Module 2
The three nations that exported the largest amount of goods to the United States in 2017 were A) China, Canada, and Mexico. B) China, Mexico, and the United Kingdom. C) China, Japan, and Saudi Arabia. D) Canada, Mexico, and Japan.
A
Which of the elements in Porter's diamond model of national advantage takes into consideration companies that locate near the suppliers they need to produce their product? A) related and supporting industries B) demand conditions C) firm strategy, structure, and rivalry D) factor conditions
A
Government administrations get concerned when the number and value of imports into the country are greater than the value of the country's exports. In other words, the administration is concerned about A) product differentiation. B) a trade deficit. C) absolute advantage. D) economies of scale.
B
In 2016, what was included in the five largest categories of U.S. goods exported to China? A) furniture B) grains C) toys D) soft goods
B
The international product life cycle is used to A) explain how international trade in manufactured goods will be linked to gross national income. B) show that a nation will trade goods that can be produced with the production factor that is most abundant. C) explain the role of innovation in trade patterns. D) explain why mercantilism failed.
C
The rapid expansion of world exports since 1980 demonstrates that A) businesspeople can expect to meet lower levels of competition in their domestic markets. B) domestic business cannot compete with cheap imports. C) the opportunity to increase sales by exporting is a viable growth strategy. D) jobs will inevitably decline in developed countries due to import competition.
C
The theory of overlapping demand explains A) how international trade in manufactured goods will be linked to gross national income. B) why companies will add excess capacity to their production systems. C) the existence of similar preferences and demands among countries with similar income levels. D) where competitive clusters will occur.
C
In examining the volume of international trade, the proportion of world exports and imports accounted for by the 10 largest exporting and importing nations in 2016 A) was less than 10 percent. B) was approximately 25 percent. C) exceeded 50 percent. D) was approximately one-third.
C
Mercantilists believed that A) merchants should import goods to raise the level of living. B) governments should lower import duties. C) a nation should have an export surplus in order to accumulate precious metals. D) a nation should produce goods for which there is a comparative advantage.
C
Overall, what has occurred with the dollar volume of service exports worldwide? A) The dollar volume of exports has maintained a low, but consistent, rate. B) Service exports have decreased with the advent of competition. C) There has been an absolute increase. D) There has been no change.
C
Since 1983, the proportion of world trade coming from the United States has A) increased by 20 percent. B) tripled. C) decreased overall. D) not changed.
C
What percentage of global output is now bound for international trade? A) 10 percent B) Less than 5 percent C) almost 50 percent D) 60 percent
D
When considering where to export, advantages to managers of focusing on a nation that is already a sizable purchaser of goods coming from the home country include all of the following EXCEPT A) the business climate in these importing nations is already relatively favorable. B) import channel members (merchants, banks, and customs brokers) are experienced in handling import shipments from the exporter's area. C) satisfactory transportation facilities have already been established.D) the cultures of the two countries should be relatively similar and compatible.
D
NAFTA and other treaties are the main reasons that most of Canada's exports go to A) Mexico. B) the European Union. C) Asia. D) the United States.
D
A country ________ when it decides to use its resources to produce only the product in which it has an absolute advantage. A) monopolizes B) specializes C) rejects trade D) globalizes
B
When considering where to export, advantages to managers of focusing on a nation that is already a sizable purchaser of goods coming from the home country include the fact that A) the cultures of the two countries should be relatively similar and compatible. B) the climate for foreign direct investment in the importing nation is relatively favorable. C) export and import regulations are not insurmountable.D) the two countries are part of the same regional trade agreement.
C
Which country ranked the highest in 2016 in terms of merchandise exports? A) United Kingdom B) India C) China D) United States
C
Which element in Porter's diamond model of national advantage distinguishes between the land a company owns and the transportation systems available for it to use? A) competitive conditions B) export conditionsC) factor conditionsD) supply conditions
C
The experience curve refers to A) the rising scale on which efficiency improves as a result of cumulative experience and learning. B) the predictable decline in the average cost of producing each unit of output as a production facility gets larger and output increases. C) the stage in the product life cycle where companies export products for the first time. D) the lack of a suitable workforce to complete a task.
