MKTG CH. 18

51. _____ duties are levied as a percentage of the value of the goods imported. A. Specific B. Protective C. Prohibitive D. Ad valorem E. Compound

Ad valorem

64. A marketer may face lower costs by shipping unassembled goods to a free trade zone (FTZ) in an importing country because: A. locally-produced components may not be used in production. B. wages may be lower in the importing country. C. FTZs levy higher taxes and surcharges on imported goods. D. ocean transportation rates may not be affected by the weight and volume of the components. E. duties may be assessed at a higher rate for unassembled goods.

wages may be lower in the importing country.

54. Which of the following is true of international currencies? A. Exchange rate volatility for international currencies is relatively low. B. There is a benchmark currency in the world against which all other currencies are pegged. C. All major currencies are free floating relative to one another. D. All currencies are fully backed by gold reserves. E. The World Bank mandates a fixed exchange rate regime.

All major currencies are free floating relative to one another.

84. _____ is a typical payment procedure for established customers where the goods are delivered, and the customer is billed on an end-of-the-month basis. A. An open account B. A letter of credit C. A bill of exchange D. Cash in advance E. Forfaiting

An open account

79. _____ are the primary outside source of aid for companies beset by the uncertainty of a countertrade. A. Trade unions B. Barter houses C. Industry associations D. Swap centers E. Satellite towns

Barter houses

82. Which of the following is an example of a price-fixing arrangement? A. Price escalation B. Barter houses C. Letters of credit D. Cartels E. Countertrade

Cartels

77. Which of the following is true of countertrading? A. Frequently there is inadequate time to conduct a market analysis in a countertrade negotiation. B. Identifying countries that have a history of countertrading is one of the major problems with countertrades. C. The use of countertrading to sell a good implies that the demand for the good is highly elastic. D. Countertrading does not benefit countries that face a shortage of hard currencies with which to trade. E. The U.S. dollar is the reserve currency that is used in countertrades.

Frequently there is inadequate time to conduct a market analysis in a countertrade negotiation.

42. Which of the following approaches to pricing is suitable when a company has high variable costs relative to its fixed costs? A. Full-cost pricing B. Marginal-cost pricing C. Cost-plus pricing D. Demand-based pricing E. Premium pricing

Full-cost pricing

62. Which of the following is true of free trade zones (FTZs)? A. In an FTZ, payment of import duties is postponed until the product leaves the FTZ area and enters the country. B. FTZs operate throughout the world, replacing imported goods with domestic goods. C. An FTZ is, in essence, a taxable enclave and considered part of the country as far as import regulations are concerned. D. An FTZ benefits export companies but does not offer any advantages to an importer. E. The creation of FTZs typically increases taxes, duties, surcharges, and freight charges on imported goods.

In an FTZ, payment of import duties is postponed until the product leaves the FTZ area and enters the country.

39. Which of the following characterizes the variable-cost pricing approach? A. In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin. B. This approach insists that no unit of a similar product is different from any other unit in terms of cost. C. This approach insists that each unit must bear its full share of the total fixed and variable cost. D. This approach is suitable when a company has high variable costs relative to its fixed costs. E. In this approach, any contribution to fixed cost after variable costs are covered is profit to the company.

In this approach, any contribution to fixed cost after variable costs are covered is profit to the company.

43. Which of the following is true of the full-cost pricing approach? A. In this approach, any contribution to fixed cost after variable costs are covered is profit to the company. B. In this approach, the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets. C. In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin. D. This approach is a practical approach to pricing when a company has high fixed costs and unused production capacity. E. This approach insists that each unit of a similar product is treated differently in terms of cost.

In this approach, prices are often set on a cost-plus basis, that is, total costs plus a profit margin.

73. Which of the following would be considered an advantage of leasing equipment rather than owning it? A. Lease revenue tends to fluctuate greatly. B. Leased equipment rarely breaks down. C. Leasing helps guarantee better maintenance on overseas equipment. D. Leasing keeps companies from using experimental equipment. E. Leasing is less risky than outright sale of equipment.

Leasing helps guarantee better maintenance on overseas equipment.

