Chapter 1
According to the World Trade Organization, the COVID-19 pandemic will affect world trade and cross-border investment may fall by as much as _____.
40%
During the 1960s, U.S. firms created just over _____ of worldwide foreign direct investment and British firms were second accounting for just over 10 percent.
65%
The globalization of markets and production implies that
domestic firms are facing intense competition from foreign firms.
The opponents of globalization argue that falling barriers to international trade will
eliminate manufacturing jobs in wealthy economies.
The Johnson Automotive Group recently closed two of its U.S. manufacturing facilities and opened a new facility in Asia to take advantage of lower labor costs and savings in energy costs. The company made this change in order to benefit from _____.
factors of production
True or false: The first web browser was introduced to the public in the 1970s and started the explosive growth of the Internet in foreign transactions.
false
A U.S.-based shoe company has decided to invest in a British company that specializes in clasps and buckles. This would be an example of _____.
foreign direct investment
The International Monetary Fund and the World Bank are both examples of _____ that help govern the global business system.
global institutions
It is common practice for people today to use products that are produced or assembled in various nations around the world. This is a reflection of _____.
globalization
Which term refers to the shift toward a more integrated and interdependent world economy?
globalization
The decline of the United States' standing in industrial power since the 1960s is considered a relative decline because it is a reflection of
the faster economic growth of other economies.
Studies exploring the share of labor in national income over the last two decades show that the share of national income accounted for by skilled labor has
increased
The division between rich and poor nations has (increased or decreased) with the advent of globalization.
increased
Global markets for industrial goods such as oil and wheat are more typical than those for consumer products because _____.
industrial goods serve universal needs
A(n) ______ business is any firm that engages in cross-border trade or investment.
international
Brite-Way Lighting is based in California and sells products within the United States as well as to ten foreign countries. Brite-Way Lighting is an example of a(n) _____ business.
international
Foreign direct investment occurs when a(n) _____.
investment is made by a company based in one country into a company or entity based in another country
Early outsourcing efforts were mostly limited to _____ activities while today numerous business activities can be outsourced.
manufacturing
Paragon Corp., based in Ohio, sources goods from Southeast Asia to take advantage of labor cost savings. This company is benefiting from _____.
the globalization of production
FlexFabric is a medium-sized company based in Virginia. Over the past five years, the company has increased its international trade efforts and now 35 percent of its business takes place overseas. FlexFabric is an example of a(n) _____.
mini-multinational
As international trade expands, the economies of the world's nation-states are becoming ______.
more intertwined
If you were to describe the global economy of the twenty-first century, it would be accurate to say that
more nations are becoming part of the developed world.
A(n) ______ is any entity that conducts business in at least two countries.
multinational enterprise
Supporters of globalization suggest that a solution to the problem of slow real income growth among the unskilled is _____.
to increase investments in education
The stock of foreign direct investment refers to the ______ of foreign investments.
total cumulative value
True or False: As emerging economies such as China, India, Russia, and Brazil continue to grow, forecasts predict a further relative decline in the share of world output and world exports accounted for by the United States and other long-established developed nations.
true
True or False: The International Monetary Fund (IMF) was established to ensure the stability of the international monetary system.
true
True or false: While lowering trade barriers initially made global production possible, the advent of technology made globalization a reality.
true
When global institutions were introduced in the 1940s, governments in struggling nations would turn to the _____ for low-interest loans needed for infrastructure projects such as building roads.
