International Business Exam 2
According to mercantilism, ______ were the mainstays of national wealth and were essential to business activity.
.gold and silver
Originally, the Trans-Pacific Partnership was a trade agreement between the United States and countries in the Pacific Rim, including ______.
New Zealand
According to Adam Smith, a country has an absolute advantage in the production of a product when it ______.
is more efficient than any other country at producing it
What are two characteristics of an oligopoly?
limited number of firms large firms
A firm should follow the transnational strategy when it is faced with which two pressures?
local responsiveness cost reductions
Firms face competitive pressures when they venture into the global marketplace. Companies face pressure for cost reductions and to be ______.
locally responsive
The various theories of FDI try to explain the ______ of FDI flows, which deals with why certain locations are favored as targets of FDI.
pattern
A number of investor countries try to encourage FDI through the use of ______.
political influence
A country which has related and supporting industries that spill over into other industries can have a ______ on that country's competitive advantage.
positive effect
Pre-1980, Japan blocked the majority of potential foreign investments. Yet, if a company that had cutting edge technology wanted to invest in Japan, they were allowed to undertake FDI. This is an example of ______.
pragmatic nationalism
Jason is a member of the company's product development team. He is involved with a(n) ______ activity.
primary
If Trevor wants his company to create more value, he should look for ways to make a product that is higher in _____
quality
Which economist was a key figure in the early free trade movement in Great Britain?
Ricardo
Which leader behavior is most likely to promote a strong ethical culture in an organization?
The boss who consistently demonstrates strong personal ethics in all of his dealings with clients.
True or false: According to the rights theories, human beings have fundamental rights and privileges that transcend national boundaries.
True
True or false: Businesspeople may behave unethically simply because they forget to ask themselves whether the decision or action they are making is ethical.
True
(T/F): With the advancement of technology, when a "shock" occurs in one financial center, it tends to spread quickly around the globe.
True: Technology connects financial centers together like never before
When people behave recklessly because they know they will be bailed out if things don't go as planned, it is an example of ______.
a moral hazard
Between 1985 and 1988, the U.S. dollar ______ in value relative to major trading currencies.
decreased
To encourage FDI, many countries have eliminated ______ taxation of foreign income.
double
When manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production, as a way to get rid of excess product, it is called ______.
dumping
In Porter's model of the determinants of national competitive advantage, he noted many US firms were led by people with ______ backgrounds, likely leading to US firms' lack of attention to improving manufacturing process and product design.
finance
Which service has been shown to be the most tightly regulated in many countries all around the world?
financial
Carl's company was able to gain economic advantage over all of its competition when it premiered the digital camera into South America before them. This is an example of a ______.
first-mover advantage
Preempting demand, gaining volume cost advantages, building the brand, and establishing a long-term competitive advantage are associated with
first-mover advantages
Converting the currency of one country into the currency of another country is done through the ______.
foreign exchange market
The predominant factor that complicates the ability of an investor to reduce total risk by diversifying their portfolio in the global capital market is ______.
foreign exchange risk
Marcy is happy to live in a country where she is allowed to purchase unlimited amounts of foreign currency. Her country demonstrates a currency that is ______ convertible.
freely
When a country allows both residents and nonresidents to purchase unlimited amounts of a foreign currency, the country's currency is ______.
freely convertible
The approach to forecasting that draws on economic theory to develop models that predict exchange rate movements is the ______ approach.
fundamental
Which of Hofstede's dimensions are likely to be found in nations where corruption is rampant?
high power distance
Government regulation tends to ______ the cost of capital in most domestic capital markets.
raise
Banks must keep some liquid funds to satisfy demand and must also set aside a percentage of each dollar deposited as a ______ requirement.
reserve
When a British bank accepts a deposit in pounds sterling, it must set aside a fraction of that money to be kept in an account at the Bank of England. All industrialized countries operate with this type of ______ requirement.
reserve
The only way a country can support a current account deficit, also known as a trade deficit, in the long-run is to ______.
sell off assets to foreigners
Member nations hoped that the WTO would be a facilitator of future trade deals especially in the area of ______.
services
The Andean Community, while not as successful at meeting the goals it set, was based on the model established by ______.
the European Union
First Mover Advantages
the economic and strategic advantages that accrue to early entrants into an industry
FDI theory suggests that exporting is preferable to licensing and FDI as long as what two conditions exist?
transportation costs are low trade barriers are low
As the text notes, unrestricted free trade is impossible if there is a lack of ______ between nations.
trust
When considering the benefit of free trade in neighboring countries, one government might favor lowering trade barriers but won't do it because of a lack of ______ in the other nation.
trust
The gold standard was embraced by most of the world's major trading countries in the late ______.
1800s
Regulatory barriers to national equity markets initially began to fall during the ______.
1980s
Noblesse Oblige
A French term referring to the honorable and benevolent behavior required of persons of noble birth and is taken to be benevolent behavior that is the responsibility of successful enterprises in business.
Absolute Advantage
A country has an absolute advantage in the production of a product when it is more efficient than any other country at producing it.
What is considered the "dark side" of technological advancements in global capital markets?
A financial crisis that occurs in one center spreads quickly around the globe.
Export Ban
A policy that partially or entirely restricts the export of a good.
Specific Tariff
A tariff levied as a fixed charge for each unit of good imported.
Import Tariffs
A tax levied on imports of goods or services.
Choose three factors that pressure a firm to respond locally when they enter the global marketplace.
Accepted business practices Host-government demands Differences in consumer tastes
Friedmans rejects the idea that
Businesses should understake social expenidutes beyond those mandated by the law and required for the effect running of a business.
In 2004, the US and six Central American countries formed a free trade agreement called ______.
CAFTA
What are two basic factors of production as labeled by Porter?
Climate Natural resources
______ perform an indirect connection function by taking cash deposits from investors and paying them interest, and then lending money to borrowers charging them interest.
Commercial
What is an example of a market maker within a capital market?
Commercial Bank
EU legislation is proposed by the European ______ which is also responsible for making sure member states follow EU laws.
Commission
Subsidies help domestic producers by:
Competing against foreign imports and Gaining export markets
What is the ultimate reason international strategies eventually fail?
Competition
CSR
Corporate Social Responsibility
Economies of Scale
Cost advantages associated with large-scale production.
Mercantilism advocates that
Countries should simultaneously encourage exports and discourage imports.
Which of these countries is benefitting through gains from trade?
Country A exports small appliances but it imports cereal and dairy products from Country B because Country B produces them more efficiently.
Utilitarian approach to business ethics was created by:
David Hume, Jermey Bntham, and John Stuart Mill
Porter speaks of the four attributes as constituting the __
Diamond
Ethical issues often arise because nations differ in:
Economic Development Business Practices Regulations Traditions
Enterprises HQed in cultures where individualism and UAI are strong were more likely to
Emphasize the importance of behaving ethically.
What is a benefit of inward FDI for a host country?
Employment effect
EFTA
European Free Trade Association
According to internalization theory, a company would rather gain entrance into a foreign market by using ______.
FDI
When a firm invests directly in a foreign market to produce or market a product, it is called ______.
FDI
(T/F): A Eurocurrency is a currency that is banked only in Europe.
False: A Eurocurrency is any currency that is banked outside its country of origin, not just Europe.
True or false: Businesses have no ability to influence government policy toward the international monetary system.
False: Businesses do have the ability to influence government policy toward the international monetary system.
True or false: Most companies focus on reducing their economic exposure while ignoring strategies to reduce their transaction and translation exposure.
False: Most companies pay little attention to their economic exposure.
Mercantilism
First theory of international trade emerged in England in mid 16th century, where gold and silver were the mainstays of national wealth and commerce. An economic philosophy advocating that countries should simultaneously encourage exports and discourage imports.
Fit-Right Shoe Company is a shoe distribution center. The company agrees to buy 1,000 pairs of shoes from a factory in China. Fit-Right enters into a 30-day forward exchange transaction with the factory. What is the result of this type of agreement?
Fit-Right will be guaranteed that they will have to pay no more than the 30-day forward exchange rate, insuring a profit.
What are three advantages of regional market integration that can result in cost savings to a business?
Harmonized product standards Free movement of goods across borders Simplified tax regimes
New trade theory, which states that countries may have an advantage in exporting because of first-mover advantages, is different from which theory that says countries have export advantages because of factor endowments?
Heckscher-Ohlin
Interest rates for borrowing money in domestic markets are ______ global markets because the pool of investors in domestic markets is smaller than in global markets.
Higher than
The ______ Agreement revised the IMF's Articles of Agreement to allow floating exchange rates.
Jamaica
A(n) ______ distribution is one that is considered fair and equitable.
Just
Giving people that which they are due is an example of a(n) ______ distribution.
Just
According to the Heckscher-Ohlin theory, it is expected that the US would export capital-intensive goods and import labor-intensive goods, but the opposite was found to be true. This became known as the
Leontief paradox.