40. _____ pricing is a practical approach to pricing when a company has high fixed costs and unused production capacity. A. Full-cost B. Cost-plus C. Marginal-cost D. Demand-based E. Premium

Marginal-cost

87. Which of the following leave(s) sellers in a position where most of the problems of international commercial finance work to their disadvantage? A. Letters of credit B. Dollar drafts C. Forfaiting D. Cash in advance E. Open accounts

Open accounts

35. The Floral Group, an importing organization in New York, has just bought an excessive amount of perfume from perfume manufacturer in Paris. Unknown to the perfume manufacturer, the Floral Group has sold 25 percent of its order to distributors in France that have been unable to purchase any products from the perfume manufacturer. Which of the following best describes the transaction that has just taken place? A. Black-listed importing B. Direct importing C. Circular importing D. Co-mingled importing E. Parallel importing

Parallel importing

49. _____ results from the added costs incurred as a result of exporting products from one country to another. A. Price deflation B. The pricing mechanism C. Price escalation D. Price gouging E. Price fixing

Price escalation

80. Which of the following is essential while making price quotations for international sale? A. Price quotations can be made only if it is shown that prices are lower in the importing country than in the exporting country. B. Price quotations must specify the currency to be used and the credit terms of the transaction. C. The price quotation and contract should define only the quantity of goods and not necessarily the quality. D. Price quotations must be quoted only in terms of electronic trade dollars. E. Price quotations need to specify the transportation charges but need not necessarily state what type of documentation needs to be used.

Price quotations must specify the currency to be used and the credit terms of the transaction.

32. In general, price decisions are viewed in two ways. Which of the following is one of them? A. Pricing depends on factors that are often beyond the control of a company. B. Pricing is more a phenomenon of luck than planning. C. Pricing is an active instrument of accomplishing marketing objectives. D. The less control a company has over the final selling price of a product, the better it is able to achieve its marketing goals. E. The broader the company's product line, the less complex is the process of controlling prices to the end user.

Pricing is an active instrument of accomplishing marketing objectives.

89. Which of the following is true of open accounts? A. Sales on open accounts are very common method of payment in foreign trade. B. Sales on open accounts are generally recommended when special merchandise is ordered by the buyer. C. Sales on open accounts are not generally recommended when there is political unrest in the importer's country. D. When the country of the importer imposes difficult exchange restrictions, the best payment arrangement recommended is open accounts. E. Sales on open accounts are less risky for the seller when it involves new buyers.

Sales on open accounts are not generally recommended when there is political unrest in the importer's country.

78. What do barter houses do? A. Specialize in trading goods acquired through barter arrangements. B. Acquire goods from producers in other countries through barter arrangements. C. Buy and hold bartered goods for resellers. D. Insure any barter goods. E. Auction bartered goods for sellers.

Specialize in trading goods acquired through barter arrangements.

52. _____ are the primary discriminatory tax that must be taken into account in reckoning with foreign competition. A. Transfer taxes B. Tariffs C. Tolls D. Excise taxes E. Inflation taxes

Tariffs

33. Which of the following is true of a company that views prices as an active instrument of accomplishing marketing objectives? A. The company sets prices to achieve specific objectives. B. The company follows market prices to achieve specific objectives. C. The company exports only excess inventory. D. The company views its export sales as an insignificant source of revenue. E. The company places a low priority on foreign business.

The company sets prices to achieve specific objectives.

67. What is the function of a countervailing duty? A. To balance revenues against costs. B. To restrict the amount a country will import. C. To increase revenues from parallel imports. D. To expand the amount a country will import. E. To permit the use of foreign currency within the country.

To restrict the amount a country will import.

59. Lower prices to the buyer may also mean lower tariffs, because most tariffs are levied on a(n) _____ basis. A. specific B. alternative C. accrual D. shorter; lower E. ad valorem

ad valorem

81. In general, the end goal of all _____ is to reduce the impact of price competition or eliminate it. A. reciprocal pricing B. administered pricing activities C. free trade agreements D. export-oriented trade strategies E. price skimming

administered pricing activities

75. The use of countertrade in international trade: A. allows trade with countries short of hard currency. B. reduces a firm's competitive advantage. C. could increase the tax liabilities of trading firms. D. leads to a loss of revenue. E. is considered unethical.

allows trade with countries short of hard currency.

