Exam Two International Business
What were two results of the Smoot-Hawley Act?
1.) US exports declined 2.) Every industry encountered tariff barriers
What are the four approaches the straw men approach of ethics is comprised of?
1.) Cultural Relativism 2.) Friedman doctrine 3.) Righteous Moralist 4.) Naive immoralist
What are two problems with the utilitarian approach to business ethics?
1.) Dealing with Unjust actions even if they benefit the majority of people 2.) Accurately weighing the costs and benefits of a given situation
What two attributes did porter believe are most significant for competitive advantage?
1.) Factor Endowments 2.) Demand Conditions
Which three factors did Micheal Porter point to in his explanation of why some nations achieve international success in particular industries?
1.) Factor Endowments 2.) domestic rivalry 3.) domestic demand
Besides the four broad attributes of a nation that shape the environment in which local firms compete, what additional variables did Porter discuss that can influence the national diamond?
1.) Government 2.) chance events
What are two components of strategic trade policy?
1.) Govts should subsidize promising domestic firms in emerging industries 2.) Govts should intervene to assist firms in overcoming barriers to entry created by foreign firms due to first-mover advantage
What are two drawbacks of government intervention in free trade?
1.) It protects inefficient industries 2.) it invites retaliation and trade wars
What Human Characteristic did Immaneul Kant use as the basis of his ethical theory?
Dignity
What country is pointed to as the master of administrative trade policies?
Japan
Of the following approaches to business ethics, which one do moral philosophers see the least value in
Straw men
Specific tariff
a tax imports that is levied as a fixed charge per unit of an imported good
The WTO is more successful that GATT because the WTO has
enforcement mechanisms that make it more effective
According to Mercantilism, ______________ were the mainstays of national wealth and were essential to business activity
gold and silver
Porter states that the government can
influence each of the four components of the diamond through subsidies, education policies and policies toward capital markets.
Patents, trademarks, and copyrights are designed to protect
intellectual property
Ricardos theory encourages free trade because
it suggest that trade is a positive sum game
A ________ distribution is one that is considered fair and equitable
just
Leontief questioned the validity of the Heckscher-Ohlin theory based on his assumptions that the US would be an exporter of
more capital intensive goods
Sachs and Warner found a strong correlation between how ___________ and the resulting economic growth.
open a country is to international trade
Import quotas are based on the
quantity of a good
noblesse oblige
refers to the moral obligation to act in an honorable and benevolent manner
Personal Ethics
the basic principles and values that govern interactions between individuals
Why do exporting countries agree to impose voluntary export restraints?
to avoid damaging tariffs and import quotas on their products
According to Milton Friedman, what is the social responsibility of a business?
to increase profits
The trade sanctions on Iraq that were imposed in 1991 after the Gulf War are an example of
using trade policy to punish rogue states
Ad valorem is based on the
value of a product
The universal deceleration of human rights has been ratified by
almost every country
A consequence of subsidies paid to companies during difficult economic times is
giving recipients an unfair competitive advantage
Ricardo's theory of comparative advantage states that
it makes sense for a country to specialize in the production of those goods that it produces most effectively and then purchase the goods that it produces less efficiently from other countries, even if this means buying goods from other countries that it could produce more efficiently itself
Dumping
when manufacturers export a product to another country at a price either below the price charged in its home market of below its cost of production
In the first two decades, the WTO has been successful based on what two reasons?
1.) member countries have faith in the WTO's dispute resolution procedures 2.) countries involved in formal procedures for trade disputes have adopted WTO recommendations
Which three industries are more likely to be targeted by anti-dumping actions?
1.) plastics 2.) Chemicals 3.) Basic Metals
Based on the economic analysis of tariffs, it can be said that they are which two of the following?
1.) pro producer 2.) anti consumer
What are two consistent examples of Ricardos theory of comparative advantage
1.) production is greater with unrestricted free trade than it is with restricted trade 2.) even if countries lack an absolute advantage in the production of any good, consumers can still consume more if there are no restrictions on trade
What are two reasons for assuming diminishing returns to specialization
1.) production might draw on marginal resources whose productivity is less than resources initially used 2.) different goods use resources in different proportions
The Uruguay Round started in 1986 and eventually provided for which three of these provisions?
1.) reducing tariffs on manufactured goods 2.) reducing agricultural subsidies 3.) reducing tariffs on industrial goods
Under the umbrella of GATT, the two sister bodies of GATS and TRIPS focus on which two issues?
1.) services 2.) intellectual property
What are two objectives for levying an export tariff?
1.) to raise revenue for the government 2.) to reduce exports from an industry sector, often for political reasons
What are three main instruments of trade policy?
1.) voluntary export restraints 2.) import quotas 3.) subsidies
The main objective of GATT was to
liberalize trade restrictions
Governments implement administrative trade policies that are designed to
make it difficult for imports to enter a country
Which of the following concepts negates the idea that a country can specialize to the degree suggested by the Ricardian model?
Diminishing Returns
Which country was the first to officially follow a policy of free trade in the mid 1800's
Great Britian
Kantian Ethics
Holds that one should always respect the humanity in other and act in accordance with rules that could apply to everyone
Friedman Doctrine
the theory that states the businesses should not incur social expenditures unless required by law or required for the efficient operations of a business
The production possibilities frontier shows
the various combinations of two goods and/or services that can be produced by a country based on available resources
What are three benefits of FDI to a home country?
1.) inward flow of foreign earnings 2.) Foreign subsidiary creates demand for home-country exports 3.) MINE learns skills from exposure to foreign market
According to Heckscher and Ohlin , each country has certain factor endowments. What are two examples
1.) land 2.) Labor
What are the four issues considered a priority on the WTO agenda?
