MGT 4230 Exam 2

The attractiveness of exporting is reduced when a product can easily be produced in almost any location. True /False

TRUE

One root cause of unethical behavior in business is a) a strong sense of personal ethics. b) pressure to meet unrealistic performance goals. c) a societal culture with low power distance. d) management's ability to see beyond economic benefits. e) organization culture that emphasizes business ethics.

b) pressure to meet unrealistic performance goals.

A tax of 14 cents is levied for each ceramic plate imported into a nation. This is an example of a(n) a) quota rent. b) specific tariff. c) ad valorem tariff. d) import quota. e) local content requirement

b) specific tariff.

The threat of antidumping action limits the ability of a firm to

use aggressive pricing to gain market share in a country.

Offshore production refers to FDI undertaken to serve the host market. True /False

FALSE

Subsidies and quotas are examples of __________ barriers a county might impose. a) antidumping b) tariff c) nontariff d) content requirements e) export restraint

c) nontariff

A South American nation has a direct restriction on the amount of vegetables that may be imported into the country. Which instrument of trade policy does this reflect? a) voluntary import restraint b) tariff rate quota c) export ban d) import quota e) quota rent

d) import quota

Dolby Fashion House, an Italian manufacturer of evening dresses, granted U.S. company On the Runway Inc. the right to produce and sell Dolby Fashion's products in the United States. In return, On the Runway Inc. has to pay a royalty fee on every unit sold. According to this information, what form of FDI is Dolby Fashion House using? a) franchising b) outsourcing c) exporting d) licensing e) insourcing

d) licensing

A number of employees at Organic Growers Inc., which is headquartered in a country where masculinity and power distance are high, do not behave in an ethical manner. In this context, the roots of unethical behavior can be traced to a) the organizational culture. b) unrealistic performance goals. c) the legal environment. d) the company's leadership. e) the societal culture.

e) the societal culture.

Mergers and acquisitions are quicker to execute than ________. This is an important consideration in the modern business world where markets evolve very rapidly. Many firms apparently believe that if they do not acquire a desirable target firm, then their global rivals will.

greenfield investments

Ad valorem tariffs are

levied as a proportion of the value of the imported good.

Porter recognizes hierarchies among the factors of production, distinguishing between basic factors (.........?) and advanced factors (.......?).

- e.g., natural resources, climate, location, and demographics) - e.g., communication infrastructure, sophisticated and skilled labor, research facilities, and technological know-how

According to Adam Smith, the _______ and not __________ should determine what a country imports and what it exports.

- invisible hand of the market mechanism - government policy

According to the product life-cycle theory, the locus of global production initially switches from developing countries to other advanced nations and then from those nations to the United States. True /False

FALSE

The threat of antidumping action enhances the ability of a firm to use aggressive pricing to gain market share in a country. True /False

FALSE

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

FALSE

When a firm exports, it need not bear the costs associated with ______, and it can reduce the risks associated with selling abroad by using a native sales agent. Similarly, when a firm allows another enterprise to produce its products under license, the licensee bears the costs or risks.

FDI

A resource-transfer effect of FDI is that it can result in a positive contribution to a host economy by supplying capital and technology which boost the country's economy. True/ False

TRUE

From the perspective of making a profit, it is sensible for a company to disperse production activities to countries where they can be performed most efficiently. True /False

TRUE

In general, tariff rates on manufactured products tend to be much lower than tariff rates on agricultural products. True/ False

TRUE

An import quota is .

a direct restriction on the quantity of some good that may be imported into a country

An oligopoly is an industry composed of

a limited number of large firms (e.g., an industry in which four firms control 80 percent of a domestic market would be defined as an oligopoly).

A common hybrid of a quota and a tariff is known as a tariff rate quota. Under a tariff rate quota,

a lower tariff rate is applied to imports within the quota than those over the quota.

Farm-Supply Inc., which is headquartered in the United States, has its production plant located in a developing country where working conditions are poor. For example, employees work 12-hour shifts, are exposed to toxic chemicals, and are paid extremely low wages. The practices Farm-Supply Inc. is demonstrating could be labeled as a) unethical. b) just. c) uneconomical. d) fair. e) courageous.

a) unethical.

