Global Business Chapter 2 Exam

The sale and purchase of goods and services across national borders is known as _____. a. entrepreneurship b. importing c. trade d. exporting e. angel investing

trade

Factor price equalization theory, states that when factors are allowed to move freely among trading nations, efficiency increases, which leads to superior allocation of production of goods and services among countries. a. True b. False

True

Mercantilists believed that for a nation to become wealthy, that nation must export as much as possible and, in turn, import as little as possible. a. True b. False

True

Singapore, a regional center for global companies, continues to attract sizable amounts of foreign investment given its strategic location, world-class infrastructure, and productive workforce. a. True b. False

True

The growth trends in China and India today illustrate the impact that international business has on blue-collar and white-collar workers in wealthy countries as relatively low-skill factory jobs as well as high-skill service profession jobs migrate overseas. a. True b. False

True

The infant industry argument is part of the socio-economic category of managed trade. a. True b. False

True

During the Soviet days, the government of India imported Soviet fighter jets and other defense hardware in exchange for Indian-made consumer goods such as soaps, detergents, and copy machines. This is an example of _____. a. countertrade b. illegal trade c. an export cartel d. an embargo e. managed trade

a. countertrade

When Poland entered the European Union -where there is free movement of labor across member countries -some of the abundant Polish plumbers migrated to the United Kingdom to fill the shortage there. The net result was that wages for plumbers in the U.K. stabilized or softened and wage rates for plumbers in Poland increased. As the U.K. consumer of plumbing services benefited from this development, one could argue that the real income of the British consumer was, therefore, enhanced. This is an example of the _____. a. factor-price equalization theory b. diamond theory c. trade policy theory d. managed trade theory e. trade deficit theory

a. factor-price equalization theory

How does Porter's model of national competitive advantage differ from the Heckscher-Ohlin theory? a. It looks more closely at the quality of factor endowments. b. It does not encourage trade. c. It does not explain why there are "winners" and "losers" in international trade. d. It examines only a country's exports. e. It examines only a country's imports.

a. It looks more closely at the quality of factor endowments.

Developed countries often resort to managed trade for reasons of unethical labor practices and violation of basic human rights. a. True b. False

a. True

Foreign direct investment (FDI) in a country brings funds and business culture from abroad, creates new well-paying jobs, introduces innovative technologies, and enhances the skills of domestic workers. a. True b. False

a. True

Porter stresses the importance of domestic demand for goods and services when determining a nation's competitive advantage. When domestic demand remains high, the number of suppliers will also be high. a. True b. False

a. True

The decoupling of world economic order and the move to a multipolar world helps explain why China is now the world's largest recipient of FDI. a. True b. False

a. True

Under a preferential duties system, goods imported from a country outside the preferred group are subject to a higher tariff. a. True b. False

a. True

The ability of one country that has an absolute advantage in the production of two or more goods (or services) to produce one of them relatively more efficiently than the other is called a(n) _____. a. comparative advantage b. opportunity cost c. factor price d. advantage of specialization e. factor endowment

a. comparative advantage

In the 3,000 B.C., Sumerian farmers realized that the grain surplus they produced could be used as barter for things they did not have. Therefore, the Sumerians obtained copper from Sinai Desert traders who were located several hundred miles to the west in order to make weapons and repel nomadic raiders. The Sumerians engaged in _____ a. international business b. in-border business c. environmental business d. domestic business e. national business

a. international business

The corporate practice of acquiring or producing quality goods or services at a lower cost abroad thereby eliminating domestic production is called _____. a. outsourcing b. importing c. foreign investment d. exporting e. trading

a. outsourcing

Until January 1, 2012, the price for ethanol consumers in the United States was higher than world free-market price by $0.54 per gallon because of the $0.54 per gallon tariff imposed by the U.S. government on ethanol imports. This is an example of a(n) _____ tariff. a. specific b. preferential c. ad valorem d. custom e. generalized

a. specific

As of 2013, was the world's largest economy, followed by _____ and _____. a. the United States; China and India b. India; the United States and China c. the United States; Mexico and Canada d. Japan; China and Mexico e. India; Japan and Canada

