eco 103 final
Neomercantilism is a policy that encourages exports, discourages imports, and allows a central government to control large flows of capital. Which of the following countries seem to follow a neomercantilist policy?
China
Assume that the exchange rate between the euro and the dollar is €1.00 = $1.50. An American tourist in Germany is buying a product whose price is €80. How much in U.S. dollars would the tourist have to pay to buy the product?
$120
Steven converted $1,000 to ¥105,000 for a trip to Japan. However, he spent only ¥50,000. During this period, the value of the dollar weakened against the yen. Using a current exchange rate of $1 = ¥100, how many dollars does Steven have left?
$500
Who benefits from the tariffs assessed on SUVs imported to the United States?
Domestic producers
Where has the movement toward regional economic integration been most ambitious?
Europe
A country that relies on the pragmatic nationalist view would say that
FDI should be allowed so long as the benefits outweigh the costs
True or false? Trade creation occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area.
False
________ occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.
A forward exchange
New Trade Theory would suggest that Boeing has stayed out of head-to-head competition with Airbus in the super large capacity aircraft sector because
Airbus was first to market with the Airbus A380 aircraft
Why is there a frostier atmosphere surrounding Chinese acquisitions?
All of the above
If GNI adjusted for cost of living in China is about $13,000 while GNI adjusted for cost of living is about $56,000 in the United States, then
Americans enjoy a higher standard of living
Briefly describe the concept of regional economic integration
An agreement between 2 countries agree to lower trading costs, freely trade with each other, get rid of tariffs, improve the trade environment
The North American Free Trade Agreement (NAFTA) increased the production and sale of automobiles in the United States and Canada as automobile parts were produced in both countries and are now traded freely. In this context, who is likely to support and oppose globalization?
Auto workers and automobile industry CEOs would support globalization.
The Bretton Woods agreement created which two multinational institutions?
International Monetary Fund and the World Bank
What are mini-multinationals?
Medium-sized and small multinationals
Which of the following was used in South Africa to advocate for human rights and undermine apartheid?
Sullivan principles
Bernie Sanders and President Trump both agree that a free trade agreement in the form of the Trans-Pacific Partnership (TPP) is bad for the country. Why?
The agreement is bad for some US workers who would compete with cheaper foreign labor
Using your knowledge of New Trade Theory, choose the reason why Boeing has not challenged Airbus for market share in the super large capacity aircraft sector.
The global market is not big enough to support multiple producers of this type of aircraft
Which of the following is a non-tariff barrier to trade that is becoming more popular?
The use of local content requirements to ensure employment in local or regional communities
Globalization has increased economic production around the world and the world's population follows economic production over time. What have researchers recently suggested about the world's population that we've discussed in class?
The world's population will begin to decline as contraception-use increases in regions of the world with high birth rates.
Based on the information on political economy in the text and the case on Venezuela above, which statement best characterizes the situation in Venezuela?
There is probably a high level of corruption within the government
How have new information and communication technologies, including the Internet, affected the political economy in general?
They have reduced a state's ability to control access to uncensored information
True or false? SUVs imported to the U.S. from Germany are more expensive than other automobiles because they are classified as "light trucks" and subject to a small, chicken-sized tariff.
True
True or false? The use of local content requirements in the USMCA, like a 75% North American content requirement for automobiles, could be considered trade diversion rather than trade creation.
True
Which global institution has focused on making low-interest loans to governments in poor nations that want to make significant infrastructure investments such as building a road or a bridge?
