Globalization practice quizes
Refer to Figure 21-1. If the consumer's income is $140, then what is the price of a CD?
$7 (income divided by total of CDs)
The marginal cost of changing production from three units to four units is
$8 total cost 4units-total cost 3units=marginal cost of change
Which of the following statements regarding totalitarianism is true?
. Tribal totalitarianism refers to one tribe or ethnic group (which may or may not be the majority of the population) monopolizing political power and oppressing other tribes or ethnic groups. b. Theocratic totalitarianism refers to the monopolization of political power in the hands of one religious party or group. c. Communist totalitarianism centers on a communist party, while right-wing totalitarianism is characterized by its intense hatred of communism.
Which of the following countries would be characterized as an emerging economy?
Brazil
Chile requires 50 units of resource to produce one ton of wine and 20 units of resource to produce one ton of blueberries. France requires 30 units of resource to produce one ton of wine and 40 units of resource to produce one ton of blueberries. Which of the following is true?
France has a comparative advantage in wine.
Use Exhibit to answer questions If trade is not allowed, consumer surplus is the area
If trade is not allowed, consumer surplus is the area
_____ refers to the replacement of cross-border markets with one firm locating in two or more countries.
Internalization
Which of the following entry modes is a type of strategic alliance?
Licensing
_____ are government payments to domestic firms.
Subsidies
Which of the following is an advantage of R&D contracts?
a. Ability to tap into the best, cost-effective locations
_____ are tariffs levied on imports sold below costs to drive domestic firms out of business.
a. Antidumping duties
Which of the following sets of words describes the initial set of actions a firm uses to gain competitive advantage and the other firm's response to it?
a. Attack, counterattack
Which of the following is a first-mover advantage?
a. Avoidance of clash with a dominant firm at home
_____ is defined as the conversion of one currency into another at Time 1, with an agreement to revert it back to the original currency at a specific Time 2 in the future.
a. Currency swap
Which of the following industry characteristics contributes to collusion?
a. Existence of an industry price leader
Which of the following ideas is closely linked to the theory of absolute advantage?
a. Free market forces should determine how much to trade with minimal government intervention.
Which of the following can be considered as an economic argument against free trade?
a. Infant industry
Which of the following is true of globalization according to the "new force" perspective?
a. It is a western ideology focused on exploiting and dominating the world through MNEs.
Which of the following describes resource mobility as assumed by the classical theories of international trade?
a. It is the assumption that a resource used in producing a product for one industry can be shifted and put to use in another industry.
Which theory is based on the notion that competitive advantage is dependent on the four interacting aspects of factor endowments, domestic demand, firm strategy, and related and supporting industries?
a. National competitive advantage of industries theory
Viewing the global economy as a pyramid, the Triad refers to _____.
a. North America, Western Europe, and Japan
Which of the following is true of indirect exports?
a. They export through domestically based export intermediaries.
In foreign exchange, a(n) _____ is said to have occurred when investors move in the same direction at the same time, like a herd.
a. bandwagon effect
The theory of comparative advantage _____.
a. explains patterns of trade based on factor endowments
A currency board is a monetary authority that issues notes and coins convertible into a key foreign currency at a _____ exchange rate.
a. fixed
The liability of foreignness is the inherent disadvantage faced by _____.
a. foreign firms in host nations due to their non-native status
Between 1870 and 1914, the value of most major currencies was maintained by fixing their prices in terms of _____.
a. gold
The gross domestic product plus the income from non-resident sources abroad gives the ____.
a. gross national product
By trying to be self-sufficient and producing a wide range of goods, _____ policies reduce the wealth of a nation in the long run.
a. mercantilist
The concept of _____ suggests that barriers to market integration at borders are high, but not high enough to completely insulate countries from each other.
a. semiglobalization
The country-of-origin effect refers to _____.
a. the positive or negative perception of firms and products from a certain country
In the context of tariff barriers, deadweight costs = _____.
a. total inefficiency - net gain
Greenfield operations are similar to acquisitions in that they are both examples of _____.
a. wholly owned subsidiaries
If a buyer's willingness to pay for a new Honda is $30,000 and she is able to actually buy it for $28,000, her consumer surplus is
a. $2,000
Suppose the Fed purchases a $1,000 government bond from you. If you deposit the entire $1,000 in your bank, what is the total potential change in the money supply as a result of the Fed's action if reserve requirements are 20 percent?
a. $5,000
The size of the global economy at the beginning of the 21st century (measured by total GDP) is approximately:
a. $60 trillion.
Refer to Figure 21-14. Suppose the price of good X is $8, the price of good Y is $10, and the consumer's income is $360. Then the consumer's optimal choice is to buy
a. 30 units of good X and 12 units of good Y.
If free trade is allowed, consumer surplus is the area
a. A
The profit-maximizing monopolist will choose the price and quantity represented by point
a. A (The highest point)
Which are the three views of globalization?
a. A recent force, a long-running evolution, and a pendulum
Which of the following statements about the Bretton Woods system are true?
a. All currencies were pegged at a fixed rate. b. All currencies were pegged to the US dollar. c. Only the US dollar was convertible into gold at $35 per ounce.
Which of the following is a first-mover advantage?
a. Avoid clashing with dominant firms in their home market.
Which of these statements regarding civil law is true?
a. Civil law is not practiced in Saudi Arabia, Iran, or the United Arab Emirates.
How is your purchase of a $40,000 BMW automobile that was produced entirely in Germany recorded in the U.S. GDP accounts?
a. Consumption increases by $40,000 and net exports decrease by $40,000.
You are a professional songwriter. The songs you have written--your intellectual property--are protected by what type of rights?
a. Copyrights
Which of type of entry mode is a wholly owned subsidiary?
a. Equity mode
What is the primary difference between FDI and FPI?
a. FDI is direct and FPI is indirect. c. FDI is defined as a 10% or more equity stake and FPI is less than 10%. d. FDI is foreign direct investment and FPI is foreign portfolio investment.
What is one advantage of FDI compared with licensing?
a. FDI provides tight control over foreign operations.
Which of the following is not employed as an argument in support of trade restrictions?
a. Free trade harms both domestic producers and domestic consumers and therefore reduces total surplus.
Which statement about the stability of institutions is accurate?
a. Institutions are dynamic, which creates both huge challenges and tremendous opportunities for domestic and international firms.
In what ways do institutions influence individual and firm behaviors?
a. Institutions reduce uncertainty by influencing the decision-making process of both individuals and firms by signaling what conduct is legitimate and acceptable and what is not.
Some of the benefits of FDI to the host country are:
a. Job creation b. Capital inflow c. Advanced technology
What are the two core propositions behind the institution-based view of global business?
a. Managers and firms pursue their interests and make choices rationally in situations; and where formal constraints are unclear or fail, informal constraints will play a larger role in reducing uncertainty and providing constancy to managers and firms.
The Triad region includes:
a. North America, Asia, and Europe.
What are the possible benefits of being a late mover?
a. Opportunity to free ride on first-mover investments b. First mover's difficulty to adapt to market changes c. Resolution of technological and market uncertainty
In addition to FDI, other ways a firm can enter foreign markets include:
a. Outsource b. License and trademark c. Import and export
Which of the following factors do NOT drive economic development in different countries?
a. Political system
Which of the following are examples of ownership, location, and internalization (OLI) advantages?
a. Possession of valuable foreign assets b. Replacement of cross-border markets with one firm operating in two markets d. Unique natural resources that provide advantages to the firm
Suppose a frost destroys much of the Florida orange crop. At the same time, suppose consumer tastes shift toward orange juice. What would we expect to happen to the equilibrium price and quantity in the market for orange juice?
a. Price will increase; quantity is ambiguous.