Sun-Jun relies on a cost-benefit analysis to decide if moving operations overseas is better than increasing the size of the current manufacturing facility in the United States. He is using the __________ approach to ethics to determine his answer. a) utilitarian b) Friedman doctrine c) naive moralist d) difference principle e) cultural relativist

a) utilitarian

Business ethics are the

accepted principles of right or wrong governing the conduct of business people, and an ethical strategy is a strategy, or course of action, that does not violate these accepted principles.

Firms in a country can make strategic use of antidumping measures to limit

aggressive competition from low-cost foreign producers.

A country that relies on the pragmatic nationalist view would say that a) international production should be distributed among countries according to the theory of comparative advantage. b) FDI should be allowed so long as the benefits outweigh the costs. c) no country should ever permit foreign corporations to undertake FDI. d) FDI is a benefit to both the source country and the host country. e) the multinational enterprise (MNE) is an instrument of imperialist domination.

b) FDI should be allowed so long as the benefits outweigh the costs.

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

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

Fast Tracker Inc., a U.S.-based company, makes custom wearable fitness trackers in Oregon, which are then shipped to Europe for sale there. Based on this information, Fast Tracker Inc. is involved in a) licensing. b) exporting. c) franchising. d) outsourcing. e) using a greenfield investment.

b) exporting.

Brianna lives in a nation that encourages the production of goods for exporting and to satisfy the needs of the nation's citizens. This results in the nation relying less on importing goods. Which trade theory does this reflect? a) new trade theory b) mercantilism c) theory of comparative advantage d) theory of absolute advantage e) Heckscher-Ohlin theory

b) mercantilism

In his theory of absolute advantage, Adam Smith advocated that __________ should determine what a country imports and what it exports. a) government policy b) the market mechanism c) social mores d) political parties e) foreign entities

b) the market mechanism

Paul Krugman argues that a 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.

If France is more efficient at producing fine wines than other nations, then France has a(n) a) mercantilist advantage. b) first-mover advantage. c) absolute advantage. d) comparative advantage. e) unsustainable advantage

c) absolute advantage.

Tavis lives in southern Florida where there is sufficient land and labor to successfully grow gourds and melons. Heckscher-Ohlin would consider the land and labor to be a) location economics. b) resource allocations. c) factor endowments. d) innovative technologies. e) economies of scale.

c) factor endowments.

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

c) franchising.

Solar Chemical, an industrial cleaning products manufacturing company, has a market share of 30 percent in Brazil. Three of its competitors together control 55 percent of the market. Whenever Solar Chemical raises or lowers the prices of its products, the other three companies quickly imitate its action. What is the market structure of this industry in Brazil? a) fair market b) monopoly c) oligopoly d) perfect competition e) pure competition

c) oligopoly

One reason a government might intervene in foreign trade is to protect consumers from a potentially dangerous product that's being imported. This would be an example of a(n) _____ argument for government intervention. a) economic b) theological c) political d) infant industry e) human rights

c) political

In order to encourage the wine production industry, the Italian government provided lowinterest loans for the purchase of equipment and plants. The government also gave cash grants and made tax reductions. Which instrument of trade policy is being used by the Italian government? a) tariffs b) voluntary export restraints c) subsidies d) local content requirements e) import quotas

c) subsidies

Foreign direct investment can make a positive contribution to a host economy by supplying ..... that would otherwise not be available and thus boost that country's economic growth rate.

capital, technology, and management resources

the following is a cause of unethical behavior: pressure from the parent company to meet unrealistic performance goals that can be attained only by

cutting corners or acting in an unethical manner.

Manny, an American executive, learns that a foreign subsidiary hired a 10-year-old orphan boy to work on the factory floor. He knows that using child labor is in direct violation of the company's own ethical code. At the same time, he does not think that denying the child his only source of income is right. Manny is facing a) the stakeholder doctrine. b) the tragedy of the commons. c) positivity effect. d) an ethical dilemma. e) the sustainability effect.

d) an ethical dilemma.

When the management team reviewed its government contract on office chairs, they noticed that in order to bid on the project, at least 37 percent of the value of the office chairs had to be produced in the United States. This stipulation is an example of a(n) a) antidumping policy. b) voluntary export restraint. c) administrative trade policy. d) local content requirement. e) ad valorem tariff.

d) local content requirement.