A
The monopolistic advantage theory suggests that firms in oligopolistic industries are likely to ________ foreign direct investment when they have technical and other advantages over indigenous firms. A) increase B) reduce C) ignore D) not change
A
The purchase of an existing business in another nation is known as a A) cross-border acquisition. B) strategic alliance. C) greenfield investment. D) home country expansion.
A
The theory that to obtain a higher return on its investment, a firm will transfer its superior knowledge to a foreign subsidiary that it controls, rather than sell it in the open market is known as A) internalization theory. B) internationalization theory. C) strategic behavior theory. D) dynamic capabilities theory.
A
The volume of international trade in services exports in 2017, worldwide, was A) $5.4 trillion. B) $8.5 trillion. C) $12.3 trillion. D) $18.8 trillion.
A
Which element is included in Porter's diamond model of national advantage? A) demand conditions B) export conditions C) social conditions D) supply conditions
A
Firms from __________ had the largest total outstanding stock of direct overseas investment at the beginning of 2018. A) Germany B) the United States C) the United Kingdom D) Japan
B
Mexico and Canada are major U.S. trading partners because they have the benefit of lower freight charges and shorter delivery times. Why do these benefits exist for these two nations? A) They established these parameters in the NAFTA agreement. B) They share a border with the United States. C) They source production materials from China. D) They have established economies of scale for goods and services.
B
Natalie purchases Open Source bottled water from France because it is derived from natural springs and the store brand doesn't say where it comes from. What is influencing Natalie's purchase decision? A) a trade surplus B) product differentiation C) overlapping demand D) economies of scale
B
Some countries send out buying missions to other countries in order to find products to import because their exports are exceeding the value of their imports. In other words, the nations are experiencing a(n) A) economy of scale. B) absolute advantage. C) trade surplus. D) product differentiation.
C
The United States can produce more wheat for the same or lower costs than many other countries. This is an example of A) a trade surplus.B) economies of scale. C) absolute advantage. D) mercantilism.
C
The establishment of new facilities from the ground up is known as A) cross-border acquisition. B) exporting. C) greenfield investment. D) gray market trade.
C
The theory suggesting that rivalry between firms in an oligopolistic industry will result in firms closely following and imitating each other's international investments in order to keep a competitor from gaining an advantage is known as A) internalization theory. B) internationalization theory. C) strategic behavior theory. D) competitive imitation theory.
C
The three largest markets for American exports of goods in 2017 were A) Japan, the United Kingdom, and China. B) Japan, Mexico, and the United Kingdom. C) Canada, Mexico, and China. D) Canada, Japan, and the United Kingdom.
C
A nation that is struggling to remain competitive in the world market may decide to reduce the value of the country's currency relative to other currencies. This process is called currency 8 A) surplus.B) deficit.C) customization. D) devaluation.
D
According to the international product life cycle, which country has the largest population of high-income consumers and as a result, competition for patronage is intense? A) Canada B) China C) Japan D) the United States
D
At the beginning of 2018, the value of the outstanding stock of foreign direct investment of all nations totaled more than A) $3.4 billion. B) $8.7 trillion. C) $19.2 trillion. D) $30.8 trillion
D
Deals that do not result in a foreign investor obtaining at least ________ of the shareholdings are classified as portfolio investments. A) 25 percent B) 100 percent C) 50 percent D) 10 percent
D
Easy Play Audio/Video Corp. has been selling audio and video equipment to the international market for six years. Recently, the company decided to drop its line of televisions because the United States is importing televisions at a lower cost than the company can make their television. Which stage of the product life cycle theory is the company currently in? A) Stage 1 B) Stage 2 C) Stage 3 D) Stage 4
D
In 2016, what was the included in the five largest categories of U.S. goods imported from China? A) aircraft B) grains C) automobiles D) footwear
D
Many firms are choosing to locate production close to available resources as a way to A) take advantage of factor endowments in overseas locations. B) increase transportation options. C) motivate employees. D) improve efficiency.