Which of the following is NOT a political argument against free trade?
a. Protection for infant industries
Moral hazard is defined as:
a. Recklessness when people and organizations (including firms and governments) do not have to face the full consequences of their actions.
From an institution-based view, a firm's foreign market entries are affected by institutions. Which of the following is NOT an institution affecting foreign market entries?
a. Resource imitability
An import quota is:
a. Restriction on the quantity of imports that can be brought into a country.
Which of the following theories does NOT lead to the conclusion that unrestricted free trade is in the best interests of all countries?
a. Strategic trade theory
Which of the following best describes how an increase in the money supply shifts aggregate demand?
a. The money supply shifts right, the interest rate falls, investment increases, and aggregate demand shifts right.
Why do managers, at some of the largest global corporations, fail to engage in currency hedging?
a. They believe that the protection against fluctuations in exchange rates is not worth the potentially high cost of currency hedging.
What is an important reason to study global business?
a. To gain competence in interacting with foreign suppliers, customers, and partners. c. To prepare for an expatriate assignment. d. To advance your career in a global economy.
A yard sale is an example of a market.
a. True
Which of the following is an advantage of a strong dollar?
a. US consumers benefit from low prices on imported products.
Which of the following is NOT true about a weak dollar?
a. US consumers benefit from low prices on imports.
A savvy global business manager must understand the following concepts to be considered literate about foreign exchange:
a. Understand the factors that influence exchange rates b. All of these c. Understand the ways to hedge currency risks d. Understand the foreign exchange market
Which statement best describes the significance of informal constraints?
a. While formal and informal institutions combine to govern firm behavior, informal constraints play a larger role in reducing uncertainty and providing constancy for managers and firms in situations where formal constraints are unclear or fail, even in developed economies.
What are some possible benefits to studying global business?
a. You will be more competent to interact with foreign suppliers and partners on behalf of the company you work for. c. Your depth of understanding of the global economy will make you more employable. d. If you go to work for a multinational, you will be better prepared for expatriate assignments abroad.
Assume that a firm is looking to expand into a foreign market, but it needs an opportunity that has low development costs and little risk. Its best choice would be:
a. a contractual agreement.
Consider the indifference curve map and budget constraint for two goods, beef and potatoes. Suppose the good measured on the horizontal axis, potatoes, is a Giffen good. Beef is measured on the vertical axis and is a normal good. When the price of potatoes increases, the substitution effect causes
a. a decrease in the consumption of potatoes, and the income effect causes an increase in the consumption of potatoes. The substitution effect is less than the income effect.
If you have the right to start your own business, it is a sure sign you are living in:
a. a democracy.
The use of the word "monopoly" in the name of the market structure called "monopolistic competition" refers to the fact that
a. a monopolistically competitive firm faces a downward-sloping demand curve for its differentiated product and so does a monopolist.
On a graph we draw a consumer's budget constraint, measuring the number of pineapples on the horizontal axis and the number of pencils on the vertical axis. If the slope of the budget constraint is -6, then
a. a pineapple costs six times as much as a pencil.
Democracy is:
a. a political system in which citizens elect representatives to govern the country.
Firms in a multimarket competitive situation might want to avoid engaging in cross-market retaliation because:
a. a price war may be too costly for all involved.
Producer surplus is the area
a. above the supply curve and below the price.
If there are implicit costs of production,
a. accounting profit will exceed economic profit.
In general, if a benevolent social planner wanted to maximize the total benefits received by buyers and sellers in a market, the planner should
a. allow the market to seek equilibrium on its own.
An increase (rightward shift) in the demand for a good will tend to cause
a. an increase in the equilibrium price and quantity.
All of the following shift the supply of watches to the right except
a. an increase in the price of watches.
Refer to Figure 4-4. The movement from point A to point B on the graph is called
a. an increase in the quantity supplied.
Disneyland Tokyo became very popular because it played up its American image. This is an example of:
a. asset of foreignness.
The efficient scale of production is the quantity of output that minimizes
a. average total cost.
If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will
a. be U-shaped.
If a production function exhibits diminishing marginal product, its slope
a. becomes flatter as the quantity of the input increases.
Consumer surplus is the area
a. below the demand curve and above the price.
Suppose the world price is below the before-trade domestic price for a good. If a country allows free trade in this good,
a. consumers will gain and producers will lose.
The M1 money supply is composed of
a. currency, demand deposits, traveler's checks, and other checkable accounts.
An increase in the price of a good along a stationary demand curve
a. decreases consumer surplus.
A Middle Eastern cosmetics company focused on regional sales is facing increasing competition from European and American cosmetics firms. In response, it refines its products and advertising messaging to emphasize its close ties to Middle Eastern cultural norms and values. This is an example of a(n):
a. defender strategy.
According to the theory of absolute advantage, under free trade,
a. each nation gains by specializing in economic activities in which a nation has absolute advantage.
Joe has ten baseball gloves and Sue has none. A baseball glove costs $50 to produce. If Joe values an additional baseball glove at $100 and Sue values a baseball glove at $40, then to maximize
a. efficiency, Joe should receive the glove.
If buyers are rational and there is no market failure,
a. free market solutions are efficient. c. free market solutions maximize total surplus.
Which of the following markets would most closely satisfy the requirements for a competitive market?
a. gold bullion
Commodity money
a. has intrinsic value.
A mortgage broker that dominates the American Southwest has decided to expand into Mexico and several Central American countries. Its new offices in the host countries offer the same mortgage services as in the home country. This is an example of:
a. horizontal FDI.
If marginal revenue exceeds marginal cost, a monopolist should
a. increase output.
The long-run effect of an increase in the money supply is to
a. increase the price level.
An increase in the price of a good along a stationary supply curve
a. increases producer surplus.
If the monopolistic competitor described by Exhibit is producing at the profit-maximizing (loss-minimizing) level of output, it
a. is generating losses.
The long-run market supply curve
a. is more elastic than the short-run market supply curve.
Beyond the enforcement of antitrust laws, collusion often fails because:
a. it has incentive problems associated with the "prisoners' dilemma."
Firms can increase their chances of success with FDI by:
a. leveraging OLI advantages in a way that is valuable, unique, and hard to imitate by rival firms. b. assessing whether FDI is justified, in light of other options. d. understanding that political realities either facilitate or constrain FDI. Hide Feedback
Miami is an ideal city for both North American firms looking to expand their business to Central and South America and for Latin American companies to expand their business to North America. This is an example of a(n):
a. location-specific advantage.
Which of the following is not a characteristic of a monopolistically competitive market?
a. long-run economic profits
Which of the following is true regarding the production and pricing decisions of monopolistically competitive firms? Monopolistically competitive firms choose the quantity at which marginal cost equals
a. marginal revenue and then use the demand curve to determine the price consistent with this quantity.
A monopolist maximizes profit by producing the quantity at which
a. marginal revenue equals marginal cost.
Imagine that a French manufacturer of high-end fashion apparel and accessories decides to expand into foreign markets by buying a chain of highly successful high-end fashion retailers in the United Arab Emirates. This is an example of:
a. matching market-seeking goals with location.