Abby asked the management team to consider how they would feel if they were asked to travel more than 65 miles to get to work—which is what they were asking the management team at the foreign office to do. Abby is relying on __________ to approach this ethical situation. a) the naive immoralist approach b) the difference principle c) the Sullivan principle d) moral imagination e) ethnocentrism

d) moral imagination

Which philosophical approach claims that a multinational's home-country standards of ethics are the ones employees should follow even when working in foreign countries? a) Sullivan principles b) cultural relativism c) naive immoralism d) righteous moralism e) Freidman doctrine

d) righteous moralism

Underlying most of the theories we have discussed is the notion that different countries have particular advantages in different productive activities. Thus, from a profit perspective, it makes sense for a firm to

disperse its productive activities to those countries where, according to the theory of international trade, they can be performed most efficiently

According to Porter, which factor endowment would be classified as an advanced factor? a) location b) natural resources c) climate d) demographics e) communication infrastructure

e) communication infrastructure

The government of a South American nation enforces tariffs and quotas to limit imported goods, while exports are subsidized. By using these instruments, the government seeks to achieve a surplus in the balance of trade. Based on this information, which approach is influencing the international trade efforts in this nation? a) product life-cycle theory b) new trade theory c) Heckscher-Ohlin theory d) theory of absolute advantage e) mercantilism

e) mercantilism

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

e) results in the licensee bearing the costs and risks.

A European nation has the world's most efficient computer monitor manufacturing industry, while a country in Central America has the world's most efficient agricultural machines industry. The European nation trades computer monitors with the Central American country in exchange for agricultural machinery. This form of trade between the two countries illustrates a) the product life-cycle theory. b) a zero-sum game. c) the Heckscher-Ohlin theory. d) the mercantilist doctrine. e) the theory of absolute advantage

e) the theory of absolute advantage

In the international business setting, the most common ethical issues involve

employment practices, human rights, environmental regulations, corruption, and the moral obligation of multinational corporations

In this case, employing child labor was not acceptable, but given that she was employed, neither was denying the child her only source of income. this is a situation in which none of the available alternatives seems ethically acceptable; aka an:

ethical dilemma

There are no easy answers to these questions. That is the nature of

ethical dilemmas

the following are a range of issues covered by political arguments for ___________: preserving jobs, protecting industries deemed important for national security, retaliating against unfair foreign competition, protecting consumers from "dangerous" products, furthering the goals of foreign policy, and advancing the human rights of individuals in exporting countries.

government intervention

A subsidy is a

government payment to a domestic producer. Subsidies take many forms, including cash grants, low-interest loans, tax breaks, and government equity participation in domestic firms

Licensing involves

granting a foreign entity (the licensee) the right to produce and sell the firm's product in return for a royalty fee on every unit sold.

The mercantilist doctrine advocated government intervention to achieve a surplus in the balance of trade. The mercantilists saw no virtue in a large volume of trade. Rather, they recommended policies to maximize exports and minimize imports. To achieve this, .....

imports were limited by tariffs and quotas, while exports were subsidized.

A country has an absolute advantage in the production of a product when

it is more efficient than any other country at producing it.

Specific tariffs are

levied as a fixed charge for each unit of a good imported (e.g., $3 per barrel of oil).

With franchising, a firm

licenses its brand name to a foreign firm in return for a percentage of the franchisee's profits. The franchising contract specifies the conditions that the franchisee must fulfill if it is to use the franchisor's brand name.

Franchising is essentially the service-industry version of ________, although it normally involves much longer-term commitments than licensing.

licensing

International trade theory tells us that home-country concerns about the negative economic effects of offshore production may be

misplaced

A critical competitive feature of _________ industries is interdependence of the major players: What one firm does can have an immediate impact on the major competitors, forcing a response in kind. By cutting prices, one firm in this type of industry can take market share away from its competitors, forcing them to respond with similar price cuts to retain their market share.

oligopolistic

In practice, many countries have adopted neither a radical policy nor a free market policy toward FDI but instead a policy that can best be described as ___________. This view is that FDI has both benefits and costs. According to this view, FDI should be allowed so long as the benefits outweigh the costs.

pragmatic nationalism

Exporting involves

producing goods at home and then shipping them to the receiving country for sale

Corporations can contribute to the global tragedy of the commons by moving production to locations where they are free to

pump pollutants into the atmosphere or dump them in oceans or rivers, thereby harming these valuable global commons.