World Bank
The globalization of the world economy has resulted in a relative _____ in the dominance of U.S. firms in the global marketplace.
decline
In today's marketplace, distribution of production to separate locations has become more economical because transportation costs have _____.
declined
Creating and managing a globally dispersed production system is made easier by the ______ in costs of information processing and communication.
decrease
Former communist nations present opportunities to Western international business as these nations show continued commitment to _____.
democracy
Renata is traveling across Europe and is surprised to find Starbucks, McDonald's, and Coca-Cola in nearly every city she visits. This shows a convergence of consumer tastes, which creates a _____.
globalization of markets
When Jerry started his small appliance manufacturing company in the 1950s, every component part was made in the United States and the product was assembled in the United States. Today, he sources the components from China. The change at this company is an example of the _____.
globalization of production
According to the supporters of globalization, falling barriers to international investment
help to create employment opportunities in countries that participate in the global trading system
The risks of doing business in countries that are facing revolutions are
higher than in countries not facing revolutions.
The globalization of _____ is the term used to describe the merging of national markets into one large global place.
markets
In terms of innovation in transportation technology occurring since the 1950s, the development of _____ has essentially reduced the size of our entire world.
superfreighters commercial jets
From the 1990s until today, foreign direct investment inflows can best be described as
surging and slumping.
Within the past 10 years, China's share of world exports of goods and services ______ the United States.
surpassed
Supporters of globalization argue that bodies such as the World Trade Organization and the United Nations exist to serve the collective interests of member states, not to subvert those interests.
true
What can be an impediment to the globalization of production?
transportation costs
Based on rankings by Forbes in 2003, the second-largest source country of multinational enterprises was _____.
Japan
What is an accurate description of the globalization of production?
Locating each stage of production where it can be done most economically
The doubling of the power of microprocessor technology while the costs of its production decreases by half is called ______ Law.
Moore's
At some point, rising income levels lead to demands for greater environmental protection and, as a result, pollution levels fall. A study by Grossman and Krueger found this generally occurred before per capita income levels reached
$8000
Which environmental concern has been found to rise steadily with higher-income levels?
Carbon dioxide emissions
Among developing nations, ______ has been the largest recipient of foreign direct investment.
China
While the United States was the dominant industrial power in the early 1960s, by 2018, _____ took over that role.
China
Why are consumer products less likely than industrial products to be a source for the global marketplace?
Differences in consumer tastes
What is one benefit of the Internet?
It makes it easier for buyers and sellers to connect.
The World Trade Organization (WTO) is the successor to ______.
GATT
What is an accurate description of the World Bank?
It focuses on helping developing countries to fight poverty through investments in the underlying structure of the country.
In the early 1960s, the United States was the world's dominant industrial power. How does the U.S. position compare today?
It has diminished industrial power.
How have tariff rates for manufactured goods been affected by the global efforts of GATT?
Tariff rates fell significantly since 1950.
Which statement best describes the International Monetary Fund (IMF)?
The IMF is often seen as the lender of last resort to nation states whose economies are in turmoil.
Which organization ensures that nation states comply to the rules associated with trade treaties signed by member states?
The World Trade Organization
According to the critics of globalization, which of the following are results of falling trade barriers? (Check all that apply.)
The destruction of manufacturing jobs in advanced economies A depression of wages in developed nations
Why would a company engage in the globalization of production?
To lower their overall cost structure
During the 1920s and 1930s, many of the world's nation-states put formidable trade barriers in place. What was the main reason behind these actions?
To protect domestic industries from foreign competition
How did nation-states react to the economic environment of the 1920s and 1930s?
Trade barriers were increased.
Select the four facts that described the demographics of the global economy up until the 1960s.
U.S. dominance in world foreign direct investment U.S. dominance in the world economy and world trade The dominance of large, multinational U.S. firms in the international business scene Roughly half of the globe was off-limits to Western international business
When NAFTA was first introduced, what was the biggest argument opponents presented?
U.S. firms would move manufacturing to Mexico and feel free to pollute the air and employ child labor.
Which of these companies is facing an impediment to the globalization of production?
U.S. law dictates that Tru-Brite Dental cannot send X-rays electronically to be read by an overseas company.
During the 1960s, which country was the predominant world power in terms of foreign direct investment?
US
The negotiations called the _____, finalized in December 1993, established the World Trade Organization to police the international trading system.
