CBA-396 International Business Test #2 JSU (Lenn Rainwater)

Why is it said that not all the new jobs created by FDI represent net additions in employment?

Because jobs created by an investment may be offset by the jobs lost in domestic companies

Economist Paul Krugman suggests that strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that _____.

Boosts national income at the expense of other countries

According to the Friedman doctrine, _____.

Businesses should not undertake social expenditures beyond those mandated by the law and required for the efficient running of a business

Which of the following is a way in which governments increase the attractiveness of FDI and licensing relative to exporting?

By implementing import quotas

Porter contends that government _____.

Can influence each of the four components of the diamond either positively or negatively

Strategic trade policy suggests that in industries where the existence of substantial scale economies implies that the world will profitably support only a few firms, countries may predominate in the export of certain products simply because they had firms that were able to _____.

Capture first-mover advantages

According to the infant industry argument, many developing countries have a potential _____ in manufacturing, but new manufacturing industries cannot initially compete with established industries in developed countries.

Comparative advantage

Free trade as a government policy was first officially embraced by Great Britain in 1846, when the British Parliament repealed a law that placed a high tariff on _____.

Corn

Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith's theory of absolute advantage?

Country A should import product X from Country B and it should not attempt to produce it at home

A multinational company is accused of paying bribes to the government of a host country to obtain permission to build a production factory. The public relations manager of the company defends the company's actions as being ethically sound; he states that in the host country, paying bribes to government officials is the accepted norm and is in keeping with the social practices in the host country. The public relations manager is using which of the following philosophical doctrines to defend the actions of the company?

Cultural relativism

If the FDI is a substitute for imports of goods or services, the effect can be to improve the _____ of the host country's balance of payments.

Current account

Which of the following is an example of an external stakeholder?

Customers

The simple comparative advantage model assumed that trade _____.

Does not change a country's stock of resources

A company that sells its product in a foreign market below the cost of production may be accused of _____.

Dumping

In 1997, two South Korean manufacturers of semiconductors, LG Semicon and Hyundai Electronics, were accused of selling dynamic random access memory chips (DRAMs) in the U.S. market at below their costs of production. It was alleged that the firms were trying to unload their excess production in the United States. This is an example of _____.

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

The _____ suggests that a firm will establish production facilities where foreign assets or resource endowments that are important to the firm are located.

Eclectic paradigm

Walmart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors. This allows Walmart to offer greater discounts to its customers. In this case, Walmart benefits from _____.

Economies of scale

Which of the following observations about tariffs is true?

Export tariffs are used to raise revenue for the government

The Heckscher-Ohlin theory predicts that countries will _____.

Export those goods that make intensive use of factors that are locally abundant

The WTO's GATS has taken the lead in _____.

Extending free trade agreements to services

A firm's _____ include customers, suppliers, and lenders.

External stakeholders

The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions excludes _____.

Facilitating payments made to expedite routine government action

A firm's organizational culture refers to the values and norms that are shared among employees of an organization and those outside the organization.

False

A manager from the United States is sent to Nigeria to supervise the construction of a road. As a righteous moralist, he is likely to learn the ethics and values of Nigeria and follow them, even if they don't concur with his own.

False

According to the pragmatic nationalistic view, the MNE is a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries.

False

Because licensing is more costly and more risky than FDI, other things being equal, the theories argue that FDI is preferable to licensing.

False

Corporations can contribute to the global tragedy of the commons by not pumping pollutants into the atmosphere or dumping them in oceans or rivers.

False

Cultural relativism suggests that even if slavery is culturally acceptable in a country, a foreign firm operating in that country should avoid using slave labor.

False

Diminishing returns show that it is feasible for a country to specialize to the degree suggested by the simple Ricardian model.

False

Direct effects of FDI arise when jobs are created in local suppliers as a result of the FDI and when jobs are created because of increased local spending by employees of the MNE.

False

During the 1980s and early 1990s, the world trading system erected by the GATT gained momentum as protectionist demands generally decreased across the world.

False

Ethical strategies are the accepted principles of right or wrong governing the conduct of businesspeople.

False

For the home country, the current account of the balance of payments improves if the purpose of the foreign investment is to serve the home market from a low-cost production location.

