IB test 3 homework w choices

In 2014, the value of the U.S. dollar relative to the euro was about 30 percent weaker than its value in 2001. How is a weak currency an advantage in trade? A weak currency makes a country's imports more attractive. A weak currency implies low translation costs. A weak currency boosts export sales for the country. A weak currency allows citizens to consume more imports. A weak currency is associated with strong trade policy.

A weak currency boosts export sales for the country.

How does a weak currency give a country an unfair advantage in trade? A weak currency allows citizens to consume more imports. A weak currency boosts exports sales for the country. A weak currency is associated with strong trade policy. A weak currency makes a country's imports more attractive. A weak currency implies low translation costs.

A weak currency boosts exports sales for the country.

Which of the following best explains why some thought the European Union (EU) would be better off without Britain? Britain's lax labor regulations made it difficult to have a unified labor policy. Britain was seen as taking a "me first" approach rather than a "what's best for the whole" approach. The geographic separation between Britain and the rest of the EU countries made it difficult to achieve consensus on EU matters. Britain's failure to adopt the euro led to gross trade imbalances that threatened the viability of economic union going forward. Companies didn't recognize Britain as being a full member of the EU.

Britain was seen as taking a "me first" approach rather than a "what's best for the whole" approach.

The 25-year-old NAFTA agreement is set to be replaced with a new agreement, the USMCA. Which countries belong to NAFTA and, going forward, the USMCA? Great Britain, China, and Germany Canada, Mexico, Brazil, and the United States the United States, Mexico, and Paraguay Canada, Mexico, and the United States Mexico, China, and the United States

Canada, Mexico, and the United States

What is a defining characteristic of a free trade area? Factors of production are allowed to move freely between member nations. Each member country is allowed to determine its own trade policies with regard to nonmembers. Member nations are required to have a common currency. Member nations are required to have a common monetary and fiscal policy. Member nations are required to have a central political apparatus that coordinates economic, social, and foreign policy.

Each member country is allowed to determine its own trade policies with regard to nonmembers.

Where has the movement toward regional economic integration been most ambitious? Africa South America North America Europe Asia

Europe

Toyota produces 1.2 million vehicles per year in the United States. Which best explains why Toyota has chosen to produce its vehicles in the United States rather than exporting from Japan? Toyota is trying to avoid Japanese competitors like Nissan and Honda by selling in the United States. Toyota believes that designing its vehicles in Japan is the main way generate profits. Toyota has decided to forgo markets in Europe and Asia in order to focus exclusively on the United States. Toyota is concerned that its ability to export from Japan could be compromised by U.S. tariffs and quotas. Toyota feels that production in China would damage its reputation for quality.

Toyota is concerned that its ability to export from Japan could be compromised by U.S. tariffs and quotas.

What is the successor agreement enacted by the Trump administration that aims to remove all barriers to the free flow of goods between Canada, the United States, and Mexico? TRIPS USMCA NAFTA EU ASEAN

USMCA

Economic theories for integration imply that free trade and investment create __________ for participants. increased trade barriers more monopolies a positive-sum game increased restrictions on exports a zero-sum game

a positive sum-game

Business executives view foreign direct investment as a way to erase the fear of protectionist pressures. circumvent future trade barriers. promote totalitarian political institutions. diminish privatization. shift toward centrally planned command economies.

circumvent future trade barriers.

To spur trade, four South African countries decide there will be no barriers to trade between the countries, agree on a common external trade policy, and allow factors of production to move freely between them. In short, the four countries formed a command economy. customs union. common market. efficient market. free trade area.

common market

The United States-Mexico-Canada Agreement (USMCA) retains much of the framework of the North American Free Trade Agreement (NAFTA) but with some changes especially in trade in automobiles. For U.S. consumers, the USMCA could make it difficult to buy a German car in the United States. means prices will decline especially on cars with tariff-free status. implies that the quality of the vehicles produced in North America will decline. could significantly increase the cost of a new car. means that China will pay for all new tariffs.

could significantly increase the cost of a new car.