What is likely to happen in the absence of a multilateral agreement in the international trading system?
Less innovation in the world economy
______ is a theory of trade which advocates that a country should export more than it imports which would result in the accumulation of gold and silver and increased national wealth and power.
Mercantilism
Besides financial advantages, what is another factor that led to growth of the Eurocurrency markets?
Political events
According to Porter, when ______ industries invest in advanced factors of production, it can help an industry achieve a global competitive advantage.
Related, supporting
James is a manager from Tennessee working at a tech support center in India. He is a firm believer in the minimum wage and treating employees fairly. Yet he sees his assistant manager firing one employee and hiring his neighbor at a lower rate. James confronts his assistant manager, claiming this behavior isn't consistent with home-country standards. Which philosophical approach to ethics does James represent?
Righteous moralist
What are two benefits of a common currency in the European Union?
Savings from handling just one currency Easier to compare prices across Europe
Adam Smith
Scottish moral philosopher and a pioneer of political economics. Seen today as the father of Capitalism. Wrote On the Wealth of Nations (1776) One of the key figures of the Scottish Enlightenment. Invisible hand of the market should determine what a country imports/exports.
Dumping
Selling goods in a foreign market for less than their cost of production or below their "fair" market value.
Which three nations are a part of ASEAN?
Singapore Philippines Indonesia
Ethical Delimma
Situations in which none of the available alternatives seem ethically acceptable.
Advanced factors of production as labeled by Porter?
Skilled labor, Technology
Sustainable Strategies
Strategies that not only help the multinational firm make good profits but that do so without harming the environment, while simultaneously ensuring that the corporation acts in a socially responsible manner with regard to its multiple stakeholders
Sustainable Strategy
Strategy that not only helps a multinational firm make a good profit, but does so without harming the environment while simultaneously ensuring that the company acts in a socially responsible manner toward its stakeholders.
McDonald's is increasingly finding that its foreign franchisees are a source of valuable new ideas. Which aspect of creating value is McDonald's taking advantage of in this instance?
Subsidiary skills
Which two groups are most likely to be considered the external stakeholders of a firm?
Suppliers Customers
Garrett knows that without the efficiency of the tracking software system, none of his products could get to the customer on time. This software system is an example of a ______ activity.
Support
What are the two types of value creation activities found within a company's operations?
Support Primary
A(n) ______ strategy is a conscious and proactive use of methods that do not harm the planet, people or profits while leaving a positive impact.
Sustainable
Apartheid System
System that denied basic political rights to the majority nonwhite population of South Africa, mandated segregation, reserved certain occupations exclusively for whites, and prohibited blacks from being placed in positions where they would manage whites.
______ constrain a firm's ability to export its products by raising the price of the exported product, which could put the firm at a competitive disadvantage with domestic firms in that country.
Tariff barriers
Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are ______.
Tariffs
Cultural Relativism
The belief that ethics are culturally determined and a firm should adopt the ethics of the country it is doing business.
The low correlation between the movement of stock markets in different countries reflects two basic factors. What are these two factors?
The countries pursue different macroeconomic policies and face different economic conditions. Different stock markets are still somewhat segmented from each other by capital controls.
What is the best description of the value of the US dollar against trading currencies from 1973 to now?
The dollar has had numerous rapid increases and subsequent downfalls.
How has the flow of FDI compared to the growth in world trade since 1990?
The flow of FDI has accelerated faster than the growth in world trade.
What happened to the Trans-Pacific Partnership after the United States withdrew from the agreement?
The remaining members continued to work together to create a new agreement.
Constant Returns to Specializatiion
The units of resources required to produce a good are assumed to remain constant no matter where one is on a country's production possibility frontier.
Recently, what has occurred in the efforts toward harmonizing differences in national accounting standards?
There has been rapid movement toward harmonization.
What is an accurate description of the correlation between the movement of stock markets in the world's four largest equity markets?
There is a low correlation between the movement of stock markets in the world's four largest equity markets.
What is an accurate description of developed nations in terms of the environment?
They have more substantial environmental regulations.
How are hedge funds regulated?
They operate largely out of existing regulatory boundaries.
The main objective of GATT was to liberalize ______ restrictions.
Trade
What is the term for when high-cost domestic producers have been replaced by low-cost producers within a free trade zone?
Trade creation
(T/F): When depositors use an unregulated banking system such as the Eurocurrency market, the probability of bank failure is greater than in a regulated system.
True: A regulated banking system has a lower probability of a bank failure.
(T/F): Eurobonds are not within the regulatory domain of any single nation.
True: Eurobonds are not regulated by any single country.
True or false: As a consequence of competitive pressure in the European automobile industry, the introduction of the euro has led to lower prices for consumers.
True: In order to hold onto business in the competitive automobile market, companies are forced to lower prices.
(T/F): Global markets are not strongly correlated, allowing investors to reduce risk by diversifying their portfolio internationally.
True: The movements of stock market prices across countries are not perfectly correlated which means that a more diversified portfolio reduces risk.
Raymond Vernon's product life-cycle theory was based on the observation that for most of the 1900s the majority of the world's new products were developed in
United States
Which country was a favorite target for FDI inflows during the 1980s and 1990s?
United States
______ ethics measure actions on a cost-benefit scale.
Utilitarian
In the 1980s, Western businesses questioned the ethics of operating in South Africa because the apartheid system in place there
Violated basic human rights.
What international organization is involved in the governing of FDI?
WTO
The Maastricht Treaty was established in order to bring ______ to the European Union.
a common currency
A country has an absolute advantage when it is able to produce
a greater quantity of a product than its competitors, using the same amount of resources.
Porters Factor Endowments
a nation's position in factors of production necessary to compete in a given industry
Krugman promoted the idea that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to ______.
a trade war
A country's ______ account tracks the country's payments to and receipts from other countries.
balance-of-payments
A ______ crisis occurs when businesses and people lose confidence in their financial institutions and withdraw their deposits.
banking
One of the changes proposed by the Single European Act was to abolish the restrictions placed on foreign truckers who pick up and deliver goods within another member's state borders. This hauling process is known as ______.
cabotage
Cabotage
coastal navigation; the exclusive right of a country to control the air traffic within its borders
Many companies develop a formal statement of primary values and ethical standards for employees and managers to follow. This is called a
code of ethics.
Which form of returns to specialization means that the units of resources required to produce one unit are assumed to remain the same no matter where a country is on the production possibility frontier?
constant
The foreign exchange market is used to ______.
convert currency
Many chain restaurants look to McDonald's as the leader in management of fast-food operations. This status demonstrates _____ McDonald's competence.
core
A global standardization strategy aims to increase profits by implementing ______.
cost reductions
As an investor puts more international stocks in his or her portfolio, the risk of the portfolio ______.
declines
The growth of the international capital market has been facilitated with the ______ of financial services.
deregulation
When a dominant enterprise is able to set different prices in different markets to reflect varying demand conditions, it is practicing price ______.
discrimination
Based on the theories of Ricardo and Smith, the consequences of free trade include ______ economic gains in terms of economic growth and wealth creation.
dynamic
The purpose of the Bretton Woods meeting was to facilitate ______.
economic growth following the war
The WTO is more successful than GATT because the WTO has ______ mechanisms that make it more effective.
enforcement
Restrictions have been placed on new members to the EU to combat the potential problems associated with ______.
enlargement
A currency board would look to _____ exchange rates when converting currency.
fixed
A key benefit of FDI to a home country is from the inward flow of ______ earnings.
foreign
An exchange rate that is used to take care of business in the future is called a _____ exchange rate.
forward
Scott's company is planning a major purchase from a Japanese company and doesn't want to take the risk that the dollar will depreciate in value against the yen. He sets up an agreement with the Japanese company to exchange currency now and execute the sale in six months. This is an example of ______.
forward exchange
When competing globally firms have ______ major strategic stances that they can adopt.
four
The political reasons for regional economic integration have been an important factor in several attempts to establish ______ trade areas and customs unions.
free
The strategic trade policy argument may look good in theory, but in practice it may be unworkable. As a result, the case for ______ trade may come to the forefront.
free
Ricardo's theory encourages ______ because it suggests that trade is a positive-sum game.
free trade
When a firm adopts a low-cost strategy on a global scale that comes from economies of scale, learning effects, and location economies it is using a ______ strategy.
global standardization
What are the four main strategic postures that firms can use when competing globally?
global standardization strategy localization strategy transnational strategy international strategy
During the 1980s, the trend was for ______ protectionism around the world.
greater
Political opposition to the WTO has been ______ in many nations.
growing
Tariff rates on agricultural products tend to be ______ tariff rates on manufactured good.
higher than
The righteous moralist says that a multinational's ______ country standards of ethics are the appropriate approach to follow in foreign countries.