A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a
a. natural monopoly.
A monopolistic market has
a. only one seller.
The Fed's tools of monetary control are
a. open-market operations, lending to banks, reserve requirements, and paying interest on reserves.
The owners of a chain of drycleaners would like to sell the business so they falsify the firm's accounting and other financial documents to make it look more profitable than it actually has been. They are engaging in:
a. opportunism.
The three modern theories of international trade are:
a. product life cycle, strategic trade, national competitive advantage of industries.
Defenders of the use of brand names argue that brand names
a. provide information about the quality of the product. b. give firms incentive to maintain high quality. c. are useful even in socialist economies such as the former Soviet Union.
Which of the following policy actions by the Fed is likely to increase the money supply?
a. reducing reserve requirements
If nominal GDP in 2019 exceeds nominal GDP in 2018, then the production of output must have
a. risen or fallen because there is not enough information to determine what happened to real output.
The law of supply states that, other things equal, when the price of a good
a. rises, the quantity supplied of the good rises.
When the supply and demand for money are expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the price level
a. shifts money demand to the right and increases the interest rate.
If an increase in the price of blue jeans leads to an increase in the demand for tennis shoes, then blue jeans and tennis shoes are
a. substitutes.
Suppose Reta is planning for retirement in a two-period world. In the first period, Reta is young and earns $1 million and in the second period, Reta is old and retired and earns nothing. The interest rate is initially 10 percent, but then it falls to 7 percent. After the interest rate falls, the
a. substitution effect will induce Reta to consume more when she is young.
A improvement in production technology will shift the
a. supply curve to the right.
When firms indirectly coordinate actions by signaling their intentions, often in an attempt to reduce output and maintain pricing above competitive levels, they are engaging in:
a. tacit collusion.
To insulate the Federal Reserve from political pressure,
a. the Board of Governors are appointed to fourteen-year terms.
Cengage Learning is a monopolist in the production of your textbook because
a. the government has granted Cengage Learning exclusive rights to produce this textbook.
A group of activists, known for their objection to globalization, is picketing the headquarters of a very large, international coffee distributor and retail operation. The activists believe this large firm does not pay fair prices to coffee growers in South America, Africa, and other developing regions. In general, they are picketing because of:
a. the location of the firm in one of the largest and most affluent countries in the world. b. the extremely large size of the firm. c. the power the country derives in part from being home to this firm.
If a market is efficient, then
a. the market allocates output to the buyers who value it the most. b. the market allocates buyers to the sellers who can produce the good at least cost. c. the quantity produced in the market maximizes the sum of consumer and producer surplus.
In long-run equilibrium in a competitive market, firms are operating at
a. the minimum of their average-total-cost curves. b. the intersection of marginal cost and marginal revenue. c. their efficient scale. d. zero economic profit.
When an increase in government purchases increases the income of some people, and those people spend some of that increase in income on additional consumer goods, we have seen a demonstration of
a. the multiplier effect.
If the price of a good is below the equilibrium price,
a. there is a shortage and the price will rise.
A grocery store should close at night if the
a. variable costs of staying open are greater than the total revenue due to staying open.
A large-scale French dairy that produces milk, cheese, yogurt, and other related products decides to buy a chain of mini-marts located throughout many EU countries. Their objective is to sell their dairy products, as well as other products, through these mini-marts. This is an example of:
a. vertical FDI.
Trade deficit refers to:
an economic condition in which a nation imports more than it exports.
Which of the following types of exchange rate policies is apt for a pure free market economy?
b. Clean float
In which of the following ways is the theory of comparative advantage linked to the Heckscher-Ohlin theory?
b. Dependency on a nation's locally available abundant factors
If a firm is operating in an environment that is customized to home market, which of the following is the most preferred strategy?
b. Dodger strategy
If a firm is operating in an environment with a high pressure for globalization, which of the following is the most preferred strategy?
b. Dodger strategy
_____ refers to the total accumulation of inbound FDI in a country or outbound FDI from a country.
b. FDI stock
Which of the following conforms to the notion put forward by the school of thought associated with stage models?
b. Firms enter culturally distant countries in later stages when they may gain more confidence.
_____ are restrictions on the quantity of imports.
b. Import quotas
Which of the following is true of the absolute advantage theory of international trade?
b. It was the first theory that advocated free trade.
Which of the following is a benefit of FDI to home countries?
b. Learning from operations
Which of the following is a modern trade theory?
b. National competitive advantage
_____ refers to the deal struck by MNEs and host governments, which change their requirements after the initial FDI entry.
b. Obsolescing bargain
Which of the following trade theories divides the nations of the world into three categories?
b. Product life cycle
Which of the following was the first international trade theory to account for changes in the patterns of trade over time?
b. Product life cycle theory
Which of the following economic perspectives on FDI has its principles rooted in Marxism?
b. The radical view
Protectionism is similar to mercantilism as they both advocated _____.
b. government involvement in international trade
Deadweight costs are net losses that occur when _____ are imposed.
b. import tariffs
Costs that a firm has to endure even when its investment turns out to be unsatisfactory are referred to as _____.
b. sunk costs
Liability of foreignness is _____.
b. the inherent disadvantage foreign firms experience in host countries
Suppose Joe changes his $1,000 demand deposit from Bank A to Bank B. If the reserve requirement is 10 percent, what is the potential change in demand deposits as a result of Joe's action?
b. $0
The following table contains information about an economy that produces only pens and books. The base year is 2017. Use this information to answer question What is the value of real GDP for 2018?
b. $1,060
Refer to Figure 21-5. If the price of good X is $5, and your budget constraint is DE, what is the price of good Y?
b. $10
Refer to Figure 21-6. If the consumer has $600 in income, what is the price of good Y?
b. $20 (Y had qty30; 600/30=20)
Refer to Table 4-5. If the four suppliers listed are the only suppliers in this market and the market demand schedule is: PriceQuantity Demanded (Dollars per case) (Cases of water) 0.00 1200 3.00 900 6.00 600 9.00 300
b. $6.00 and 600 cases.
For the economy as a whole, what percentage of firm revenue is spent on advertising?
b. 2 percent
The following table contains information about an economy that produces only pens and books. The base year is 2017. Use this information to answer question What is the approximate percentage increase in prices from 2018 to 2019?
b. 22 percent
If the marginal propensity to consume (MPC) is 0.75, the value of the multiplier is
b. 4.
If the reserve ratio is 25 percent, the value of the money multiplier is
b. 4.
If a tariff is placed on this good, consumer surplus is the area
b. A + B.
Which of the following changes would not shift the supply curve for a good or service?
b. A change in the price of the good or service
Which of the following is not put forth as a criticism of advertising and brand names?
b. Advertising increases competition, which causes unnecessary bankruptcies and layoffs.
Which of the following statements is true?
b. All costs are variable in the long run.
Which of the following statements about a bank's balance sheet is true?
b. Assets minus liabilities equals owner's equity or capital.
Which of the following is NOT a nontariff trade barrier (NTB)?
b. Cultural distance
Formal institutions include all of the following EXCEPT:
b. Cultures (family, economy, govt, education, religion)
Which of the following is NOT a method used by competitors to signal their intention to reduce competitive intensity to other competitors?
b. Developing new markets where there is less competition
The advantages of agglomeration result from all of the following EXCEPT:
b. Fewer competitors in the same location
Which of the following statements about import quotas is true?
b. For every tariff, there is an import quota that could have generated a similar result.