World Bank
Audi is a German automobile manufacturer that has built a new plant in Mexico from the ground up. This is an example of
a Greenfield investment
A strong US dollar is good for
a US company purchasing French sweaters to be sold in the US
Paul Krugman characterizes strategic trade policy as being
a boost to national income at the expense of other countries
A country that has ________ is an unattractive choice for international business.
a closed totalitarian dictatorship
In a floating exchange rate system, a current account deficit is likely to be corrected by
a depreciation in its exchange rate
People in the West tend to associate a representative democracy with
a market economic system
According to research, the net effect of NAFTA on jobs in the United States from about 1993 to 2013 was
a modest overall loss of jobs
Kellen's Karpets is headquartered in Las Vegas, Nevada, and has production plants in Mexico and Indonesia. Kellen's Karpets is an example of
a multinational enterprise
How does the International Monetary Fund (IMF) provide loans to deficit-laden countries
a pool of gold and currencies contributed by its members provides the resources for lending operations
Economic theories for integration imply that free trade and investment create _____ for participants.
a positive-sum game
Nikoli lives in New Salom which specializes in component parts, while its geographical neighbor, Durma specializes in heavy machinery. New Salom exports component parts to Durma, which in turn exports heavy machinery to New Salom. According to the theory of comparative advantage, this mutually beneficial trade relationship best illustrates
a positive-sum game
Countries that receive loans from the IMF are required to
adopt specific economic policies to attain stabilization
A customs union differs from a free trade area because it allows for
adoption of a common external trade policy
One suggestion for helping poor countries enjoy the benefits of free trade is for richer nations to reduce barriers to importing products from those nations particularly for textiles and _____ products.
agricultural
A zero-sum game occurs when
an economic gain by one country results in an economic loss by another
Sun-Yip is the manager of an appliance manufacturing facility in a developing country. This facility does not meet the acceptable standards of the manufacturing facility in his home nation. He knows that demanding a better facility will raise the cost of the appliances that are mainly exported to other less-developed countries. However, he also realizes that by not demanding a better facility, the employees who work there are prone to serious health issues. Sun-Yip is facing
an ethical dilemma
VW's decision to commit significant financial and R&D resources to electric vehicles can best be described as ____ approach to business ethics.
an utilitarian
Under a civil law system, it is the responsibility of a judge only to ___ the law
apply
The U.S. dollar to Euro exchange rate changed from $2.15 per Euro to $1.00 per Euro. This is an example of U.S. dollar
appreciation
Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m. is ¥115 = $1. Rinaldo finds out that the rate quoted in New York at 10:00 a.m. (3:00 p.m. London time) is ¥135 = $1. Rinaldo decides to buy yen in New York and sell it in London. Rinaldo is engaging in
arbitrage
Kendall Wood Products Corp. purchased securities on the London Stock Exchange and then immediately resold them on the New York Stock Exchange at a higher price. The profits from this transaction were used to buy new machinery for the mill. This company engaged in
arbitrage
A country is said to be in _____ when the income its residents earn from exports is equal to the money its residents pay to other countries for imports.
balance-of-trade equilibrium
Traders at a stock exchange notice that five traders on the floor seem to be selling more yen and purchasing more euros because of an expected decline in the yen. As a result, all other traders started to do the same. This is an example of the ________ that creates a self-fulfilling prophecy when the yen does decline in value.
bandwagon effect
When a country specializes in producing a good for which they have a comparative advantage and trades that good, what happens?
both countries are able to consume more than they could before trade
Jerome kew it was wrong for him company to continue ignoring environmental standards set down by the state. Jerome is able to determine this based on
business ethnics
U.S. candy makers have responded to the tariffs and price floor policies that were introduced as temporary measures in the U.S. sugar industry during the 1930s
by moving production to foreign markets
In many of the world's nation-states, there has been a move away from ________ since the late 1980s.
centrally planned command economies
Business executives view foreign direct investment as a way to
circumvent future trade barriers
Democracy, in its purest form, is based on the belief that
citizens should be directly involved in decision making
As a judge in France, Maurice is not allowed to interpret the law but relies on a strict set of codes to determine the outcome of a case. Which type of law is in place in France?
