MGT 4230 Exam 2

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.

False

Offshore production refers to FDI undertaken to serve the host market.

False

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

False

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

False

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?

Mergers and acquisitions are quicker to execute then greenfield investments

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

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

True

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

True

Paul Krugman characterizes strategic trade policy as being

a boost to 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)

absolute advantage

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

an ethical dilemma

A firm might justify a preference for licensing over FDI because licensing

results in the license bearing the costs and risks

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

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

unethical

A country that relies on the pragmatic nationalist view would say that

FDI should be allowed so long as the benefits outweigh the costs

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

business ethics

According to Porter, which factor endowment would be classified as an advanced factor?

communication infrastructure

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?

demand conditions

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

exporting

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

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

franchising

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?

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?

licensing

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)

local content requirement

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?

mercantilism

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?

mercantilism

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.

moral imagination

Subsidies and quotas are examples of __________ barriers a county might impose.

nontariff

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?

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.

political

One root cause of unethical behavior in business is

pressure to meet unrealistic performance goals.

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?

righteous moralism

A tax of 14 cents is levied for each ceramic plate imported into a nation. This is an example of a(n)

specific tariff

In order to encourage the wine production industry, the Italian government provided low-interest loans for the purchase of equipment and plants. The government also gave cash grants. Which instrument of trade policy is being used by the Italian government?

subsidies

During the second stage of the ethical decision-making process, managers must determine whether a proposed decision would violate

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

the global tragedy of the commons

In his theory of absolute advantage, Adam Smith advocated that __________ should determine what a country imports and what it exports.

the market mechanism

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

the societal culture

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

the theory of absolute advantage

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.

utilitarian