International Business- Chapter 2

Totalitarianism occurs when an authoritarian leadership is motivated by a distinct ideology.

true

31. The _____ stated that a nation's wealth should not be judged by how much gold and silver it had but rather by the living standards of its people. a. factor proportions theory b. mercantilism theory c. absolute advantage theory d. comparative advantage theory e. Leontief Paradox

C

35. The _____ theory suggests that companies first produce for domestic consumption. a. product life cycle b. comparative advantage c. country similarity d. absolute advantage e. factor proportions

C

In the early 1950s, the United States was abundant in capital and, therefore, should have been exporting more capital-intensive goods. However, contrary to the factor proportions theory, the United States was importing more capital-intensive goods and exporting labor-intensive goods. This is an example of: a. the product life cycle. b. mercantilism. c. the Leontief Paradox. d. protectionism. e. neo-mercantilism.

C

Which of the following is not a classical country-based theory? a. mercantilism b. comparative advantage c. national competitive advantage d. absolute advantage e. Heckscher-Ohlin

C

_____ has become an optimal location for labor-intensive industries due to the availability of cheap, large pools of labor. a. The United States of America b. Sweden c. India d. The United Kingdom e. Japan

C

The Internet has lessened the ability of the countries to regulate or strong-arm companies into abiding by their rules and regulations.

true

The economic theory of mercantilism stated that a country's wealth was determined by the amount of its gold and silver holdings. True or false

true

36. Swedish economist Steffan Linder's theory proposed that: a. consumers in countries that are in the same or similar stage of development would have similar preferences. b. a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade. c. countries would produce and export goods that required resources that were in great supply. d. firms must develop competitive advantages to counter global competition in their industries. e. nations should promote exports by imposing restrictions on imports.

A

44. Direct democracy is a form of government in which: a. the government derives its power from the people of the country by means of a petition referendum. b. the government derives its power from the people of the country by means of elected representatives of the people. c. the government derives its power from the dominant ethnic group of the country. d. a single party with an ideology controls and directs the functioning of the government. e. the government derives its power from the cultures and traditions of the largest religious community of the country.

A

65. Firms invest in production or plant facilities in a country in order to supply raw materials, parts, or finished products to their home country. These firms are engaged in: a. backward vertical FDI. b. forward vertical FDI. c. horizontal FDI. d. inward FDI. e. portfolio investment.

A

_____ occurs when a country cannot produce a product more efficiently than the other country; however, it can produce that product better and more efficiently than it does other goods. a. Comparative advantage b. Differential advantage c. Absolute advantage d. Global strategic rivalry e. Country similarity

A

47. Planned economy refers to an economic system in which: a. a regional economic bloc directs and controls the economy, including the means and decision making for production. b. the government or state directs and controls the economy, including the means and decision making for production. c. the domestic, privately owned companies direct and control the economy, including the means and decision making for production. d. multinational companies direct and control the economy, including the means and decision making for production. e. the dominant ethnic group controls and directs the economy, including the means and the decision making for production.

B

50. Which of the following is true about Sharia? a. It is the least widely accepted religious law system. b. It prohibits charging interest on money and other common investment activities. c. It is a commercial, rather than a moral, legal system. d. It prohibits banks from engaging in sale-buyback or leaseback of an asset. e. It does not permit banks to charge large up-front fees.

B

66. Firms invest in production or plant facilities in a country and then sell the goods in that particular local or regional market. These firms are engaged in: a. backward vertical FDI. b. forward vertical FDI. c. horizontal FDI. d. inward FDI. e. portfolio investment.

B

68. Which of the following is not a determinant that Porter identified in his national competitive advantage theory? a. local market resources and capabilities b. local government stability c. local market demand conditions d. local suppliers and complementary industries e. local firm characteristics

B

70. With regard to financial incentives, home-country governments offer businesses: a. free manpower to attract companies to invest. b. a combination of insurance, loans, and tax breaks in an effort to promote their companies' overseas investments. c. as the investing companies, a monopolistic share of the market in order to attract them. d. heavy taxes imposed on domestic companies to attract foreign companies. e. tariff-free entry to the investing companies.

B

Specific tariffs are: a. fixed taxes that are imposed on the customers irrespective of the value of the product or the service. b. taxes that are levied as a fixed charge, regardless of the value of the product or service. c. tariffs that are calculated as a percentage of the value of the product or service. d. taxes that are levied on the exporters depending on the value of the products or the service being provided. e. taxes that are levied on the producers of specific goods as decided by the ministry in charge of the finances of a country.