civil law system
An individual's right to do something may be restricted on the grounds that it runs counter to "the good of society" when the political system emphasizes
collectivism
As Japan has become economically richer, there has been a decline in
collectivism
The needs of society as a whole are generally viewed as being more important than individual freedoms when the emphasis is on
collectivism
Which type of economy was found in communist countries where the government determined what would be produced and the price it would be sold for?
command
One disadvantage of a strategic alliance is
competitors gain a low-cost route to new technology and markets
VW's goal of being the world leader in electric vehicles together with its decision to devote large resources to the effort signals
corporate social responsibility
_____ is the idea that businesspeople should consider the social consequences of economic actions when making business decisions, and that there should be a presumption in favor of decisions that have both good economic and social consequences.
corporate social responsibility
According to new trade theory, trade, through its impact on economies of scale, is most likely to
decrease the average costs of goods
In the context of political economy, one notable development of the past 30 years has been the spread of
democracy
What political system has a government that is by the people, exercised either directly or through elected representatives?
democracy
With its goal of offering a complete line of electric cars beginning in 2020, VW is
demonstrating its commitment to pursuing a sustainable strategy
A(n) _____ system refers to one in which a country's currency is nominally allowed to float freely against other currencies but in which the government will intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value.
dirty float
Who are the losers as a result of the tariffs on SUVs imported to the United States?
domestic consumers
The group that benefits the most from receiving subsidies is
domestic producers
If Indonesia exports vast quantities of cheap textiles to Italy, selling them at below their costs of production, it would be an example of
dumping
____ is a variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value
dumping
________ is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value.
dumping
Jeremy reminded the board members that it is important to understand the inflation rate of a country before entering into business. Jeremy is concerned with the ________ risks of doing business.
economic
Within a(n) _____, there is a level of economic integration that involves the use of a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy.
economic union
The ________ shows all of the different positions that a firm can adopt with regard to value creation and low cost assuming that its internal operations are configured adequately to support a particular position.
efficiency frontier
Speed money or grease payments, are payments made to
ensure a business receives the standard treatment that it ought to receive
When Mark Zuckerberg co-founded Facebook, he was acting as a(n) ________ since he was the first to commercialize this innovative new product.
entrepreneur
The ___ refers to systematic reduction to production costs that have been observed over the life of a product
experience curve
The effect of bulky or heavy products on transportation costs can make _______ an inappropriate strategy.
exporting
TickTock Inc., an American watchmaker, makes custom watches in California, which it then ships to Brazil for sale there. Based on this information, TickTock Inc. is involved in
exporting
WoodCore Inc. produces an entire line of office furniture at its manufacturing facility in the United States and then ships its products for sale to various companies in Europe. WoodCore Inc. is involved in
exporting
When a currency depreciates relative to another currency, ________ typically increase.
exports
The labor, energy, land, and capital a country relies on to source goods and services are known as
factors of production
True or False? A shadow economy refers to similar economic activity that takes place in competing nations
false
True or False? According to Adam Smith, government policy should determine a country's imports and exports.
false
True or False? To truly benefit from globalization, a firm needs to be a multinational conglomerate rather than a small or mid-size company.
false
True or false? Mercantilism, propagated in the sixteenth and seventeenth centuries, advocated that countries should discourage exports.
false
True or false? A country in sub-Saharan Africa where people continue to practice subsistence farming is an emerging market.
false
True or false? A country with an absolute advantage is more efficient in producing all goods and does not benefit from trade with a country that is less efficient in producing all goods.
false
True or false? A free trade union like NAFTA and USMCA allows for the free movement of factors of production like labor.
false
True or false? A localization strategy focuses on using mass production of product to meet general tastes preferences
false
True or false? An individual's personal ethical code generally has little influence on their behavior in business.
false
True or false? As a result of globalization, we have been moving toward a world in which national economies are relatively self-contained entities
false
True or false? By the mid-1990s, communism had reached its highest point in history
false
True or false? China is taking steps toward a more democratic political system when they remove presidential term limits.
