mgmt. 425 test 2 ex questions

The U.S. Department of Commerce sets the threshold at which a company's international capital flow is classified as foreign direct investment (FDI) at ________ of stock ownership in a company.

10 percent

According to the U.S. Commerce Department, a $1.0 billion increase in exports should create how many jobs in the United States?

22800

the us department of commerce estimates that for every 1 billion increase in exports, ____ jobs are created in the us

22800

What two circumstances may cause home country governments to encourage outward foreign direct investment (FDI)?

First, outward foreign direct investment (FDI) can increase the long-term competitiveness of companies. Companies that invest and operate in the most competitive environments worldwide must continuously improve performance and derive technological advantages from alliances formed with other companies. Second, a nation may encourage FDI "sunset" industries, those using outdated and obsolete technologies, or employing low-wage workers with few skills. By allowing some of these jobs to go abroad and retraining workers in higher-paying skilled work, a nation can upgrade its economy toward "sunrise" industries.

The theory of absolute advantage argues that international trade should be ________.

allowed to flow according to market forces

When a country imports more goods and services and pays more abroad than it exports and receives from abroad, it experiences a(n) ________.

current account deficit

t/f It is estimated that 12 million U.S. jobs depend on imports.

false

t/f The international product life cycle theory states that firms undertake foreign direct investment and later export the product as it moves through its life cycle.

false

true /false The theory of comparative advantage states that a country with a comparative advantage in the production of a certain good will produce that good even when barriers to trade exist.

false

which of the following is not a reason why governments impose restrictions on free trade cultural genealogical political economic

genalogical

Why is political union difficult to achieve?

it requires nations to give up a high degree of sovereignty

Which of the following statements about Japan is NOT true?

japan recently embarked on a pan Asian spehere of influece

According to factor proportions theory, a country will specialize in products that require labor if ________.

the cost of the labor is low relative to the cost of land and capital

an estimated 12 million Us jobs depend on exports, and these jobs pay more than jobs not related to international trade true/false

true

t.f An internalization advantage is one that arises from internalizing a business activity rather than leaving it to a relatively inefficient market.

true

Raymond Vernon developed the international product life cycle theory model around the ________.

us

The principle of non-discrimination in trade, called normal trade relations, was carried over from the General Agreement on Tariffs and Trade to the ________.

world trade organization

it is estimated that ___ million us jobs depend on exports

12 million

antidumping versus anticountervailing

An antidumping duty is an additional tariff placed on an imported product that a nation believes is being dumped on its market. Dumping is an act by a company, not a country and thus the WTO cannot punish the country in which the offending company is based. There are no charges of government subsidies. A countervailing duty is an additional tariff placed on an imported product that a nation believes is receiving an unfair subsidy. Unlike dumping, payment of a subsidy is an action by a country, not a company. For this reason the WTO can act against the government that originally paid the subsidy and the government that reacts with a countervailing duty.

Describe the two methods host countries use to restrict incoming foreign direct investment (FDI).

First, host nations can restrict incoming FDI through "ownership restrictions." They can prohibit non-domestic companies from investing in cultural industries and those vital to national security. They may also restrict non-domestic firms to holding less than a 50 percent stake in local firms when they undertake FDI. Second, they can impose "performance demands" that influence how an international company operates in the host nation. These demands may include ensuring that a portion of the product's content originates locally, stipulating the portion of output that must be exported, or requiring that certain technologies be transferred to local businesses.

why do governments intervene in the free flow of trade?