66. One approach to defining the pricing policy of dumping is to say that it is a case where a product is sold in the international market: A. at a price below the cost of production. B. only to those that can pay for it. C. where the demand for the good is higher than in the domestic market. D. at a higher price than in the domestic market. E. at the same price as in the domestic market.

at a price below the cost of production.

83. A _____ exists when various companies producing similar products or services work together to control markets for the types of goods and services they produce. A. cabal B. monopoly C. cartel D. producers' association E. competitive market

cartel

55. When the value of the dollar is weak relative to the buyer's currency, sellers generally employ _____ pricing. A. competition-based B. demand-based C. premium D. psychological E. cost-plus

cost-plus

74. When Polar Inc., an American fast-food company, wanted to market its burgers and fries in France, it was asked to accept French wine in return. This is an example of: A. bargaining. B. countervailing duties. C. buy-back. D. countertrade. E. bribery.

countertrade.

69. For _____ duties to be levied on a good, it must be shown that prices are lower in the importing country than in the exporting country and that producers in the importing country are being directly harmed by dumping. A. countertrade B. domestic protection C. countervailing D. foreign practice E. import restriction

countervailing

53. In a _____ market, it is essential for a company to keep prices low and raise brand value to win the trust of consumers. A. fragmented B. monopolistic C. competitive D. deflationary E. consolidated

deflationary

70. Dumping in the world markets is likely to increase when: A. domestic production capacity is low. B. demand in the home country is low. C. demand in the foreign country is low. D. foreign production capacity is high. E. cost of production is low.

demand in the home country is low.

86. With _____, the seller assumes all risk until the actual dollars are received. A. open accounts B. irrevocable letters of credit C. dollar drafts D. factoring E. forfaiting

dollar drafts

63. By shipping unassembled goods to a free trade zone (FTZ) in an importing country, a marketer can lower costs because: A. labor costs are higher in the importing country. B. the final prices of the good are adjusted for inflation. C. assembled goods qualify for lower freight rates. D. duties are assessed at lower rates for unassembled goods. E. local content used in production is low.

duties are assessed at lower rates for unassembled goods.

36. Since it encourages retailers to stock large assortments of a product, the practice of _____ distribution often creates a favorable condition for parallel importing. A. exclusive B. selective C. intensive D. global E. dual

exclusive

34. A company that views pricing as a static element in a business decision: A. places a high priority on foreign business. B. sets prices to achieve specific objectives such as targeted return on profit. C. customizes its products for the foreign market. D. views domestic sales as an insignificant source of revenue. E. exports only excess inventory.

exports only excess inventory.

90. In _____, a company has an ongoing relationship with a bank that routinely buys its short-term accounts receivable at a discount. A. forfaiting B. factoring C. a barter transaction D. a cash-in-advance transaction E. an open accounts transaction

factoring

88. In a(n) _____, the seller makes a one-time arrangement with a bank or other financial institution to take over responsibility for collecting the account receivable. A. forfaiting transaction B. factoring transaction C. barter transaction D. cash-in-advance payment E. open account

forfaiting transaction

41. In _____ pricing, the philosophy is that no unit of a similar product is different from any other unit in terms of cost and that each unit must bear its full share of the total fixed and variable cost. A. full-cost B. fixed-cost C. variable-cost D. demand-based E. premium

full-cost

85. A(n) _____ means that once the seller has accepted the credit, the buyer cannot alter it in any way without permission of the seller. A. open account B. irrevocable letter of credit C. bill of lading D. bill of exchange E. sales agreement

irrevocable letter of credit

72. An important selling technique to alleviate high prices and capital shortages for capital equipment is the _____ system. A. leasing B. anti-dumping C. direct buy-back D. consignment E. rental

leasing

57. The final price of an imported product is likely to be high if: A. the channels of distribution are short. B. the number of middlemen in distribution channels is low. C. large orders are placed by retailers. D. marketing and distribution channel infrastructures are well developed. E. middleman markups are not standardized.

middleman markups are not standardized.

