International Management Module 2

Which countries have consistently remained on the list of top 15 nations from which the United States imports for the past 50 years? (Check all that apply.) Germany Japan Italy China United Kingdom

Germany Japan Italy United Kingdom

True or false: Doing business abroad with a nation's major trading partner is made easy by the fact that cultural objections are usually nonexistent. True False

False When doing business with a major trading partner, there should be no strong cultural objections at home to buying that nation's goods. Firms must ensure that cultural objections do not exist.

______ includes both ownership and control of real or physical assets such as plants and other facilities. Exporting Free trade Franchising Foreign direct investment

Foreign direct investment

Deals that do not result in the foreign investor's obtaining at least 10 percent of the shareholdings are classified as ______ investments. management direct portfolio strategic

portfolio

The EU and ASEAN have reinforced the increasing ________ (regionalization/globalization) of trade.

regionalization

True or False: The substantial increase in portfolio investments from people residing outside the United States is due to the large number and scale of acquisitions of U.S. companies by foreign companies. True False

True

In the last 20 years, trade in ______ has experienced the fastest growth. merchandise raw materials services human resources

services

A trade _____ is the amount by which the value of a nation's exports exceeds the value of its imports.

surplus

Economist David Ricardo's idea of a comparative advantage is based on the idea that when two countries are involved in trade, ______. neither country will benefit from trade the trade can only result in a negative-sum outcome both countries can benefit from trade one of the countries will benefit more from trade

both countries can benefit from trade

What were 3 of the largest categories of exports to China from the United States in 2019? chemicals soybeans appliances clothing transportation equipment

chemicals soybeans transportation equipment

As a result of their continued economic development, developing countries have dramatically _____ (increased/decreased) their share of FDI stock.

decreased

A trade _____ is the amount by which the value of imports into a nation exceeds the value of its exports.

deficit

A nation can attempt to regain competitiveness in world markets through currency _______, which lowers the value of a nation's currency relative to other currencies and, as a result, lowers the prices of its exports.

devaluation

Which theory is currently the most widely cited and accepted theory of foreign direct investment? monopolistic advantage theory eclectic theory of international production internalization theory comparative advantage theory

eclectic theory of international production

Which theory of FDI proposes an overall framework for explaining why firms choose to engage in FDI rather than serve foreign markets through alternatives such as exporting, licensing, or strategic alliances? comparative advantage theory monopolistic advantage theory eclectic theory of international production internationalization theory

eclectic theory of international production

The _____ rate is used to convert from foreign currency to domestic currency.

exchange

The price of one currency stated in term of another currency is called the ______. positive balance-of-payment inflation rate exchange rate negative balance-of-payment

exchange rate

After its first two years in business, Lennart's company realized that by purchasing component parts from Indonesia, it could save 12% in the final cost of goods. Lennart's company was able to improve its efficiency based on the knowledge it gained during its first two years in business. This example demonstrates the idea of the ______. economy of scale product life cycle supply-and-demand model experience curve

experience curve

Since 2005, the proportion of service exports from the United States has ______. decreased remained the same increased

increased

The volume of FDI flowing into developing countries has been (increasing/decreasing).

increasing

The ______ advantage of the eclectic theory of international production suggests that it is in a firm's best interest to exploit its ownership-specific advantages by retaining ownership and control. location-specific internalization comparative investment-specific

internalization

Which advantage of the eclectic theory of international production involves retaining ownership and control, where either the market does not exist or it functions inefficiently, making the transaction cost of market-based options too high? internalization ownership-specific investment-specific location-specific

internalization

Which FDI theory suggests that due to high transaction costs, a firm may obtain a better price by using the superior knowledge itself than by selling the knowledge on the open market? monopolistic advantage theory absolute advantage theory internalization theory strategic behavior theory

internalization theory

Which three mercantilist policies are currently being practiced in China, thus giving price advantages to Chinese companies? lax regulatory oversight undervalued currency export subsidies overvalued currency increased use of tariffs

lax regulatory oversight undervalued currency export subsidies

Companies often start with foreign trade prior to foreign direct investment, because foreign trade is Blank______. (Check all that apply.) Multiple select question. more expensive less costly more profitable less risky

less costly less risky

Which of the following are contributing to increases in foreign direct investment? (Check all that apply.) new production and communication technologies fewer international trade agreements fewer government barriers to trade increased competition from globalizing firms

new production and communication technologies fewer government barriers to trade increased competition from globalizing firms