Governments intervene in trade for reasons that are political, (to protect jobs, preserve national security, respond to unfair trade practices of other nations, and gain influence over other nations), economic (to protect infant industries and pursue strategic trade policy), and cultural (to protect national identity).

explain how subsidies promote trade

Subsidies involve financial assistance to domestic producers in the form of cash payments, low-interest loans, tax breaks, product price supports, or some other form. Subsides are intended to assist domestic companies in fending off international competitors. This can mean becoming more competitive in the home market or increasing competitiveness in international markets through exports.

problems with infant industry argument

There are four main problems: (1) It is difficult, if not impossible, for governments to distinguish between industries that are worth protecting and those that are not; (2) Protection can cause firms to become complacent toward innovation; (3) Protection can do more economic harm than good; and (4) Small, promising companies can obtain funding from capital markets more frequently than in the past and thus need to depend less on financial support from their governments.

which of the following is typically proctected for national security reasons

agriculture

Home country incentives to promote outflows of foreign direct investment (FDI) include ________. Insurance to cover the risks of investing abroad Loans to firms wanting to invest abroad Tax breaks on profits earned abroad All of the above

all of above

Which of the following is an assumption of both the absolute and comparative advantage theories? Countries are driven only by the maximization of production and consumption There are no costs for transporting traded goods from one country to another There are only two countries engaged in the production and consumption of just two goods All of the above

all of the above

A ________ is an additional tariff placed on an imported product that a nation believes is being dumped on its market.

antidumping duty

governments impost trade barriers for all of the following reason except a. protect national security b gain influence over other nations c respotn to other nations fair trade practices d to protect jobs

c respond to other nations fair trade practices

Members of a ________ remove all barriers to trade and the movement of labor and capital between themselves but erect a common trade policy against nonmembers.

common market

Suppose country A can produce 10 tons of rice and 2 automobiles with a given amount of labor, and country B can produce 5 tons of rice and 3 automobiles with the same amount of labor. According to the theory of absolute advantage, ________.

country a has an absolute advantage in producing rice

Unwanted cultural influence that occurs through a nation's imports is called ________.

cultural perilism

________ remain the prime destination for foreign direct investment (FDI) because cross-border mergers and acquisitions are concentrated there.

developed countries

Because the formation of trading blocs significantly reduces or eliminates trade barriers among members, the producer of a particular good or service is likely to be the bloc's most ________ producer.

efficient

A ________ is a complete ban on trade (exports and imports) in one or more products with a country.

embargo

When a company's specialized knowledge is ________, the only way to exploit a market opportunity in another nation may be to undertake foreign direct investment (FDI).

embodied in its employees

Nation-states in ________ followed the mercantilist philosophy from about 1500 to the late 1700s.

europe

Around 75 percent of Europe's exports are destined for ________.

european nations

Mercantilism preferred trade to be free from government intervention. true/false

false

The potential to exert influence on internal politics is primarily why the United States maintains its embargo on Nicaragua. true/false

false

t/f Globalization allows companies from only developed countries to undertake foreign direct investment (FDI).

false

t/f If a country's current and capital accounts do not balance, the country is by definition experiencing a current account deficit.

false

true.false The theories of absolute and comparative advantage consider capital and labor the only resources used in the production process.

false

true/false According to comparative advantage theory, if country A has an absolute advantage over country B in the production of all goods, countries A and B will never trade with each other.

false

true/false According to the theory of absolute advantage, gains that countries obtain from trade depend on relative prices of traded goods.

false

true/false An ad valorem tariff is levied as a specific fee for each unit (by number, weight, etc.) of an imported product.

false

true/false Factor proportions theory states that a country specializes in producing and exporting goods in which it is most productive.

false

true/false Governments generally pay for subsidies with funds obtained from sales of government securities.

false

true/false Porter's theory of national competitive advantage argues that government has no role in fostering the national competitiveness of industries.

false

true/false Porter's theory of national competitive advantage tries to explain why some nations trade more than other nations.

false

true/false Home countries typically offer infrastructure improvements to promote outflows of foreign direct investment.

false

true/false Mercantilism destroys the absolute advantage theory argument that international trade is a zero-sum game.

false

true/false The most common cultural motive for government intervention in trade is to preserve national security.

