Chapter 3

Which of the following countries most likely has a comparative advantage?

An Asian country that produces quality automobiles with little opportunity cost compared to other countries

Despite the growth rates in many high-population countries being weak, most of these nations remain ahead of the United States in terms of development and prosperity.

False

Despite their huge populations, China and India represent a much smaller opportunity in terms of size and economic growth.

False

In the context of foreign direct investment, which of the following statements is true of a partnership?

It is a formal, long-term agreement.

Which of the following is the most costly form of foreign direct investment?

Offshoring

Nescat Autos, an automobile manufacturing company, developed a secondary market for its products in a foreign country. This allowed the company to minimize its losses when its primary market failed to generate enough revenue to benefit the company. In this scenario, which of the following is most likely to have influenced Nescat Autos's decision to set up a market in another country?

Reduced risk

Although a trade deficit signals the wealth of an economy that can afford to buy huge amounts of foreign products, a large deficit can be destabilizing.

True

Mewpeth, an Asian nation, is the world's largest producer of cotton. The country was able to achieve this status by increasing the production of cotton and compromising on the production of wheat. The given scenario exemplifies the concept of _____.

opportunity cost

Wichasha, an African country, exports barley and cotton worth $100 million to Illema, a European country, and it imports sugarcane worth $25 million from Illema. As such, the total value of Wichasha's exports is higher than the total value of its imports. This difference between the value of Wichasha's exports and imports is known as _____.

the balance of trade

Mora, an American jewelry manufacturing company, wants to import diamonds from Renoria, an Asian country. However, the officials in charge of the trade in Renoria agree to formalize the transaction only if they are paid a certain amount of money for their personal benefit. Since American businesses are prohibited from offering bribes to any foreign nation, Mora has to look to another exporter of diamonds. In the given scenario, Mora is most likely facing the barrier of _____.

legal differences