False

GATT has not recognized the infant industry argument as a legitimate reason for protectionism.

False

Governments normally are concerned when their country is running a surplus on the current account of their balance of payments.

False

Heckscher-Ohlin theory stresses that comparative advantage arises from differences in productivity.

False

International businesses cannot gain economic advantages by making payments to corrupt government officials.

False

Licensing involves the establishment of a new operation in a foreign country.

False

Licensing is usually a good option for firms in high-tech industries where protecting firm-specific expertise is of paramount importance.

False

Mercantilist doctrine advocates unrestricted free trade between countries.

False

One of the successful outcomes of the Doha Round negotiations has been that many nations have proceeded with bilateral free trade agreements.

False

One way countries have encouraged firms to undertake FDI is through double taxation.

False

Porter's theory of national competitive advantage recommends unrestricted free trade between countries.

False

Protecting industries deemed important for national security and retaliating against unfair foreign competition are economic arguments for government intervention.

False

Resources always move easily from one economic activity to another.

False

Rivals rarely imitate what a firm does in an oligopoly.

False

Societal business ethics are divorced from personal ethics.

False

Tariff barriers lower the costs of exporting products to a country.

False

Tariffs are generally pro-consumer and anti-producer.

False

Tariffs on industrial goods remain higher than tariffs on services.

False

The British advanced corporation tax system taxed British companies' foreign earnings at a higher rate than their domestic earnings. This tax code created an incentive for British companies to invest abroad.

False

The Friedman doctrine is the belief that ethics are nothing more than a reflection of culture and therefore, a firm should adopt the ethics of the culture in which it is operating.

False

The WTO does not have the power to impose trade sanctions.

False

The ethical obligations of a multinational corporation toward employment conditions, human rights, environmental pollution, and the use of power are always clear-cut.

False

The infant industry argument is the latest argument for government intervention in trade.

False

The utilitarian approach to ethics is a straw man approach to business ethics that has some inherent value, but is unsatisfactory in important ways.

False

To establish moral intent, managers need to stand in the shoes of a stakeholder and ask how a proposed decision might impact that stakeholder.

False

To foster ethical behavior, many businesses draft a code of ethics which is an informal statement of the ethical priorities the company follows.

False

Trade wars benefit countries with interventionist governments.

False

Under a tariff rate quota, a higher tariff rate is applied to imports within the quota than those over the quota.

False

Unlike other trade policies, local content regulations tend to benefit consumers and not producers.

False

XYZ Toys manufactures and sells small quantities of each of its products, but it can still benefit from economies of scale.

False

What primarily explains why developing nations are characterized by a lower percentage of cross-border mergers and acquisitions compared to developed nations?

Fewer target firms to acquire in developing nations

_____ gives a firm tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability.

Foreign direct investment

Which of the following refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country?

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.

Free trade

________ in agriculture could jump-start economic growth among the world's poorer nations and alleviate global poverty.

Free trade

An international U.S.-based company sets up a production unit in a developing country with poor environmental regulations. This contributes to the _____.

Global tragedy of the commons

According to the strategic trade policy argument, _____.

Government support can help domestic firms overcome the first-mover advantages enjoyed by foreign competitors

Factor endowments refer to the extent to which a country _____.

Has such resources as land, labor, and capital.

When transportation costs are added to production costs, it becomes unprofitable to ship some products over a large distance. This is particularly true of products that _____.

Have a low value-to-weight ratio

Which of the following is a direct consequence of the interdependence between firms in an oligopoly?

Imitative behavior

According to the _____ argument, governments should temporarily support new industries until they have grown strong enough to meet international competition.

Infant industry

Which of the following is a major benefit of engaging in free trade?

It gives countries access to products that they cannot produce

Which of the following is a drawback of government intervention?

It may invite retaliation and trigger a trade war

Licensing would be a good option for firms in which of the following industries?

It would be a good option in fragmented, low-technology industries in which globally dispersed manufacturing is not an option

A French wind power company gives an Indonesian company the right to produce and sell wind turbines in return for a royalty fee on every unit sold. Which business practice is this an example of?