68. A _____, which restricts the amount a country will import, may be imposed on foreign goods benefiting from subsidies, whether in production, export, or transportation. A. trigger volume B. trigger price C. minimum access volume D. market access opportunity E. substantial cause

minimum access volume

61. Drew's company imports materials and parts into a free trade zone (FTZ) within the United States and then exports finished products to other countries. Her company will: A. incur higher labor costs than other domestic companies. B. not be able to store finished goods with the FTZ. C. have to pay tariffs based on the value of both the parts and materials. D. have to pay tariffs based on the value of the finished products when they leave the country. E. not have to pay tariffs on the imported materials and parts.

not have to pay tariffs on the imported materials and parts.

46. A _____ policy is used to stimulate market and sales growth by deliberately offering products at low prices. A. penetration pricing B. variable-cost pricing C. premium pricing D. price skimming E. full-cost pricing

penetration pricing

76. The crucial problem confronting a seller in a countertrade negotiation is determining the _____ for the goods offered as payment. A. delivery method B. warranties C. insurance premiums D. potential demand E. the cost

potential demand

44. A company uses _____ when the objective is to reach a segment of the market that is relatively price insensitive and thus willing to pay a premium price for the value received. A. penetration pricing B. everyday low pricing C. full-cost pricing D. price skimming E. psychological pricing

price skimming

45. If the supply of a good in a market is limited, a company may follow a _____ approach to maximize revenue and to match demand to supply. A. penetration pricing B. psychological pricing C. variable-cost pricing D. full-cost pricing E. price skimming

price skimming

47. Lush Cosmetics, a firm based in the U.S., recently started exporting cosmetics to India. Lush introduced a new range of mineral-based makeup for the first time in the Indian market. It was also priced much higher than the other brands in the market. This is an example of _____. A. a penetration pricing policy B. a psychological pricing policy C. bundling D. price skimming E. cost-based pricing policy

price skimming

56. When the Indian rupee depreciated against the U.S. dollar, PC manufacturers who were dependent on imported parts had to _____ in order to retain their profit margins. A. raise the quantity of inputs they used in production B. give discounts to their customers C. increase the wages that they paid to labor D. increase the production of PCs E. raise the price of PCs

raise the price of PCs

58. One of the possible reasons for manufacturing in a third country could be an attempt to _____. A. standardize middlemen margins B. reduce the credit risk of the seller C. reduce the capital-labor ratio D. increase the inputs used in manufacturing E. reduce manufacturing costs

reduce manufacturing costs

60. The creation of a free trade zone leads to: A. a decline in exports. B. an increase in taxes and duties levied on a good. C. reduced price escalation. D. a fall in imports. E. higher labor costs and overheads.

reduced price escalation.

71. Assembly in the importing country is a way companies attempt to lower prices and avoid dumping charges. These assembly plants are known as _____ plants. A. antidumping B. screwdriver C. import-oriented D. export-oriented E. automated

screwdriver

31. Assuming that the international marketer has produced the right product, used the proper channel of distribution, and promoted the good correctly, the effort can fail badly if the international marketer fails to: A. inform the host government of all its marketing objectives. B. set the right price for the goods or services. C. work with trade union representatives. D. consider the environmental impact of its goods or services. E. work on a franchise basis in the country.

set the right price for the goods or services.

50. A(n) _____ duty is a flat charge per physical unit imported. A. ad valorem B. compound C. prohibitive D. alternative E. specific

specific

48. In most cases, the reason that products which cost relatively little in one country cost more in another is: A. profiteering. B. inadequate demand. C. inelastic demand. D. elastic demand. E. the costs of exporting.

the costs of exporting.

37. Firms that are unfamiliar with overseas marketing and firms that produce industrial goods orient their pricing solely on the basis of: A. cultural differences in perceptions of pricing. B. market segmentation from market to market. C. the costs of production of the good. D. market segmentation from country to country. E. competitive pricing in the market.

the costs of production of the good.

65. The costs of production may be lowered if a firm ships unassembled goods to a free trade zone (FTZ) in an importing country because: A. wages and other overheads may be higher in an FTZ. B. locally-produced components do not qualify for tariffs. C. unassembled goods may qualify for lower freight rates. D. the finished goods are exported to other countries. E. goods imported in an FTZ qualify for the same level of tariffs as other imported goods.

unassembled goods may qualify for lower freight rates.

38. In _____ pricing, the firm is concerned only with the marginal or incremental cost of producing goods to be sold in overseas markets. A. full-cost B. fixed-cost C. variable-cost D. demand-based E. premium

variable-cost