1.) High level of protectionism in agriculture 2.) anti dumping policies 3.) lack of strong protection of intellectual property 4.) high tariff rates on goods and services
What are four determinants of ethical behavior?
1.) Leadership 2.) Personal ethics 3.) Societal culture 4.) organizational culture
What two of the following outcomes typically occur with the implementation of local content regulations?
1.) Local content regulations provide protection for a domestic producer 2.) The restrictions on imports raise the prices of imported components which lead to higher prices for the consumer
A new trade theorists would say that a company should rely on which of the following to gain first-mover advantages?
1.) Luck 2.) innovation 3.) Entrepreneurship
Which two theories provide the moral compass that is important when thinking through the ethical implications of decisions in a systematic way
1.) Rawls theory of justice 2.) Rights theories
What are two examples of advanced factors of production as identified by Porter?
1.) Skilled Labor 2.) Research Facilities
What are the three sources of economies of scale?
1.) The ability of large volume producers to use more effective , specialized employees 2.) Spreading fixed costs over a larger volume 3.) the ability of large volume producers to use more specialized equipment
What are two ways trade barriers hamper a firms productive activities?
1.) They raise the cost of exporting products 2.) Quotas limit the ability to serve a country from outside locales
What are the two types of FDI?
1.) acquisition or merger with an existing foreign firm 2.) establishing a new operation in a foreign market
What positive contributions to a host country can FDI provide?
1.) balance of payment effects 2.) resource transfer effects 3.) economic growth
What does porter label as basic factors of production?
1.) climate 2.) natural resources
What are two examples of external stakeholders?
1.) customers 2.) suppliers
Which groups are positively impacted when an import tariff is enacted?
1.) domestic producers 2.) government
What were the first two industries targeted by the WTO as part of its effort to include regulations governing foreign direct investment?
1.) global telecommunications 2.) financial services
To shift a countrys production possibility frontier outward, which two of the following should take place?
1.) increase the efficiency with which resources are used 2.) increase the stock of a countrys resources
Ethical Strategy
A business strategy that does not violate the accepted principles of right or wrong governing the conduct of business people
What is the focus of justice theories?
A just distribution of economic goods and services
When a company acts in its own self-interest and abuses a resource that isn't owned by anyone, such as a river, it is participating in the
tragedy of the commons
According to economists, if we control the technological impact of productivity, then _________ theory has more predictive power
Heckscher-Ohlin
What is the theory that states that countries will export goods and make intensive use of factor endowments that are abundant in the economy?
Heckscher-Ohlin
What theories concentrate on the fair distribution of economic goods and services in a society?
Justice
What was taking place in South Africa when the apartheid system was dominant?
Mandated segregation between whites and nonwhites
What characteristic helps managers walk away from a decision that is profitable, but not ethical?
Moral Courage
What trade theory explains why countries are trade partners when they are trading similar goods and services?
New Trade
The ethnocentric view that most new products are developed and introduced in the US is a key weakness in the
Product life cycle theory
Which economist was a key figure in the early free trade movement in Great Britain
Ricardo
____________ constrain a firms ability to export its products by raising the price of the exported product, which could put the firm at a competitive disadvantage with domestic firms in that country
Tariff barriers
What international organization is involved in the governing of FDI?
WTO
The Naive Immoralist believes that
if a multinational firm does not follow the ethical norms of the host country, then other multinational firms do not have to follow them
Mercantilism promotes the idea that trade was a zero sum game which means that
a gain by one country results is a loss by another
Mercantilism
a theory of trade that advocates that a country should export more than it imports which would result in the accumulation of gold and silver and increased national wealth and power
What industry tends to benefit the most from subsidies in most countries?
agriculture
Some ethics experts have proposed practical guides or ethical _________ to make ethical decisions in a systematic way.
algorithms
What step in the decision making process if often overlooked by companies?
audit the decision
Tracking its expenditures and its receipts from other countries occurs in a country's
balance of payments account
Product Life Cycle
based on the observation that early in the development of commodity, all the parts and labor come from the area in which it was invented
Many companies develop a formal statement of primary values and ethical standards for employees and managers to follow. This is called a
code of ethics
Countries can use _______________ duties on an offending import to offset dumping.
countervailling
Porter states that firms are typically most sensitive to the needs of their closest customers. He called this
demand conditions
Under new trade theory, as the size of the market increases , companies may be able to develop better
economies of scale
Quota rent provides producers with
extra profit
Tariff rate quotas
permit a specific quantity of imported goods to enter the country under a reduced rate while those exceeding the quantity are charged at a higher rate
Traffic rate quotas
permit a specific quantity of imported goods to enter the country under a reduced rate while those exceeding the quantity are charger at a higher rate
According to the product life cycle, once a product becomes more standardized, the main competitive weapon a company has it _________
price
An Import Quota is a type of trade restriction that
sets a physical limit on the quantity of a product that can be imported into the country in a set period of time
How do facilitating payments benefit a company?
smooths the progress of services to which the business is entitled
A payment which ensures that a business receives the standard treatment that it ought to receive from a foreign government in known as
speed money
Cultural Relativism
the belief that ethics are culturally determined and a firm should adopt the ethics of the country it is doing business in
New Trade Theory
the global market may only be able to support a limited number of firms in industries when the output required to attain economies of scale represents a significant amount of total world demand
What is the main criticism of Mercantilism?
the goal of a constant positive balance of trade is impossible
The Boha Round started in 2001 and continues today to deal with
the issues of agriculture protectionism, protection of intellectual property, and other priorities of the WTO.
