International Business Exam 1

China: Xi Jinping, the new party chief, has said officials need to guard against corruption as its spread would doom the party and the state. a. Social Democracy b. Theocratic Totalitarianism c. Communist Totalitarianism d. Right-Wing Totalitarianism e. Representative Democracy f. Tribal Totalitarianism

c. Communist Totalitarianism

Simone lives in a country in which the government does not impose quotas on what can be imported or on what businesses can produce and sell to another country. What type of situation does this describe? a. a positive-sum game b. dumping c. free trade d. protectionism e. a zero-sum game

c. free trade

Which is not a factor contributing to economic growth in China since the 1970s? a. nationalization of most vital industrial sectors b. increase in international trade c. privatization of many smaller state-owned enterprises d. removal of price controls e. development of stock markets

a. nationalization of most vital industrial sectors

Foreign producers agree to __________ imposed by an exporting country because they fear more damaging punitive tariffs or import quotas might follow if they do not. a. voluntary export restraints b. tariff rate quotas c. quota rents d. export bans e. dumping

a. voluntary export restraints

Saudi Arabia: Ruled by an Islamic absolute monarchy. a. Social Democracy b. Theocratic Totalitarianism c. Communist Totalitarianism d. Right-Wing Totalitarianism e. Representative Democracy f. Tribal Totalitarianism

b. Theocratic Totalitarianism

United States: Two major political parties field candidates for federal, state, and local elections. a. Social Democracy b. Theocratic Totalitarianism c. Communist Totalitarianism d. Right-Wing Totalitarianism e. Representative Democracy f. Tribal Totalitarianism

e. Representative Democracy

Zimbabwe: Defeated in 2008 parliamentary elections, President Mugabe remains in power today. a. Social Democracy b. Theocratic Totalitarianism c. Communist Totalitarianism d. Right-Wing Totalitarianism e. Representative Democracy f. Tribal Totalitarianism

f. Tribal Totalitarianism

Judges under a civil law system have less flexibility than those under a common law system. True or False

True

When the government provides a low-interest loan to a failing industry to bolster business, it is an example of a subsidy. True or False

True

France: State-owned enterprises allow for the "public good rather than the private profit." a. Social Democracy b. Theocratic Totalitarianism c. Communist Totalitarianism d. Right-Wing Totalitarianism e. Representative Democracy f. Tribal Totalitarianism

a. Social Democracy

What is one of the three measures used to determine the Human Development Index (HDI) of a country? a. life expectancy at birth b. gender ratio c. carbon footprint of the country d. wholesale price index e. factors of production

a. life expectancy at birth

A South American nation has a direct restriction on the amount of vegetables that may be imported into the country. Which instrument of trade policy does this reflect? a. voluntary import restraint b. tariff rate quota c. export ban d. import quota e. quota rent

d. import quota

China's economic growth from the late 1970s to the present can largely be attributed to: a. its focus on enlarging government-run sectors like agriculture. b. the nationalization of major industries. c. its lack of privatization reform. d. its shift toward more private enterprises. e. the growth of its state-owned companies.

d. its shift toward more private enterprises.

If China provides cash assistance to its companies in the steel industry, China is using which type of trade instrument? a. specific tariff b. import quota c. ad valorem tariff d. subsidy e. voluntary export restraint

d. subsidy

Consumer Agriculture Inc. is planning an international expansion. In terms of the costs involved in conducting business in a country, it will be most economical for the company if it chooses a country: a. with a closed totalitarian political system. b. where the company will have to provide its own infrastructure and supporting business. c. where laws regarding product safety, safety in the workplace, and environmental pollution are extremely stringent. d. where politicians are held accountable by the electorate. e. with no local laws to protect intellectual property.

d. where politicians are held accountable by the electorate.

A situation in which an economic gain by one country results in an economic loss by another is called a: a. positive-sum game. b. diminishing return. c. first-mover advantage. d. zero-sum game. e. dynamic effect.

d. zero-sum game.