false
True or false? Economic decline typically follows deregulation and the removal of price controls. This was the case in Germany following World War II.
false
True or false? Following the Arab Spring, Saudi Arabia now has a democratic political system.
false
True or false? In a free trade area, all barriers to the trade of goods and services among member countries are removed and a common external trade policy is adopted.
false
True or false? In a planned economy, there is a great deal of freedom for entrepreneurial activity and reward.
false
True or false? Spot exchange rate and the 30-day forward rates are the same
false
True or false? The United States is he world's largest foreign investor, but other countries typically do not invest in the United States.
false
True or false? The flow of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.
false
True or false? The globalization of the world economy is having a negative effect of the volume of FDI
false
True or false? The globalization of the world economy is having a negative effect on the volume of FDI.
false
True or false? The term political economy is used to stress the fact that the political, economic, and legal systems of a country are independent of each other and do not influence one another.
false
True or false? There is a universal consensus on the definition of culture
false
True or false? To truly benefit from globalization, a firm needs to be a multinational conglomerate rather than a small or mid-size company.
false
True or false? Two identical sweaters are sold for $40 in the United States and 40 Euro in France. The exchange rate of U.S. dollar to Euro is $0.90 for 1 Euro. It is cheaper to pay $40 for the sweater rather than 40 Euro.
false
True or false? We discovered through a class example that trade is a positive-sum game because one country typically benefits from trade while the other is left worse off.
false
True or false? When a firm exports its products to a foreign country, foreign direct investment occurs.
false
Airbus pioneered the development of the new superjumbo jet at a cost of $15 billion. It quickly obtained contracts for much of the 400 units that are expected to be ordered in the next 20 years, thereby effectively shutting out its competitor, Boeing. Airbus benefits from
first-mover advantages
The exchange rate for converting the U.S. dollar into other currencies is continuously adjusted depending on the laws of supply and demand. This illustrates a _____ exchange rate.
floating
A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan. This is an example of:
foreign direct investment
If the firm is facing the threat of trade barriers such as high import tariffs or quotas and the firm has proprietary technology, the firm should consider
foreign direct investment
The ________ view argues that international production should be distributed among countries according to the theory of comparative advantage and countries should specialize in the production of goods they can produce most efficiently.
free market
A nation based on individualism would agree that
free market ideologies should be followed for achieving better standards or living
Alana lives in a country in which the government does not impose quotas on what can be imported or on what businesses can produce and sell to another country. What type of situation does this describe?
free trade
While the countries of Canada and Mexico are committed to removing all barriers to the free flow of goods and services between each other, they are independent in their trade policy dealings with other countries. This represents a(n)
free trade area
What is the shift toward a more integrated and interdependent world economy called?
globalization
Agri-Corp manufactures large farm implements and currently sources component parts for these large machines from fifteen different companies around globe. They use these sources to take advantage of lower costs. This demonstrates the idea of
globalization of production
A payment made to expedite or to secure the performance of a routine governmental action is called a
grease payment
Payments used to ensure receiving the standard treatment that a business ought to receive from a foreign government, but might not due to the obstruction of a foreign official, are called
grease payments
__________ measures the total annual income received by residents of a nation.
gross national income
Jacob is the chief financial officer for RinseAll Detergent products. His company is interested in investing in a facility in Indonesia, but he is worried about unpredictable fluctuations in future exchange rates, which could cost his company millions of dollars. One way to ensure against this exchange risk is for Jacob to use
hedging
Last week, Saturn Tide a U.S.-based energy firm, entered into an agreement with another party to exchange currency and execute the deal in eighteen months. What is Saturn Tide using to insure itself against foreign exchange risk?
hedging
In a social context, the term values is used to describe the
ideas about what a group believes to be good, right, and desirable
A tiny South Pacific island country produces large quantities of coconut-based products. To protect this industry, the island government mandates that only designated trading companies can import the crop, each of which is allocated the right to import a maximum number of pounds of coconuts each year. This is an example of a(n)
import quota
Italy has a direct restriction on the amount of metal products that may be imported into the country. Which instrument of trade policy does this reflect?