home
During 2007 and 2008, many investors were taking money out of the US by selling dollar-denominated assets, like US stocks, and purchasing euro-denominated assets. As a result, the value of the euro ______.
increased
The use of currency management instruments such as swaps and the forward market have _____ since 1973.
increased
When governments intervene in foreign trade, they often claim they are protecting ______ from unfair foreign competition.
industries
A(n) ______ market is one in which prices do not reflect all available information, and forward exchange rates will not be the best predictors of future spot exchange rates.
inefficient
According to the ______ market school of thought, companies can improve the foreign exchange market's estimate of future exchange rates by investing in forecasting services.
inefficient
When a country's money supply grows faster than goods and services can be produced, it results in ______.
inflation
If a country does not have protections in place for ______ property, it is likely that businesses will be less inclined to pursue innovation.
intellectual
When Xerox first introduced the photocopier, it was able to implement an international strategy because ______.
it did not have any competition
Politicians on both sides of the table in the United States claim that NAFTA is responsible for significant ______ in the US and as a result, it has now been renegotiated to the USMCA.
job losses
According to Heckscher and Ohlin, each country has certain factor endowments. What are two examples of these?
labor land
One argument explaining the difficulty of establishing trade areas in Africa is that these countries have ______ and therefore need to be "protected" by tariff barriers from unfair foreign competition.
less-developed economies
Internalization theory tries to explain why firms often prefer FDI over ______ as a method for getting into foreign markets.
licensing
The factor that impacts all the theories of trade because companies should produce where it is most efficient is
location
Trina's company has moved all sewing and piece-work capabilities to a plant in Thailand in order to reduce costs. Her company is taking advantage of a(n) ______ economy.
location
According to research, the PPP is a relatively good predictor of ______ exchange rate movements, but is not as good a predictor of ______ movements.
long-run; short-run
A host country cost of FDI could be the ______ of sovereignty and autonomy.
loss
Greenfield investing spurs competition by increasing the number of players in a market and this will tend to ______ prices and ______ economic welfare
lower, increase
When a company is starting up, it likely needs to borrow startup funds. A key advantage of borrowing from global capital markets is that it ______.
lowers the borrower's cost of capital
The international ______ system is responsible for governing exchange rates.
monetary
In response to the apparent failure of the current Doha Round, many nations have implemented ______.
multilateral trade agreements
The basis in Marxist politics is evident when radical writers argue that ______ enterprises are an instrument of imperialist domination.
multinational
A(n) ______ currency is when neither residents nor nonresidents are allowed to exchange money into a foreign currency.
nonconvertible
Diminishing returns to specialization
occurs when more units of resources are required to produce each additional unit.
What is considered the most common political argument for government intervention in foreign trade?
protecting jobs and industries
The Central America Free Trade Agreement was designed to ______ between the member nations.
reduce trade barriers
A customs union is put in place to ______.
regulate foreign trade policy among members
After many months of analysis and study, the insurance company introduced a new disability product that would allow consumers of all income brackets an affordable insurance choice. Which primary activity did this company rely on to create this product?
research and development
The design of products and production processes is included in the primary activity known as ______.
research and development
The idea that business people should favor decisions that have both good economic and social consequences is called corporate
social responsibility.
Government intervention may NOT be well executed due to the possibility that policy will be captured by ______.
special interest groups
Free trade has the benefit of ______, which allows a country to manufacture and export in locations where they have a comparative advantage.
specialization
Utilitarian Ethics
the moral worth of actions or practices is determined by their consequences.
According to Milton Friedman, what is the social responsibility of a business?
to increase profits
What measures did many countries use to get around GATT regulations in the 1980s?
voluntary export restraints
An American tourist in Japan is interested in buying a souvenir that costs 1800 yen. How much is this in dollars if the exchange rate is $1 to Y400?
$4.50
What are two current trends in FDI?
- an increase in FDI aimed at countries that have liberalized their FDI regimes - an increase in the volume of FDI
What are the two types of FDI?
- establishing a new operation in a foreign market - acquisition or merger with an existing foreign firm
What are two limitations of licensing?
- firm does not have tight control over producing, marketing and strategy in a foreign country - gives away valuable know-how to a potential competitor
What are the three major appealing features of the Eurobond market?
Absence of regulatory interference Favorable tax status Less stringent disclosure requirements
Which statement accurately describes a feature of the Eurobond market?
It has a favorable tax status.
Which instrument of trade policy has been in use the longest?
Tariffs
What country has been the largest source of FDI since World War II?
United States
Most pegged exchange rates are tied to the ______.
dollar
Rights such as freedom of association and freedom of speech are
not universally accepted.
For most major currencies, forward exchange rates are commonly quoted for which three periods of time?
30 days 180 days 90 days
Import Quota
A direct restriction on the quantity of a good that can be imported into a country.
Export Tariff
A tax placed on the export of a good.
Which three sales and marketing functions can help a firm create value?
Advertising Consumer assessments Brand positioning
Capital markets match large corporations who want to invest their surplus cash with individuals who want to ______.
Borrow Money
How do borrowers and investors view a global capital market?
Both borrowers and investors consider it a benefit.
When Byron Manufacturing decided to recycle component parts, it not only saved the company money, it also limited the amount of waste it sent to landfills. This decision reflects the idea of ______.
CSR
Who are the three members of the North American Free Trade agreement?
Canada Mexico United States
NAFTA abolished tariffs on 99% of the goods traded between ______.
Canada United States Mexico
Which type of control of exposure is MOST effective at protecting resources efficiently and ensuring that each subunit adopts the correct mix of tactics and strategies?
Centralized
The European Parliament must approve all members of the European ______ before this body can begin its work.
Commission
Which type of returns to specialization happen when additional units of resources are required to produce each additional unit?
Diminishing
The emphasis of the ______ has been on free trade in industrial goods, and it was founded by those western European countries that initially decided not to be part of the European Community.
EFTA
The most obvious example of a region where there are institutional forces that are pushing toward convergence is the ______.
EU
Any currency banked outside of its country of origin is a Eurocurrency. Which currency makes up about two-thirds of all Eurocurrencies?
Eurodollar
What are the two major trading blocks in Europe?
European Free Trade Association European Union
True or False: The European Union is considered an optimal currency area.
False: An optimal currency area, that has similarities in the structure of economic activity, makes it feasible to adopt a single currency and use a single exchange rate as a tool of macroeconomic policy.
True or false: Atag, a Dutch maker of kitchen appliances, was successful in marketing to the "euro-consumer" and realized it could make fewer products because demand was consistent across Europe. Cultural differences did not affect Atag's approach.
False: Atag's attempts to market to the euro-consumer failed because consumer preferences across varied greatly across the nations.
True or false: Most economists agree that a fixed exchange rate system is preferable to a floating exchange rate system.
False: Economists cannot agree which type of exchange rate system is preferable.
True or False: Under the Jamaica Agreement, gold was once again reintroduced as a reserve asset.
False: Gold was abandoned as a reserve asset under the Jamaica Agreement.
The theory that states that businesses should not incur social expenditures unless required by law or required for the efficient operations of a business is the ______.
Friedman Doctrine
Which country was the first to officially follow a policy of free trade in the mid 1800s?
Great Britain
The policy position of the ______ is that when this institution lends money to countries, it imposes a tight macroeconomic policy that is not always considered appropriate by critics.
IMF
With regard to strategic trade policy, what are two actions governments take in response to pressure from business firms?
Increased protectionism Push for more open markets and freer trade
What two benefits do global capital markets provide to investors and borrowers?
Increases the supply of funds for borrowers, Increases the investment opportunities for investors
What is the main factor that makes Eurocurrency markets attractive to both borrowers and depositors?
Lack of government regulation
What are the four issues considered a priority on the WTO agenda?
Lack of strong protection of intellectual property High tariff rates on goods and services Antidumping policies High level of protectionism in agriculture
______ refer to cost savings that are the result of learning by performing a task.
Learning effects
The most important foreign exchange trading center (with 43% of the market) is ______.
London
Milton Friedman
Noble Prize winning economist who wrote a New York Times article in 1970 that has become a classic straw man example.
______ refers to the moral obligation to act in an honorable and benevolent manner.
Noblesse oblige
What was an attempt at regional economic integration for the United States?
North American Free Trade Agreement
What did Paul Samuelson point to as his biggest concern with free trade and its possible affects on middle-class wages in the United States?
Offshoring of jobs as the result of communication technology.
Identical products sold in different countries must sell for the same price in competitive markets when their price is expressed in terms of the same currency. This is called the law of_____ _______
One Price
Righteous Moralist
One who claims that a multinationals home country standers of ethics are the appropriate ones for companies to follow in foreign countries.
Basic message of comparative advantage
Potential world production is greater with unrestricted free trade than it is with restricted trade and suggests tha trade is a positive-sum game in which all coutnries that participate realize economic gains.