What is the difference between the traditional definition of International Business and this text's definition of global business?
b. In many cases, international business refers to domestic firms expanding into international (cross-border) economic activities; here, global business also includes domestic firms' strategies for competing against foreign firms entering their home territory.
The following are examples of location-specific advantages:
b. Industry demand that creates a skilled labor force. c. Industry demand that facilitates a pool of specialized suppliers and buyers. d. Knowledge spillovers among closely located firms.
How do firms create value when engaging rivals?
b. Launch products in multiple markets. c. Hold a dominant position in key markets. d. Secure patents on key products.
Which of the following is included in formal institutions?
b. Legal systems
Which of the following is NOT one of the factors that make an industry particularly conducive to collusion?
b. Many firms in the industry
In the long run, the competitive equilibrium is
b. P2, Q2.
In the long run, some competitive firms will exit the market if the price is below
b. P2.
The profit earned by the profit-maximizing monopolist is represented by the area
b. P4ACP1. (all of the profits area)
Which of the following is a type of attack?
b. Price reduction c. New product introduction d. Advertising campaign
Which of the following would not increase in response to a decrease in the price of ironing boards?
b. The quantity of irons supplied at each possible price of irons
The modern trade theories include the following EXCEPT:
b. Theory of comparative advantage
Which of the following statements regarding the role of the U.S. dollar outside the U.S. is NOT true?
b. There is never an active market for dollars in any country.
Intellectual property rights (IPR) covers the following:
b. Trademarks c. Copyrights d. Patents
The fundamental question in global business is:
b. What determines the success and failure of firms around the globe?
Which of the following statements is true?
b. When the Fed sells government bonds, the money supply decreases.
Which of the following statements about the effects of FDI on host countries is true?
b. While FDI creates jobs and encourages the development of management know-how within the host country, it can also lead to adverse effects on competition and capital outflow.
Suppose scientists provide evidence that people who drink energy drinks are more likely to have a heart attack than people who do not drink energy drinks. We would expect to see
b. a decrease in the demand for energy drinks.
Globalization can be viewed as:
b. a new force sweeping through the world in recent times. c. a pendulum that swings from one extreme to another from time to time. d. a long-run historical evolution since the dawn of human history.
If the demand for a good falls when income falls, then the good is called
b. a normal good.
If free trade is allowed, a country will export a good if the world price is
b. above the before-trade domestic price of the good.
The initial impact of an increase in government spending is to shift
b. aggregate demand to the right.
Peru is rich with gold and copper mines. Assume that Peruvians have set up expert systems for mining and exporting more of these natural resources than any other country. This is an example of:
b. an absolute advantage.
Refer to Figure 4-3 . The shift from Da to Db is called
b. an increase in demand.
If the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause
b. an increase in the number of firms in the market but no increase in the price of the good.
If a producer has market power (can influence the price of the product in the market) then free market solutions
b. are inefficient.
In the long run, some firms will exit the market if the price of the good offered for sale is less than
b. average total cost.
If marginal costs equal average total costs,
b. average total costs are minimized.
If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve
b. becomes steeper as the quantity of output increases.
Using government regulations to force a natural monopoly to charge a price equal to its marginal cost will
b. cause the monopolist to exit the market.
GDP would include which of the following?
b. consulting services
Risk analysis of any country must include an analysis of the country's:
b. currency risks.
Suppose a wave of investor and consumer optimism has increased spending so that the current level of output exceeds the long-run natural rate. If policymakers choose to engage in activist stabilization policy, they should
b. decrease government spending, which shifts aggregate demand to the left.
The law of demand states that an increase in the price of a good
b. decreases the quantity demanded for that good.
Refer to Figure 21-8. As the consumer moves from A to B to C, the marginal rate of substitution
b. decreases. (points moving down and right)
Required reserves of banks are a fixed percentage of their
b. deposits.
Imagine that that same electronics manufacturer exports the new smart phone to a foreign market for sale at an extremely low cost. Its intention is to eliminate its foreign rivals, after which it plans to significantly raise its prices. The firm is engaging in:
b. dumping.
In the long run, if a very small factory were to expand its scale of operations, it is likely that it would initially experience
b. economies of scale.
For a competitive firm, marginal revenue is
b. equal to the price of the good sold.
Accounting profit is equal to total revenue minus
b. explicit costs.
Exhibit depicts a monopolistically competitive firm
b. generating zero profits in the long run.
If an IMF member country were to find itself in a severe balance of payments crisis that threatened its financial stability, the IMF would most likely:
b. give the country a loan but require the country to make long-term policy reforms.
A good is an inferior good if the consumer buys less of it when
b. his income rises.
Because producers are better able to organize than consumers are, we would expect there to be political pressure to create
b. import restrictions.
If you were an entrepreneur designing a new product targeted at people earning a per capita annual income around $5,000, you would find your customers:
b. in the second tier of the global economic pyramid.
The purpose of antitrust laws is to
b. increase competition in an industry by preventing mergers and breaking up large firms.
Suppose a wave of investor and consumer pessimism causes a reduction in spending. If the Federal Reserve chooses to engage in activist stabilization policy, it should
b. increase the money supply and decrease interest rates.
Foreign exchange rates are influenced by:
b. interest rates and money supply. c. relative price differences and purchasing power parity. d. supply and demand of the currencies.
Foreign portfolio investment (FPI) is:
b. investment in foreign stocks and bonds that do not involve the active management of foreign assets.
If your grandparents buy a new retirement home, this transaction would affect
b. investment.
Brazil lets supply-and-demand conditions determine its exchange rates, although the government does intervene to some degree. Brazil practices a:
b. managed floating exchange rate policy.
The competitive firm maximizes profit when it produces output up to the point where
b. marginal cost equals marginal revenue.
Adam Smith's "invisible hand" concept suggests that a competitive market outcome
b. maximizes total surplus.
A consumer consumes two normal goods, popcorn and Pepsi. The price of Pepsi rises. The substitution effect, by itself, suggests that the consumer will consume
b. more popcorn and less Pepsi.
Refer to Figure 21-16. Interest rates increase by 4 percent. Nathaniel's optimal choice point moves from A to B. Nathaniel consumes
b. more while he is younger and saves less than he did before interest rates increased.
U.S. gross domestic product (in contrast to gross national product) measures the production and income of
b. people and factories located within the borders of the United States.
Americans value the quality, taste, and exoticism of African-grown coffee. Thus, any firm selling coffee from Kenya in the United States will enjoy a:
b. positive country-of-origin effect.
A home appliance manufacturer located in The Netherlands decides to open two new manufacturing plants, one in Poland and the other in Thailand. Its purpose is to offset currency losses through:
b. strategic hedging.
Semiglobalization suggests:
b. that there are barriers to market integration at borders which are high but not high enough to insulate countries from each other completely.
From an institution-based view, a government's legal requirement for a business to pay taxes would be an example of:
b. the influence of a formal institution.
The discount rate is
b. the interest rate the Fed charges on loans to banks.
When an increase in government purchases causes firms to purchase additional plant and equipment, we have seen a demonstration of
b. the investment accelerator.
Which of the following firms is most likely to spend a large percentage of their revenue on advertising?
b. the producer of a highly differentiated consumer product
Keynes's liquidity preference theory of the interest rate suggests that the interest rate is determined by
b. the supply and demand for money.