New Trade Theory would suggest that Boeing has stayed out of head-to-head competition with Airbus in the super large capacity aircraft sector because: a. Airbus has better designers. b. most buyers for the aircraft are located in markets closer to Airbus. c. the Boeing 747 is more fuel efficient. d. Boeing already produces the 747. e. Airbus was first to market with the Airbus 380 aircraft.

e. Airbus was first to market with the Airbus 380 aircraft.

Brazil used tariffs to protect its auto industry in the 1950s. Tariffs a. are levied by an industry to protect firms from competition. b. produce revenue for the firm. c. typically lower the price of products for consumers. d. are paid for by foreign governments. e. are taxes levied on imports or exports.

e. are taxes levied on imports or exports.

A __________ economy follows the principles of collectivism as resources are allocated based on "the common good." a. mixed b. private c. supply d. market e. command

e. command

As democracy has spread since the 1980s, so has the development of more __________ economies. a. centrally-planned b. mixed c. totalitarian d. command e. market-based

e. market based

A textbook author would apply for a trademark to obtain the exclusive legal rights associated with their written piece. True or False

False

Italy in the 1930s: Benito Mussolini's dictatorship. a. Social Democracy b. Theocratic Totalitarianism c. Communist Totalitarianism d. Right-Wing Totalitarianism e. Representative Democracy f. Tribal Totalitarianism

d. Right-Wing Totalitarianism

How can Venezuela's economic system best be described during Hugo Chavez's years as president? a. market b. command c. totalitarian d. mixed e. socialist

d. mixed

According to the product life-cycle theory, the ultimate result is that production of goods becomes concentrated in the country where a product originated—typically, a developed nation. True or False

False

Contracts in a common law system tend to be shorter and less detailed than those created in a civil law system. True or False

False

Governments sometimes rely on trade policy to try to improve the human rights policies of trading partners. True or False

True

Raymond Vernon's product life-cycle theory was based on the observation that for most of the twentieth century a very large proportion of the world's new products were developed by firms situated in the United States and sold first in the U.S. market. True or False

True

In 2008, the Trump Administration imposed 25 percent tariffs on imports of foreign steel into the United States. Which statement is true? a. The policy is attempting to influence what U.S. citizens and companies buy from foreign countries. b. The policy is designed to allow the invisible hand rather than government policy to determine trade flows. c. The Trump Administration is following Adam Smith's philosophy of the invisible hand. d. The Trump Administration is adopting a laissez-faire approach to trade. e. The Trump Administration is pursuing a policy of free trade.

a. The policy is attempting to influence what U.S. citizens and companies buy from foreign countries.

Which theory stresses that in some cases, countries specialize in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms? a. new trade theory b. Heckscher-Ohlin theory c. mercantilism d. theory of comparative advantage e. theory of absolute advantage

a. new trade theory

Using the information on political economy in your text and the case above, how would you characterize Venezuela's political economy under President Nicolas Maduro? a. Dictatorship b. Pseudo-democracy c. Pure command economy d. Pure market economy e. Totalitarian state

b. Pseudo-democracy

A tax of 14 cents is levied for each ceramic plate imported into a nation. This is an example of a(n) a. quota rent b. specific tariff c. ad valorem tariff d. import quota e. local content requirement

b. specific tariff

For decades, there have been just two producers of large commercial aircraft, Boeing and Airbus. Which statement best explains how New Trade Theory views this situation from a manufacturing perspective? a. The lack of trade barriers within the European Union makes it easy for individual airlines to purchase tariff-free aircraft. b. Location advantages favor Airbus for sales, but Boeing for design. c. The economies of scale required to be a profitable manufacturer effectively limit the size of the global market. d. Because Airbus is based in the European Union there is no incentive for individual European countries to establish their own aircraft production. e. The size of the investment needed to support the production of large commercial aircraft is only available in large developed countries.

c. The economies of scale required to be a profitable manufacturer effectively limit the size of the global market.