Uruguay Round
Critics of globalization point out that free trade
allows firms to abuse the weak labor and environmental laws in developing countries.
One concern voiced by critics of globalization is that
an interdependent global economy shifts economic power away from national governments and toward organizations such as the United Nations
According to critics of globalization, increased free trade and investment over the past few decades have
broadened the gap between the rich and poor nations.
Current trends indicate that, due to the emerging economies, the world is moving _____ an economic system that is more favorable for international business.
closer to
Advances in _____ technology make it possible for companies to outsource customer service operations to another country.
communication
Moore's law predicts that
computer power will approximately double every 18 months.
A refrigerator parts manufacturer in China receives an order and loads the goods into a large receptacle that is then loaded on a ship headed for the United States. When the ship docks, this receptacle is placed onto a truck and the goods are delivered to a warehouse in Iowa. This scenario shows how _____ made the delivery of goods in the global marketplace much easier.
containerization
The change in the U.S. economic position since 1960 has been labeled a(n) _____ decline because it reflected the faster growing economy of several other economies.
relative
Some demonstrations against globalization are based on the idea that falling barriers to international trade
result in job losses in industries targeted by foreign competitors.
Companies rely on containerization to _____.
simplify the transfer of shipments from one form of transport to another
True or False: The development of Internet technology has lowered the barriers that small firms face in building international sales.
true
True or false: Containerization made the process of moving goods from one country to another less labor intensive.
true
A country's stock of foreign direct investment is the total cumulative value of foreign investments that are taken as a percentage of that country's _____.
GDP
What is one impact of globalization?
Greater uniformity replaces diversity.
What are some companies reportedly considering regarding their production efforts and minimizing catastrophes like the COVID-19 pandemic?
Moving production closer to home to avoid future disruptions
Trade agreements between nations are another way in which trade barriers have been reduced. Which statement accurately depicts the current state of trade agreements in the world?
Since the 1990s, trade agreements have increased dramatically.
Select the four reasons that explain why managing an international business is different from managing a purely domestic business.
The range of problems in international business is wider. International business must work within government limits International transactions involve converting money into different currencies. Countries are different.
Which of the following are notable trends in the demographics of multinational enterprises since the 1960s? (Check all that apply.)
The rise of non-U.S. multinationals The growth of mini-multinationals
Globalization naturally leads to firms following each other around the world, which then _____.
creates some uniformity across markets
What is a challenge faced by companies entering the global market?
differences in consumer tastes and preferences
One reason why a global market does not fully exist is _____.
differences in legal regulations among national markets
Critics of globalization protest in order to
diminish the impact of the culture of multinational enterprises on the world.
A manager in a(n) (international or domestic) business faces a wider and more complex range of problems than one in a(n) (international or domestic) business
international, domestic
Just a few decades ago, it would have cost a business much more money to find buyers in a foreign country. What has helped lower the cost of this process and allows buyers and sellers to easily find each other regardless of their location?
internet
The ______ has developed into the information backbone of the global economy and reduced the constraints of location, scale, and time zone.
internet
Those who support globalization argue that increasing globalization will
lead to reduced prices for goods and services.
The Uruguay Round negotiations resulted in
lowering the trade barriers between various national markets.
As the barriers to the free flow of goods, services, and capital fell during the 1970s, one motivation for foreign direct investment by non-U.S. firms was the desire to
move production activities to more desirable locations.
Land, labor, capital, and energy are all examples of factors of _____.
production
Detailed analysis of data over the last two decades shows that the share of national income enjoyed by (skilled or unskilled) labor has increased, suggesting that the fall in labor's share in national income is due to a fall in the share of (skilled or unskilled) labor.
skilled, unskilled
Global institutions are needed to _____.
stabilize and monitor the global marketplace.
Evidence suggests that _____ has impacted the declining share of national income enjoyed by labor more so than globalization has.
technological change
Advances in information processing and communication are two ways _____ has made the globalization of markets a reality.
technology