BU355 Test 2

The ultimate controlling authority with the EU is the European Council. European Commission. Court of Justice. European Community. European Parliament.

European Council.

________ was a multilateral agreement established in 1947 whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like. Asia-Pacific Economic Cooperation (APEC) North American Free Trade Agreement (NAFTA) General Agreement on Tariffs and Trade (GATT) Smoot-Hawley Act Trans Pacific Partnership (TPP)

General Agreement on Tariffs and Trade (GATT)

How did the Smoot-Hawley Act affect employment? It created more jobs domestically and abroad. It decreased the overall wage rate. It boosted job rates around the world. It did not have any effect on employment. It had a damaging effect on employment abroad.

It had a damaging effect on employment abroad.

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. It makes Europe an optimal currency area. It leads to higher prices in Europe. It decreases competition in Europe. It increases the profit margins of European producers.

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 undermine oil producers in the United States. It believed that without this control, all oil-related jobs would be moved to Canada. It wanted to maintain national sovereignty. It wanted to share in the specialization of production of goods and services. It was the only export the country shared with three European nations.

It wanted to maintain national sovereignty.

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? A greenfield investment will provide quickest access to the steel forms. FDI flows are similar between developed and developing nations. Mergers and acquisitions are quicker to execute than greenfield investments. The higher percentage of mergers and acquisitions in developing nations compared to developed nations indicate the low valuation of target firms in developing countries. It is easier and less risky for a firm to build up through a greenfield investment rather than through acquisitions.

Mergers and acquisitions are quicker to execute than greenfield investments.

The European Community was established by the Maastricht Treaty. Treaty of Lisbon. Treaty of Rome. Single European Act. Treaty of Paris.

Treaty of Rome.

Which organization was created to implement the GATT agreement? World Trade Organization United Nations World Bank International Monetary Fund Department of Justice

World Trade Organization

Paul Krugman characterizes strategic trade policy as being similar to the infant industry argument. a boost to national income at the expense of other countries. the closest that countries can get to free trade. a way to reduce the possibility of retaliatory actions by other governments. a way to reduce administrative barriers to trade.

a boost to national income at the expense of other countries.

A(n) ________ has no barriers to trade among member countries, includes a common external trade policy, and allows factors of production to move freely among members, but does not have a common currency. common market economic union free trade area customs union political union

common market

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 licensing. exporting. franchising. outsourcing. using a greenfield investment.

exporting

Burger King licenses its brand name to foreign firms as long as they agree to run their restaurants on exactly the same lines as Burger King restaurants elsewhere in the world. In return, the foreign firms have to pay Burger King a percentage of their profits. This is an example of exporting. strategic alliance. franchising. a greenfield investment. offshoring.

franchising

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 mercantilist pragmatic nationalist conservatist radical

free market

Most economists would agree that the best interests of international business are found in a nation with a laissez-faire policy. command economy. free trade policy. planned economy. mercantilist view.

free trade policy.

One reason the British electorate voted to exit the European Union is because of an increase in ________ within Europe. human rights violations immigration entrepreneurism agriculture prices commodities

immigration

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? voluntary import restraint tariff rate quota export ban import quota quota rent

import quota

High tariff barriers and subsidies in the agricultural industry ultimately lead to the lack of overproduction of products. an increased volume of agricultural trade. increased prices for consumers. stronger competition from foreign suppliers. lower overall prices for the end-user.

increased prices for consumers.

Royal Chocolatier, a British manufacturer of chocolates, granted U.S. company American Candy Inc. the right to produce and sell Royal Chocolatier's products in the United States In return, American Candy Inc. has to pay a royalty fee on every unit sold. According to this information, what is being done by Royal Chocolatier? franchising outsourcing exporting licensing

licensing

When the management team reviewed its government contract on office furnishings, they noticed that in order to bid on the project, at least 44 percent of the value of the office furniture had to be produced in the United States. This stipulation is an example of a(n) antidumping policy. voluntary export restraint. administrative trade policy. local content requirement. ad valorem tariff.

local content requirement.

A country that wants to create the highest level of economic integration would enter into a(n) common market. free trade area. economic union. political union. customs union.

political union.

Ownership restraint is a method of encouraging inward FDI by a host country. restricting inward FDI by a host country. encouraging outward FDI by a home country. restricting outward FDI by a home country. restricting outward FDI by a host country.

restricting inward FDI by a host country.

A firm might justify a preference for licensing over FDI because licensing results in the licensor retaining control over technical know-how. gives the licensor tight control over the operations of the licensee in the foreign nation. allows the firm to take advantage of differences in factor costs across countries. reduces the potential risks of creating a future competitor. results in the licensee bearing the costs and risks.

results in the licensee bearing the costs and risks.

A tax of 32 cents is levied for each pair of eyeglasses imported into a nation. This is an example of a(n) quota rent. specific tariff. ad valorem tariff. import quota. local content requirement.

specific tariff.

An economist would say that the benefits of regional integration are determined by the location of manufacturing facilities. the amount of trade diversion. the formation of a political union. the level of consumer involvement. the amount of trade creation.

the amount of trade creation.

One of the main benefits that FDI provides to the home country is the home country's balance of payments benefits from the inward flow of foreign earnings. FDI benefits the home country by substituting domestic production. FDI increases employment in the home country in the short run. the balance of payments position improves from the initial capital outflow required to finance the FDI. the demand for exports from the home country will reduce in the long run.

the home country's balance of payments benefits from the inward flow of foreign earnings.

The creation of a single market increases price competition for business. In other words, it creates a(n) opportunity. threat. strength. dynamism. weakness.

threat

Licensing is a good option to enter a foreign market when transportation costs are minor. the technical know to be shared is extremely valuable. tight control of the foreign operation is not required. the competitive advantage of a firm is based upon managerial knowledge that is embedded in the routines of the firm. trade barriers between countries are trivial in nature.

tight control of the foreign operation is not required.

The stock of FDI refers to the total accumulated value of foreign-owned assets at a given time. the net position of FDI flows after comparing inflows and outflows during a period. the outflows of FDI from a country. amount of FDI undertaken over a given time period. the inflows of FDI into a country.

total accumulated value of foreign-owned assets at a given time.

Two eastern European countries formed a free trade agreement. As a result, one of the countries that used to produce its own plastic bottles at a higher cost now imports them from the other country at a lower cost. This is an example of trade diversion. dumping. retaliatory trade action. trade creation. a political union.

trade creation.

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 tariff rate quotas quota rents export bans dumping

voluntary export restraints