Which view of FDI states that there are benefits and costs to FDI and that countries attempt to maximize the benefits and minimize the national costs of FDI?
Pragmatic nationalism
Primary activities of the value chain can be categorized into what four functions
Production Customer service R&D Marketing & sales
What two situations are consistent with Ricardo's theory of comparative advantage?
Production is greater with unrestricted free trade than it is with restricted trade Even if countries lack an absolute advantage in the production of any good, consumers can still consume more if there are no restrictions on trade
Import quotas are based on the ______ of a good.
Quantity
Free Trade
The absence of barriers to the free flow of goods and services between countries.
The United States raised the dollar price of gold by nearly $15 per ounce in 1934. What was the result?
The dollar was worth less.
The theory of comparative advantage suggests
Trade is a positive-sum game in which all countries that participate realize economic gains.
True or false: Companies can use psychological tests in the hiring process to help identify people who have a strong sense of personal ethics.
True
True or false: Diminishing returns sets in when a country that has produced rice for 10 years now has to use increasingly more land to produce 1 ton of rice.
True
True or false: First mover advantages are especially important in industries where the global market can profitably support only a limited number of firms.
True
True or false: The decision-making process is one of the determinants of ethical behavior.
True
True or false: The product life-cycle theory suggests that mature industries tend to shift production out of the United States and into low-cost assembly locations.
True
True or false: NAFTA provided protection for intellectual property rights.
True: NAFTA provides protection for intellectual property rights.
Maastricht Treaty
a treaty created in 1991 that set strict financial criteria for joining the proposed monetary union, with it single currency and set 1999 as the start date for its establishment.
Our personal ethics tell us it is wrong to cheat on a test. Conversely, it is right to
accept responsibly for your actions.
What industry tends to benefit the most from subsidies in most countries?
agriculture
Since the 1970s, developed countries like Great Britain and the US have tended to finance their deficits by ______.
borrowing private money
Heckscher and Ohlin identified differences in national factor endowments as the root of ______.
comparative advantage
The infant industry argument for trade intervention states that developing countries need to support new industries until they are strong enough to ______.
compete globally
International businesses frequently have to address ethical issues that develop because
countries have different business laws, practices, and regulations.
During a currency crisis, the value of a country's currency ______.
depreciates
When a country does not adopt a formal pegged rate, but tries to keep its currency within some range of a reference currency, this is called a(n) ______ system.
dirty float
A ______ system is when a government intervenes in the currency market to limit volatility of its currency exchange rate.
dirty-float
When a company produces a good in the home country and then ships it to another country for sale it is called ______.
exporting
The ______ of FDI describes the amount of FDI undertaken during a year.
flow
Country A specializes in the production of rice because it can do so efficiently, but it imports electronics because it is not able to produce them as efficiently as the country they import from. What is this an example of?
gains from trade
One main reason why the International Fisher Effect is NOT good at explaining short-term exchange rate movements is the impact of ______ on those movements.
investor psychology
In order to win a contract from Mexico, QVB Autos Manufacturing must make 65% of the component parts for their automobiles in Mexico. This is an example of a ______.
local content requirement
The production activity of a firm can create value by working to ______.
lower costs
Maria's boss asked her to do whatever it takes to secure a contract. Maria knows that paying a bribe would ensure that the contract would be signed, but doesn't do this because she knows that while paying the bribe would ensure large profits, doing so would be unethical. Maria is demonstrating ______.
moral courage
Governments occasionally protect certain industries, like defense-related industries, for ______ reasons.
national security
What is NOT included in the Doha agenda?
raising tariffs on industrial services
Ethics Officer
responsible for managing their organizations' ethics and legal compliance programs
The ______ rate is the exchange rate of currency at a particular time on a particular day.
spot exchange
Governments tying currencies to gold and guaranteeing convertibility to gold is known as the gold ______.
standard
A key impediment to economic integration is that although a majority of citizens may benefit from free trade, certain groups may lose their jobs to low-cost and low-skilled labor in other countries as was the experience of some US and Canadian workers in the ______ industry following the establishment of NAFTA.
textile
Firm strategy, structure, and rivalry
the conditions governing how companies are created, organized, and managed, and the nature of domestic rivalry
Demand Conditions
the nature of home-country demand for the industry's product or service
Multilateral Trade Agreements
trade agreements among multiple countries
An efficient market lacks ______.
trade barriers
Jennifer doesn't understand why the management team decided to continue supporting the supplier in India when it was obvious that a better product at a better price was available from a supplier in Indonesia. According to the text, what is the best starting point to understand this decision?
understand the process the management team uses to makes decisions
TimeTurner Corp. is a company based in the United States that manufactures luxury wrist watches. By western standards, if the company uses sweatshop labor to make these watches it is most likely to be considered
unethical.
Which of these corporate strategies would be considered a sustainable strategy?
A strategy designed to reduce CO2 emissions
Administrative Trade Policies
Administrative policies, typically adopted by government bureaucracies, that can be used to restrict imports or boost exports.
Subsidy
Government financial assistance to a domestic producer.
Within the Eurocurrency market, banks can offer higher interest rates on Eurocurrency deposits than on deposits made in the home currency. What makes this possible?
a lack of government regulation
The information gap that international investors face is further complicated by the differences in q______ conventions, which makes the analysis of cross-border investments opportunities challenging.
accounting
In some countries, bribes are considered appropriate in business. In other countries, bribes are against the law. This is an example of ______.
an ethical dilemma
Special Interest Groups
an organization of people with some common interest who try to influence government decisions
A policy of racial segregation and political and economic discrimination against blacks/nonwhites in South Africa was known as the
apartheid system.
The global equity markets allow firms to do which three activities?
attract capital from international investors list stock on multiple exchanges raise funds by issuing equity or debt globally
A ______ crisis refers to a loss of confidence in the banking system that leads to a run on banks, as individuals and companies withdraw their deposits. This is what happened in Iceland in 2008.
banking
In a business setting, noblesse oblige refers to ______ behavior considered to be the responsibility of successful enterprises.
benevolent
A ______ exchange rate discourages competitive devaluations and imposes monetary discipline.
fixed
When trying to understand why Japan exports automobiles or why Switzerland exports watches, David Ricardo's theory of comparative advantage bases the explanation in terms of differences in
labor productivity.
One potential benefit to consumers related to offshore production is ______.
lower prices for goods
Core competencies are typically expressed in ______ that other firms are unable to duplicate.
skills within a firm
Economic theories suggest that free trade allows countries to ______.
specialize in producing goods and service that they are most efficient at producing
While it is hard to determine which side is right in the debate over fixed exchange rates and floating exchange rates, it is evident that the fixed exchange rate regime of the Bretton Woods era probably will not work since ______ broke the system originally.
speculation
Brittany is traveling in Germany and went to a bank to convert $200 into euros. She was concerned when she received fewer euros than she had last week when she converted the same amount of money. The teller explained that the money had been converted based on the rate that was available today for currency exchange and this rate fluctuates. What type of rate is being used in this transaction?
spot exchange
Production and marketing responsibilities are typically delegated to ______ when customer preferences create a strong pressure for local responsiveness.
the firm's foreign subsidiary
Once the British government gave formal notification of its exit from the EU, it was given ______ to negotiate the terms of the exit.
two years
Consumers throughout the world have the same use for sugar -- it is used as a sweetener in every country. Sugar is an example of a(n) ______ need.
universal
Foreign exchange rates have been very ______ since 1973 due to the many crises that have occurred in this period, such as the OPEC oil crises and the Asian currency crisis.
volatile
Which maxim accurately summarizes the concept of cultural relativism?
when in Rome, do as the Romans do
McDonald's local franchises in France have begun to offer more elegant seating areas and an upscale menu. This was done in response to slow growth rates in the area. Impressed with the increased sales at these stores, McDonald's executives are considering making these changes elsewhere. In this instance, what aspect of creating value is demonstrated?
Leveraging subsidiary skills
Capital controls can affect the correlation between the movement of stock markets in different countries. What is an example of a capital control?
Limits on the amount of a firm's stock that a foreigner can own
Lillian's company makes chocolate candy bars. They make one type of candy for the US market and make another type of candy that isn't quite as sweet for the European market because consumers there prefer that. What type of strategy does Lillian's company use to sell its products?
Localization
What strategy increases the value of a product in the local market through customization for different national tastes and preferences?
Localization
To achieve the highest efficiencies, a company decides to manufacture its products in Thailand, but does all final assembly of the products in China. The company is focusing on the ______ implication for international business.
Location
What name is given to the advantages that coincide with utilizing resource endowments or assets tied to a specific area?
Location-specific
The six most important foreign exchange trading centers are ______.
London, New York, Zurich, Tokyo, Hong Kong, and Singapore.
Studies have shown that the stock markets in different countries have a _______ correlation.
Low
Because of the limited regulation of the Eurobond market, there is a _____ cost of issuing these bonds.