import quota
Some countries limit the amount of sugar that can be imported. This restriction is called a(n)
import quota
When a currency appreciates relative to another currency, ________ typically increase.
imports
The government of Alfon believes that its citizens should have complete freedom in their economic and political pursuits, and the Alfon ideology is "private profit over public good". In this context, it can be said that Alfon follows the philosophy of
individualism
When Aristotle said that private property is more highly productive than communal property, he was advocating for
individualism
The ________ argument was proposed by Alexander Hamilton in 1792 and is by far the oldest economic argument for government intervention.
infant industry
Traditional grocery stores now have to compete with Amazon's front-door delivery services. As a result, many grocery stores now offer online ordering and home home delivery. This new strategy is an example of
innovation
The practices of bribery
is a normal part of business in some countries
Which of the following is a criticism of the "infant industry argument".
it could be used by companies to receive preferential government treatment an to never "grow up"
The U.S. President has renegotiated NAFTA to save more jobs in the United States. One criticism of the new USMCA agreement is
it includes local-content requirements which could raise the price of goods produced in the United States.
Agri-Cor sells farm equipment throughout the euro zone. The company has noticed that some customers travel to countries where equipment sells for less to obtain a better deal. What implication of adopting the euro as a common currency does this situation demonstrate?
it makes it easier to compare prices across Europe
Mexico agreed to NAFTA after it was determined that the country's oil industry would be controlled by Mexico. Why did Mexico fight for this right?
it wanted to maintain national sovereignty
When it was initially formed, critics of NAFTA worried that
it would result in considerable loss of jobs in the United States
Which ethical approach typically focuses on the attainment of fair and equitable distribution of economic goods and services?
justice theories
Assume that the exchange rate between the U.S. dollar and the Japanese yen is $1 = ¥150. A book that retails for $10 in New York should sell for ¥1,500 in Tokyo, if there are no trade barriers and transportation costs, according to the
law of one price
U.S.-based Centra Corporation is hesitant about entering into a licensing agreement with Fission, Inc., a company from another nation, due to the likelihood that Fission will break a contract or expropriate property rights. What specific type of risk is Centra Corporation trying to avoid?
legal
What is one of the three measures used to determine the Human Development Index (HDI) of a country?
life expectancy at birth
ComTek Limited has an order to sell 50,000 central processing units (CPUs) to Brazil, but the Brazilian government stipulated that 35 percent of the component parts of those CPUs must be produced in Brazil. This stipulation is an example of a(n)
local content requirement
When the management team reviewed its government contract on office furnishing, they noticed that in order to bid on the project, at lead 44 percent of the value of the office furniture had to be produced in the United States. This stipulation is an example of
local content requirement
A(n) ________ focuses on increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets.
localization strategy
Kitchen-Rite believes that by producing its small appliances in Canada, they can take advantage of lower wage rates in that country. By pursuing such a strategy, Kitchen-Rite hopes to realize
location economies
JumpIn Products is a market leader in playground equipment, which is typically large, bulky, and very heavy. In order to compete, JumpIn Products sells its entire line at very low prices. Although its products can be produced anywhere, it is considering exporting as a way to grow in overseas markets. The viability of JumpIn Products' exporting strategy could be constrained by transportation costs, particularly of products that can be produced in almost any location and have a
low value-to-weight ratio
A key advantage of adopting the euro is that it
lowers foreign exchange and hedging costs in Europe
According to the Bretton Woods agreement, the task of the IMF would be to
maintain order in the international monetary system
Which strategy is in a country's best interests, according to the Ain tenet of mercantilism?
maintaining a trade surplus
Which strategy is in a country's best interests, according to the main tenet of mercantilism?