Functions of foreign exchange GM converts $10 million to yen and then back into dollars within three months. -payments for imports -currency speculation -payment for exports -investments of excess cash

currency speculation

3M, an American firm, manufactures adhesive tape in St. Paul, Minnesota, and ships the tape to South Korea for sale. According to this information, 3M uses __________ to deliver this product. exporting licensing franchising insourcing outsourcing

exporting

Kitchen Supply Corp. produces its entire line of restaurant-grade kitchen utensils and serving dishes at its manufacturing facility in the United States and then ships its products to various companies in Europe to sell. Kitchen Supply Corp. is involved in outsourcing licensing franchising exporting diversifying

exporting

According to the U.S. Department of Commerce, what occurs whenever a U.S. citizen, organization, or affiliated group takes an interest of 10 percent or more in a foreign business entity? multilateral investment foreign direct investment privatization an absolute advantage isolationism

foreign direct investment

A high-fashion clothing firm from the United States invests in a fabric processing plant in Indonesia. This is an example of an absolute advantage. stock consolidation. foreign direct investment. product differentiation market segmentation

foreign direct investment.

Toyota's $25 billion investment in the U.S. market indicates that the Japanese company believes that the United States is a strategically important market. When considering future international expansion, if Toyota has valuable know-how that cannot be protected with a licensing contract and also faces high transportation costs, Toyota should export from Japan. invest directly in target markets. use different technology. consider a less popular vehicle. outsource all production.

invest directly in target markets.

Functions of foreign exchange Dell deposits 10 million in a Dubai bank -payments for imports -currency speculation -payment for exports -investments of excess cash

investment of excess cash

The United States has been an attractive target for FDI partly because of its abundance of cheap and skilled labor. large and wealthy domestic markets. commitment to environmental issues. low corporate tax rates high trade barriers

large and wealthy domestic markets.

As a company policy, Kelvin Appliance Corp. periodically grants foreign entities the right to produce and sell its products in return for a royalty fee on every unit sold. Kelvin Appliance Corp.'s approach to FDI is outsourcing. exporting licensing diverging hedging

licensing

Clear the Way Glass, a leading manufacturer of heavy, oversized glass blocks in the United States, is considering exporting as its FDI strategy. Exporting may not be a good option for Clear the Way Glass because of the glass blocks' unattractiveness in foreign markets. high value-to-weight ratio. high cost of manufacture. low weight-to-value ratio. low value-to-weight ratio.

low value-to-weight ratio.

Once it undertakes FDI, a firm becomes a(n) outsourcer retail chain offshore company multinational enterprise. national corporation.

multinational enterprise.

The oil and gas industry in a foreign country is dominated by just three firms and these firms control at least 80 percent of the domestic market. The market structure in this country is a(n) perfect competition. democracy oligopoly monopoly monarchy

oligopoly

Functions of foreign exchange Toyota sells 10,000 cars in the United States -payments for imports -currency speculation -payment for exports -investments of excess cash

payments for exports

Functions of foreign exchange Apple buys 5,000 computer screens from Japan -payments for imports -currency speculation -payment for exports -investments of excess cash

payments for imports

What type of exchange rate regime is present in Vietnam? fixed floating pegged spot managed

pegged

In its current state, the European Union (EU) can best be characterized as being at which level of economic integration? customs union free trade area economic union political union common market

political union

The European Parliament plays an important role in the European Union and creates a(n) __________ to coordinate the economic, social, and foreign policy of the member states. political union customs union exclusive economic zone free trade agreement common market

political union

Four countries in Central America agreed to reduce and ultimately remove tariff and nontariff barriers to the free flow of goods, services, and factors of production between each other. The agreement among these countries is referred to as regional economic integration cross-cultural integration a zoning agreement administrative trade policies a balance-of-trade equilibrium

regional economic integration

At least some of the losses reported by the two South Korean airlines can be attributed to __________ fuel costs associated with a __________ won. falling, weakening lower, appreciating rising, weakening lower, depreciating rising, rising

rising, weakening

Brazilian coffee farmers have benefitted from the depreciation of the U.S. dollar. the drop in the price of robusta beans. the drop in the value of the Brazilian real. the sharp appreciation of the local currency. the depreciation of the Vietnamese dong.

the drop in the value of the Brazilian real.

A firm is most likely to favor foreign direct investment over exporting when the firm wants its technological know-how to be widely disseminated. the firm wishes to maintain control over its operations and business strategy. the transportation costs are low. there are no trade barriers. the firm wants to customize its products as per the tastes and preferences of foreign consumers.

the firm wishes to maintain control over its operations and business strategy.

A firm will favor FDI over exporting as an entry strategy when the costs of establishing production facilities are high. the transportation costs or trade barriers are high. there are problems associated with doing business in a different culture. the products involved have a high value-to-weight ratio. the firm wants to occupy a position that falls inside the efficiency frontier.

the transportation costs or trade barriers are high.