Lower
What are the two ways a firm can create more value for its products?
Make product more attractive to consumer Lower production costs
What are two factors that support the idea for political integration of nations through trade?
Making nations interdependent can decrease the potential for violent conflict Countries can enhance their political weight in the world
Identify the components of a business that make up its operations.
Marketing Human resources Information systems
NAFTA is a regional economic alliance made up of the United States, Canada and _____.
Mexico
What characteristic helps managers walk away from a decision that is profitable, but not ethical?
Moral courage
Which two theories provide the moral compass that is important when thinking through the ethical implications of decisions in a systematic way?
Rights theories Rawl's theory of justice
Determinants of Ethical Behavior:
Societal Culture, Decision-Making Processes, Leadership, Unrealistic Performance Goals, Organization Culture, Personal Ethics
What are three ways a company can increase its profitability and rate of profit growth by expanding internationally?
Source activities where they are performed most efficiently Sell products to the international market Realize greater cost economies
Grease Payments are also known as
Speed Money, Facilitating Payments
Precautionary Principle
States that when scientific knowledge regarding the impact of a course of action is insufficient, inclusive, or uncertain and preliminary scientific evaluationindicates that there are reasonable grounds for concern that the action may have potentially dangerous effects on the environment, human, animal, or plant health, then that action should not be pursued or postponed until our knowledge improves.
Along with the United States, which five countries accounted for 60% of all FDI outflows from 2000-2020?
The United Kingdom France Japan Germany The Netherlands
Which round of GATT negotiations provided enhanced protection for intellectual property and significantly reduced barriers on trade in textiles?
The Uruguay Round
What are three sources of economies of scale?
The ability of large-volume producers to use effective, specialized employees Spreading fixed costs over a large volume of product The ability of large-volume producers to use specialized equipment
Gains from Trade
The economic benefits realized when countries specialize in the production (and export) of goods and services that they can produce most efficiently, while importing goods and services that they cannot produce so efficiently from other nations.
The European Union is a product of what two political factors?
The effects of two world wars on western Europe Europe's desire to be seen as a major player in world politics and economics
Leontief Paradox
The empirical finding that, in contrast to the predictions of the Heckscher-Ohlin theory, US exports are less capital intensive than US imports.
Factor Endowments
The extent to which a country is endowed with such resources as land, labor, and capital.
In an organization where personal ethics are important, which individual should be hired?
The individual who has a disappointing interview despite having verified glowing letters of recommendation that attest to his integrity.
Adam Smith argued that ___
The invisible hand of the market mechanism, rather than government policy, should determine what a country imports and exports implying a aliases-faire stance toward trade.
What was taking place in South Africa when the apartheid system was dominant?
There was mandated segregation between whites and blacks/nonwhites.
True or false: All WTO members were participating in regional trade agreements by 2021.
True: By 2019, all members had notified the WTO of participation in one or more regional trade agreements.
(T/F): A British firm can borrow money from domestic sources or go to the global capital markets. The interest rates will probably be lower in the global capital markets because of the higher pool of funds.
True: Domestic interest rates are higher due to limited prices of funds
True or false: Empirical evidence suggests that the International Fisher effect does NOT explain short-term exchange rate movements well.
True: Empirical evidence suggests that the International Fisher effect does not explain short-term exchange rate movements well.
True or false: When RCA licensed its color television product to a number of Japanese companies in the 1960s, these companies turned around and entered the US to directly compete with RCA and diminished its role in the market. In this situation, licensing resulted in RCA giving away proprietary information to a potential competitor.
True: Licensing resulted in RCA giving away proprietary information to a potential competitor.
True or false: Governments do not always act in the national interest when intervening in the economy.
True: Many times governments are influenced by politically important interest groups.
True or False: If many national markets are controlled by a few multinational enterprises with the power to influence prices and distribution channels, PPP theory may not hold.
True: The ability of a few multinationals to control prices negates aspects of PPP theory.
True or false: Jim's US-based paper products company sources paper from a plant in Brazil that takes advantage of the available forestry near the plant. This is an example of a location-specific advantage.
True: The forestry is tied to the Brazil plant and the US plant combined its assets with that plant to create FDI.
Foreign Corrupt Practices Act
U.S. law regulating behavior regarding the conduct of international business in the taking of bribes and other unethical actions.
The fixed rate exchange system established at Bretton Woods eventually collapsed. This collapse is attributed to the role of the ______ in the system.
US dollar
Which ethical theory emphasizes that the best actions are those that benefit the most number of people and harm the least number of people?
Utilitarianism
Organizational Culture
Values and norms shared among an organizations employees.
What two countries have shifted to a more hostile approach to FDI?
Venezuela Bolivia
Based on the present system, speculative buying and selling of currency tends to create _____ movements in exchange rates.
Volatile
Which statement accurately depicts how volatile exchange rates affect the international capital market?
Volatile exchange rates create uncertainty which might act as a brake on the growth of the international capital market.
How do volatile floating exchange rates affect investments in foreign assets?
Volatile floating exchange rates create additional risk.
How would experts reply to the question, "Is Porter's theory correct?"
We do not know. It has not been subjected to empirical testing.
Starting in the 1950s, the ______ concentrated on lending money for public sector projects in third-world countries.
World Bank
What financial institution was tasked with assisting in rebuilding Europe after World War II, but ended up helping third-world countries with public sector projects?
World Bank
Diminishing returns sets in when
a country or a firm requires ever more resources to produce an equal increase in output.
What is the focus of the justice theories?
a fair distribution of economic goods and services
For which of these products does the attractiveness of exporting decrease relative to either FDI or licensing?
A product that can be produced almost anywhere
Local Content Requirement (LCR)
A requirement that some specific fraction of a good be produced domestically.
Doha Round
A series of negotiations under the World Trade Organization that began in Doha, Qatar, in 2001. It followed the Uruguay Round and has focused on agricultural subsidies, intellectual property, and other issues.
Ad Valorem Tariff
A tariff levied as a proportion of the value of an imported good.
What are the three potential costs of FDI to host countries?
Adverse effects on balance of payments Perceived loss of national sovereignty & autonomy Adverse effects on competition
_____ tends to be one of the largest beneficiaries of subsidies in most countries.
Agriculture
What is hyperinflation?
An explosive and seemingly uncontrollable price inflation in which money loses value very rapidly
To shift a country's production possibility frontier outward, which two activities should take place?
An increase in the efficiency with which resources are used An increase in the stock of the country's resources
Rawl's theory of justice
Argues that all economic goods and services should be distributed equally except when an unequal distribution would work to everyone's advantage.
What are the three main elements supporting a floating exchange rate system?
Automatic trade balance adjustments Monetary policy autonomy Economic recovery following a crisis
Identify the three costs of FDI to a home country.
Balance of payments negatively affected initially from the capital outflow to fund FDI Balance of payments negatively affected if purpose of FDI is to develop a low-cost production location Balance of payments negatively affected if FDI is a substitute for direct exports
During the 1970s, Congress did not allow US industries to export crude oil production. This action is an example of an export ______.
Ban
Companies typically face two types of competitive pressures when entering global markets. What are these two pressures?
Be locally responsive Reduce costs
What are two reasons why countries should remain focused on opening markets?
Because average tariffs on services remains higher than on industrial goods Because of high tariff rates on imports of selected goods from developing nations into developed nations
Tracking its expenditures and its receipts from other countries occurs in a country's ______ of ______ accounts.
Blank 1: balance Blank 2: payments or payment
In 1969, which countries created the Andean Pact that was modeled on the EU, but was not as successful in achieving regional groups objectives?
Bolivia, Chile, Colombia, Ecuador, Peru
Mercosur is a free trade pact started in 1988 by which two South American countries?
Brazil Argentina
Which country would be most likely to form a regional convergence with the United States?
Canada
Which three of these employees are involved with a primary activity at their company?
Carol is a customer service representative. Michael assembles automobiles at the plant. John is responsible for all marketing activities.
Porter states that firms are typically most sensitive to the needs of their closest customers. He called this ______ conditions.
Demand
Porter argues that favorable ____ will not result in ____ unless the state of rivalry is sufficient to cause firms to respond to them.
Demand Conditions, Comparitive Advantage
Which two of these attributes did Porter believe are MOST significant for competitive advantage?
Demand conditions Factor endowments
What are two reasons for assuming diminishing returns to specialization?
Different goods use resources in different proportions. Production might draw on marginal resources whose productivity is less than resources initially used.
US firms that issue securities in the US have to comply with SEC regulations. If these firms issue securities in the Eurobond market, an advantage is limited ______ requirements, as they do not have to provide as much information.
Disclosure
Just Distribution
Distribution of goods and services that is considered fair and equitable.
The ______ Round started in 2001 and continues today to deal with the issues of agriculture protectionism, protection of intellectual property, and other priorities of the WTO.
