Chapter 5 Test #2

Scenario: Chuck Praeger, Global Entrepreneur Chuck Praeger has made a name for himself by selling high-quality golf equipment to customers in Europe. He would like to expand his business into the Pacific Rim countries and has therefore, begun making inquiries into potential distributors. Chuck is convinced that his golf equipment will sell itself. But he is preparing a special presentation for Asian customers because he wants to make a good first impression. As an expert in culture of the Pacific Rim countries, which of the following would be your most likely advice to Chuck? A. Aggressive salesmanship is unlikely to work in Pacific Rim countries. B. Be sure to have a tight legal contract ready, to avoid product piracy problems. C. Avoid the confusion introduced by third-party contacts. D. Have plenty of English-language business cards to pass around because most Asians know English and like the language.

A. Aggressive salesmanship is unlikely to work in Pacific Rim countries.

Scenario: Foodland and Drinkland Two countries, Foodland and Drinkland, produce food and drinks. In Foodland, one resource unit produces 20 tons of food and one resource unit produces 10 tons of drinks. In Drinkland, one resource unit produces 12 tons of food and one resource unit produces 24 tons of drinks. Based on the above scenario, which of the following statements is true? A. Foodland has an absolute advantage in producing food. B. Foodland has an absolute advantage in producing drinks. C. Drinkland has an absolute advantage in producing food. D. Drinkland has an absolute advantage in producing both food and drinks.

A. Foodland has an absolute advantage in producing food.

Scenario: Foodland and Drinkland Two countries, Foodland and Drinkland, produce food and drinks. In Foodland, one resource unit produces 20 tons of food and one resource unit produces 10 tons of drinks. In Drinkland, one resource unit produces 12 tons of food and one resource unit produces 24 tons of drinks. A third country, Funland, also produces food and drinks. In Funland, one resource unit produces 8 tons of food and 6 tons of drinks. Which of the following is true about Funland, Foodland, and Drinkland? A. Funland has a comparative advantage in producing food. B. Funland has a comparative advantage in producing drinks. C. Funland has an absolute advantage in producing drinks. D. Funland has an absolute advantage in producing food.

A. Funland has a comparative advantage in producing food.

The ________ theory states that countries produce and export goods that require resources available in abundance and import goods that require resources in short supply. A. factor proportions B. new trade C. absolute advantage D. international product life cycle

A. factor proportions

Both absolute and comparative advantage theories assume that ________ is the only resource used in the production process. A. labor B. capital C. equipment D. land

A. labor

One of the major pillars upon which the practice of mercantilism rested was ________. A. trade surpluses B. economies of scale C. pricing mechanism D. excessive imports

A. trade surpluses

The theory of absolute advantage destroys the mercantilist idea that international trade is a ________. A. zero-sum game B. win-win game C. positive-sum game D. negative-sum game

A. zero-sum game

The theory of comparative advantage was proposed by ________. A. Adam Smith B. Raymond Vernon C. David Ricardo D. Bertil Ohlin

C. David Ricardo

The importance of trade for a nation can be measured by ________. A. the living standards of people involved in only trade activities B. the number of acquired territories the nation has that serves as sources of inexpensive raw materials C. examining the volume of its trade relative to its total output D. examining the amount of wealth acquired by the national government through restrictive trade policies

C. examining the volume of its trade relative to its total output

The international product life cycle theory was put forth for ________. A. natural resources B. service goods C. manufactured goods D. abundant resources

C. manufactured goods

During which stage of the international product life cycle theory does demand rise and remain sustained for a fairly lengthy period of time? A. standardized product stage B. new product stage C. maturing product stage D. product decline stage

C. maturing product stage

Today, countries seen by others as trying to maintain a trade surplus and expand their national treasures at the expense of other nations are accused of practicing ________. A. social stratification B. totalitarianism C. anti-mercantilism D. economic nationalism

D. economic nationalism

Which of the following is an assumption made by the comparative advantage theory? A. creation of trade surpluses B. government interference and control in trade activities C. creation of trade deficits D. maximization of production and consumption

D. maximization of production and consumption

The measures of a nation's well-being other than the financial wealth accumulated through exports are irrelevant according to ________. A. absolute advantage theory B. new trade theory C. factor proportions theory D. mercantilism

D. mercantilism

Scenario: Better Mousetrap Inc. Better Mousetrap Inc. is a manufacturing company that sells pest control products. Recently the company launched an innovative mousetrap with a unique design that has been selling well in the U.S. market. Senior Vice President Marc Wallace, even recommended expanding sales overseas in order to increase company revenues. Wallace's executive team reviews the stages of the international product life cycle to understand better what to expect when the product is sold overseas. Since there is virtually no export market for the product at present, the product is most likely in which of the following stages of the international product life cycle? A. standardized product stage B. product decline stage C. maturing product stage D. new product stage

D. new product stage