Which type of exposure are South Korea's airlines facing when they make a single purchase of jet fuel and pay for it in USD? translation exposure transaction exposure economic exposure ordinary exposure single source exposure

transaction exposure

Which type of exposure are South Korea's airlines facing when they report their year-end results? ordinary exposure reporting exposure transaction exposure economic exposure translation exposure

translation exposure

If the United States has a weak dollar relative to the euro, what is the impact for a European importer buying products from the United States that are priced in dollars? The European company will demand that the products be priced in a third currency. The European company will experience no effect because of its special relationship with the EU. The European company will demand that the products be priced in euros. The European company will benefit from its relatively strong euro. The European company will lose money.

The European company will benefit from its relatively strong euro.

If Mexico has a weak peso relative to the dollar, what is the impact for U.S. companies importing inputs from Mexico that are priced in pesos? The U.S. company will demand that the inputs be priced in a third currency. The U.S. company will lose money. The U.S. company will benefit from its relatively strong dollar. The U.S. company will experience no effect because of NAFTA. The U.S. company will demand that the inputs are priced in dollars.

The U.S. company will benefit from its relatively strong dollar.

What is the impact of a strong dollar relative to the euro for a U.S. consumer buying a Porsche produced in Germany with parts from Slovakia? The U.S. consumer will probably purchase a Corvette instead. The car will cost more to reflect the higher dollar. The U.S. consumer will probably have to choose a lesser model to afford the car. The car should be less expensive for the U.S. consumer. The U.S. consumer will probably choose a used car because the imported car will be too expensive.

The car should be less expensive for the U.S. consumer.

What is the impact of a strong dollar relative to the peso for a U.S. consumer buying a car produced in Mexico? The car will cost more to reflect the higher dollar. The car should be less expensive for the U.S. consumer. The U.S. consumer will probably choose a used car because the imported car will be too expensive. The U.S. consumer will probably purchase a domestically produced car instead. The U.S. consumer will probably have to choose a lesser model to afford the car.

The car should be less expensive for the U.S. consumer.

Which fundamental element of a political union did the European Union (EU) lack as a result of Britain's decision to opt out of provisions such as the EU Charter of Fundamental Rights, the Schengen Agreement, and the Eurozone? The complete integration of trade and currency regulations for member and nonmember nations. The identity of the country bloc as a singular decision-making entity. The willingness of countries to give up sovereignty for the benefit of all. The automatic currency adjustment alternative used by the European Union's Central Bank. The ability to coordinate PPP across member nations.

The willingness of countries to give up sovereignty for the benefit of all.

What has happened to the value of the South Korean won relative to the U.S. dollar from January to July given the following information? January USD 1 = WON 1,000 July USD 1=WON 1,200 The won has appreciated against the dollar. The won has depreciated against the dollar. The dollar has depreciated against the won. The won has appreciated by about 15 percent. The dollar has depreciated by about 15 percent.

The won has depreciated against the dollar.

Donald Trump has called China a "currency manipulator." What does he mean by this? Trump is arguing that China prints more currency in order to keep its currency artificially high. Trump is contending that China avoids transaction and translation risk by keeping its currency stable. Trump is claiming that China intervenes in the market to influence the value of its currency to benefit China. Trump is suggesting that China targets the currencies of rival countries with the goal of increasing competitiveness. Trump is pointing out that China maintains a pegged rate that benefits investors in the country.

Trump is claiming that China intervenes in the market to influence the value of its currency to benefit China.

Which of the following is most likely if the United States-Mexico-Canada Agreement (USMCA) is approved in member countries? U.S. autoworkers will see substantially lower wages, while wages in Mexico will rise. U.S. automakers will have to source more inputs within the bloc for vehicles to qualify as tariff-free. U.S. consumers will face higher prices but Canadian consumers will see prices drop. Automakers will circumvent the high local content requirements by exporting finished vehicles from China. Automakers will offset higher wages within the bloc by buying more inputs from South Korea and China.

U.S. automakers will have to source more inputs within the bloc for vehicles to qualify as tariff-free.

Which of the following has contributed to the problems Vietnam is facing with its coffee revenues? Vietnam's currency is pegged to the dollar. The managed float system results in variable earnings. Most farmers decided to turn to alternative crops. Spot prices for coffee have not kept pace with inflation in Vietnam. Farmers failed to hedge.

Vietnam's currency is pegged to the dollar.