Licensing

As transportation costs or trade barriers increase, exporting becomes unprofitable, and the choice is between FDI and _____.

Licensing

Tariff rate quotas are common in agriculture, where their goal is to _____.

Limit imports over quota

The majority of cross-border investment in the developed world is in the form of _____.

Mergers and acquisitions

Companies can strengthen the _____ of employees by committing themselves to not retaliate against employees who complain about unethical actions.

Moral courage

Which of the following enables managers to walk away from a decision that is profitable, but unethical?

Moral courage

_____ enables managers to walk away from a decision that is profitable but unethical.

Moral courage

Diminishing returns to specialization occur when _____.

More units of resources are required to produce each additional unit

A _____ asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.

Naive immoralist

_____ stresses that in some cases countries specialize in the production and export of particular products because the world market can support only a limited number of firms.

New trade theory

Which of the following is true regarding Porter's diamond theory?

Porter's theory has not been subjected to detailed empirical testing, so we do not know if it is correct.

The theory of comparative advantage suggests that trade is a _____ game in which all countries that participate realize economic gains.

Positive-sum

The country of Manystan has adopted neither a radical policy nor a free market policy, but rather one that posits that FDI has both benefits and costs. This is best described as _____.

Pragmatic nationalism

The _____ theory was based on the observation that for most of the twentieth century a very large proportion of the world's new products had been developed by U.S. firms and sold first in the U.S. market.

Product life-cycle

Local content regulations _____.

Protect domestic producers by limiting foreign competition

Which of the following is a reason managers working abroad in multinational firms may behave in a manner that is unethical?

Psychological and geographical distances of a foreign subsidiary from the home office

What is the primary reason Africa has attracted FDI in recent years?

Raw material availability

Business ethics that either deny the value of business ethics or apply the concept in a very unsatisfactory way are termed _____.

Straw man

An Italian car manufacturer purchases a U.S. producer of car tires. This is an example of _____.

An acquisition

Josiah was managing a factory in India, and had a decision to make. The factory used child labor, which he disapproved of, but he knew the families of these children might starve without their income. This situation, in which none of the available alternatives seems morally acceptable, is called _____.

An ethical dilemma

Which of the following best describes an industry composed of a limited number of large firms?

An oligopoly

External stakeholders _____.

Are typically customers, suppliers, lenders, etc.

Which of the following was designed to allow GM to operate ethically in South Africa as long as the company did not obey the apartheid laws in its own South African operations?

Sullivan principles

Which of the following is one of the main instruments of trade policy?

Tariffs

After the Uruguay Round of GATT negotiations extended global trading rules to cover trade in services, the first two industries targeted for reform by the WTO were _____.

Telecommunications and financial services

According to the _____, the social responsibility of business is to increase profits, so long as the company stays within the rules of law.

The Friedman doctrine

One of the advantages of being the first mover in a market is _____.

The ability to capture scale economies ahead of later entrants

If foreigners suddenly reduced their investments in the United States, what would happen?

The foreigners would sell U.S. dollars for another currency

In the international business setting, one of the most common ethical issues involves _____.

The moral obligation of multinational corporations

If, for example, the textile industry in a nation is characterized by vigorous domestic rivalry, which of the following observations of this nation's international competency is most likely to be true?

The nation's textile firms will have a competitive advantage in international trade

Professor Baldwin believes that early in the life cycle of a U.S. product, demand in other advanced countries is limited to high-income groups. Consequently, it is seldom worthwhile for firms in those countries to start producing the product. This view conforms to _____.

The product life-cycle theory

Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics because of which of the following?

They may be based in a culture that does not place the same value on ethical norms important in the manager's home country

Which of the following is a trade barrier that affects a firm's strategy?

To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise

A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.

True

According to Paul Samuelson's critique, a poor country will rapidly improve its productivity if a rich country enters into a free trade agreement with it.

True

According to the new trade theory, firms that establish a first-mover advantage with regard to the production of a particular new product may subsequently dominate global trade in that product.

True

An oligopoly is an industry composed of a limited number of large firms.

True

Antidumping actions are concentrated in certain sectors of the economy such as basic metal industries, chemicals, plastics, and machinery and electrical equipment.