Doha
The weakening of which currency helped raise the value of the euro from $1.17 in 1999 to $1.54 in 2008?
Dollar
The most significant trading block in Europe in terms of numbers and economic influence is the ______.
EU
Protectionism
Economic policy of shielding an economy from imports.
By increasing the efficiency of resource utilization int he global economy__
Economist theorize that international trade results in greater economic growth and provides economic befits to all counties that participate in a global trading system.
To ensure that the business has appropriate legal compliance programs and acts in an ethical manner, some firms now have created a position for a(n) ______ officer.
Ethics
What management position specifically serves as an organization's internal control point for improprieties?
Ethics Officer
_____ drive what people decide to do, ______ and _______ drive what companies decide to do.
Ethics, Coporate Social Responsibility, Sustainability
Some smaller states in Africa and the Caribbean have no domestic currency. These states rely on which two foreign currencies?
Euro US dollar
The movement toward regional economic integration has been most ambitious in ______.
Europe
What is the name of the financial institution established in the EU to ensure price stability and is intended to be independent from political pressure?
European Central Bank
Which trade union is made up of European countries that initially decided NOT to be part of the European Community and emphasized free trade in industrial goods?
European Free Trade Association
Following the devastation of two world wars in Europe, the ______ was established as a means to reach lasting peace.
European Union
What is considered the most successful attempt at regional economic integration?
European Union
The text notes two reasons why FDI has outpaced world trade and world output. What are those two reasons?
Even though trade barriers are diminishing, firms still fear protectionist pressures. FDI has been driven by political and economic changes in developing nations.
The failure to find a link between which two conditions has been referred to as the purchasing power parity puzzle?
Exchange rates Inflation rates
Goods that are taxed as they ship out of a country have a(n) ______ tariff.
Export
The text notes two reasons why FDI has outpaced world trade and world output. What are those two reasons?
FDI has been driven by political and economic changes in developing nations. Even though trade barriers are diminishing, firms still fear protectionist pressures.
True or false: When FDI occurs through greenfield investment, this will lower competition in a market and decrease economic welfare.
False: Greenfield investment will increase the number of players in a market, which will lead to lower prices and increased economic welfare.
(T/F): Location economies refer to the distribution point of a company's products.
False: Location economies are those that arise from performing a value creation activity in the optimal location for that activity.
(T/F): A lack of homogeneity in the global marketplace is evident in the worldwide acceptance of McDonald's hamburgers.
False: McDonald's hamburgers are an example of increasing homogeneity in the global market
(T/F): A company would typically experience a decrease in profit growth if it should decide to disperse value creation activities to different locations as a way to perform those activities more efficiently.
False: One way to increase profits is to source location economies to those where functions are performed most efficiently.
True or false: Organizational culture refers to the system used to create job levels and hierarchies within a company.
False: Organizational culture refers to the values and norms that are shared among employees.
True or false: Porter would agree that there is a weak association between vigorous domestic rivalry and the creation of competitive advantage.
False: Porter would disagree with this as he believed there was a strong association between vigorous domestic rivalry and the creation of competitive advantage.
True or false: Pursuing strategies that are sustainable has little impact on helping an organization ensure that ethical issues are considered in business decisions.
False: Pursuing strategies that are sustainable is one of the seven actions that a firm can take to make sure ethical issues are considered in business decisions.
True or false: Short-term exchange rate movements are simple to predict.
False: Short-term exchange rate movements are difficult to predict.
True or false: The pragmatic nationalism view contends that FDI has no costs, but many benefits.
False: The pragmatic nationalism view contends that FDI has both benefits and costs.
True or False: Under the terms of the EU-UK Trade and Cooperation Agreement, there is a "full tariff, zero quota" regime in place.
False: Under the agreement, there is a zero-tariff, zero quote regime in place.
According to new trade theory, the dominance of the United States and Europe in the commercial jet aircraft industry is related to ____ mover advantages.
First
A(n) ______ board holds reserves of foreign currency equal to the fixed exchange, and commits itself to converting its domestic currency on demand to another currency at a fixed exchange rate.
currency
When a speculative attack on the exchange value of a currency results in a depreciation of that currency, it is called a(n) ______ crisis.
currency
The ______ account tracks goods and services exports and imports in balance-of-payments accounting.
current
Meghan's job involves responding to emails from clients who have product questions and complaints. Which primary activity function is Meghan involved in?
customer service
What are two types of primary activities found in many businesses?
customer service production
One of the first steps to economic and political integration is a(n) ______ union, where trade barriers among member nations are removed and a common trade policy is adopted.
customs
The OPEC oil crisis in 1971 increased the US inflation rate, which led to negative effects on the trade position, and this led to a(n) ______ in the value of the dollar.
decrease
The protection of intellectual property has becoming increasingly important to the WTO. The basis for this is that without this protection, the incentive for innovation would ______ and economies would suffer.
decrease
The cost of recording, transmitting and processing information ______ from the 1960s to the 1990s.
decreased
Technology has been a major factor in the growth of global capital markets because technology has ______.
decreased the costs of transactions
For national security reasons, the ______ industry is often protected by the national government.
defense
What determines the value of a spot exchange rate?
demand and supply
Exchange rates are based on the ______.
demand and supply of one currency against another
Even though it was extra work for the company to implement, Johan was happy that consumers had asked for a better grade of plastic for the toys his company produced. In this instance, the competitive advantage of Johan's company is being affected by ______.
demand conditions
The Eurocurrency market experienced growth initially because it offered financial advantages to investors who wanted to ______.
deposit and borrow other currencies
A lead strategy occurs when a firm attempts to collect foreign currency receivables early when a currency is expected to ______ and pay foreign currency payables before they are due when a currency is expected to ______.
depreciate; appreciate
A country in which inflation is on the rise will have a currency that ______ compared to a country in which inflation is low.
depreciates
When Great Britain returned to the gold standard in 1925, it placed the pound at the prewar gold parity level and, as a result, placed the country in a period of ______.
depression
Two qualifications put on new members to join the EU were ______.
deregulating markets privatizing state assets
Globally, there has been a trend toward ______ of the financial markets.
deregulation
Japanese banks are now allowed to open international banking facilities. This is made possible by ______.
deregulation
The Big Bang that occurred in Great Britain was the name given to the start of ______ in that country.
deregulation
When the US allowed foreign banks to enter the US capital market and domestic banks to expand their operations overseas in the late 1970s, it was due to ______.
deregulation
Past activity of FDI shows that the majority of it has been directed at ______.
developed nations
It takes 12 units of resources to produce 100 pounds of silk. It takes 13 units to produce 115 pounds of silk and 15 units to produce 120 pounds of silk. This is an example of ______ returns to specialization.
diminishing
A fixed exchange rate system is supported by monetary ______ while the floating exchange rate system supports the monetary ______ argument.
discipline; autonomy
Because non-US firms do not have to comply with SEC regulations, the limited ______ requirements make the Eurobond market more attractive than issuing dollar-denominated bonds in the US.
disclosure
A key to reducing economic exposure involves ______ so the firm is not severely affected by adverse changes in exchange rates.
distributing a firm's productive assets to various locations
A business should follow an international strategy when it finds itself in which two situations?
does not face cost pressures does not face pressures to customize a product based on local preference
At the end of the fiscal year, Jack's company sells their bicycles in Thailand at below what it costs to produce the bikes in order to unload excess inventory. This is an example of ______.
dumping
The ______ combines the various perspectives of foreign direct investment into a holistic theory.
eclectic paradigm
A fundamental analysis approach to forecasting relies on ______ theory.
economic
One way to reduce ______ exposure involves distributing a firm's productive assets to various locations.
economic
Strategic trade policy suggests a(n) ______ justification for government intervention in trade.
economic
The ______ theories of international trade predict that free trade allows countries to specialize in producing goods and services that they are most efficient at producing, and unrestricted free trade encourages this specialization.
economic
Free Trade is the opposite of ____
economic isolationism
An assembly line in a candy factory is an example of ______ because it allows the candy company to benefit from cost reductions based on the vast amounts of candy produced.
economies of scale
The cost reductions that comes from increased output of a product are known as
economies of scale
Under new trade theory, as the size of markets increase, companies may be able to develop better ______.
economies of scale
The two components of the experience curve are ______.
economies of scale learning effects
A market in which prices reflect all available public information is considered to be ______.
efficient
One way the GATT hoped to achieve its objective was by ______.
eliminating tariffs
Ethical issues arise in international business when
environmental regulations in host nations are less stringent than those in the home country.
