International Business Exam 2

If Italy is more efficient at producing fine leather shoes and handbags, then Italy has a(n)

Absolute Advantage

Which terms indicates that the units of resources required to produce a good are assumed to remain fixed no matter where one is on a country's production possibility frontier?

Constant returns to specialization

Most economists would agree that the best interests of international business are found in a nation with a

Free trade policy

_________ was a multilateral agreement established in 1947 whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas and the like

General Agreement on Tariffs and Trade (GATT)

Paul Krugman characterizes the strategic trade policy as being

A boost to national income at the expense of other countries

One focus of strategic trade policy is to help domestic companies gain...

A first mover advantage

One form of FDI is ______ which involves the establishment of a new operation in a foreign country.

A greenfield investment

According to porter, which factor endowment would be classified as an advanced factor?

Communication Infrastructure

One example of a(n) effect of FDI is when a foreign MNE employs a number of host-country citizens

Direct

______ 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

Dumping

Some countries have a policy that entirely restricts the export of coffee products. This is called a(n)

Export Ban

A country that relies on the pragmatic nationalist view would say that

FDI should be allowed so long as the benefits outweigh the costs.

The economic and strategic advantages that accrue to early entrants into an industry are called

First-mover advantages

The _____ view argues that international production should be distributed among countries according to the theory of comparative advantage and countries should specialize in the production of goods they can make most efficiently

Free Market

Payments used to ensure receiving the standard treatment that a business ought to receive from a foreign government, but might not due to the obstruction of a foreign official, are called

Grease Payments

High tariff barriers and subsidies in the agricultural industry ultimately lead to

Increased prices for consumers

The ________ Argument was proposed by Alexander Hamilton in 1792 and is by far the oldest economic argument for government intervention.

Infant Industry

What do new trade theorists point to as the reason for gaining a first-mover advantage?

Innovation and luck

How did the smoot-hawley act affect employment?

It had a damaging effect on employment abroad

Which ethical approach typically focuses on the attainment of fair and equitable distribution of economic goods and services?

Justice Theories

Internalization theory is used to explain why a company prefers FDI over ________ as a way to enter a foreign market.

Licensing

An implication of trade barriers for business practice is that they

Limit a firm's ability to serve a country from locations outside of that country

___________ gives employees the integrity to go public to the media and blow the whistle on persistent unethical behavior in a company

Moral Courage

_____ arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.

Multipoint competition

Which approach suggests that nations may benefit from trade even when they do not differ in resource endowments or technology?

New Trade Theory

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?

New Trade Theory

___________ Justifies some limited government intervention to support the development of certain export-oriented industries

New Trade Theory

Subsidies and quotas are examples of _____ barriers a county might impose.

Nontariff

One root cause of unethical behavior in business is

Pressure to meet unrealistic performance goals

A(n) _________ refers to the extra profit that producers make when supply is artificially limited by an import quota

Quota Rent

Which political ideology reflects the idea that a multinational enterprise is an instrument of imperialist domination

Radical view

A firm might justify a preference for licensing over FDI because licensing.

Results in the licensee bearing the costs and risks

Which philosophical approach is typically associated with managers from developed nations, and claims that a multinational's home country standards of ethics are the appropriate ones for companies to follow in foreign countries.

Righteous Moralism

A ________ is an individual or group that has an interest or claim in what a company does and how well it performs

Stakeholders

According to ______, location-specific advantages are of considerable importance in explaining both the rationale for and the direction of FDI

The eclectic paradigm

During the second stage of the ethical decision-making process, managers must determine whether a proposed decision would violate

The fundamental rights of any stakeholders

One of the main benefits that FDI provides to the home country is

The home country's balance of the payments benefits from the inward flow of foreign earnings

In his theory of absolute advantage, Adam Smith advocate that ________ should determine what a country imports and what it exports.

The market mechanism

The basic position of the friedman doctrine says that

The only social responsibility of business is to increase profits, so long as the company stays within the rules of law.

The Heckscher-Ohlin theory is based on the idea that

The pattern of international trade is determined by differences in factor endowments.

The basic message of _________ is that potential world production is greater with unrestricted free trade than it is with restricted trade.

Theory of comparative advantage

Licensing is good option to enter a foreign market when

Tight control of the foreign operation is not required

The stock of FDI refers to the

Total accumulated value of foreign owned-assets at a given time.

A country that imports more goods than it exports experiences a

Trade deficit

The ___________ approach to ethics holds that moral worth of actions or practices is determined by their consequences and is committed to the maximization of good and the minimization of harm.

Utilitarian

Foreign producers agree to _________ imposed by an exporting country because they fear more damaging punitive tariffs or imports quotas might follow if they do not.

Voluntary export restraints

Which organization was created to implement the GATT agreement?

WTO

According to the product life-cycle theory, once a new product becomes widely accepted internationally then production for that product.

Will start to take place in other countries

A situation in which an economic gain by one country results in an economic loss by another is called a

Zero-sum game

Ownership restraint is a method of

restricting inward FDI by host country.