The strategic behavior theory suggests that strategic rivalry between firms in a(n) Blank______ industry will result in firms closely following and imitating each other's international investments in order to keep a competitor from gaining an advantage. geopolitical individualistic oligopolistic monopolistic

oligopolistic

Which type of industry has a limited number of competing firms? oligopolistic domestic purely competitive monopolistic

oligopolistic

Which theory argues for the existence of similar preferences and demand for products and services among nations with similar levels of per capita income? experience curve resource endowments economies of scale overlapping demand

overlapping demand

Which advantage of the eclectic theory of international production suggests that a firm has or can develop a firm-specific advantage through ownership of tangible and intangible assets that are not available to other firms and that can be transferred abroad? comparative advantage absolute advantage location-specific advantage ownership-specific advantage

ownership-specific advantage

True or false: Historically, after firms have engaged in foreign direct investment, then they will start to engage in foreign trade. True False

False

True or false: Nations should import goods for which they have a comparative advantage True False

False

True or false: Two-thirds of the value of corporate investments made in the United States from abroad has been spent establishing new businesses. True False

False

_____ competition is the market situation in which there is a sufficiently large number of well-informed buyers and sellers of a homogeneous product such that no individual participant has enough power to determine the price of the product.

Perfect

True or false: The international product life cycle theory is demonstrated by the fact that personal computers were initially introduced in the United States but over time their production has moved overseas and they are now imported into the United States. True False

True

Place the stages of the international product life cycle (IPLC) in the correct order from first to last. Note: the first stage should be at the top of your list.

U.S. exports Foreign production Foreign competition in export markets Import competition in U.S. markets

Which variable in Michael Porter's diamond model distinguishes between land, location, or natural resources and transportation systems or university research institutes? factor conditions firm strategy, structure, and rivalry demand conditions related and supporting industries

factor conditions

Although the mercantilist era ended, we still define a(n) ______ trade balance to mean that a nation exports more goods and services than it imports. favorable mercantile unfavorable negative

favorable

Of the following, which is NOT contributing to increases in foreign direct investment? increased competition from globalizing firms fewer government barriers to trade fewer international trade agreements new production and communication technologies

fewer international trade agreements

The initial stage of the international product life cycle is _____. exchange import defusion innovation

innovation

Which advantage of the eclectic theory of international production involves retaining ownership and control, where either the market does not exist or it functions inefficiently, making the transaction cost of market-based options too high? location-specific ownership-specific internalization investment-specifi

internalization

The land, labor, capital, and related production factors that a nation possesses are called ______. economies of scale resource endowments gross national product natural resources

resource endowments

According to the theory of overlapping demand, goods produced for domestic consumption will eventually be exported to countries with ______. (Check all that apply.) dissimilar resource endowments similar demand similar income per capita similar supply

similar demand similar income per capita

What percentage of exports from developing nations went to developed countries in 2019? 12% 43% 70% 90%

43%

Approximately what percentage of global output is destined for international trade? 60% 25% 70% 45%

60%

The top 10 trading partners of the United States accounted for ______ of total U.S. exports in 2019. 26% 36% 64% 72%

64%

Which of the following assumptions must be present when arguing the internalization theory? Multiple choice question. A firm must be willing to import the majority of its product. A firm must not have any outstanding debt. A firm must not have any competition. A firm must have superior knowledge over its competitors.

A firm must not have any competition. A firm must have superior knowledge over its competitors.

Of the countries listed below, which one supplies the United States with huge amounts of electronic products and components? France Canada Brazil China

China

Today, which country is seen by many as the "fortress of mecantilism"? China Russia Japan Brazil

China

Which country has become the world's largest exporter? China Brazil United States South Korea

China

Which nation ranks number one in exports of merchandise? India China United Kingdom United States

China

Select the benefits of doing business with major trading partners? (Check all that apply.) Currency from the foreign country is available to pay for the exports. Satisfactory transportation facilities are already established. The business climate is already relatively favorable. No pressure is applied by the government of a trading partner.

Currency from the foreign country is available to pay for the exports. Satisfactory transportation facilities are already established. The business climate is already relatively favorable.

Which explanation suggests that countries will export products requiring large amounts of their abundant production factors and import products requiring large amounts of their scarce production factors? Economies of scale and the experience curve International product life cycle Differences in resource endowments Overlapping demand

Differences in resource endowments

Franz was happy to report to the management team that its larger production facility made it possible to increase the number of bicycles produced and also decrease the cost of each bicycle. Which theory explains this scenario? Diseconomies of scale The product life cycle theory Economies of scale The demand curve theory

Economies of scale

Which of the following statements are accurate regarding an oligopolistic industry? (Check all that apply.) Interdependence among firms increases the likelihood that firms will imitate their competition. It is an industry with a limited number of competing firms. The actions of one firm can strongly affect the performance of others in the industry. It is an industry where the actions of one firm have no effect on any other firms. Need help? Review these concept resources.

Interdependence among firms increases the likelihood that firms will imitate their competition. It is an industry with a limited number of competing firms. The actions of one firm can strongly affect the performance of others in the industry.