In your country, you are prevented by law from charging your customers interest because it is forbidden in sacred texts. Your country is governed by:
b. theocratic law.
The use of the word "competition" in the name of the market structure called "monopolistic competition" refers to the fact that
b. there are many sellers in a monopolistically competitive market and there is free entry and exit in the market just like a competitive market.
When firms enter a monopolistically competitive market and the business-stealing externality is larger than the product-variety externality, then
b. there are too many firms in the market and market efficiency could be increased if firms exited the market.
A monopoly is able to continue to generate economic profits in the long run because
b. there is some barrier to entry to that market.
To express its opposition to the political regime in Myanmar, the United States has banned the importation of jade and other gemstones from that country. This is an example of a:
b. trade embargo.
Imagine that a Chinese electronic game manufacturer has decided to go global. It does well with its lower-priced products but cannot break into the market with its high-end game consoles and games. The firm then acquires a well-respected Norwegian high-end game manufacturer, and begins selling high-end products under that brand name. The firm has successfully overcome the liability of foreignness by:
b. using tangible resources.
The theory of mercantilism:
b. views international trade as a zero-sum game.
_____ refers to the clustering of economic activities in certain locations.
c. Agglomeration
Which of the following was true of the Bretton Woods system?
c. All currencies were pegged at a fixed rate to the dollar.
_____ is a country's international transaction statement, which includes merchandise trade, service trade, and capital movement.
c. Balance of payments
_____ allow participants to buy and sell currencies now for future delivery.
c. Forward transactions
Which theory suggests that nations will develop comparative advantages based on their locally abundant factors?
c. Heckscher-Ohlin theory
Which combination of resource similarity and market commonality results in the most intense competition?
c. High resource similarity, low market commonality
Which of the following is true of voluntary export restraints?
c. It is an export quota levied by a country on the quantity of its exports.
Which of the following would be an example of a top down innovation?
c. Lowering prices and features of existing products to meet emerging market needs
Which of the following is defined as the degree of overlap between two rivals' markets?
c. Market commonality
_____ occurs when firms engage the same rivals in numerous markets.
c. Multimarket competition
Which of the following is a non-equity mode of entry?
c. Turnkey projects
Which of the following does the institution-based view of global business lay emphasis on?
c. Understanding the laws and values of the firm's host nation
The process of anticipating rivals' actions in order to both revise a firm's plan and prepare to deal with rivals' response is called _____.
c. competitor analysis
A manager arguing against currency hedging would most likely argue that _____.
c. currency hedging eats into company profits
The distinction between _____ is what defines an MNE from a firm that merely exports or imports.
c. equity and non-equity modes of entry
FPI (foreign portfolio investment) refers to the _____.
c. investment in a portfolio of foreign securities that do not entail the active management of foreign assets
The television industry in the United States is controlled by seven giant corporations: The Walt Disney Company, CBS Corporation, Viacom, Comcast, Hearst Corporation, Time Warner, and News Corporation. Thus, the television industry in the U.S. is a typical _____ industry.
c. oligopolistic
OLI advantages refer to a firm's quest for _____via FDI.
c. ownership advantages, location advantages, and internalization advantages
The act of setting prices below cost to eliminate rivals while intending to raise them in the long run to make up for the initial losses is known as _____.
c. predatory pricing
Firms prefer FDI to licensing because FDI_____.
c. provides the firm with direct ownership to its foreign assets
The _____ theory advocates government intervention in highly capital-intensive, high entry-barrier industries in which domestic firms may have little chance without government assistance.
c. strategic trade
The following table contains information about an economy that produces only pens and books. The base year is 2017. Use this information to answer question What is the value of nominal GDP for 2018?
c. $1,200
If a cobbler buys leather for $100 and thread for $50 and uses them to produce and sell $500 worth of shoes to consumers, the contribution to GDP is
c. $500.
The following table contains information about an economy that produces only pens and books. The base year is 2017. Use this information to answer question What is the percentage increase in prices from 2017 to 2018?
c. 13 percent
Use the following information to answer question The marginal product of labor as production moves from employing one worker to employing two workers is #of workers output 0 0 1 23 2 40 3 50
c. 17.
If free trade is allowed, consumer surplus is the area
c. A + B + C + D + E + F.
Which of the following statements about a tariff is true?
c. A tariff increases producer surplus, decreases consumer surplus, increases revenue to the government, and reduces total surplus.
The deadweight loss associated with monopoly pricing is represented by the area
c. ABD. (center triangle)
Which of the following is not an argument put forth by economists in support of the use of advertising?
c. Advertising provides a creative outlet for artists and writers.
Which of the following statement is NOT true about market economy?
c. All factors of production should be government owned and controlled.
Which of the following is NOT a driver for counterattacks?
c. Blue ocean strategy
BRIC is an acronym for the emerging economies of:
c. Brazil, Russia, India, and China.
Bundle J contains 10 units of good X and 5 units of good Y. Bundle K contains 5 units of good X and 10 units of good Y. Bundle L contains 10 units of good X and 10 units of good Y. Assume that the consumer's preferences satisfy the four properties of indifference curves. The price of X is $1, the price of Y is $2, and the consumer has an income of $20. Which bundle will the consumer choose?
c. Bundle J
If trade is not allowed, producer surplus is the area
c. C
Which of the following arguments advocates that the US trade deficit with China is a huge problem?
c. Cheap imports sold at "the China price" push down prices and cause deflation.
Which of the following are example(s) of explicit collusion?
c. Creating a cartel and directly negotiating an agreement to fix prices.
The gains from trade correspond to the area
c. D
The deadweight loss from the tariff is the area
c. D + F.
The theory of comparative advantage was advocated by:
c. David Ricardo.
The International Monetary Fund (IMF) does the following EXCEPT:
c. Determine exchange rates
Which of the following is an example of a first mover gaining a competitive advantage?
c. Due to its lucrative offer, a Chinese state-owned energy company wins the first contract to mine the vast coalfields in Zimbabwe.
Government revenue from the tariff is the area
c. E.
Which of the following statement(s) about dumping are correct?
c. Exporter sells below cost abroad and exporter plans to raises prices after eliminating local competitors.
The primary political views on FDI are:
c. Free market and pragmatic nationalism
If a tariff is placed on this good, producer surplus is the area
c. G + C.
Which of the following statement is NOT true about civil law?
c. In civil law countries, judges interpret the law largely based on previous judicial decisions.
Which of the following statements about price and marginal cost in competitive and monopolized markets is true?
c. In competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost.
Which of the following is NOT a proposition of the institution-based view of global business?
c. Informal institutions do not govern firm behavior.
Which of the following is NOT a motivation for trading internationally?
c. Institutions can either limit or facilitate trade.
Among the five factors determining the supply and demand of foreign exchange are:
c. Interest rates, money supply, and exchange rate policies.
Which of the following demonstrates the law of demand?
c. Jayden buys more donuts at $0.25 per donut than at $0.50 per donut, other things equal.
Which of the following industry characteristic makes collusion difficult?
c. Low entry barriers
Which of the following situation represents the LOWEST intensity of rivalry between two companies?
c. Low resource similarity and high market commonality
Suppose both buyers and sellers of wheat expect the price of wheat to rise in the near future. What would we expect to happen to the equilibrium price and quantity in the market for wheat today?
c. Price will increase; quantity is ambiguous.