maintaining a trade surplus
The price of a bouquet of tulips in France is 4 euros. Jenna Algren, a frequent international traveler, found that a similar bouquet of tulips cost only 3 euros in Belgium. This demonstrates that the benefit of adopting the euro as a common currency is that it
makes it easier to compare prices across Europe
When Volkswagen decided to cheat emissions controls for their vehicles to give themselves a competitive advantage, then they have chiefly failed in
making corporate social responsibility a cornerstone of enterprise policy
During early globalization efforts, outsourcing was typically confined to _____ activities.
manufacturing
An economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced is called a _____ system.
market
What are the three broad forms of economic systems
market, command, and mixed
As democracy has spread since the 1980s, so has the development of more ____ economies.
market-based
Totalitarian states usually have
media that are heavily censored
Kevin lives in a nation that encourages the production of goods for exporting and to satisfy the needs of the nation's citizens so fewer imports are needed. Which trade theory does this reflect?
mercantilism
The nation of Tazia exports agricultural products and in turn imports products that it does not produce such as computers and electronic devices. As a result, it spends more on imports than it gains from exports. Which perspective would frown on this form of international trade?
mercantilism
Concrete Forms International needs immediate access to steel in order to produce a new product line. It cannot afford to wait and establish a new operation in a foreign country where steel is prevalent, so it decides to purchase an existing company instead. Why did Concrete Forms decide to make this purchase?
mergers and acquisitions are quicker to execute than greenfield investments
Before Hugo Chavez took power in 1999, what type of economic system was in place in in Venezuela?
mixed
When an employee says no to a supervisor because what he or she was asked to do was unethical, it exhibits the employee's
moral courage
________ gives employees the integrity to go public to the media and blow the whistle on persistent unethical behavior in a company.
moral courage
Connor asked the management team to consider how they would feel if they were asked to travel more than 50 miles to get to work—which is what they were asking the management team at the foreign office to do. Connor is relying on ________ to approach this ethical situation.
moral imagination
One of the most controversial aspects of _____ is that it supports government intervention and strategic trade policy.
new trade theory
Subsidies and quotas are examples of ________ barriers a county might impose.
nontariff
The CEO of Gold Chip Software engages in corruption and uses his power in the company to enrich himself and his family members. Consequently, his employees also engage in the same behavior. In this case, the roots of unethical behavior can be traced to
organizational leadership
HealthWise Corporation has developed a new diet supplement to assist with weight loss. Which type of legal protection grants HealthWise Corporation exclusive rights for a defined period to the manufacture, use, or sale of this new diet supplement?
patent
What practice should a company avoid to ensure ethical decision making?
placing its economic interests before its moral principles
The European Parliament plays an important role in the European Union and creates a(n) _____ to coordinate the economic, social, and foreign policy of the member states
political union
The European Parliament plays an important role in the European Union and creates a(n) _____ to coordinate the economic, social, and foreign policy of the member states.
political union
One root cause of unethical behavior in business is
pressure to meet unrealistic performance goals
The Wells Fargo fraud case is a good example of
pressure to meet unrealistic performance goals
In 2017, the Brazilian government transferred the state ownership of the electric company, the airports, highways, and ports to private investors to stimulate the economy. This is an example of
privatization
The sale of state-owned enterprises to independent, nonpublic investors is referred to as
privatization
The rate of return that a firm makes on its invested capital is referred to as
profitability
The tariffs and floor price in the U.S. sugar industry
protect US producers at the expense of US consumers
Which political ideology reflects the idea that a multinational enterprise is an instrument of imperialist domination?