a. the United States; China and India

An agreement where a large number of developed counties permit duty-free imports of a selected list of products that originate from specific countries is known as _____. a. the generalized system of preferences b. an import agreement c. a custom duty d. an export agreement e. an ad valorem agreement

a. the generalized system of preferences

12. When was mercantilism practiced? a. 1300-1400 b. 1500-1750 c. 1820-1875 d. 1900-1975 e. 1990-2010

b. 1500-1750

Of the following, which is NOT in the geo-political category of managed trade? a. National security b. Ethics and safety c. Strategic industries d. Embargoes e. Protection of critical industries

b. Ethics and safety

A specific tariff describes a tax on imports levied as a constant percentage of the monetary value of one unit of the imported good. a. True b. False

b. False

Competitive industrial structures are unlikely to create innovative or dynamic firms willing to compete abroad. However, a monopolistic industry will foster innovative, cost efficient, aggressive firms that can adjust to changing economic conditions at home and will be well prepared to compete abroad. a. True b. False

b. False

One way international trade benefits consumers is by providing lower living standards. a. True b. False

b. False

_____ refers to agreements, sometimes temporary, between countries (or a group of countries) that aim at achieving certain trade outcomes. a. Qualitative agreements b. Managed trade agreements c. Quantitative agreements d. Voluntary export agreements e. Domestic content provision agreements

b. Managed trade agreements

Assume that because of soil and climatic conditions, Brazil is more efficient in the production of coffee than the United States. At the same time, the United States is more efficient in the production of apples than Brazil. Each of these countries can be said to have a(n) _____. a. comparative advantage b. absolute advantage c. bartering disadvantage d. mercantile disadvantage e. factor endowment destruction in land

b. absolute advantage

Both the theory of comparative advantage in production and the H-O theory provide ______ as a basis for international trade. a. trade surplus theory b. factor endowments c. managed trade theory d. trade deficit theory e. foreign direct investment

b. factor endowments

The _____ states that when factors are allowed to move freely among trading nations, efficiency increases, which leads to price of factors becoming equal among countries. a. managed trade theory b. factor-price equalization theory c. trade policy theory d. trade deficit theory e. diamond theory

b. factor-price equalization theory

Someone who believes in the infant industry argument would be MOST likely to support ______ for a new industry. a. an embargo b. high tariffs c. an export cartel d. illegal trade e. domestic content provisions

b. high tariffs

Who authored The Competitive Advantage of Nations? a. Bertil Ohlin b. Eli Heckscher c. Michael Porter d. Henry Ford e. John Locke

c. Michael Porter

A group of countries that could effectively control export volume to keep their export prices, revenues, and economic growth stable or high is known as a(n) _____. a. alliance b. joint venture c. export cartel d. embargo e. managed trade agreement

c. export cartel

An agreement among WTO countries in which any tariff concession granted by one member to any other country will automatically be extended to all other countries of WTO is called the _____ principle. a. absolute advantage b. comparative advantage c. most favored nation d. voluntary export e. shared wealth

c. most favored nation

During the mid-18th century, British economist ________, who came to be known as the father of free market and open trade systems, recognized the absurdity of Mercantilism. a. Eli Heckscher b. John Locke c. Adam Smith d. Bertil Ohlin e. Henry Ford

c. Adam Smith

The world's two largest economies in terms of national income in the early-19th century were _____. a. the United States and Canada b. India and Japan c. China and India d. Japan and China e. the United States and Mexico

c. China and India

Of the following statements about foreign direct investment, which is NOT true? a. FDI in a country brings funds and business culture from abroad. b. Foreign investment flows are generally based on long-term global or country outlook. c. Foreign investors have little faith in high-income economies such as Canada. d. FDI creates new well-paying jobs. e. Governments all over the world try to create a business-friendly environment to attract such investments.

c. Foreign investors have little faith in high-income economies such as Canada.

Suppose the United States exports automobiles to Saudi Arabia and agrees to import a corresponding value of oil from Saudi Arabia. This is an example of a. the infant industry argument. b. a domestic content provision. c. countertrade. d. an export cartel. e. a trade deficit.

c. countertrade.