Which of the following is not a function of money?
c. Protection against inflation
If the price is P4, a competitive firm will maximize profits if it produces
c. Q3. meets marginal costs
Which country follows theocratic law?
c. Saudi Arabia
Which of the following are the two key components of a balance of trade?
c. Surplus and deficit
Which of the following are the primary types of foreign exchange transactions made by financial companies?
c. Swaps, spot transactions, forward transactions
Refer to Figure 21-7. Which of the following comparisons is correct regarding the marginal rate of substitution (MRS) of donuts for cake?
c. The MRS is greater between bundles A and B than between bundles B and C. (the points are moving to the left on the graph)
The following table shows the amount of output a worker can produce per hour in the United States and Canada. pens PENCILS us 8 4 CAN 8 2
c. The United States will export pencils, and Canada will export pens.
What is a cognitive pillar?
c. The internalized values and beliefs that guide behavior
Which of the following is true regarding the similarities and differences in monopolistic competition and monopoly?
c. The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run.
Refer to Figure 21-12. Suppose that a consumer is originally at point R. Then the price of good X decreases. Which of the following represents the substitution effect of the price decrease?
c. The movement from point R to point T
Which three countries invest the most money in other countries (FDI outflow)?
c. United States, France, Germany
Which of the following shifts the demand for watches to the right?
c. a decrease in the price of watch batteries if watch batteries and watches are complements
The Group of 20 (G-20) is:
c. a group of 19 countries plus the European Union whose leaders meet to solve global economic problems. (meets yearly)
Which of the following firms has the least incentive to advertise?
c. a wholesaler of crude oil
Assume that a major technology company is looking to expand into a foreign market but it can't risk losing its core innovations by sharing them with anyone outside the corporation. Its best choice would be:
c. a wholly owned subsidiary.
A decrease (leftward shift) in the supply for a good will tend to cause
c. an increase in the equilibrium price and a decrease in the equilibrium quantity.
Currently you purchase ten frozen pizza per month. You will graduate from college in December, and you will start a new job in January. You have no plans to purchase frozen pizzas in January. For you, frozen pizzas are
c. an inferior good.
If a market generates a side effect or externality, then free market solutions
c. are inefficient.
One source of inefficiency in monopolistic competition is that
c. because price is above marginal cost, some units are not produced that buyers value in excess of the cost of production and this causes a deadweight loss.
When a monopolist produces an additional unit, the marginal revenue generated by that unit must be
c. below the price because the price effect outweighs the output effect.
If a seller in a competitive market chooses to charge more than the going price, then
c. buyers will make purchases from other sellers.
An inferior good is one for which an increase in income causes a(n)
c. decrease in demand.
Equilibrium quantity must decrease when demand
c. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.
Refer to Table 4-2 . If these are the only four buyers in the market, then when the price increases from $1.00 to $1.50, the market quantity demanded
c. decreases by 7 units.
When money demand is expressed in a graph with the interest rate on the vertical axis and the quantity of money on the horizontal axis, an increase in the interest rate
c. decreases the quantity demanded of money.
Facing strong competition from MNE cosmetics firms, an Israeli firm focused on products with unique components extracted from the Dead Sea that couldn't be found in other parts of the world. This is an example of:
c. defender strategy.
When a country allows trade and exports a good,
c. domestic producers are better off, domestic consumers are worse off, and the nation is better off because the gains of the winners exceed the losses of the losers.
If a competitive firm doubles its output, its total revenue
c. doubles.
Suppose there is an increase in both the supply and demand for personal computers. Furthermore, suppose the supply of personal computers increases more than demand for personal computers. In the market for personal computers, we would expect the
c. equilibrium quantity to rise and the equilibrium price to fall.
Multinational enterprises (MNEs) are:
c. firms that engage in foreign direct investment (FDI).
Due to political and economic reasons, some countries match the exchange rate of their currencies relative to other currencies, which is known as a:
c. fixed floating exchange rate policy.
A foreign exchange transaction in which participants buy and sell currencies now for future delivery is called a:
c. forward transaction.
A good example of agglomeration is:
c. hundreds of small, medium, and large internet-based, high-tech companies all located in Silicon Valley in California.
An oligopoly is an:
c. industry dominated by a small number of competitors.
Foreign direct investment (FDI) is:
c. investment in activities that control and manage value-added activities in foreign countries.
Some emerging economy MNEs are using the LLL framework to the challenge the conventional wisdom on international growth. The LLL framework includes:
c. linkage and leverage.
A perfectly competitive market has
c. many buyers and sellers.
Expensive television commercials that appear to provide no specific information about the product being advertised
c. may be useful because they provide a signal to the consumer about the quality of the product.
In the short run, the competitive firm's supply curve is the
c. portion of the marginal-cost curve that lies above the average-variable-cost curve.
Liana consumes only beer and chips. Her indifference curves are all bowed inward. Consider the bundles (2,6), (4,4), and (6,2). If Liana is indifferent between (2,6) and (6,2), then Liana must
c. prefer (4,4) to (6,2). (she likes them both equally)
In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes
c. profits and firms enter the market.
Some people believe that anything made in Asia is poorly made and therefore not worth much money. This bias may have a negative impact on Asian firms when they attempt to sell well-made, quality, valuable products in non-Asian markets. Firms in this situation would be:
c. suffering from the liability of foreignness.
A buyer's willingness to pay is
c. that buyer's maximum amount he is willing to pay for a good.
Suppose the government increases its purchases by $16 billion. If the multiplier effect exceeds the crowding-out effect, then
c. the aggregate-demand curve shifts to the right by more than $16 billion.
Medical care clearly enhances people's lives. Therefore, we should consume medical care until
c. the benefit buyers place on medical care is equal to the cost of producing it.
When an increase in government purchases raises incomes, shifts money demand to the right, raises the interest rate, and lowers investment, we have seen a demonstration of
c. the crowding-out effect.
The liability of foreignness is:
c. the inherent disadvantage that foreign firms experience in host countries because of their non-native status.
If banks increase their holdings of excess reserves
c. the money multiplier and the money supply decrease.
A decrease in the reserve requirement causes
c. the money multiplier to rise.
Suppose all banks maintain a 100 percent reserve ratio. If an individual deposits $1,000 of currency in a bank,
c. the money supply is unaffected.
If the price of a good is equal to the equilibrium price,
c. the quantity demanded is equal to the quantity supplied and the price remains unchanged.
Imagine you are running a small home-based business selling software you developed. You are tempted to not report all of your sales so that you don't have to pay the full amount of sales tax required by law, but you don't want to jeopardize yourself or your business so you pay the full amount. Within an institutional framework, your behavior is influenced by:
c. the regulatory pillar.
Economic profit is equal to total revenue minus
c. the sum of implicit and explicit costs.
If one country's interest rate is high relative to other countries
c. this will attract foreign funds and this will cause the home country's exchange to appreciate
Which of the following is an automatic stabilizer?
c. unemployment benefits
An example of a transfer payment is
c. unemployment benefits.
The Board of Governors of the Federal Reserve System consists of
c. up to seven members appointed by the president.
If the Fed engages in an open-market purchase, and at the same time, it raises reserve requirements,
c. we cannot be certain what will happen to the money supply.