When the current account of a country's balance of payments is in balance it is called the balance-of-trade ______.
equilibrium
What can a country use to counteract a country that uses subsidies to support an industry?
establish anti-dumping regulations
Scandinavia scores high on the individualism and uncertainty avoidance measures of societal culture. According to Hofstede's dimensions of societal culture, Scandinavia is more likely to engage in ______ business behavior than countries which score high on masculinity and power distance measures.
ethical
Sharon is visiting her company's manufacturing subcontractor in Pakistan. She is disturbed when she notices children working on the machinery in a room with no air conditioning and little access to water, but she also knows these children are probably supporting their families. This is an example of a(n) ______.
ethical dilemma
The IMF was initially established to allow members to borrow short term to adjust their balance-of-payments position and maintain their ______.
exchange rate
PPP theory shows a direct relationship between a change in relative prices and a change in ______.
exchange rates
A product's production costs tend to decline over time. This is referred to as the ______ curve.
experience
After analyzing the profit projections for next year, Lisa reminded the group that production costs would continue to decline on those products that had been in production for five years. What concept was Lisa referring to?
experience curve
When considering free trade opportunities in Mexico, with access to cheap labor and diverse plant life, it makes sense for Mexico to ______ agricultural goods.
export
Kimberly's company produces body lotion in the United States and ships it overseas to retail stores that sell the product. Her company is delivering product through ______.
exporting
______ allows a company to collect a royalty fee from a foreign firm that it has granted the right to produce and sell its product.
exporting
Transaction ______ refers to the extent that income from individual transactions is affected by changes in foreign exchange values.
exposure
Hillary's country only lets nonresidents convert money into a foreign currency without any restrictions. This country has a(n) ______ convertible currency.
externally
When only nonresidents can convert a currency into a foreign currency with no limitations, the currency is identified as ______.
externally convertible
Which of the four attributes identified by Porter would be evident in a country that has the necessary infrastructure to compete in a given industry?
factor endowments
The Heckscher-Ohlin theory of international trade focuses on ______ when explaining what a country chooses to export.
factors of production
The most common exchange rate regime used today is the ______ arrangement, used by 43% of the nations.
fixed peg
What is the most common type of bond in the global bond market?
fixed-rate bond
What type of bond pays the investor an annual interest payment and then the face value is added back at maturity?
fixed-rate bond
Monetary policy autonomy and automatic trade balance adjustments are elements that tend to support ______ exchange rates.
floating
The Jamaica agreement was a way to recognize current trends and adjust for ______ exchange rates.
floating
When the foreign exchange market determines the relative value of a currency in a country, that country is using a(n) ______ exchange rate regime.
floating
Establishing a new operation in a foreign market and acquiring or merging with a foreign business are examples of ______.
foreign direct investment
What is a company participating in when it directly invests in facilities to produce or market a product in a foreign country?
foreign direct investment
The efficient market school believes that the foreign exchange market is efficient at setting ______ exchange rates.
forward
The efficient market school suggests that ______ exchange rates are optimal at forecasting future ______ exchange rates.
forward; spot
The ______ view of FDI states that international production should be allocated based on the theory of comparative advantage.
free market
The Association of Southeast Asian Nations was formed with the intent to foster ______.
free trade
In which level of economic integration are all barriers to trade among member countries removed?
free trade area
Lauren's company is eager to trade with Canada because there are no quotas or subsidies on the product they want to sell there. This describes a ______.
free trade area
Following the Industrial Revolution, to allow for the use of paper currencies to finance trade, governments agreed to convert the paper currency into _____ on demand at a fixed rate.
gold
Under the agreement at Bretton Woods, all countries were to fix the value of their currencies in terms of ______.
gold
A dirty float results when ______ intervention is used to maintain the value of a currency.
government
Porter states that ______ can influence each of the four components of the diamond through subsidies, education policies, and policies toward capital markets.
government
The link between price changes and changes in exchange rates is further weakened by ______ intervention in foreign exchange markets in their attempt to affect the value of their currencies.
government
What are the two reasons given for the rapid growth of the global capital market?
government deregulation growth in information technology
After US companies objected that the Foreign Corrupt Practices Act would put them at a competitive disadvantage, the FCPA was eventually amended to allow for ______.
grease payments
Private investment funds that make "long bets" on assets they think will increase in value or "short bets" on assets they think will decline in value are called ______ funds.
hedge
A(n) ______ is a type of trade restriction that sets a physical limit on the quantity of a product that can be imported into the country in a set period of time.
import quota
The start of the demise of the fixed exchange rate system was notable in 1971 when the US was ______ more than ______.
importing; exporting
A tariff is a tax levied on ______.
imports or exports
Some believe that local customization is declining in importance. What two reasons are cited as the reason for this decline?
improved transportation methods the advent of communication technology
Initially, Mercosur provided a(n) _______ in trade between Brazil and Argentina.
increase
Unpredictable movements in exchange rates are likely to ______ the risk associated with foreign currency borrowing.
increase
The _____ market school believes that forward exchange rates are NOT the best predictors of future spot exchange rates.
inefficient
Interest rates reflect expectations about future ______ rates, which has been shown to lead to a depreciation in exchange rates.
inflation
nterest rates reflect expectations about future ______ rates, which has been shown to lead to a depreciation in exchange rates.
inflation
Increases in interest rates reflect likely increases in ______, which is connected to depreciating ______ rates.
inflation; exchange
Sasha receives a bi-weekly inventory report that shows her how many catalogs are in the warehouse. The report is generated automatically by the system that tracks all warehouse items. Sasha's report is a by-product of a(n) ______ system.
information
Krugman argues that strategic trade policy should not be embraced because many times governments are influenced by politically important ______ to intervene in the economy.
interest groups
What are the three fundamental determinants of exchange rates?
interest rates inflation rates monetary growth
Individuals or groups who work for or own the business are referred to as ______ stakeholders.
internal
A(n) ______ strategy is when a firm attempts to collect foreign currency receivables early when a currency is expected to depreciate and pay foreign currency payables before they are due when a currency is expected to appreciate.
lead
Charlotte told the new employees on the clothing assembly line that their ability to produce a final product would increase as they learned the most efficient way to sew the dresses. Charlotte is describing a ______ effect.
learning
Grant's company has given a company in Japan the right to produce and sell its line of active wear. For every article of clothing the Japanese company sells, it pays Grant's company a fee. This is an example of ______.
licensing
The limits of ______ include giving away valuable know-how to competitors and losing control over marketing, production and strategy.
licensing
Evan works in a country in which the government has stated that 45% of all goods must be produced domestically. What type of requirement does this country have in place?
local content requirement
Marta's company wants to sell coffee products in Mexico but in order to do so they need to adjust their products to reflect the desires of customers in Mexico. In other words, her company feels the pressure of ______.
local responsiveness
A Chicago-based company decides to outsource all product designs to Singapore because it has been found to have the most efficient design companies. In this situation, the ______ implication for international business is being considered.
location
Exporting strategy does not work for a ______ value-to-weight ratio product that can be produced anywhere.
low
Trade creation takes place when ______-cost producers replace other types of producers already within the free trade area.
low
The Kendrick Corporation has ______ transportation costs and is facing ______ trade barriers. This company should choose exporting over FDI.
low; low
Rich country A enters into a free trade agreement with poor country B. Poor country B improves its productivity. Rich country A pays lower prices for goods imported from poor country B. However, Samuelson expresses concern that these lower prices may not offset possible ______ in rich country A.
lower real wage rates
Greenfield investing spurs competition by increasing the number of players in a market and this will tend to ______ prices and ______ economic welfare Multiple choice question.
lower, increase
Another name for a dirty-float system is a(n) ______ system.
managed-float
What type of discipline is inherent in a fixed exchange rate system?
monetary
The institutional arrangements that have reign over exchange rates are referred to as the international ______.
monetary system
An example of a ______ is when banks lend too much money to over-extended companies, expecting bail-out help from their government.
moral hazard
As a result of the Doha Round, ______ countries are entering into multilateral and bilateral trade agreements.
more
When customer preferences differ significantly between countries, there is _____ pressure for local responsiveness.
more
Leontief questioned the validity of the Heckscher-Ohlin theory based on his assumption that the US would be an exporter of ______.
more capital-intensive goods
The radical view toward FDI argues that ______ extract profits from the host country and take them back to their home country.
multinational enterprises
According to the Single European Act, a product standard developed in one EC country should be accepted in another. This is known as the principle of ______ recognition.
mutual
Which trade theory explains why countries are trade partners when they are trading similar goods and services?
new trade
Which trade theory states that for products where economies of scale are significant and represent a substantial amount of world demand, the first movers in an industry can gain a scale-based cost advantage that is not available to late entrants?
new trade
No one in Trevor's country is allowed to convert currency into any foreign currency. This is an example of ______ currency.
nonconvertible
FDI that is pursued to serve the home market is called ______ production.
offshore
A(n) ______ is an industry made up of a limited number of large firms where there is an interdependence of the major players.
oligopoly
A major criticism of the IMF is that it imposes tight macroeconomic policy on any country it lends money to. This is referred to as a(n) ______ approach.
one-size-fits-all
The different value creation activities found in a firm are called ______.
operations
A (n) _____ currency area, makes it possible to adopt a single currency and use a single exchange rate as a tool of macroeconomic policy.
optimal
A(n) ______ exchange rate implies that the value of the currency is fixed relative to a reference currency.
pegged
Many smaller nations prefer ______ rates because these exchange rates assist in moderating inflationary pressures in these countries.
pegged
Universal needs exist with which two of these product groups?
personal computers and hand-held calculators bulk chemicals, petroleum and steel
The basic principles and values that govern interactions between individuals are known as
personal ethics.
