleven nations of the former Union of Soviet Socialist Republics (USSR) are participants in the _______. a. Former Baltic Republics Trade Agreement b. Organization of Petroleum Exporting Countries c. Association of Southeast Asian Nations d. European Union e. Commonwealth of Independent States

e. Commonwealth of Independent States

136. Which of the following requires the greatest level of involvement, investment, and risk? a. Contract manufacturing b. Licensing c. Outsourcing d. Joint venture e. Direct investment

e. Direct investment

135. Which of the following requires the least level of involvement, investment, and risk? a. Joint venture b. Direct investment c. Licensing d. Contract manufacturing e. Exporting

e. Exporting

91. Which of the following would be an effect of restricting the amount of a particular foreign currency that can be purchased or sold in a country? a. Increasing consumer choice b. Reducing funds for infrastructure c. Devaluing its currency d. Increasing the amount of goods importers can purchase with that currency e. Limiting the amount of goods importers can purchase with that currency

e. Limiting the amount of goods importers can purchase with that currency

111. Suppose the country of Eritrea wanted to join the World Trade Organization (WTO) and thus be guaranteed the same treatment as all other WTO members. What WTO principle is Eritrea interested in receiving? a. Free trade globally b. Most beneficial-currency status c. Participation in the euro d. Foreign-exchange control e. Most-favored-nation status

e. Most-favored-nation status

151. Which of the following can result in significant cost savings that can be passed on to consumers in the form of lower prices? a. Indirect investment b. Direct investment c. Contract manufacturing d. Licensing e. Outsourcing

e. Outsourcing

140. Kendrick decides his company will start exporting and he wants to start doing so at the most basic level. What action should Kendrick take to meet his objectives? a. License the company's brand name and products to a foreign firm. b. Outsource the production of the firm's products to a foreign firm. c. Open new facilities around the world. d. Form a joint venture with a complementary company in a foreign country. e. Sell the company's products to an export-import merchant.

e. Sell the company's products to an export-import merchant.

184. Carolina, Enzo, and Marco have formed a limited liability company to make educational supply packets for Spanish-speaking elementary school students. They have discussed the lack of educational supplies in many of the schools in El Salvador and would like to export these supply packets to El Salvador and other Latin American nations. They have been operating in the United States for eight years but will need a $1 million short-term loan to produce goods for the El Salvador and Latin American markets. Which of the following agencies would be a viable loan source? a. International Monetary Fund b. Ex-Im Bank c. World Bank d. The Inter-American Development Bank e. Small Business Administration

e. Small Business Administration

86. Which of the following is an economic challenge related to international business? a. Laws b. Language c. Religious institutions d. Bribes e. Standard of living

e. Standard of living

154. Which of the following are becoming the dominant means of competing in the automobile and computer industries? a. Licensing b. Outsourcing c. Trading companies d. Joint ventures e. Strategic alliances

e. Strategic alliances

116. Which of the following is the third largest market in Latin America for U.S. exports? a. Comprehensive and Progressive Agreement for Trans-Pacific Partnership b. Uruguay c. Peru d. The Association of Southeast Asian Nations e. The Dominican Republic-Central America Free Trade Agreement

e. The Dominican Republic-Central America Free Trade Agreement

168. Who are the two largest contributors to the Asian Development Bank? a. China and Japan b. Japan and India c. China and Indonesia d. Russia and China e. The United States and Japan

e. The United States and Japan

107. What has been one of the most important results of the dramatic increase in international trade volume over the past 60 years? a. The decline in the importance of exports to the U.S. economy b. The elimination of absolute advantages c. The improvement in climate change d. The decline of living standards around the world e. The rise of living standards around the world

e. The rise of living standards around the world

34. Refer to Garden Living. Because the company is known for its ability to produce lawn furniture more efficiently than any other company in the world, the company must have a(n) _______ advantage. a. total b. relative c. comparative d. proportional e. absolute

e. absolute

97. A newly formed country in Central America has no high tariffs, yet other countries find it difficult to trade with the new country because of its requirements for product labeling, testing, and certifications. The country's requirements would be classified as _______. a. embargos b. currency devaluations c. import quotas d. economic restrictions e. bureaucratic red tape

e. bureaucratic red tape

49. Although trade deficits may have some benefits to a country, in the long run, they tend to _______. a. result in more job creation at home b. reduce consumer choice c. increase consumer prices d. increase inflation e. cause more jobs to move overseas to lower-cost countries

e. cause more jobs to move overseas to lower-cost countries

80. China is selling face masks in the United States for very low prices, even lower than the prevailing prices in China, and thus making it extremely difficult for American manufacturers to compete. This is an example of _______. a. exporting b. importing c. an embargo d. dropping e. dumping

e. dumping

88. When the U.S. government bars the importation of beef from Argentina into the United States, it is imposing a(n) _______. a. import quota b. currency devaluation c. import tariff d. exchange control e. embargo

e. embargo

120. Although NAFTA was renegotiated and replaced because of criticism, it did succeed at its core goals of _______. a. improving labor standards in the United States, Canada, and Mexico b. helping the environment c. fostering technological changes in North America d. increasing non-tariff barriers e. expanding trade and investment between the United States, Canada, and Mexico

e. expanding trade and investment between the United States, Canada, and Mexico

70. Chinese tourists come to experience the magic of Universal Studios and other attractions around Los Angeles, CA. These tourists are _______. a. contributing to the United States' deficit balance of payments b. helping increase the balance of payments for China c. exporting products back to China d. further decreasing the United States' balance of payments e. helping the United States' balance of payments

e. helping the United States' balance of payments

87. If it wants to reduce the dollars flowing out of the country, the United States can limit the number of South Korean cars being imported for one year by imposing a(n) _______. a. embargo b. import tariff c. exchange control d. currency devaluation e. import quota

e. import quota

146. A _______ is a partnership formed to achieve a specific goal or to operate for a specific period of time. a. trading company b. strategic alliance c. licensing company d. countertrade agreement e. joint venture

e. joint venture

149. Forming a joint venture with an existing foreign company offers all of the following advantages except _______. a. joining an established firm b. maintaining control over product attributes c. gaining immediate marketing knowledge d. reducing risk e. requiring less commitment from all parties involved in the joint venture

e. requiring less commitment from all parties involved in the joint venture

103. All of the following are reasons against having trade restrictions except _______. a. the loss of jobs b. the misallocation of international resources c. the restriction of consumers' choices d. higher prices for consumers e. the protection of the health of citizens

e. the protection of the health of citizens