Which of these individuals can be considered an entrepreneur? a. Jocelyn, an employee at a home goods store, is solely responsible for all the purchases and sales at the store. b. Samantha recycles old household articles to build artwork for her personal use. c. Zander makes his living by investing in small companies that have the potential to grow. d. Kellen started a company that processes cable wire into fabric used in blankets. e. Manuel invented a fingernail strengthening formula and sold it to a company that sells several other nail products.

d. Kellen started a company that processes cable wire into fabric used in blankets.

China's state-owned enterprises: a. are an indication of its thriving market economy. b. are primarily limited to the information technology sector. c. reflect the commitment of China to democratic ideals. d. are less productive than its private sector businesses. e. have largely been replaced across all sectors with privately held companies.

d. are less productive than its private sector businesses.

Under a tariff rate quota, a higher tariff rate is applied to imports within the quota than those over the quota. True or False

False

When considering the violation of property rights, blackmail is a form of public action. True or False

False

Alexander Hamilton promoted the idea that government should support a new industry with government intervention tactics until the industry is strong enough to face international competition. True or False

True

During the past three decades, South Korea adopted a more democratic government. This illustrates that democracy can be a consequence of economic progress. True or False

True

Economists who argue that innovation and entrepreneurial activity are the engines of long-run economic growth, define innovation broadly to include not just new products but also new processes, new organizations, new management practices, and new strategies. True or False

True

Factor endowments refer to the availability of land and labor which affect the ability of a country to produce goods. True or False

True

Using your knowledge of New Trade Theory, which statement best explains the advantage Airbus has in the production and export of super large capacity aircraft? a. Airbus has been able to capture scale economies that make it difficult for later entrants to match. b. Airbus's alliance with major airlines effectively shut other manufacturers out of the market. c. Boeing's cost basis is lower, but it lacks the sales force of Airbus. d. Airbus is able to benefit from substantial government subsidies. e. Competitors are able to match Airbus on price but not cost.

a. Airbus has been able to capture scale economies that make it difficult for later entrants to match.

Which best characterizes the political system in China? a. China is a one-party state. b. China has a representative democracy. c. China has a multiparty state dominated by the Communist regime d. China has a multiparty state dominated by the Communist regime e. China has a pseudo-democracy.

a. China is a one-party state.

China has been accused of prohibiting U.S. companies that offer cloud computing from offering their services in China. Which argument best explains this? a. China wants to protect its firms from their more competitive U.S. rivals. b. China is hoping to limit the use of cloud computing in China. c. Chinese firms in cloud computing offer more services than American firms. d. China would like to develop a superior technology to cloud computing. e. Chinese firms in the cloud computing industry are more competitive than U.S. companies.

a. China wants to protect its firms from their more competitive U.S. rivals.

The 2018 tariffs on imported steel implemented by President Trump are the first such tariffs since those implemented in 2002 by President Bush. The 2002 tariffs slightly increased U.S. steel production, yet significantly raised the cost of steel in the United States. Which statement best describes the Trump Administration's philosophy regarding the benefits of trade? a. President Trump views trade as a zero-sum game. b. President Trump's policy is in line with Adam Smith's theory of absolute advantage. c. President Trump believes higher economic growth is associated with a more open economy. d. President Trump believes trade is superior to foreign investment. e. President Trump views trade as a positive sum game.

a. President Trump views trade as a zero-sum game.

A country that abolishes laws that regulate private enterprises and removes price controls is in the process of: a. deregulation. b. industrialization. c. divestiture. d. privatization. e. isolationism.

a. deregulation.

The main reason that gross national income figures can be misleading is because they: a. don't consider differences in the cost of living. b. are determined by individual governments instead of a national institution. c. are an adjustment of the purchasing power parity (PPP). d. measure the total dollar amount of imports coming into a nation. e. allow for a direct comparison of living standards in different countries.

a. don't consider differences in the cost of living.

The United States has accused China of a. exacerbating the global glut of steel by investing in additional production. b. contributing to the skyrocketing price of aluminum. c. encouraging cloud computing firms to export their services to China but not to invest. d. facilitating its own textile industry at the expense of the United States e. facilitating its own textile industry at the expense of the United States

a. exacerbating the global glut of steel by investing in additional production.