_____ refers to the clustering of economic activities in certain locations.
d. Agglomeration
A(n) _____ is a non-equity mode of entry used to build a longer-term presence by building and then operating a facility for a period of time before transferring operations to a domestic agency or firm.
d. BOT agreement
More than 25% of global GDP comes from _____.
d. BRICS countries
____ is an attack on a competitor's other markets if this competitor attacks a firm's original market.
d. Cross-market retaliation
____ best suits situations where the pressures to globalize are relatively low, and local firms' strengths lie in a deep understanding of local markets.
d. Defender strategy
Which of the following conditions will attract foreign funds into a country?
d. If the country's interest rate is relatively high compared to other countries
Which of the following is true of the Group of 20 (G-20)?
d. It only has 19 member countries.
_____ are rules stipulating that a certain proportion of the value of the goods made in one country must originate from that country.
d. Local content requirements
_____ refers to the amount of resources committed to entering a foreign market.
d. Scale of entry
_____ refers to non-financial companies spreading out its activities in different currency zones in order to offset the currency losses in certain regions through gains in other regions.
d. Strategic hedging
A vertical FDI (foreign direct investment) refers to a type of FDI in which _____.
d. a firm moves upstream or downstream at different value chain stages in a host country
The term "emerging economies" has replaced the term _____.
d. developing countries
The fixing of East and West Germany's currencies at a 1:1 ratio to each other during the German unification in 1990 is an example of a _____.
d. fixed exchange rate policy
The resource-based view of global business differs from the institution-based view of global business in that the resource-based view _____.
d. focuses on the internal strengths on the firm
A _____ is the price of one currency, such as the dollar, in terms of another, such as the euro.
d. foreign exchange rate
People who earn _____ a year comprise the base of the global economic pyramid.
d. less than $2,000
A _____ antirust policy would protect established firms that have already invested and nurtured an industry from new entrants.
d. pro-incumbent
In the third stage of the product life cycle theory, the _____.
d. product is standardized 1st-new stage 2nd-maturing stage
The weight a member country carries within the IMF, which determines the amount of its financial contribution, its capacity to borrow from the IMF, and its voting power is referred to as a(n) _____.
d. quota
The average fixed cost of producing four units is
d. $2.50.
Use the following information to answer question. Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Madelyn can work at a competing pottery factory for $40,000 per year. The economic profit at Madelyn's pottery factory is
d. $30,000.
Refer to Table 4-6 . The equilibrium price and quantity, respectively, are Price Qty Demanded Qty Supplied (Dollars per unit) (units) (units) 10 10 60 8 20 45 6 30 30 4 40 15 2 50 0
d. $6 and 30 units.
Use the following information to answer question. Madelyn owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for $100 each. It costs Madelyn $20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested $100,000 in her factory and equipment: $50,000 from her savings and $50,000 borrowed at 10 percent (assume that she could have loaned her money out at 10 percent, too). Madelyn can work at a competing pottery factory for $40,000 per year. The accounting profit at Madelyn's pottery factory is
d. $75,000.
If the price is P4, the firm will earn profits equal to the area
d. (P4 − P3) × Q3.
What is the percentage increase in real GDP from 2018 to 2019?
d. 0 percent
Which of the following is an example of a subsidy?
d. A government guaranteeing that farmers earn a certain amount, regardless of how much food they produce or how much it is worth.
Which economic system is the most common?
d. A mixed economy
Which of the following statements regarding taxes is correct?
d. A permanent change in taxes has a greater effect on aggregate demand than a temporary change in taxes.
Which of the following is not a barrier to entry in a monopolized market?
d. A single firm is very large.
What is the definition of an institution-based view of global business?
d. An institution-based view suggests that the success and failure of firms are enabled and constrained by institutions, also known as the rules of the game, such as regulations, laws, cultures, ethics, and norms.
If Google and Microsoft were to propose a joint venture to develop a new internet search engine, the US government would block them based on:
d. Antitrust law.
If free trade is allowed, producer surplus is the area
d. B + C + D.
The efficient price and quantity are represented by point
d. D. (different quantity, lesser price, lesser MC)
If a country's competition and antitrust policies are pro-incumbent and pro-producer, which of the following is a likely outcome?
d. Domestic consumers will most likely pay high prices.
Refer to Figure 21-1. All of the points identified on the figure represent affordable consumption options with the exception of
d. E (only dot outside the chart)
Which of the following entry modes is considered a non equity method?
d. Exports
Which of the following is not a characteristic of a competitive market?
d. Firms generate small but positive economic profits in the long run.
Which of the following entry mode(s) are considered equity methods?
d. Greenfield and joint ventures
Choose the set of countries that are all emerging economies.
d. India, China, Thailand, Malaysia
Which of the following statements about stabilization policy is true?
d. Many economists prefer automatic stabilizers because they affect the economy with a shorter lag than activist stabilization policy.
In the short run, competitive firms will temporarily shut down production if the price falls below
d. P1.
Which of the following statements about price discrimination is not true?
d. Perfect price discrimination generates a deadweight loss.
Which of the following statements is true about the impact of an increase in the price of lettuce?
d. The equilibrium price and quantity of salad dressing will fall.
Free trade is defined as:
d. The idea that market forces should determine how much to trade with little or no government intervention.
Which of the following events could cause an increase in the supply of ceiling fans?
d. The number of sellers of ceiling fans increases.
What is the definition of a resource-based view of global business?
d. The resource-based view focuses on a firm's internal resources and capabilities.
Why do companies "dump" products in foreign markets?
d. To gain market share and establish the brand.
In which of these categories is the United States NOT the top trading nation?
d. Top merchandise exporter
If the world price for a good exceeds the before-trade domestic price for a good, then that country must have
d. a comparative advantage in the production of the good.
A multinational enterprise (MNE) is:
d. a firm that engages in foreign direct investments.
Which of the following would be excluded from 2019 GDP? The sale of
d. a home built in 2018 and first sold in 2019.
Purchasing power parity is:
d. an adjustment made to the GDP to reflect differences in the cost of living.
If an increase in consumer incomes leads to a decrease in the demand for camping equipment, then camping equipment is
d. an inferior good.
An industry dominated by a small number of players is called:
d. an oligopoly.
When marginal costs are below average total costs,
d. average total costs are falling.
A statement that documents all of Bolivia's international transactions, including merchandise trade, service trade, and capital movement, is called its:
d. balance of payments.
Real GDP is measured in ______ prices while nominal GDP is measured in ______ prices.
d. base year; current year
Total surplus is the area
d. below the demand curve and above the supply curve.
Suppose the price of hot wings is $10, the price of beer is $1, and the consumer's income is $50. In addition, suppose the consumer's budget constraint illustrates hot wings on the horizontal axis and beer on the vertical axis. Refer to Scenario 21-1. If the price of beer doubles to $2, then the
d. budget constraint intersects the vertical axis at 25 beers. (income/beer price=budget constraint change) 50/2=25
Which of the following policy combinations would consistently work to increase the money supply?
d. buy government bonds, decrease reserve requirements, decrease the discount rate
The monopolistically competitive market shown in Exhibit will, in the long run,
d. cause producers to exit the market, which will shift the demand faced by incumbent firms to the right.
Imagine that a Japanese toy producer has developed a group of animated characters that look quite different from American-style animated characters. They have used these characters on numerous product lines, including trading cards, games, and clothing. To introduce the products to the American market, the firm produces a TV show starring the characters and launches a massive advertising campaign. The firm has successfully overcome the liability of foreignness by:
d. changing informal institutions.
Price setting by a monopolist at a level higher than the competitive price level is:
d. collusive price setting.