B

The strategy to promote exports by imposing restrictions on imports is called: a. capitalism. b. protectionism. c. liberalization. d. mercantilism. e. free trade.

B

Which of the following is not a modern firm-based theory? a. country similarity b. Heckscher-Ohlin c. Porter's national competitive advantage d. product life cycle e. global strategic rivalry

B

62. A Japanese retailer builds a store in India to sell badminton rackets. This would serve as an example of: a. backward vertical FDI. b. brownfield FDI. c. forward vertical FDI. d. horizontal FDI. e. portfolio investment.

D

Factor proportions theory states that: a. firms must develop competitive advantages to counter global competition in their industries. b. production of the new product will occur completely in the home country of its innovation. c. most trade in manufactured goods will be between countries with similar per capita incomes. d. countries would produce and export goods that required resources that were in great supply. e. a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade.

D

Neo-mercantilism refers to an economic policy in which: a. a country trades in manufactured goods with countries having similar per capita incomes. b. a country focuses on producing a good more efficiently than another nation. c. countries produce and export goods that required resources that were in great supply. d. countries promote a combination of protectionist policies and restrictions and domestic- industry subsidies. e. countries import goods that required resources that were in short supply.

D

The _____ states that a country's wealth was determined by the amount of its gold and silver holdings. a. Leontief Paradox b. absolute advantage theory c. comparative advantage theory d. mercantilism theory e. country similarity theory

D

38. The critical ways that firms can obtain a sustainable competitive advantage are/is called the _____ for that industry. a. comparative advantages b. factors of production c. service factors d. brand equity e. barriers to entry

E

46. Civil law refers to a legal system based on: a. the official dictates of the government ruling a country. b. traditions and precedence, wherein judges interpret the law and judicial rulings can set precedent. c. the customs and traditions followed by the dominant cultural group of a particular country. d. religious guidelines. e. a detailed set of laws that constitute a code on how the law is applied to the facts.

E

A brownfield FDI is when: a. multinational companies make financial contributions to charitable organizations in a foreign country. b. a company invests in the agricultural sector of a particular country. c. multinational corporations enter into developing countries to build new factories or stores. d. firms create new long-term jobs in the foreign country by hiring new employees. e. a company or government entity purchases or leases existing production facilities to launch a new production activity.

E

Purchasing goods and services or deciding to invest in a local market depends on a business's needs and overall strategy.

true

Trade surplus refers to a situation where the value of imports is greater than the value of exports. True or false

Trade surplus refers to a situation where the value of imports is greater than the value of exports. Trade surplus: a situation where the value of exports are greater than the value of imports, and to avoid a trade deficit, or a situation where the value of imports is greater than the value of exports.

The classical international trade theories are from the perspective of a country. True or False

True

The modern international trade theories explain trade from a firm, rather than a country, perspective. T or F

True

The British colonial empire sought to increase its wealth by using raw materials from places ranging from what are now the Americas and India.

true

Political stability is a key part of government efforts to attract foreign investment to their country.

true

A company needs to sell in the local market in order to deem it a good option for direct investment.

false

According to the absolute advantage theory, a country cannot produce more efficiently than another country; however, it can produce a product better and more efficiently than it does other goods.

false

Companies involved in Brownfield foreign direct investment build new facilities right from scratch usually in an area where no previous facilities existed.

false

Companies make portfolio investment by participating in a joint venture with a foreign company.

false

Few governments still actively limit and control foreign investment.

false

Foreign direct investment refers to the investment in a company's stocks, bonds, or assets, but not for the purpose of controlling or directing the firm's operations or management.

false

Free trade only benefits select industries, at the expense of both consumers and other companies, within and outside of the industry.

false

Global businesses can afford to ignore the political and legal climate in countries in which they currently operate.

false

Trade deficit refers to a situation where the value of exports is greater than the value of imports. T or F

false

The foreign direct investment made by a company is primarily a part of its long-term strategy.

fasle

A main differentiator of political systems is each system's philosophy on the rights of the individual and the group as well as the role of government.

true

According to Porter's theory, a healthy level of rivalry between local firms will spur innovation and competitiveness. T or F

true

Capitalism is an economic system in which the means of production are owned and controlled privately.

true

Countries such as China still favor exports and discourage imports through a form of neo- mercantilism.

true

Governments want to be able to control and regulate the flow of FDI, so that local political and economic concerns are addressed.

true

Most countries maintain a balance between anarchism and totalitarianism and the balance is often a reflection of the country's history, culture, and religion.

true