President Trump claims the 25 percent tariffs on imported steel are necessary to protect U.S. steel jobs. Which is a potential outcome of his policy? a. U.S. steel workers are more efficient as compared to foreign steel makers. b. U.S. consumers will pay higher prices for domestic steel than they would for imported steel. c. Foreign steel companies will see a rise in their exports to the United States. d. U.S. steel companies will quickly become more efficient as compared to their foreign competitors. e. Employment in the U.S. steel industry will rise sharply.

b. U.S. consumers will pay higher prices for domestic steel than they would for imported steel.

When considering the cost of doing business in another country, what would be considered the most attractive market or investment site? a. a country that has adopted a closed totalitarian state b. a country that has a well-developed body of business contract law c. a country with a command-based economic system d. a country with stringent product safety laws and huge liability insurance rates e. a country that does not provide any protection for property rights

b. a country that has a well-developed body of business contract law

A country that has lax intellectual property laws will find that: a. many companies in the country will focus on innovative products. b. firms will be reluctant to enter into such a country. c. imitating a patented product or process will become difficult. d. inventors and authors will have better opportunities to grow and to be rewarded. e. most of the companies in the country will commit themselves to extensive basic research.

b. firms will be reluctant to enter into such a country.

China, India, and Indonesia are expected to be among the world's seven largest economies by 2050. Economic development in a country can be measured using a. the current account. b. gross national income. c. the human development index. d. deregulation indices. e. Moore's Law.

b. gross national income.

U.S.-based Nelson Corporation is hesitant about entering into a licensing agreement with Lapson, Inc., a company from another nation, due to the likelihood that Lapson will break a contract or expropriate property rights. What specific type of risk is Nelson Corporation trying to avoid? a. ethical b. legal c. economic d. technological e. political

b. legal

By 2050, India will be one of the largest economies in the world. A disadvantage of using data such as GNI and PPP to understand the attractiveness of India as an export or investment market is that they: a. ignore growth rates in other parts of the world that could be superior. b. provide a static picture of development. c. capture black economy data at the expense of real economic data. d. ignore economic growth rates. e. focus only on fluid elements in the economy and ignore the fixed variables.

b. provide a static picture of development.

In his theory of absolute advantage, Adam Smith advocated that __________ should determine what a country imports and what it exports. a. government policy b. the market mechanism c. social mores d. political parties e. foreign entities

b. the market mechanism

The infant industry argument suggests that protecting infant industries from foreign competitors will allow them time to become large enough to enjoy economies of scale. Who typically wins and who loses from a government policy to protect infant industries? a. Domestic consumers and domestic producers gain, while foreign producers and the home government lose. b. Foreign producers, domestic producers, domestic consumers, and the home government all lose. c. Domestic consumers and foreign producers lose, while the home government and home producers gain. d. The home government gains, while domestic producers, foreign producers, and domestic consumers all lose. e. Domestic consumers lose, while domestic producers, foreign producers, and the home government all gain.

c. Domestic consumers and foreign producers lose, while the home government and home producers gain.

Based on the information provided in the video, which philosophy best describes Donald Trump's perspective on trade between nations? a. Trump agrees with David Ricardo's theory of comparative advantage. b. Trump supports Adam Smith's theory of absolute advantage. c. Trump has a mercantilist philosophy toward trade. d. U.S. trade policy under Trump is pro free trade. e. Under Trump, the United States is moving toward unrestricted free trade.

c. Trump has a mercantilist philosophy toward trade.

In a pure command economy, the prices at which goods and services are sold are planned by the: a. consumers. b. producers. c. government. d. private monopolists. e. World Trade Organization.

c. government.

The development of new products, processes, organizations, management practices, and strategies is called: a. deregulation. b. privatization. c. innovation. d. private action. e. protectionism.

c. innovation.

