International Business Exam 2
Which of the following specifies that U.S. government agencies must give preference to U.S. products when putting contracts for equipment out to bid unless the foreign products have a significant price advantage?
Buy America Act
Which of the following is true of the relationship between trade and economic growth?
Countries open to international trade display higher growth rates than those that close their economies to trade.
What is meant by the term foreign direct investment? Describe the difference between the flow of foreign direct investment and the stock of foreign direct investment.
Foreign direct investment (FDI) occurs when a firm invests directly in facilities to produce or market a product in a foreign country. According to the U.S. Department of Commerce, FDI occurs whenever a U.S. citizen, organization, or affiliated group takes an interest of 10 percent or more in a foreign business entity. Once a firm undertakes FDI, it becomes a multinational enterprise. The flow of foreign direct investment refers to the amount of FDI undertaken over a given period (normally a year). The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.
What is meant by the term free trade? Is free trade compatible with the concept of mercantilism?
Free trade refers to the absence of government barriers to the free flow of goods and services between countries. Free trade refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country. The concept of mercantilism is not compatible with the concept of free trade. The main tenet of mercantilism is that it is in a country's best interests to maintain a trade surplus by exporting more than it imports. Consistent with this belief, the mercantilist doctrine advocated government intervention to achieve a surplus in the balance of trade through policies to maximize exports and minimize imports. To achieve this, imports were limited by tariffs and quotas, while exports were subsidized.
The WTO's Agreement on which of the following is an attempt to narrow the gaps in the way intellectual property rights are protected around the world and to bring them under common international rules?
Trade-Related Aspects of Intellectual Property Rights (TRIPS)
Which of the following statements is true about voluntary export restraints (VERs)?
When imports are limited to a low percentage of the market by a VER, the price is bid up for that limited foreign supply.
Which of the following are bureaucratic rules designed to make it difficult for imports to enter a country?
administrative trade policies
The argument for unrestricted free trade is that both import controls and export incentives
are self-defeating and result in wasted resources.
Businesses can make sure that they are hiring individuals with strong personal ethics by
asking for letters of reference from the prospective employees.
Which of the following is most likely to be a function of ethics officers in firms?
auditing decisions to make sure they are consistent with the company's moral principles
Which of the following are national accounts that track both payments to and receipts from other countries?
balance-of-payments
Which of the following refers to 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
Which of the following components of Porter's diamond is particularly important in shaping the attributes of domestically made products and in creating pressures for innovation and quality?
demand conditions
According to the product life-cycle theory, the high cost of U.S. labor gave U.S. firms an incentive to
develop cost-saving process innovations.
Direct effects of FDI on employment in the host country arise when a foreign MNE
employs a number of host country citizens.
Which of the following refers to accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization?
ethics
The strategic behavior theory is used to
explain the patterns of FDI flows based on the idea that FDI flows are a reflection of strategic rivalry between firms in the global marketplace.
The economic and strategic advantages that accrue to early entrants in an industry are called
first-mover advantages.
According to the U.S. Department of Commerce, which of the following, occurs whenever a U.S. citizen, organization, or affiliated group takes an interest of 10 percent or more in a foreign business entity?
foreign direct investment
General Electric (GE) built an operation from scratch in Nigeria. This is an example of a(n)
greenfield investment.
What is the result of the threat of antidumping action?
limits the ability of a firm to use aggressive pricing to gain market share in a country
Which of the following asserts that countries should simultaneously encourage exports and discourage imports?
mercantilism
The term global commons refers to
natural resources from which everyone benefits but for which no one is specifically responsible.
The code of ethics of a company draws heavily upon documents such as the UN Universal Declaration of Human Rights, which itself is grounded in Kantian and rights-based theories of moral philosophy. In the context of this information, this company is most likely to
respect the dignity of an individual and the right of employees to freedom of association.
Which of the following is the term for when a lower tariff rate is applied to imports within the quota than those over the quota?
tariff rate quota
A firm is most likely to favor foreign direct investment over exporting when
the firm wishes to maintain control over its operations and business strategy.
Vernon theorizes that as the market in the United States and other advanced nations matures
the product becomes more standardized, and price becomes the main competitive weapon.
A current account deficit is also known as a(n)
trade deficit
By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.
true
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.
true
Subsidies are a trade policy instrument.
true
The concept of corporate social responsibility (CSR) refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions.
true
The indirect employment effects of FDI are often as large as, if not larger than, the direct effects.
true
The stock of foreign direct investment refers to the total accumulated value of foreign-owned assets at a given time.
true
The term ethics refers to accepted principles of right or wrong that govern the conduct of a person, the members of a profession, or the actions of an organization.
true
Which of the following best indicates the motive for foreign firms to engage in dumping?
unloading excess production in foreign markets
Which of the following approaches to ethics holds that an action is judged desirable if it leads to the best possible balance of good consequences over bad consequences?
utilitarian
Which of the following suggests that consumers in all nations can consume more if there are no restrictions on trade?
Ricardo's theory of comparative advantage
Free trade is likely to increase a country's stock of resources and the efficiency with which it utilizes those resources.
TRUE
In stating that all human beings are born free and equal in dignity and rights and that they are endowed with reason and conscience and should act toward one another in a spirit of brotherhood, Article 1 of the Universal Declaration of Human Rights echoes
Kantian ethics.
Why are home-country managers working abroad in multinational firms (expatriate managers) likely to experience more than the usual degree of pressure to violate their personal ethics?
Home-country managers working abroad in multinational firms (expatriate managers) may experience more than the usual degree of pressure to violate their personal ethics. They are away from their ordinary social context and supporting culture, and they are psychologically and geographically distant from the parent company. They may be based in a culture that does not place the same value on ethical norms important in the manager's home country, and they may be surrounded by local employees who have less rigorous ethical standards. The parent company may pressure expatriate managers to meet unrealistic goals that can only be fulfilled by cutting corners or acting unethically. For example, to meet centrally mandated performance goals, expatriate managers might give bribes to win contracts or might implement working conditions and environmental controls that are below minimal acceptable standards. Local managers might encourage the expatriate to adopt such behavior. Due to its geographical distance, the parent company may be unable to see how expatriate managers are meeting goals or may choose not to see how they are doing so, allowing such behavior to flourish and persist.
Which of the following statements is true about import quotas?
Import quotas benefit domestic producers by limiting import competition.
Explain with an example the administrative trade policies used by governments in addition to the formal instruments of trade policy.
In addition to the formal instruments of trade policy, governments of all types sometimes use informal or administrative policies to restrict imports and boost exports. Administrative trade policies are bureaucratic rules designed to make it difficult for imports to enter a country. It has been argued that the Japanese are the masters of this trade barrier. In recent decades, Japan's formal tariff and nontariff barriers have been among the lowest in the world. However, critics charge that the country's informal administrative barriers to imports more than compensate for this. For example, at one point the Netherlands exported tulip bulbs to almost every country in the world except Japan. In Japan, customs inspectors insisted on checking every tulip bulb by cutting it vertically down the middle, and even Japanese ingenuity could not put them back together. Federal Express also initially had a tough time expanding its global express shipping services into Japan because Japanese customs inspectors insist on opening a large proportion of express packages to check for pornography, a process that delayed an "express" package for days. As with all instruments of trade policy, administrative instruments benefit producers and hurt consumers, who are denied access to possibly superior foreign products.
If a company were to draw from the ideas proposed in the various theories of international trade, from a profit perspective, how would it go about selecting locations for its businesses?
It would disperse its productive activities to those countries where they can be performed most efficiently.