Which of the following products is least likely to be sold in a monopolistically competitive market?
d. cotton
The line that relates the price of a good and the quantity demanded of that good is called the demand
d. curve, and it usually slopes downward.
An increase in the price of a good will
d. decrease quantity demanded.
The initial effect of an increase in the money supply is to
d. decrease the interest rate.
Assume that a consumer's indifference curve is bowed inward and negatively sloped. As the consumer moves from left to right along the horizontal axis, the consumer's marginal rate of substitution
d. decreases.
The value of plant and equipment worn out in the process of manufacturing goods and services is measured by
d. depreciation.
The owners of a small rice noodle manufacturing firm in Thailand are facing increasing competition from larger food manufacturers and distributors throughout Asia who wish to move into the Thai market. In response, they sell their company to one of these larger firms. This is an example of a(n):
d. dodger strategy.
Gross domestic product is the sum of the market value of the
d. final goods and services.
Compared to a perfectly competitive market, a monopoly market will usually generate
d. higher prices and lower output.
If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost, the firm could increase profits if it
d. increased production.
Refer to Table 4-4. If these are the only four sellers in the market, then when the price increases from $6 to $8, the market quantity supplied
d. increases by 12 units.
Two goods are complements when a decrease in the price of one good
d. increases the demand for the other good.
The law of supply states that an increase in the price of a good
d. increases the quantity supplied of that good.
Local firms, in emerging economies, use a dodger strategy to respond to MNEs entry when:
d. industry pressures to globalize are high and assets are customized to home markets.
Assume that Germany passes a law regarding automobile manufacturing. The law states that at least 50% of the components of each car must be made in Germany and at least 35% of the assembly work must be done in Germany. This is an example of:
d. local content requirements.
Imagine that an Australian manufacturing firm would like to open a new plant in Europe. The new plant will house both a research-and-development center and a major production line. In evaluating the best location for the plant, the firm rejects moving to Germany, which is known for its world-class engineers but also for the higher salaries commanded by its union-protected workers, in favor of Bosnia-Herzogovina, where labor is less expensive. The firm has placed a priority on:
d. matching efficiency-seeking goals with location.
The three OLI advantages are:
d. ownership, location, internalization.
If all firms in a market have identical cost structures and if inputs used in the production of the good in that market are readily available, then the long-run market supply curve for that good should be
d. perfectly elastic.
Imagine that an electronics manufacturer introduces a new smart phone in its home market at an extremely low cost. Its intention is to eliminate its domestic rivals, after which it plans to significantly raise its prices. The firm is engaging in:
d. predatory pricing.
An increase in the marginal propensity to consume (MPC)
d. raises the value of the multiplier.
The key role of institutions is to:
d. reduce uncertainty.
Refer to Figure 21-8. As the consumer moves from A to B to C, the consumer's total utility
d. remains constant.
Imagine your manufacturing plant gets most of its raw materials from suppliers along the Gulf Coast of the United States. However, you have alternate suppliers from other parts of the country lined up, just in case the Gulf Coast is hit with a devastating hurricane or other debilitating disaster and your suppliers there can't deliver the raw goods. You have engaged in:
d. scenario planning.
In the market for real output, the initial effect of an increase in the money supply is to
d. shift aggregate demand to the right.
Purchasing power parity (PPP) is a theory that:
d. suggests that in the absence of trade barriers (such as tariffs), the price for identical products sold in different countries must be the same.
Although the Bretton Woods system is no longer with us, one of its most enduring legacies is:
d. the International Monetary Fund.
For the United States, the most important source of the downward slope of the aggregate-demand curve is
d. the interest-rate effect.
When politicians argue that outsourcing or offshoring of technical support to India by Dell Computer Corporation is harmful to the U.S. economy, they are employing which of the following arguments for restricting trade?
d. the jobs argument
The seller's cost of production is
d. the minimum amount the seller is willing to accept for a good.
Ryan experiences an increase in her wages. The hours of labor that she supplies to the market would increase if
d. the substitution effect is larger than the income effect.
If the price of a good is above the equilibrium price,
d. there is a surplus and the price will fall.
The inefficiency associated with monopoly is due to
d. underproduction of the good.
If an input necessary for production is in limited supply so that an expansion of the industry raises costs for all existing firms in the market, then the long-run market supply curve for a good could be
d. upward sloping.
Imagine that a major Italian automobile manufacturer has decided to move into the Asian market by setting up a JV with a South Korean automobile manufacturer. The Italian firm is:
d. using an equity mode of entry.
If regulators break up a natural monopoly into many smaller firms, the cost of production
d. will rise.
Which of the following is true with regard to monopolistically competitive firms' scale of production and pricing decisions? Monopolistically competitive firms produce
d. with excess capacity and charge a price above marginal cost.
The exchange rate policy in which governments selectively intervene to influence exchange rates is called:
dirty float
The monopolist's supply curve
does not exist
Suppose that the price of a new bicycle is $300. Sue values a new bicycle at $400. It costs $200 for the seller to produce the new bicycle. What is the value of total surplus if Sue buys a new bike?
e. $200
The average total cost of producing three units is
e. $9.33. fixed+variable=total/#of units for average
The following table contains information about an economy that produces only pens and books. The base year is 2017. Use this information to answer question What is the value of the GDP deflator in 2018?
e. 113
Suppose consumer tastes shift toward the consumption of apples. Which of the following statements is an accurate description of the impact of this event on the market for apples?
e. There is an increase in the demand for apples and an increase in the quantity supplied of apples.
Suppose there are three identical vases available to be purchased. Buyer 1 is willing to pay $30 for one, buyer 2 is willing to pay $25 for one, and buyer 3 is willing to pay $20 for one. If the price is $25, how many vases will be sold and what is the value of consumer surplus in this market?
e. Two vases will be sold, and consumer surplus is $5.
Which of the following is a variable cost in the short run?
e. Wages paid to factory labor
Gross domestic product can be measured as the sum of
e. consumption, investment, government purchases, and net exports.
U.S. GDP would exclude which of the following?
e. cotton purchased by Lee Jeans
The production process described above exhibits # of workers output 0 0 1 23 2 40 3 50
e. diminishing marginal product of labor.
Suppose there is an increase in both the supply and demand for personal computers. In the market for personal computers, we would expect the
e. equilibrium quantity to rise and the change in the equilibrium price to be ambiguous.
If U.S. GDP exceeds U.S. GNP, then
e. foreigners are producing more in the United States than Americans are producing in foreign countries.
The efficient scale of production is
e. four units.
In the long run, the competitive firm's supply curve is the
e. portion of the marginal-cost curve that lies above the average-total-cost curve.
If a benevolent social planner chooses to produce more than the equilibrium quantity of a good, then
e. the cost of production on the last unit produced exceeds the value placed on it by buyers.
If a benevolent social planner chooses to produce less than the equilibrium quantity of a good, then
e. the value placed on the last unit of production by buyers exceeds the cost of production.
A Spain-based chain of tapas bars authorizes a French company to open a chain of tapas bars using the Spanish company's name, logo, menu, process, and advertising. This is an example of:
licensing
The strategy of treating each country as a unique market and in total isolation is referred to as _____.
localization
An example of fiat money is
paper dollars
The _____ principle advocated that governments should actively protect domestic industries from imports and vigorously promote exports.
protectionism
MNEs (multinational enterprise) from the Triad dominate the list of the 500 largest MNEs; their share has been _____.
shrinking
Public ownership of natural monopolies
tends to be inefficient
