International Business Chapter 5

Trade among the world's high-income economies accounts for roughly ________ percent of total world merchandise trade. a. 20 b. 40 c. 60 d. 80

60

Nearly ________ percent of Western Europe's exports are destined for other nations in Western Europe. a. 20 b. 50 c. 75 d. 85

75

________ occurs between different states, regions, or cities within a country. a. Domestic trade b. Foreign direct investment c. International trade d. Mercantilism

Domestic Trade

Countries did all of the following to implement mercantilism EXCEPT ________. a. enhanced trade deficits b. government intervention c. colonization d. maintained trade surpluses

Enhanced trade deficits

A trade deficit is the condition that results when the value of a nation's exports is greater than the value of its imports.

False

According to Adam Smith, international trade should be restricted by tariffs and quotas to give a country an absolute advantage

False

According to mercantilism, accumulation of wealth depended on expanding a nation's total volume of trade, not necessarily on creating a trade surplus.

False

Adam Smith developed the theory of comparative advantage in 1776.

False

Canada is the world's largest exporter of merchandise.

False

China dominates the rest of the world in the export of both merchandise and commercial services.

False

Exploring the volume of international trade and world output provides useful insights into who trades with whom.

False

Factor proportions theory states that factors in great supply relative to demand will be more costly than factors in short supply relative to demand.

False

Given that international trade is not a manufacturing activity, it has no impact on the job creation potential of an economy.

False

Given the decline of manufacturing activities worldwide, service exports now make up around 80 percent of total world trade.

False

International trade occurs between different states, regions, or cities within a country.

False

One way to measure the importance of trade to a nation is to examine the volume of trade in an economy relative to its total output.

False

Over time, trade has consistently grown more slowly than world output.

False

The United States is central Europe's mightiest trading partner.

False

The international product life cycle theory states that in the maturing product stage, production facilities are introduced in countries with the highest demand.

False

The purchase, sale or exchange of goods and services across national borders is called domestic trade

False

The theory of absolute advantage destroys the mercantilist notion that international trade is a positive-sum game.

False

The trade theory that nations should accumulate financial wealth, usually in the form of gold, by encouraging imports and discouraging exports is called mercantilism.

False

The value and volume of international trade has been decreasing recently.

False

The value of North American exports to Asia is less than one-half the value of Asian exports to North America.

False

Today, world merchandise exports are roughly $9.2 trillion.

False

Two-way trade between high-income countries and low- and middle-income nations accounts for less than 1 percent of total world trade.

False (34%)

Nearly 74 percent of Europe's exports are destined for other European nations.

False (71%)

Which of these countries is Central Europe's mightiest trading partner? a. Germany b. Hungary c. Japan d. The United States

Germany

When doing business in the Pacific Rim, ________. a. carry business cards printed only in the home country language b. be persistent and aggressive; Asians often take a while before they agree to a meeting c. don't accept invitations to dine at someone's house; go for a neutral location d. go easy with the legalese

Go easy with the legalese

Which of the following statements is NOT true? a. International trade is opening new doors to entrepreneurial opportunity across Africa. b. International trade provides a country's people with a greater choice of goods and services. c. International trade has little effect on job creation in most countries. d. The value and volume of international trade continues to increase

International trade has little effect on job creation in most countries

The value of North American exports to Asia is ________. a. more than half the value of Asian exports to North America b. roughly equal to China's exports to the U.S. c. less than half the value of Asian exports to North America d. is in balance with Asia's exports to the U.S.

Is in balance with Asia's exports to the U.S.

Most of the world merchandise trade is comprised of trade in ________. a. natural resources b. services c. manufactured goods d. knowledge-based goods

Manufactured goods

Which of the following statements is NOT true? a. Trade in services makes up about 20 percent of total world trade. b. Trade in services tends to be more important for emerging markets. c. The United States is a top exporter of services in the world. d. Trade in services is growing for many nations.

Trade in services tends to be more important for emerging markets

The condition that results when the value of a nation's exports is greater than the value of its imports is called ________. a. trade deficit b. mercantilism c. trade surplus d. absolute advantage

Trade surplus

According to comparative advantage theory, trade is still beneficial even if one country is less efficient in the production of two goods, as long as it is less inefficient in the production of one of the goods

True

According to new trade theory, as a company increases the extent to which it specializes in the production of a particular good, output rises because of gains in efficiency.

True

Factor proportions theory says that a country will produce and export goods that require resources (factors) that are abundant and import goods that require resources in short supply.

True

In the context of international trade, isolationism is generally considered undesirable.

True

National competitive advantage theory argues that companies that can benefit from the product or process technologies of an internationally competitive industry begin to form clusters of related economic activities in the same geographic region.

True

Nearly half of all exports in Asia are intra-regional.

True

Slower world economic output slows the volume of international trade, and higher output encourages trade

True

The U.S. Department of Commerce estimates that for every $1 billion increase in exports, around 23,000 jobs are created in the United States.

True

The level of world output in any given year influences the level of trade in that year.

True

Trade dependency, once a blessing for Mexico, is now causing economic disruption as some companies shift jobs out of the country to places such as China.

True

When countries try to maintain a trade surplus and expand their national treasuries at the expense of other nations, they are accused of practicing neo-mercantilism

True

Whereas comparative advantage theory focuses on the productivity of the production process for a particular good, factor proportions theory argues that a country specializes in producing and exporting goods using the factors of production that are most abundant.

True

The focus of factor proportions theory is on the ________. a. productivity of the production process b. efficiency of the production process c. use of abundant production factors d. use of expensive production factors

Use of abundant production factors

Customs agencies in most countries record all of the following EXCEPT the ________. a. destination of exports b. source of imports c. physical quantities and values of goods crossing their borders d. value of underground transactions

Value of underground transactions