radical view
The six countries on the northern side of the Pacific Rim agreed to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. The agreement among these countries is referred to as
regional economic integration
The Single European Act was put in place in an attempt to
remove all impediment to formation of a single market
In the United States, citizens have the right to elect officials who make decisions on behalf of the public. This practice is the reason the United States is a
representative democracy
A foreign government was not enforcing its intellectual property rights, which resulted in massive copyright infringements. In turn, this was costing US companies millions of dollars in lost sales revenues. To force the country to play by the rules, the United States threatened to impose trade sanctions on a range of imports from the country's businesses. The underlying motive for intervention by the US government was
retaliation
Karl Marx would disagree with what idea
selling state-owned enterprises to private investors
When Wells-Fargo puts pressure on their employees to set their customers up with 8 accounts, then the root of unethical behavior is best described as
setting unrealistic performance goals
A positive economic change from 1960 to 2018 was seen in the
share of world output accounted for by developing nations
Fast food chain restaurants promote different menu choices in different countries depending on a range of factors such as demographics, local taste, income levels, and cultural values. This demonstrates that
significant difference still exist among national markets
What is acting as a deterrent for foreign firms willing to do business with former communist nations of Eastern Europe and central Asia?
signs of growing unrest and totalitarian tendencies seen in these countries
A tax of 32 cents is levied for each pair of eyeglasses imported into a nation. This is an example of a(n)
specific tariff
The rate at which a foreign exchange dealer converts one currency into another currency on a particular day is the
spot exchange rate
A ____ is an individual or group that has an interest or claim in what a company does and how well it performs
stakeholder
An unfavorable environment for innovations and entrepreneurship is the result of
state monopoly in production
DiamondPlus Jewelers currently has $583,000 in foreign-owned assets. This represents the _____ of the company.
stock of FDI
Frisco Corp. and Farren Industries agreed to a short-term contract in which Frisco Corp. would develop the software for Farren Industries to use when selling to the international customer. This short-term agreement is an example of a
strategic alliance
In some years, the U.S. government has paid wheat farmers an additional 50 cents on every bushel of wheat they sell. This money is an example of a(n)
subsidy
Strategies that not only help the multinational firm make good profits, but that do so without harming the environment while simultaneously ensuring that the corporation acts in a socially responsible manner with regard to its stakeholders are called
sustainable strategies
Mexico has raised the taxes on cheeses imported from the United States. These taxes are an example of a(n)
tariff
There are seven main instruments used in trade policy with ___ being the oldest and the simplest.
tariffs
GNI figures are helpful in understanding an economy because they
tell us how poor a country is relative to another
Under the fixed exchange rate regime established at Bretton Woods, _____ served as the reference point for all other currencies.
the US dollar
The movement of traders like a herd, all in the same direction and at the same time, in response to each other's perceived actions, is called
the bandwagon effect
Those who support globalization recognize that while some concessions occur during the process of globalization, ultimately, it still works because
the benefits outweigh the costs.
According to ________, location-specific advantages are of considerable importance in explaining both the rationale for and the direction of foreign direct investment.
the eclectic paradigm
Who benefits from corporate social responsibility?
the local community
In his theory of absolute advantage, Adam Smith advocated that ________ should determine what a country imports and what it exports.
the market mechanism
A number of employees at Sports Plus Inc., which is headquartered in a country where masculinity and power distance are high, do not behave in an ethical manner. In this context, the roots of unethical behavior can be traced to
the societal culture
A firm will favor FDI over exporting as an entry strategy when
the transportation costs or trade barriers are high
The basic message of ____ is that potential world production is greater with unrestricted free trade than it is with restricted trade
theory of comparative advantage
Which of the following is not a reason why governments intervene in trade?
to lower their country's welfare
Gear Electronics used to buy all of its component parts from a local plant in Cleveland, Ohio, but this year it has decided to buy the parts from a lower-cost facility located in Tijuana, Mexico. This is an example of
trade creation
When Boeing, a United States aircraft manufacturer, purchases parts from Mexico at a lower price than the United States because of NAFTA, this is an example of
trade creation
The United States imports sugar from several nations. If the NAFTA agreement caused the United States to import sugar only from Canada, even though it cost more to do so, it would be an example of
trade diversion
True or false? A firm that faces large transportation costs and trade barriers when exporting their goods can evade the costs with foreign direct investment. Group starts
true
True or false? A political union creates a central source for coordinating the economic, social, and foreign policy of member states.
