IB Exam 2
Which of the following countries is a member of the North American Free Trade Agreement (NAFTA)?
Canada
Which of the following institutions is least likely to play an important role in monitoring and enforcing economic and political integration in the European Union?
European court of human rights
Both absolute and comparative advantage theories assume that ________ is the only resource used in the production process.
Labor??
The ________ altered the U.S. trade policy from a stance of free trade to one of protectionism in the 1930s.
Smoot-hawley act
Which of the following statements is true about cultural influences?
Unwanted cultural influence in a nation can cause governments to block imports that it believes are harmful.
Purposely understaffing customs offices to cause time delays, requiring special licenses that take a long time to obtain, and requiring air carriers to land at inconvenient airports are all examples of ________.
administrative delays
Regulatory controls or bureaucratic rules designed to impair the rapid flow of imports into a country are called ________.
administrative delays
A country's ________ is a summary of all economic transaction between one country and the rest of the world, over a given period of time.
balance of payments
Scenario: Happyland Happyland is a country characterized by beautiful beaches, vast natural resources, and a highly skilled labor force. Happyland is now encouraging foreign direct investment flows. The country has been exporting textiles, computer hardware, and software programs. The net result of the trade is that Happyland exports far more goods and services and receives more income from abroad than it imports and pays abroad. If Happyland is successful in attracting foreign direct investment, transactions involving those investments would appear in the country's ________ account.
capital
According to the theory of ________, trade is 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.
comparative advantage
Which theory suggests that a country should produce and export those goods and services for which it is relatively more productive than other countries and import those goods and services for which other countries are relatively more productive?
comparative advantage
________ make it more difficult for importers of nonessential goods to acquire foreign exchange.
currency controls
The U.S. government has decided to impose a tariff rate quota on sugar imports into the United States. Which of the following would benefit from this decision?
domestic sugar producers
________ can occur when a firm sells its goods in a foreign market at a price below what it charges in its home market.
dumping
Another term for neomercantilism is ________.
economic nationalism
A(n) ________ is an absolute ban on the exporting and importing of goods to a particular destination.
embargo
Which of the following is an instrument that governments use to promote trade?
export financing
Which of the following financial companies in the United States is involved in activities of selling of goods abroad, and offers insurance on foreign accounts receivable?
export import bank
Which of the following financial companies in the United States is involved in activities of selling of goods abroad, and offers insurance on foreign accounts receivable?
export-import bank
A common market area is the greatest extent of national integration.
false
According to the eclectic theory that explains FDI, an ownership advantage is the advantage that arises from internalizing a business activity rather than leaving it to a relatively inefficient market.
false
According to the international product life cycle theory, the innovating firm's country is primarily an exporter of the product in all three stages.
false
According to the market imperfections theory, competition is a common market imperfection.
false
All factors of production are internationally mobile.
false
An absolute advantage is the economic and strategic advantage gained by being the first company to enter an industry.
false
An import tariff is levied by the government of a country that a product is passing through on its way to its final destination.
false
Companies that belong to a nation's internationally competitive industries exist in isolation from supporting industries.
false
In a customs union, each country can maintain whatever policy it sees fit against nonmember countries.
false
Mercantilism views competition for the world's wealth as a positive-sum game.
false
The automobile industry is typically protected for national security reasons.
false
The greatest benefit of regional integration is trade diversion.
false
The major purpose of foreign trade zones is to implement barriers to trade and commerce.
false
The value of trade passing through the borders of all countries always exceeds the amount of goods and services they produce.
false
Today, the Southern Common Market acts as a political union.
false
Trade deficit occurs when the value of a country's exports is greater than the value of its imports.
false
Scenario: Global Manufacturing Inc. (GMI) Global Manufacturing Inc., a fast-growing U.S. company, plans for a production system in which two components of its product will be manufactured in locations where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI plans to purchase an existing company in Brazil to produce component A and build a subsidiary in Thailand to produce component B. GMI's investments are examples of ________.
foreign direct investment
Which of the following is recorded in the capital account of a country's balance of payments?
foreign official assets
The extension of a company's activities into stages of production that absorb the company's outputs is known as ________.
forward integration
Countries belonging to a ________ maintain whatever policies they see fit against nonmember countries.
free trade area
The term protectionism, when applied to international trade, refers to ________.
governmental restrictions and competitive support actions to affect trade flows
The most common tariffs used today are the ________ tariffs.
import
According to the ________ argument, as an industry grows and matures, it gains the knowledge it needs to become more innovative, efficient, and competitive.
infant industry
The term ________ refers to the voluntary exchange of goods, services, assets, or money between one person or organization and another across national borders.
international trade
Which of the following is a method of restricting trade?
local content requirements
According to the international product life cycle theory, in which stage of a product's life cycle does a company directly invest in production facilities in countries where demand is great enough to warrant production facilities?
maturing product stage
The measures of a nation's well-being other than the financial wealth accumulated through exports are irrelevant according to ________.
