Chapter 3 Quiz_BSAD 1113

Novakia is a small country that has abundant natural resources. Annually, it exports goods worth $100 billion and imports goods worth $60 billion. Also, its annual revenue through taxes is $80 billion and expenditures total is $100 billion. In this scenario, what is the balance of trade of Novakia?

$40 billion Explanation: In this scenario, the balance of trade of Novakia is $40 billion. A nation's balance of trade is the difference in value between its exports and imports.

From the perspective of the United States, the process of foreign companies transferring tasks and jobs to U.S. companies is called

insourcing Explanation: Although outsourcing has become politically controversial in recent years amid concerns over jobs lost to overseas workers, foreign companies transfer tasks and jobs to U.S. companies-sometimes called insourcing-far more often than U.S. companies outsource tasks and jobs abroad.

China purchases wheat and other food grains from foreign markets. This is called

importing Explanation: If a country purchases wheat and other food grains from foreign markets, it is referred to as importing. Importing is the purchase of goods and services from foreign markets.

Which of the following is true of the North American Free Trade Agreement (NAFTA)?

It simplifies country of origin rules. Explanation: The North American Free Trade Agreement (NAFTA) makes it easier for U.S. businesses to invest in Mexico and Canada; provides protection for intellectual property (of special interest to high-technology and entertainment industries); expands trade by requiring equal treatment of U.S. firms in both countries; and simplifies country-of-origin rules. NAFTA has increased trade between Canada and Mexico.

What would happen if the United States government had to devalue the dollar?

It would lower the cost of American goods abroad. Explanation: If the U.S. government were to devalue the dollar, it would lower the cost of American goods abroad and make trips to the United States less expensive for foreign tourists. Thus, devaluation encourages the sale of domestic goods and tourism.

Which of the following is an example of a global strategy?

Starbucks standardizes its products across the United States and other countries. Explanation: Starbucks standardizing its products across the United States and other countries is an example of a global strategy. Global strategy (globalization) involves standardizing products for the whole world, as if it were a single entity. As it has become a global brand, Starbucks has standardized its products and stores.

Which of the following trade alliances is likely to promote economic cooperation between Australia, Russia, and Thailand?

The Asia-Pacific Economic Cooperation (APEC) Explanation: The Asia-Pacific Economic Cooperation (APEC) promotes open trade and economic and technical cooperation among member nations, which includes Australia, Brunei Darussalam, Canada, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Thailand, and the United States. The alliance has grown to include Chile, China, Hong Kong, China, Mexico, Papua New Guinea, Peru, Russia, Chinese Taipei, and Vietnam.

Which of the following organizations was created in 1995 by the Uruguay Round and is based in Geneva, Switzerland?

The World Trade Organization Explanation: The World Trade Organization (WTO), an international organization dealing with the rules of trade between nations, was created in 1995 by the Uruguay Round. Based in Geneva, Switzerland, the WTO has adopted a leadership role in negotiating trade disputes among nations.

Until recently, the country of United Marva could develop and produce medical devices and equipment more efficiently than other countries, and, in a sense, monopolized the industry. In the medical devices and equipment market, United Marva had a(n) _____ advantage.

absolute Explanation: In the medical equipment market, United Marva had an absolute advantage, which is a monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item. Some nations have a monopoly on the production of a particular resource or product.

The Organization of Petroleum Exporting Countries (OPEC) consists of 12 member countries across three continents. It aims to increase the price of petroleum throughout the world and to maintain high prices. This organization is an example of a

cartel Explanation: The Organization of Petroleum Exporting Countries (OPEC) is an example of a cartel. Political concerns may lead a group of nations to form a cartel, a group of firms or nations that agrees to act as a monopoly and not compete with each other, to generate a competitive advantage in world markets.

A country barters the surplus coffee beans it grows for other agricultural products grown in a neighboring country. There is no exchange of currency between these countries. The type of business arrangement between the two countries can be regarded as a(n)

countertrade arrangement Explanation: The type of business arrangement between the two countries can be regarded as a countertrade agreement, which involves bartering products for other products instead of for currency. Such arrangements are fairly common in international trade.

Companies that want a high degree of control and are willing to invest considerable resources in international business may consider _____ as their method of entry into foreign markets.

direct investment Explanation: Companies that want more control and are willing to invest considerable resources in international business may consider direct investment, the ownership of overseas facilities. Direct investment may involve the development and operation of new facilities or the purchase of all or part of an existing operation in a foreign country.

Betsy's Beads sells its products in foreign markets at $3/pound to gain market share even though it costs the company $4/pound to make the beads. This practice is referred to as

dumping Explanation: This practice is referred to as dumping. One common reason for setting quotas or tariffs is to prohibit dumping, which occurs when a country or business sells products at less than what it costs to produce them.

United Nabvia and Fernsland, two neighboring nations, have some political differences. Thus, United Nabvia has banned the import of wine from Fernsland. This is an example of a(n)

embargo Explanation: This is an example of an embargo. An embargo prohibits trade in a particular product. Embargoes are generally directed at specific goods or countries and may be established for political, economic, health, or religious reasons.

If 1 euro equals 1.26 United States dollars, the ratio between these two currencies can be regarded as their

exchange rate Explanation: The ratio between these two currencies can be regarded as their exchange rate. Exchange rate is the ratio at which one nation's currency can be exchanged for another nation's currency.

In international business, an advantage of trading through an export agent instead of directly is that the company does not have to deal with

foreign currencies Explanation: An advantage of trading through an export agent instead of directly is that the company does not have to deal with foreign currencies or the red tape (paying tariffs and handling paperwork) of international business. Export agents seldom produce goods themselves; instead, they usually handle international transactions for other firms.

A(n) _____ limits the number of units of a particular product that can be imported into a country.

quota Explanation: A quota limits the number of units of a particular product that can be imported into a country. A quota may be established by voluntary agreement or by government decree.

While determining the economic development of a country in terms of infrastructure, the factors to consider are

railroads, hospitals, and highways. Explanation: A country's level of development is determined in part by its infrastructure, the physical facilities that support its economic activities, such as railroads, highways, ports, airfields, utilities and power plants, schools, hospitals, communication systems, and commercial distribution systems.

If a country's annual imports and exports are $320 billion and $280 billion, respectively, the difference between the two is

the balance of trade Explanation: A nation's balance of trade is the difference in value between its exports and imports. Trade deficits are harmful because they can mean the failure of businesses, the loss of jobs, and a lowered standard of living.

A country with a _____ has a favorable balance of payments.

trade surplus Explanation: A country with a trade surplus generally has a favorable balance of payments because it is receiving more money from trade with foreign countries than it is paying out. When a country has a trade deficit, more money flows out of the country than into it.