D
A nation having absolute disadvantages in the production of two goods with respect to another nation has a(n) ___________ in the production of the good in which its absolute disadvantage is less. A) comparative advantage B) absolute advantage C) mercantilist advantage D) competitive advantage
A
According to Porter, the four variables he believes influence a firm's ability to gain a competitive advantage create a A) virtuous circle. B) consistent triangle. C) reliable square. D) redundant cone.
A
According to the theory of comparative advantage, a nation A) should produce the goods for which its absolute disadvantage is less. B) can gain from trade if it is equally inefficient in producing two goods. C) must have an absolute advantage in at least one good to gain from trade. D) should strive to produce trade surpluses to acquire supplies of precious metals.
A
How are exchange rates used in international trade? A) Exchange rates are used to convert from foreign to domestic currency. B) Exchange rates indicate which products create an absolute advantage for trading partners. C) Exchange rates are used to devalue property in exchange for goods. D) Exchange rates set the costs of labor.
A
If Ecuador has an absolute advantage in coffee and Argentina in wheat, then, according to trade theory A) Ecuador should focus production on coffee and trade for other goods. B) Ecuador would do well to produce its own wheat rather than import it from Bolivia. C) Argentina should focus on producing coffee and trade for wheat. D) there will be a perfect trade balance between the two countries.
A
Nations encounter a trade surplus when the value of A) exports exceeds the value of imports. B) imports and exports doesn't change. C) imports exceeds the value of exports. D) imports and exports is balanced.
A
Supporters of mercantilism would agree that A) accumulation of precious metals is an activity essential to a nation's welfare. B) industrial development is the primary source of a nation's wealth. C) trade policies that generally benefited consumers and emerging industrialists should be promoted.D) more than one nation can maintain a comparative advantage.
A
Since 1980, the United States proportion of world trade in commercial services has A) not changed. B) increased one-third. C) decreased overall. D) Increased more than fivefold.
B
The capability of one nation to produce more of a good or service than another country for the same or lower cost of inputs is a(n) A) comparative advantage. B) absolute advantage. C) mercantilist advantage. D) trade surplus.
B
The monopolistic advantage theory states that A) a firm that has a monopoly has a major advantage in overseas investment. B) FDI is made by firms in oligopolistic industries possessing technical advantages over local companies. C) a firm that has a monopoly domestically will have no competition making overseas investments. D) the firm making the overseas investment first has a monopolistic advantage.
B
The theory of resource endowment explains A) why France sends cosmetics, wine, and clothing to Chile. B) that a nation will trade goods that can be produced with the production factor that is most abundant. C) why an automobile can be made either by hand or by a capital-intensive process. D) that a nation less efficient in producing a good has a comparative advantage.
B
What is an example of a resource endowment that a nation possesses? A) government B) landC) religionD) universities
B
When examining the volume of international trade, how are goods and services currently represented? A) Exports of goods and services quadrupled between 1990 and 2013. B) Exports of services grew faster than trade in merchandise for the last 20 years. C) There are fewer goods traded than services. D) Goods and services have reached equal levels of trading volumes.
B
Which statement describes economies of scale? A) They refer to the rising scale on which efficiency improves as a result of cumulative experience and learning. B) They are the predictable decline in the average cost of producing each unit of output as a production facility gets larger and output increases. C) They are only relevant to manufacturing industries.D) They occur due to the presence of abundance resource endowments within a nation.
B
A market situation in which there is a sufficiently large number of well-informed buyers and sellers of a homogeneous product such that no individual participant has enough power to determine the price of the product, resulting in a marketplace that is efficient in production and allocation of products is known as A) absolute advantage. B) mercantilism. C) trade deficit. D) perfect competition.