Hugo Chavez's move to nationalize troubled firms is consistent with a: a. capitalist society. b. pure democracy. c. mixed economy. d. market economy. e. common law system.

c. mixed economy.

Subsidies and quotas are examples of __________ barriers a county might impose. a. antidumping b. tariff c. nontariff d. content requirements e. export restraint

c. nontariff

One reason a government might intervene in foreign trade is to protect consumers from a potentially dangerous product that's being imported. This would be an example of a(n) _____ argument for government intervention. a. economic b. theological c. political d. infant industry e. human rights

c. political

In order to encourage the wine production industry, the Italian government provided low-interest loans for the purchase of equipment and plants. The government also gave cash grants and made tax reductions. Which instrument of trade policy is being used by the Italian government? a. tariffs b. voluntary export restraints c. subsidies d. local content requirements e. import quotas

c. subsidies

Which activity engaged in by Big Town Billiards best exemplifies innovation? a. Big Town Billiards cut the prices of its products by 10 percent. b. Big Town Billiards entered the Chinese market. c. Big Town Billiards offered a "me-to" product similar to that of a competitor. d. Big Town Billiards developed a new business model by selling directly to customers. e. Big Town Billiards cut its costs by 10 percent.

d. Big Town Billiards developed a new business model by selling directly to customers.

India, China, and Indonesia have all focused on improving their education systems and implementing market reforms. Which of the following is true about education and economic development? a. Amartya Sen would rank India, China, and Indonesia high on the political freedom index. b. India, China, and Indonesia have recognized that investment in education is more important than economic freedom. c. Innovation reforms to spur growth are not necessary in these countries given their commitment to education. d. India, China, and Indonesia should rank higher on the Human Development Index as compared to countries that have not invested in education. e. Investment in education will ultimately result in less global competition and an inward focus by these countries.

d. India, China, and Indonesia should rank higher on the Human Development Index as compared to countries that have not invested in education.

__________ justifies some limited government intervention to support the development of certain export-oriented industries. a. Heckscher-Ohlin theory b. Mercantilism c. Theory of comparative advantage d. New trade theory e. Theory of absolute advantage

d. New trade theory

China, India, and Indonesia are all expected to grow faster than the United States in the next few decades. ________ allows us to better understand cost of living differences between these countries. a. Political risk b. The Human Development Index c. Moore's Law d. Purchasing power parity e. Gross national income

d. Purchasing power parity

Using your knowledge of New Trade Theory, choose the reason why Boeing has not challenged Airbus for market share in the super large capacity aircraft sector. a. Boeing's main customers are not interested in buying the aircraft b. Trade barriers in the United States give Airbus a competitive advantage. c. Boeing has committed to focusing on its domestic market. d. The global market is not big enough to support multiple producers of this type of aircraft. e. Boeing lacks the ability to successfully design a super large aircraft.

d. The global market is not big enough to support multiple producers of this type of aircraft.

Based on the information on political economy in the text and the case on Venezuela above, which statement best characterizes the situation in Venezuela? a. The country is very closer to true dictatorship. b. Further nationalization of business should not be expected. c. Greater privatization should be expected in the short term. d. There is probably a high level of corruption within the government. e. Bribery is likely to be fairly low as a result of the authoritarian state.

d. There is probably a high level of corruption within the government.

The mercantilist doctrine promoted government intervention in order to achieve: a. global product consistency. b. higher prices on exported goods. c. more stable commodities. d. a surplus in the balance of trade. e. a decrease in factor endowments.

d. a surplus in the balance of trade.

As part of its effort to protect its auto makers from foreign competition, suppose Brazil levied a tariff based on a proportion of the value of the product. Brazil would be imposing a(n) _______ tariff. a. fixed b. transit c. uniform d. ad valorem e. specific

d. ad valorem

Historically, communist countries focused on collectivist goals. The government planned production, fixed commodity prices, and also directed investments to ensure they benefitted the nation as a whole and not only a few individuals. What type of economy did this represent? a. market b. mixed c. traditional d. command e. capitalist

d. command

The global pandemic of 2020 forced retail stores to create online shopping opportunities and adopt curbside delivery practices—somewhat similar to what Amazon had been doing for years. This new strategy adopted by retail stores is an example of: a. privatization. b. economic deregulation. c. purchasing power parity. d. innovation. e. benchmarking.

d. innovation.