true
True or false? According to Michael Porter, one way to create superior value is to differentiate the product so that consumers are willing to pay a premium price.
true
True or false? According to the free market view, countries should specialize in the production of those goods and services that they can produce most efficiently.
true
True or false? During the late 1980s and early 1990s, many totalitarian governments collapsed and were replaced by democratically elected governments.
true
True or false? FDI can result in a positive contribution to a host economy by supplying capital and technology which boost the country's economy.
true
True or false? FDI outflows are increasing over time
true
True or false? Free trade exists when there is no government influence on what citizens can buy from another country or sell to another country.
true
True or false? Government intervention can be self-defeating because it tends to protect the inefficient rather than help firms become efficient global competitors.
true
True or false? Governments can protect consumers from unsafe products by issuing a limit or a ban on such products.
true
True or false? Historically, most FDI has been directed at the developed nations of the world.
true
True or false? If a country's economy is to sustain long-run economic growth, the business environment must be conductive to the consistent production of product and process innovations and to entrepreneurial activity
true
True or false? If countries are allowed to freely trade with each other, then there are gains from trade in the form of greater consumption
true
True or false? If current trends continue, there will likely be more foreign investment in markets that were previous unavailable to the West. This seems to be the case with Elon Musk's investment in China and Jeff Bezos' investment in India
true
True or false? In general, command and mixed economies failed to deliver the kind of sustained economic performance that was achieved by countries adopting market-based systems
true
True or false? Investor psychology has an effect of short-run exchange rate movements
true
True or false? Many of the ethical issues in international business are rooted in the fact that political systems, law, economic development, and culture vary significantly from nation to nation.
true
True or false? Market-oriented Nordic countries like Sweden have a welfare state and high economic freedom.
true
True or false? NAFTA is a regional economic agreement between the United States, Canada, and Mexico
true
True or false? One criticism of globalization is that falling trade barriers encourage companies to locate manufacturing activities in another country to take advantage of lower wage rates.
true
True or false? One way to assess a political system is by understanding the emphasis on individualism or collectivism
true
True or false? Privatization occurs when state-owned property is transferred into the hands of individuals. Group starts
true
True or false? The WTO, UN, IMF, and CISG are all organizations or conventions that are joined or followed voluntarily.
true
True or false? The World Trade Organization, the International Monetary Fund and its sister institution the World Bank, and the United Nations were all created by voluntary agreement between individual nation-states
true
True or false? The amount of value a firm creates is measured by the difference between its costs of production and the value that consumers perceive in its products.
true
True or false? The information system of a company is an example of a support activity.
true
True or false? Throughout the 1990s, the amount of investment directed at both developed and developing nations increased dramatically
true
True or false? Values and norms make up the culture of a society
true
Saturn Systems Inc., which is headquartered in the United States, has its production plant located in a less-developed country where working conditions are poor. For example, employees work 15-hour shifts, are exposed to toxic chemicals, and are forced to work overtime. What type of behavior is Saturn Systems Inc. Exhibiting?
unethical
Within organizational culture, _____ are abstract ideas about what a group thinks is good, right, and desirable.
values
Which situation poses the greatest problem for international businesses in the long run?
volatility of the global exchange rate regime
Foreign producers agree to ________ imposed by an exporting country because they fear more damaging punitive tariffs or import quotas might follow if they do not.
voluntary export restraints
The practice of "gift giving" between the parties to a business negotiation is considered right and proper in many Asian cultures. However, some Westerners view the practice as a form of bribery, and therefore unethical, particularly if the gifts are substantial. This demonstrates that
what is ethical depends on one's cultural perspective
A situation in which an economic gain by one country results in an economic loss by another is called a
zero-sum game