Which of the following statements is true of how the strong U.S. dollar has affected the global coffee market? Brazilian growers are decreasing coffee production. Vietnam is benefiting from high export revenue. Vietnamese coffee farmers are reducing coffee production and investing in alternative crops. Coffee is being stockpiled in Brazil by farmers who are unwilling to sell at current prices. Brazil's coffee exports are declining rapidly.

Vietnamese coffee farmers are reducing coffee production and investing in alternative crops.

Which of the following would be most beneficial for Vietnam's coffee growers? an appreciation of the Vietnamese dong a depreciation of the Brazilian real an appreciation of the euro a depreciation of the British pound sterling a depreciation in the value of the U.S. dollar

a depreciation in the value of the U.S. dollar

Three South American countries enter into an agreement to remove all tariffs and trade barriers between them. They decide on a common external trade policy and charge the same tariffs. Which level of economic integration best describes this arrangement? political union customs union common market economic union monetary union

customs union

The relationship between the U.S. dollar and the European Union's euro has been up and down. In 2018, for example, a strong U.S. economy together with persistent economic weakness in Europe resulted in American exports to the euro zone being 17 percent more expensive when priced in euros. Which type of exchange rate exposure are managers dealing with in this longer-term scenario? translation exposure international Fisher effect Fisher effect economic exposure transaction exposure

economic exposure

The European Union is considered a(n) __________ even though not all members have adopted a common currency. planned economy free trade area economic union customs union common market

economic union

The six member countries that have embraced a common market are disappointed with the outcome of their economic integration. They want something that entails a closer economic integration and cooperation than a common market and decide to pursue a common currency. They are forming a(n) command economy. customs union. efficient market. free trade area. economic union.

economic union

Within a(n) __________, there is a level of economic integration that involves the use of a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy. free trade area customs union common market economic union command economy

economic union

Under a common market agreement, you would find absence of a common external trade policy with regard to nonmembers. free movement of labor because there are no restrictions on immigration or emigration. establishment of barriers to the free flow of goods between member nations. a lack of administrative machinery to oversee trade relations with nonmembers. mandatory use of a common currency among member nations.

free movement of labor because there are no restrictions on immigration or emigration.

What is the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements? licensing agreements economic unions common markets free trade agreements political unions

free trade agreements

Assume that France and Italy agree to remove all barriers to the trade of goods between them. However, the countries agree that each would be allowed to determine its own trade policies with regard to nonmembers. The economic integration between these countries is called a(n) free trade area customs union common market economic union political union

free trade area

If it is approved by legislators in member countries, the United States-Mexico-Canada Agreement (USMCA) will replace the existing North American Free Trade Agreement (NAFTA). Which level of regional economic integration best describes NAFTA? trade union common market economic union customs union free trade area

free trade area

While the countries of Canada and Mexico are committed to removing all barriers to the free flow of goods and services between each other, they are independent in their trade policy dealings with other countries. This represents a(n) free trade area. customs union. common market. economic union. political union.

free trade area

Global Medical Supply built an operation from scratch in Spain. This is an example of a(n) merger acquisition strategic alliance FDI stock greenfield investment

greenfield investment

Rather than acquire an existing machine parts manufacturer in Mexico, Robertson Corp., based in Ohio, chose to establish new operations in a northern Mexico city. This form of FDI is called consolidation greenfield investment an acquisition a licensing agreement mass customization

greenfield investment

The world flow of foreign direct investment between 1990 and 2017 increased 600 percent. If a company decides to establish a new operation in a foreign country, that company has engaged in an acquisition. a licensing arrangement. a merger. greenfield investment. a franchise arrangement.

greenfield investment.

Compared to the growth in world trade and world output since 1990, FDI has grown at about the same rate. grown more rapidly. failed to match the growth of world trade. grown at a slower rate. remained stagnant.

grown more rapidly

The interdependence between firms in an oligopoly leads to trade wars decrease in the supply imitative behavior higher demand increased domestic consumption

imitative behavior

Governments impose quotas to limit FDI importing franchising outsourcing licensing

importing

Edu-Tech Inc. grants a foreign entity the right to produce and sell the firm's online coursework products in return for a royalty fee on every course sold. Edu-Tech Inc.'s approach to FDI is called outsourcing licensing franchising exporting diversifying

licensing

The __________ is one reason a company might prefer FDI over exporting. presence or threat of trade barriers costs of acquiring a foreign enterprise costs of establishing production facilities in a foreign country risk of giving away valuable technological know-how to a potential foreign competitor possibility of diminishing returns

presence or threat of trade barriers