True

Antidumping policies are designed to punish foreign firms that are engaged in dumping.

True

Apple's iPhone was unique when it first came out, with many features that no other phones had. As such, it enjoyed great success and dominated the cell phone market. This demonstrates the first-mover advantage.

True

Building an organization culture that places a high value on ethical behavior requires incentive and reward systems.

True

By placing tariffs on imported goods, governments can increase the cost of exporting relative to foreign direct investment and licensing.

True

Countries adopting a pragmatic stance pursue policies designed to maximize the national benefits and minimize the national costs.

True

Ethical dilemmas are situations in which none of the available alternatives seems ethically acceptable.

True

Ethics officers are hired by many businesses to make sure that all employees are trained to be ethically aware and that ethical considerations enter the business decision-making process at all levels of the organization.

True

Factor endowments refer to the extent to which a country is gifted with such resources as land, labor, and capital.

True

From a profit perspective, it makes sense for firms to disperse their productive activities to those countries where they can be performed most efficiently.

True

Heckscher-Ohlin theory supports the case for unrestricted free trade between nations.

True

In a business setting, noblesse oblige is taken to mean benevolent behavior that is the responsibility of successful enterprises.

True

In general, FDI in the form of greenfield investments should increase competition.

True

John Dunning pioneered the eclectic paradigm.

True

Local content regulations provide protection for a domestic producer of parts by limiting foreign competition.

True

Mergers and acquisitions are quicker to execute than greenfield investments.

True

Milton Friedman's basic position is that the only social responsibility of business is to increase profits, so long as the company stays within the rules of law.

True

New trade theorists stress the role of luck in giving a firm first-mover advantages.

True

Only a few countries have adopted the free market view in its pure form.

True

Research supports the view that multinational firms often transfer significant technology when they invest in a foreign country.

True

Social responsibility refers to the idea that businesspeople should favor decisions that have both good economic and social consequences.

True

Some of the arguments made by the product life-cycle theory seem ethnocentric and increasingly dated when viewed from an Asian or European perspective.

True

Tax concessions, low-interest loans, and grants or subsidies are all incentives that governments offer to foreign firms to invest in their countries.

True

The Foreign Corrupt Practices Act was amended to allow "facilitating payments" to secure contracts that would not otherwise be secured.

True

The Sullivan principles mandated that GM could operate in South Africa as long as the company did not comply with and promoted the abolition of apartheid laws.

True

The TRIPS regulations oblige WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years.

True

The WTO supports the promotion of international trade in services.

True

The World Trade Organization was created as part of the Uruguay Round.

True

The amount of foreign direct investment (FDI) undertaken over a given time period is known as the flow of FDI.

True

The simple model of free trade assumed away transportation costs between countries.

True

The theories of Smith and Ricardo show that a country should engage in international trade, even for products that it is able to produce for itself.

True

To conform to local content regulations, a firm may have to locate more production activities in a given market than it would otherwise.

True

What is considered normal business practice in one country may be considered unethical in other countries.

True

`An individual with a strong sense of personal ethics is less likely to behave in an unethical manner in a business setting.

True

Often, the code of ethics draws heavily upon documents such as the _____, which itself is grounded in Kantian and rights-based theories of moral philosophy.

UN Universal Declaration of Human Rights

The Japanese government was pressured by the U.S. government to place limits on the number of vehicles exported to the United States by Japanese automobile producers in 1981. This is an example of _____.

Voluntary export restraint

A British firm that sets up production units in China is accused of releasing untreated chemical waste into water bodies. The manager of the firm defends the firm stating that, factories in China set up by French and American firms also release untreated chemical waste into water bodies. What approach to business ethics is the manager using?

naive immoralist

Establishing ______ involves a business resolving to place moral concerns ahead of other concerns in cases where either the fundamental rights of stakeholders or key moral principles have been violated.

moral intent

Developing nations currently account for _____ of FDI in the form of cross-border mergers and acquisitions.

About one-third or less

_____ argued that countries should specialize in the production of goods for which they have an absolute advantage.

Adam Smith

Which of the following factors has had a positive effect on the volume of foreign trade investments?

World economy globalization

According to the _____, even if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should maintain the standards of the company's home country.

righteous moralist