Which of the following are true regarding foreign direct investment? (Check all that apply.) It includes the control of real or physical assets. It includes the ownership of plants and other facilities. It includes the ownership of real or physical assets. It includes investments such as portfolios, stocks, and bonds.

It includes the control of real or physical assets. It includes the ownership of plants and other facilities. It includes the ownership of real or physical assets.

Which statements are accurate regarding mercantilism? (Check all that apply.) It is a complex political and economic theory. It tended to create a trade surplus. It caused governments to increase imports and decrease exports. It viewed precious metals such as gold and silver as the only source of wealth.

It is a complex political and economic theory. It tended to create a trade surplus. It viewed precious metals such as gold and silver as the only source of wealth.

For which reasons are Mexico and Canada are major trading partners with the United States? (Check all that apply.) Lower freight charges Membership in USMCA Expensive contacts between buyers and sellers Shorter delivery times

Lower freight charges Membership in USMCA Shorter delivery times

Which statements are true regarding international trade? (Check all that apply.) Trade restrictions that stop the free flow of goods will enhance a nation's welfare. Nations will attain a higher standard of living by specializing in goods for which they have a comparative advantage. International trade exists because firms export. Nations should import goods for which they have a comparative disadvantage.

Nations will attain a higher standard of living by specializing in goods for which they have a comparative advantage. International trade exists because firms export. Nations should import goods for which they have a comparative disadvantage.

Although trade has increased globally, the proportion of world trade coming from which of the following regions has actually decreased since 1980? (Check all that apply.) North America Middle East China Africa

North America Middle East Africa

For which three reasons do firms tend to cluster together on a geographic basis? Shared technological information Specialized local suppliers Pooling of a common labor force Common pool of customers

Shared technological information Specialized local suppliers Pooling of a common labor force

Which of the following are reasons why many Asian countries are both import and export partners of the United States? (Check all that apply.) Their rising standards of living enable their people to afford more imported products. They are purchasing large amounts of capital goods to further their industrial expansion. Their governments have been pressured by the U.S. government to lower their trade surplus. They are exporting an excessive amount of raw materials primarily to the United States for assembly or finished goods.

Their rising standards of living enable their people to afford more imported products. They are purchasing large amounts of capital goods to further their industrial expansion. Their governments have been pressured by the U.S. government to lower their trade surplus.

The amount invested each year into other countries is referred to as ______. annual FDI inflow annual FDI outflow trade surplus positive balance-of-trade

annual FDI outflow

Which of the following were among the largest categories of imports from China to the United States in 2016? (Select all that apply.) appliances passenger cars apparel electrical machinery

appliances apparel electrical machinery

Adam Smith argued that each nation should specialize in making those goods it can produce most efficiently—goods for which it has a(n) _____ advantage. mercantilist selective absolute competitive

absolute

What situation exists when a nation can produce more of a good or service than another country for the same or lower cost of inputs? Multiple choice question. comparative advantage mercantilist advantage selective advantage absolute advantage

absolute advantage

What situation exists when a nation can produce more of a good or service than another country for the same or lower cost of inputs? comparative advantage mercantilist advantage selective advantage absolute advantage

absolute advantage

World trade tends to be dominated by exchanges _____ geographic regions. outside within

within

When one nation is less efficient than another in the production of two goods, the less efficient nation has a (n) ______ advantage in the production of that good for which its absolute disadvantage is less. strategic absolute competitive comparative

comparative

When one nation is less efficient than another in the production of two goods, the less efficient nation has a (n) ______ advantage in the production of that good for which its absolute disadvantage is less. strategic competitive absolute comparative

comparative

Canada is efficient at producing forestry and agricultural products, but cannot produce coffee as efficiently as some other nations. As such, Canada sells forestry and agricultural products to other countries and buys coffee. This is an example of ______. supply and demand comparative advantage relative advantage economic profit

comparative advantage

Select the reasons why foreign direct investment in the United States has focused on the acquisition of existing companies rather than new ones. (Check all that apply.) corporate restructuring greater success with a known brand name rapid access to U.S. technology decreased international competitive pressure

corporate restructuring greater success with a known brand name rapid access to U.S. technology

The purchase of an existing business in another nation is called _____. cross-border acquisition strategic alliance joint venture greenfield investment

cross-border acquisition

The annual FDI investments going into ____ (developed/developing) countries has been decreasing.