mercantilism
________ says that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports.
mercantilism
Scenario: Happyland Happyland is a country characterized by beautiful beaches, vast natural resources, and a highly skilled labor force. Happyland is now encouraging foreign direct investment flows. The country has been exporting textiles, computer hardware, and software programs. The net result of the trade is that Happyland exports far more goods and services and receives more income from abroad than it imports and pays abroad. Transactions involving the export of Happyland's textile and computer products are included in its ________ account.
merchandise
The main challenge facing the Caribbean Community and Common Market (CARICOM) is that ________.
most members trade more with nonmembers than they do with each other
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 ________.
neo-mercantilism
During which of the following stages of the international product life cycle theory does high purchasing power and buyer demand in an industrialized nation encourage a company to design and introduce a product concept?
new product stage
Which of the following is the main cultural motive behind government intervention in trade?
protection of national identity
A ________ is a numerical limit on the quantity of a good that may be imported into a country during some time period.
quota
Which of the following would most likely be used as a subsidy to entice firms to locate or expand facilities in a particular community?
reduced utility rates
The process whereby countries in a geographic area cooperate with one another to reduce or eliminate barriers to the international flow of products, people, or capital is called ________.
regional economic integration
Regional economic integration is also referred to as ________.
regionalism
Which of the following do products designated as dual use require before exports can take place?
special government approval
A(n) ________ imposes a low tariff rate on a limited amount of imports of a specified good, but imposes a prohibitively high tariff on the good above that limited amount.
tariff rate quota
Which of the following will add to the cost of an imported product by levying an additional tax upon it?
tariffs
Scenario: Global Manufacturing Inc. (GMI) Global Manufacturing Inc., a fast-growing U.S. company, plans for a production system in which two components of its product will be manufactured in locations where the cost of production is lowest. The components will then be taken to maquiladoras for final assembly. GMI plans to purchase an existing company in Brazil to produce component A and build a subsidiary in Thailand to produce component B. In which of the following accounts would GMI's purchase of the company in Brazil appear?
the capital accounts of Brazil and the United States
Which of the following is an important goal of regional economic integration?
to raise the living standards of people
Managers should understand the effect of trade protectionism because ________.
trade protectionism may make it difficult for a company to buy what it needs from foreign suppliers
Products manufactured in Brazil are transported through Mexico on their way to England. Mexico applies a tariff on the goods. What type of tariff is implemented by Mexico?
transit tariff
A compound tariff on an imported product is calculated partly as a percentage of its stated price and partly as a specific fee for each unit.
true
A group of nations in a geographic region undergoing economic integration is called a regional trading bloc.
true
According to Adam Smith, international trade should not be restricted by tariffs and quotas in order to give a country an absolute advantage.
true
Companies that belong to a nation's internationally competitive industries exist in isolation from supporting industries.
true
Economist David Ricardo developed the theory of comparative advantage.
true
Factor proportions theory states that a country will produce and export those goods that require resources abundantly available within the country
true
Factor proportions theory states that a country will produce and export those goods that require resources abundantly available within the country.
true
Foreign direct investment is acquisition of foreign assets for the purpose of controlling them.
true
International trade is the purchase, sale, or exchange of goods and services across national borders.
true
Mercantilism states that nations should only concern themselves with accumulating financial wealth.
true
Mercantilist countries used to amass wealth by acquiring less-developed territories around the world.
true
National competitive advantage theory states that a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade.
true
Products that are of use in both industrial and military applications are designated as dual-use products.
true
Restrictions on the convertibility of one currency into others is called currency controls.
true
Tariffs are a source of government revenue mostly among developing nations.
true
Tariffs are taxes placed on goods being imported into a country. A tariff can act as a barrier to trade by increasing the cost of the imported goods to the consumers.
true
The Maastricht Treaty called for political union of the member nations.
true
The North American Free Trade Agreement membership includes Canada, Mexico, and the United States.
true
The ability of a nation to produce a good more efficiently than any other nation is called its absolute advantage.
true
The factor proportions theory of international trade was developed by Heckscher-Ohlin.
true
The increase in the level of trade between nations that results from regional economic integration is called trade creation.
true
The most common economic reasons for nations' attempts to influence international trade are the protection of young industries from competition and the promotion of a strategic trade policy.
true
The pattern of imports and exports that occurs in the absence of trade barriers is called free trade.
true
The theory of absolute advantage destroys the mercantilist idea that international trade is a zero-sum game.
true
The theory of absolute advantage measures a nation's wealth by the standard of living of its people.
true
Trade in services tends to be relatively more important for the world's richest countries.
true
When a company exports a product at a price lower than the price normally charged in its domestic market, it is said to be dumping.
true
When a country's currency is stronger relative to other nations, domestic products are more expensive than imports.
true
Which of the following countries has been facing difficulties in negotiations regarding its application for European Union membership?
turkey
A country imposes a tariff on goods that it sells abroad at the request of another nation. This is an example of a(n) ________.
voluntary export restraint
Countries might impose a(n) ________ in response to the threat of an import quota or total ban on a product by an importing nation.
voluntary export restraint