The key assumptions for the H-O theory to work are: (1) perfect immobility of factors of production among countries; and (2) _____. a. very small labor force b. the acceleration of a trade deficit c. perfect competition in the workplace d. superior allocation of production of goods and services e. the existence of a trade surplus

c. perfect competition in the workplace

Which of the following would NOT be considered a factor of production? a. capital b. land c. trade d. technology e. labor

c. trade

7. Which of the following was NOT one of the top exporting nations in 2010? a. The United States b. South Korea c. Italy d. Australia e. Belgium

d. Australia

The _____ theory attributes the comparative advantage of a nation to its factor endowments. a. absolute advantage b. comparative advantage c. factor price d. Heckscher-Ohlin e. mercantilism

d. Heckscher-Ohlin

Of the following, which is NOT in the socio-economic category of managed trade? a. Ethics and safety b. The infant industry argument c. Countertrade d. National security e. Export cartels

d. National security

Endowments used to produce goods and services are called _____. a. factor equalizations b. imports c. outputs d. factors of production e. mercantilism

d. factors of production

Historically, the main instrument of trade policy has been _____. a. export subsidy b. export taxes c. corporate duties d. import tariff e. special tariff

d. import tariff

According to Porter's "diamond" model, the success or competitive advantage of a nation at the global stage depends upon the interaction of all of the following EXCEPT a. demand conditions. b. related and supporting industries. c. firm strategy, structure, and rivalry. d. a conservative political structure. e. factor conditions.

d. a conservative political structure.

Which would a mercantilist value the MOST? a. factor endowments b. labor c. absolute advantage d. a trade surplus e. a trade deficit

d. a trade surplus

Taxes on imports that are collected by a designated government agency responsible for regulating imports are called _____. a. generalized tariffs b. preferential tariffs c. ad valorem tariffs d. custom duties e. specific tariffs

d. custom duties

he oldest form of trade theory is called _____. a. Machiavellianism b. factor equalization c. comparative advantage d. mercantilism e. absolute advantage

d. mercantilism

The United States has maintained a trade embargo for almost 50 years with _____ in an attempt to put pressure on the country to move toward democracy. a. the Ukraine b. the Netherlands c. Turkey d. Italy e. Cuba

e. Cuba

It is estimated that for every billion dollars worth of exports from the United States _____ domestic jobs are created. a. 5,000 b. 100,000 c. 500,000 d. 1,000,000 e. 20,000

e. 20,000

Of the following statements about mercantilism, which is NOT true? a. Mercantilists encouraged their people to produce large families. b. It was practiced as Europe emerged from the feudal systems of the Middle Ages and moved toward nationalism c. Mercantilists did not want, or care, to see the big picture. d. Mercantilists believed that for a nation to become wealthy, that nation must export as much as possible and, in turn, import as little as possible. e. During the time it was practiced, wealth was largely determined by the amount of land one had access to.

e. During the time it was practiced, wealth was largely determined by the amount of land one had access to.

The United States, the European Union, and Australia imposed various trade sanctions on _____ because of that country's annexation of Crimea and military actin in east Ukraine. a. Turkey b. Bulgaria c. Uzbekistan d. Poland e. Russia

e. Russia

Of the following statements about trade, which is NOT true? a. Open trade and investment does create winners and losers. b. The gains from open trade are always greater than the losses. c. Trade is the two-way flow of exports and imports of goods and services. d. Trade generates jobs in both export and import sectors of an economy. e. Trade does not influence culture.

e. Trade does not influence culture.

The U.S. government may require that apparel imported into the United States should use U.S. cotton, or use a certain amount of American labor. This is an example of a(n) _____. a. domestic content import b. qualitative restrictions c. voluntary export restriction d. quantitative restrictions e. domestic content provision

e. domestic content provision

Which of the following was NOT one of the top exporting nations in 2012? a. Japan b. Hong Kong c. China d. Germany e. the United Kingdom

e. the United Kingdom

It is estimated that for every billion dollars worth of exports from the United States, 100,000 domestic jobs are created. a. True b. False

false

Porter exemplifies China as a powerhouse for consumer electronics because of the quality and quantity of its engineers, and the ability and willingness of Chinese consumers to try out new electronic products that are perfected and later exported. a. True b. False

false