D
A major portion of the exports from developing countries go to ________ countries, and this proportion has been ________. A) developed; increasing B) developing; increasing C) developed; decreasing D) developing; decreasing
C
According to the theory of comparative advantage, trade can benefit A) the exporting country involved in a trade. B) neither country involved in a trade. C) both countries involved in a trade. D) the importing country involved in a trade.
C
Adam Smith argued against mercantilism by claiming that A) governments, not market forces, should determine the directions, volume, and composition of international trade. B) a nation could trade advantageously if it had a comparative advantage. C) market forces, not government controls, should determine direction, volume, and the composition of international trade. D) customers' tastes are affected by income levels.
C
An industry that has a limited number of competing firms, such as the U.S. mobile phone market in which four firms controlled 98 percent of the market in 2018, is known as A) perfect competition. B) a monopoly. C) an oligopolistic industry. D) deregulated.
C
Dunning's eclectic theory of international production states that if a firm is going to invest in production facilities abroad, it must have the following kinds of advantages: A) ownership-specific, location-specific, and internationalization. B) strategic, organizational, and technological. C) ownership-specific, location-specific, and internalization. D) technological, financial, and human resource.
C
Five years ago it cost Bernie's Bikes Inc. about $52 dollars to build a single bike. Today, it only costs the company about $31 because they have automated the process and are able to purchase component parts in larger quantities.What allowed the company to reduce the price to build a bike? A) product differentiation B) trade surplus C) economies of scale D) trade deficit
C
Green Fields Coffee Co. introduced its line of herbal coffees to the international market two years ago. They were well received and now foreign competitors are starting to appear. Which stage of the product life cycle theory is the company currently in? A) Stage 1 B) Stage 2 C) Stage 3 D) Stage 4
C
Product differentiation refers to the A) availability of a variety of goods in a single product category. B) the ability of one country to produce a product that another country cannot produce. C) the existence and demand for similar products among nations. D) unique differences companies build into their products.
D
The proportion of merchandise exports from Asia has ________ since 1983. A) increased by 20 percent B) tripled C) seen an overall decline D) almost doubled
D
The theory of overlapping demand suggests that A) international trade in services will be more common between countries with high and low relative levels of labor costs. B) countries with similar geography will have similar demand traits. C) trade wars will usually occur between countries that have similar levels of income. D) international trade in manufactured goods will be more common between countries with similar levels of income.
D
The theory that for a firm to successfully invest overseas, it must have not only ownership of unique knowledge or resources, but also the ability to dynamically create, sustain, and exploit these capabilities over time, is known as A) internalization theory. B) internationalization theory. C) strategic behavior theory. D) dynamic capabilities theory.
D
The two components of foreign investment include portfolio investment and A) exporting. B) importing. C) government tariffs. D) direct investment.
D
Theory based on ________ states that international and interregional differences in production costs occur because of differences in the supply of production factors. A) comparative advantage B) absolute advantage C) mercantilist advantage D) resource endowments
D
What is one of the reasons suggested by Alfred Marshall for why firms tend to cluster together on a geographic basis? A) Production costs decline as facilities get larger. B) Efficiency improves as the result of cumulative experience. C) Competition will not enter the market. D) Technological information can be readily shared.
D
What is the second stage in the international product life cycle theory? A) The United States innovates and exports. B) Foreign competition appears in export markets. C) Import competition appears in the United States. D) Foreign production begins.
D
When the value of imports into a nation exceeds the value of its exports, that nation is experiencing a(n) A) economy of scale. B) fixed market. C) competitive advantage. D) trade deficit.
D
Which countries have become more important trading partners to the United States as suppliers of electronic products? A) Canada and Mexico. B) China and Canada. C) Germany and the United Kingdom D) China and Malaysia
D
Which country currently exports the most to the United States? A) Indonesia B) Canada C) Mexico D) China
D
Who advocated the early attempt to develop an international trade theory in response to the practice of mercantilism? A) David Ricardo B) Raymond Vernon C) Stefan Linder D) Adam Smith
D
World trade is dominated with exchanges _______ A) among nonbordering countries. B) between geographic regions. C) between state-owned enterprises. D) within geographic regions.
D