false national identity

The pattern of imports and exports that occurs in the absence of trade barriers is called fair trade. true/false

false free trade

All of the following are drawbacks to strategic trade policy EXCEPT ________. Implementing strategic trade policy can be inefficient and costly Strategic trade policy can be subject to lobbying by industries and may provide little benefit to consumers Firms might become afflicted with a first-mover advantage None of the above

firms might become afflicted with a first mover advantage

A designated geographic region in which merchandise is allowed to pass through with lower customs duties and/or fewer customs procedures is called a ________.

foreign trade zone

the pattern of imports and exports that occur in the absence of trae barriers is called

free trade

Which of the following is considered a government-imposed tax on imports?

import tariff

Which of the following is NOT a conceptual problem of the infant industry argument? Infant industries may become formidable competitors if given time and incentives to grow. Protection can do more economic harm than good. Protection can cause complacency among domestic companies. Governments might not be capable of identifying industries worth protecting.

infant industries may become formidable competitors I given time and incentives to grow

notion that a country's emerging industries need protection from international competition until they become internationally competitive is part of the ________ argument.

infant industry

In the standardized product stage of the international product life cycle, increased competition causes a company to build production capacity in ________.

low cost developing nations

According to mercantilism, the accumulation of wealth depended on ________.

maintaining a nations trade surplus

the trade theory that nations should accumulate financial wealth, usually in form of gold, by encouraging exports and discouraging imports is called

mercantilism

The two main drivers of rising foreign direct investment (FDI) flows over the past decade are globalization and ________.

mergers and acquisitions

Host country incentives to promote inflows of foreign direct investment (FDI) include all of the following EXCEPT ________. Tax incentives Performance demands Low-interest loans Infrastructure improvements

performance demands

when a government intervenes in trade to protect jobs at home, it does so for ___ motives

political

Nations in the European Union (EU) are taking steps toward integrating their economic and political systems, which is called ________.

political union

Investment that does not involve obtaining a degree of control in a company is called ________.

portfolio investment

governments restrict products considered critical during wartime, such as weapons and fuel, to ____

preserve national security

which of the following is a politival motive for government intervention in trade

preserve national security

A group of nations in a geographic region undergoing economic integration is called a ________.

regional trading bloc

products designated as dual use require _____ before export can take place

special government approval

New trade theory states that unit costs of production will be pushed lower as ________.

specialization and output increase

Which of the following is an instrument governments use to promote trade?

subsidies, export financing, and foreign trade zones so all of the above

the condition that results when the value of a countrys imports is greatera than the value of its exports

trade deficit

International trade in services accounts for about 20 percent of total world trade. t.f

true

International trade is the purchase, sale, or exchange of goods and services across national borders. t/f

true

Mercantilist nations believed that international trade was a zero-sum game.

true

The international product life cycle theory is challenged by the fact that more companies are operating in international markets from their inception.

true

t/f A company might undertake foreign direct investment (FDI) to reduce the costs of research and development, production, or distribution.

true

t/f According to the eclectic theory of foreign direct investment, a productive workforce is an acquired form of location advantage.

true

t/f Values, attitudes, and beliefs form the basis for much of a government's position regarding foreign direct investment (FDI).

true

t/f\ Globalization is one of the main reasons for the rising tide of foreign direct investment (FDI).

true

today, world merchandise exports are roughly 9.2 trillion

true

tre/false Host countries might impose ownership restrictions and performance demands to restrict inflows of foreign direct investment.

true

true/false Some countries fiercely protect their agricultural sector for national security reasons.

true

true/false Tariffs can be classified as export tariffs, import tariffs, and transit tariffs.

true

true/false Technologies or products that have both industrial and military applications are called "dual use products."

true

true/false The infant industry argument is based on the idea that young industries need protection because of a steep learning curve.

true

true/false One reason a country imposes an export quota on its domestic producers is to restrict the world supply of a good and thereby increase its international price.

true

What country is the world's largest exporter of services?

us