Mercantilism is an economic philosophy advocating that countries should

simultaneously encourage exports and discourage imports.

A local content requirement (LCR) is a requirement that

some specific fraction of a good be produced domestically. The requirement can be expressed either in physical terms (e.g., 75 percent of component parts for this product must be produced locally) or in value terms (e.g., 75 percent of the value of this product must be produced locally).

Firms are typically most sensitive to the needs of their closest customers. Porter argues that a nation's firms gain competitive advantage if their domestic consumers are _________ and _______. Such consumers pressure local firms to meet high standards of product quality and to produce innovative products

sophisticated and demanding

According to Smith with absolute advantage, countries should

specialize in the production of goods for which they have an absolute advantage and then trade these goods for those produced by other countries.

Stakeholder analysis involves a certain amount of what has been called moral imagination. This means

standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder.

A fall in tariff barriers in recent decades has been accompanied by a rise in nontariff barriers, such as

subsidies, quotas, voluntary export restraints, and antidumping duties.

According to the product life-cycle theory, the locus of global production initially switches from

the United States to other advanced nations and then from those nations to developing countries.

Righteous moralism claims that a multinational's home-country standards of ethics are ........... - This approach is typically associated with managers from:

the appropriate ones for companies to follow in foreign countries. --> developed nations

By factor endowments, Heckscher-Ohlin meant

the extent to which a country is endowed with such resources as land, labor, and capital.

the term offshore production refers to FDI undertaken to serve

the home market.

The viability of exporting physical goods is often constrained by _______ and ______.

transportation costs and trade barriers. --> 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 and that can be produced in almost any location.

Custom Cabinetry International needs immediate access to wood in order to produce an order of 50,000 high-end retail display cases by the end of next year. It cannot afford to wait and establish a new operation in a foreign country where this species of wood is prevalent, so it decides to purchase an existing company instead. Why did Custom Cabinetry decide to make this purchase? a) A greenfield investment will provide quickest access to the steel forms. b) FDI flows are similar between developed and developing nations. c) Mergers and acquisitions are quicker to execute than greenfield investments. d) The higher percentage of mergers and acquisitions in developing nations compared to developed nations indicate the low valuation of target firms in developing countries. e) It is easier and less risky for a firm to build up through a greenfield investment rather than through acquisitions.

c) Mergers and acquisitions are quicker to execute than greenfield investments.

Collin knows it is wrong for his company to continue pouring manufacturing waste products into the water system based on environmental standards set down by the state. Collin is demonstrating a lack of a) business strategies. b) business objectives. c) business ethics. d) business development. e) business goals.

c) business ethics.

Aesha works for a moderately priced running shoe manufacturer and while their products are lower in cost, there is a high degree of consumer pressure to create the best quality running shoes possible and to constantly innovate with new designs. Which aspect of Porter's Diamond does this demonstrate? a) factor endowments b) firm structure and rivalry c) demand conditions d) related and supporting industries e) first-mover advantages

c) demand conditions

During the second stage of the ethical decision-making process, managers must determine whether a proposed decision would violate a) home country values. b) utilitarian beliefs. c) the global commons. d) the fundamental rights of any stakeholders. e) a righteous distribution.

d) the fundamental rights of any stakeholders.

Kellen Builders decides to move production to a developing country where they are free to pump pollutants into the atmosphere without legal restriction. By doing this, the company is contributing to a) corporate social responsibility. b) facilitating payments. c) cultural relativism. d) the global tragedy of the commons. e) the difference principle.

d) the global tragedy of the commons.

Another focus of the WTO has been the high level of tariffs and subsidies in the agricultural sector of many economies. Tariff rates on agricultural products are generally

much higher than tariff rates on manufactured products or services.

Many businesses have adopted specific tools such as cost-benefit analysis and risk assessment that are firmly rooted in a ____________ philosophy. Managers often weigh the benefits and costs of an action before deciding whether to pursue it.

utilitarian

Step 2 of the ethical decision-making process involves judging the ethics of the proposed strategic decision, given the information gained in step 1. Managers need to determine whether a proposed decision would

violate the fundamental rights of any stakeholder.