Before Hugo Chavez took power in 1999, what type of economic system was in place in in Venezuela? a. market b. totalitarian c. socialist d. mixed e. command

d. mixed

In 2017, the Brazilian government transferred the state ownership of the electric company, the airports, highways, and ports to private investors to stimulate the economy. This is an example of: a. communism. b. protectionism. c. nationalization. d. privatization. e. socialism.

d. privatization.

A country that has __________ lowers the risk of doing business in that country. a. a high rate of inflation b. a low standard of living c. the presence of more than one ethnic nationality d. the presence of a strong legal system e. a large number of nonperforming loans

d. the presence of a strong legal system

Alexander Hamilton argued that tariffs are an effective means of protecting infant industries until they are better able to compete. Which is not true of tariffs used to protect infant industries? a. They are typically pro-producer. b. They discourage greater efficiency in the protected industry. c. They are typically anticonsumer. d. They impose significant costs on consumers in the form of higher prices e. They promote more efficient use of resources.

e. They promote more efficient use of resources.

Under common law, __________ refers to the ways in which laws are applied in specific situations. a. precedent b. theocratic c. tradition d. common e. custom

e. custom

__________ is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value. a. circular trade b. subsidy c. barter d. countertrade e. dumping

e. dumping

The government of a South American nation enforces tariffs and quotas to limit imported goods, while exports are subsidized. By using these instruments, the government seeks to achieve a surplus in the balance of trade. Based on this information, which approach is influencing the international trade efforts in this nation? a. product life-cycle theory b. new trade theory c. Heckscher-Ohlin theory d. theory of absolute advantage e. mercantilism

e. mercantilism

Wise Eyes Corporation has developed a new oral supplement to prevent macular degeneration. Which type of legal protection grants Wise Eyes Corporation exclusive rights for a defined period to the manufacture, use, or sale of this new supplement? a. copyright b. treaty c. trademark d. warranty e. patent

e. patent

Ocean Athletics is hesitant about entering Ukraine, because the country has been experiencing social unrest in recent years. Based on this information, what type of risk is Ocean Athletics trying to avoid? a. ethical b. legal c. economic d. technological e. political

e. political

The United States is demanding that China reduce overcapacity in which industry? a. rice b. automotive c. textiles d. wheat e. steel

e. steel

Aircraft like the Airbus 380 and Boeing 747 are cost efficient only on long haul flights that are relatively heavily traveled. According to New Trade Theory, which statement is true? a. There should be a decline in the number of Boeing 747s being sold to Europe. b. New Trade Theory would suggest that aircraft trade patterns would be strong between the United States and Europe. c. There should be an increase in sales of the Airbus 380 to the United States. d. Fuel efficiency in aircraft could be an indicator of trade routes. e. the market for large jet aircraft is limited to those airlines providing long haul flights in highly traveled routes.

e. the market for large jet aircraft is limited to those airlines providing long haul flights in highly traveled routes.

The geographical location of a Pacific island is advantageous for the seafood industry because it has access to a variety of aquatic life forms and also a number of freshwater sources. The lack of arable land drives local demand for seafood, and the island is one of the world's major exporters of seafood products. Which theory of international trade best explains this island's dominance as an exporter of seafood? a. new trade theory b. product life-cycle theory c. mercantilism d. Heckscher-Ohlin theory e. theory of national competitive advantage

e. theory of national competitive advantage

When the management team reviewed its government contract on office chairs, they noticed that in order to bid on the project, at least 37 percent of the value of the office chairs had to be produced in the United States. This stipulation is an example of a(n) a. antidumping policy b. voluntary export restraint c. administrative trade policy d. local content requirement e. ad valorem tariff

local content requirement