developed

The ______ refers to the rising scale on which efficiency improves as a result of cumulative experience and learning. product life cycle experience curve supply-and-demand model economy of scale

experience curve

The foreign investment component known as Blank______ requires investors to participate in the management of the firm. portfolio investment strategic investment direct investment debenture investment

direct investment

The ______ theory suggests that for a firm to be successful overseas, it must have ownership of unique knowledge or resources and be able to sustain them over time. absolute advantage dynamic capability comparative advantage direct investment

dynamic capability

Which term means the predictable decline in the average cost of producing each unit of output as a production facility gets larger and output increases? demand curve theory economies of scale product life cycle experience curve

economies of scale

What are three basic types of tangible and intangible ownership-specific advantages? economies of scale or scope knowledge or technology cultural advantages monopolistic advantages

economies of scale or scope knowledge or technology monopolistic advantages

Perfect competition results in ______. (Select all that apply.) artificially high prices efficient production efficient allocation of products strong advertising campaigns

efficient production efficient allocation of products

Mercantilism advocated that countries should simultaneously ______ exports and ______ imports. Multiple choice question. limit; tax encourage; discourage discourage; encourage tax; limit

encourage; discourage

According to mercantilism, ______ were the mainstays of national wealth and were essential to business activity. exports and imports stocks and bonds manufacturing and agriculture gold and silver

gold and silver

A _____ investment is the establishment of new facilities from the ground up.

greenfield

The dynamic capability theory suggests that in order for an international foreign direct investment to be successful, the firm must ______. (Check all that apply.) have the ability to transfer the capability to international environments in order to produce a competitive advantage have the ability to dynamically create, sustain, and exploit the capability over time have the ability to create a global strategy to fit every market in the same manner have ownership of unique knowledge and resources

have the ability to transfer the capability to international environments in order to produce a competitive advantage have the ability to dynamically create, sustain, and exploit the capability over time have ownership of unique knowledge and resources

The greatest usefulness of the international product life cycle theory in explaining trade comes when companies introduce their new products into ____ (international/home) markets first.

home

The proportion of service exports from the United States has ______ (increased/decreased) in the past three decades.

increased

After analyzing which nations account for the most exports and imports, it is evident that international trade ______. is unevenly distributed across the world is evenly distributed across the world is used mostly by developing countries is used mostly by underdeveloped countries

is unevenly distributed across the world

What percentage of exports from developed economies go to other industrialized nations? virtually none less than half about three-quarters almost all

less than half

For a firm to have a -____ specific advantage overseas, the foreign market must have specific economic, social, or political characteristics.

location

Which theory suggests that foreign direct investment is made by firms in industries with relatively few competitors, due to their possession of technical and other advantages over indigenous firms? absolute advantage theory comparative advantage theory monopolistic advantage theory strategic behavior theory

monopolistic advantage theory

A nation's ability to design, produce, distribute, or service products within an international trading context while earning increasing returns on its resources is known as Blank______. Multiple choice question. resource endowments absolute advantage free trade national competitiveness

national competitiveness

With _____, investors are not directly concerned with the control of a firm, they still invest immense amounts in stocks and bonds from other countries. FDI investment direct investment portfolio investment strategic investment

portfolio investment

In balance-of-payments accounting, an export that brings money to the country is called Blank______, but imports that cause monetary outflows are labeled ______. positive; negative a liability; a receivable negative; positive a receivable; a liability

positive; negative

According to the economic theory of mercantilism, the only source of wealth was _____. wealth and knowledge precious metals farmland gas and oil

precious metals

The idea that a denim manufacturer in the United States can export its products to China while at the same time a Chinese manufacturer in the denim market can export to the United States because each of the product lines has unique qualities demonstrates the idea of ______. trade deficit product differentiation economies of scale trade surplus

product differentiation

What are the four variables in Michael Porter's diamond model of national advantage? related and supporting industries demand conditions government intervention foreign direct investment conditions firm strategy, structure, and rivalry factor conditions

related and supporting industries demand condition firm strategy, structure, and rivalry factor conditions

Which of the following industries are examples of the monopolistic advantage theory? (Check all that apply.) breakfast cereal smartphones commercial aircraft manufacturers fashion accessories

smartphones commercial aircraft manufacturers

For a firm to have a location-specific advantage overseas, the foreign market must have specific _____ characteristics. (Check all that apply.) social economic political competitive

social economic political

Which theory suggests that strategic rivalry between firms in an oligopolistic industry will result in firms closely following and imitating each other's international investments in order to keep a competitor from gaining an advantage? internationalization theory oligopolistic advantage theory strategic behavior theory comparative advantage theory

strategic behavior theory

According to British economist David Ricardo, when one country has an absolute advantage over another in the production of two different goods, trade can still be a positive-sum game provided that ______. the nation with the absolute advantage is willing to trade in the first place the less efficient nation does not need either of the goods the more powerful nation has the less efficient nation is not equally less efficient in the production of both goods Need help? Review these concept resources.

the less efficient nation is not equally less efficient in the production of both goods

The book value of all foreign direct investment refers to the value of the ______. Multiple choice question. applicable finance charges unpaid loan agreements total outstanding stock housing market

total outstanding stock