African countries have attempted to form a continental trade agreement, but have been stymied by significant ______ turmoil.
political
Economic theories point toward the idea that all participating countries will gain from regional integration. In other words, it is a ______-sum game.
positive
What are two impediments to establishing economic integration?
potential job losses concerns over national sovereignty
Under the new USMCA, in order to qualify for zero tariffs, automakers are required to ______.
produce 75% of a vehicle's content in North America
Photocopiers were initially exported from the United States. As more and more foreign competitors entered the market, the United States began to import photocopiers. This is an example of which theory?
product life cycle
The manufacturing of garden equipment is an example of which primary activity?
production
Which primary activity takes place when telephone components are put together on an assembly line?
production
Smaller nations prefer pegged rates because these exchange rates ______.
provide monetary discipline and lead to low inflation
The value of the US dollar declined during the OPEC oil crisis in 1971 when the price of oil ______.
quadrupled
The employees were told that their jobs would no longer exist in June because the company was moving production to China. Julie didn't know what she was going to do because her skills as a seamstress were only in demand for certain types of companies and many of them were moving facilities overseas where labor was cheaper. This demonstrates how ______ do not easily move from one economic activity to another.
resources
Ownership restraints and performance requirements are two ways in which governments can ______ FDI.
restrict
Certain theories accept that there are rights, both positive and negative, that all humans have simply because they are human. These are known as ______ theories.
rights
Jen knows that it is not possible to accurately predict how exchange rates might fluctuate and result in a loss of finances for her company. In other words, Jen understands the reality of foreign exchange ______.
risk
The adverse consequences of unpredictable changes in exchange rates is called foreign exchange ______.
risk
The World Trade Organization has based the majority of its efforts on pushing for the liberalization of regulations in international trade governing ______.
services
What are two responsibilities of The European Central Bank?
set interest rates set monetary policy
Forward exchange markets are more likely to lower risk with ______ borrowings.
short-term
The impact of psychological factors and investor expectations make it difficult for exchange rate theories to predict ______ changes in exchange rates.
short-term
Free trade can result in dynamic gains that ______ economic growth.
stimulate
The ______ of FDI measures the total accumulated value of a company's foreign-owned assets at a specific time.
stock
A company's ______ is defined as the actions that managers take to attain the goals of the company.
strategy
Mia's goal for the company this year is to sell its product line internationally. She feels this will increase profits within the next three years by as much as 30%. Mia is developing a ______ for the company.
strategy
What are three main instruments of trade policy?
subsidies voluntary export restraints import quotas
When the US government "bailed out" the automobile industry starting in 2009 by loaning money to keep General Motors and other automakers in business, it was an example of a(n) ______.
subsidy
According to the text, reducing many of the tariffs that are still in existence will lead to ______.
substantial gains in global trade
Which type of activities must be in place in order for primary activities to occur in the value chain?
support
A country is in a balance-of-trade equilibrium when ______.
the income residents earn from exports equals the money its residents pay to other countries for imports
Interest rates in domestic markets are higher than interest rates in global markets because ______.
the pool of investors in domestic markets is less than global markets
Related and Supporting Industries
the presence or absence of supplier industries and related industries that are internationally competitive
It would be possible to determine the PPP exchange rate that would exist if markets were efficient by comparing ______.
the prices of identical products in different currencies
According to David Ricardo's theory of comparative advantage, a country should focus on ______.
the production of goods it produces most efficiently
Kenneth wants to buy a new winter coat for his trip to London. He found the coat for $80 at Nordstrom in New York but he thinks he would prefer to buy it at Harrod's when he gets to London. He knows that based on the law of one price, the coat should cost ______ in London.
the same
Over the past two decades, there has been an increase in regional ______ that encourage regional economic integration.
trade blocs
Suppose a US company agrees to buy products worth 1 million euros. At the time of the agreement, the dollar/euro exchange rate was $1 = €1.10, but at the time of payment, the exchange rate is $1 = €0.80. The additional money owed by the US company due to the adverse movement in exchange rates between the time of the deal and the time when payment is due is called ______ exposure.
transaction
A business should follow the ______ strategy when it experiences pressures for cost reduction AND local responsiveness.
transnational
Heidi told her husband that there was no possible way she could meet her monthly sales goal now that her manager had doubled it. She decided the only way to make the new goal was to add 5% to every sales order and hide this cost under "personal needs" when she submitted her report. What is causing Heidi to act in this unethical manner?
unrealistic performance goals
The managers of ABC Manufacturing are struggling to meet their increased quota. They decide to eliminate two quality control steps in the manufacturing process in order to meet the demand. This is unethical behavior that was a result of
unrealistic performance goals.
By limiting or banning certain products through regulations, governments can protect consumers from products that are ______.
unsafe
The eurozone is made up of the European Union members who ______.
use the euro as currency
he eurozone is made up of the European Union members who ______.
use the euro as currency
Bryan's company wanted to gain a greater market share on its bicycle products so it built in greater functionality to the bikes and created an after-service customer call center. Which aspect of value creation is Bryan's company concerned with?
value
The marketing department survey showed that many customers preferred a smaller container for the company's line of iced coffee products. The R&D department immediately began work on a new container. These departments worked together to increase the ______ of the product.
value
What theories concentrate on the fair distribution of economic goods and services in a society?
Justice
Which statement is accurate regarding corporate influence on the international monetary system?
It is in the best interests of international businesses to promote an international monetary system that minimizes volatile exchange rate movements.
In the mid-1980s, Bolivia was in the midst of hyperinflation. This was partly fueled because of what action by the government?
It prohibited conversion of the peso into other currencies.
What are two drawbacks of government intervention in free trade?
It protects inefficient industries. It invites retaliation and trade wars.
Which institution was established at Bretton Woods to maintain order in the international monetary system?
International Monetary Fund
When did apartheid in South Africa end?
1994
While the British elected to leave the EU in 2016, it didn't actually formally exit until ______.
2020
Rights theories
20th century that recognize that human beings have fundamental rights and privileges that transcend national boundaries and culture.
If the exchange rate is 1 British pound to $1.35, an American in London will need $______ (rounded to closest whole number) to purchase a purse priced at 20 pounds.
27
Which statement accurately depicts the current growth of the global capital market?
It is growing quickly.
The economic success of ______ put a strain on the world trading system in the 1980s and promoted protectionism measures.
Japan
The HP Way stresses the need for
Confidence in and respect for people, open communication, and concern for the individual employees.
The PPP, according to research, seems to predict exchange rate movements best for countries exhibiting which two characteristics?
Countries with underdeveloped capital markets Countries with high inflation rates
Which country is pointed to as the master of administrative trade policies?
Japan
Which act outlaws the payment of bribes to foreign government officials to gain businesses?
Foreign Corrupt Practices Act
Choose the three benefits of FDI to a home country.
Foreign subsidiary creates demand for home-country exports Inward flow of foreign earnings MNE learns skills from exposure to foreign market
When the government does not use quotas, taxes or other means to restrict what its citizens can buy from or sell to another country, it is called _______ trade.
Free
A country that does not implement quotas on imported products and does not limit what its citizens can produce and sell to another country is practicing ________.
Free Trade
Which view of FDI is based on the classical international trade theory of Smith and Ricardo asserting that international production should be based on comparative advantage?
Free market
Personal Ethics
Generally accepted principles of right and wrong governing the conduct of individuals.
The broadest range of investment opportunities would be found in a ______ capital market.
Global
Which activity occurred under the gold standard?
Governments agreed to convert paper currency into gold on demand at a fixed rate to allow for the use of paper currencies to finance trade.
What are two drawbacks of the Eurocurrency market?
Higher probability of bank failure Foreign exchange rate risk
Corporate Social Resonsbility
Idea that businesspeople should consider the social consequences of economic actions when making business decisions and that there should be a presumption in favor of decisions that have both good economic and social consequences.
According to the text, which three actions can managers take to ensure that ethical issues are considered in business decision making?
Implement decision-making processes that consider ethical aspects of business decisions. Build an organizational culture that values ethical behavior. Favor hiring and promoting of people with a sense of personal ethics.
Setting a fixed exchange rate imposes discipline on countries in two ways. What are those two ways?
Imposes monetary discipline on countries Prevents competitive devaluations and brings stability to global trade
External Stakeholders
Individuals or groups that have some claim on a firm such as customers, suppliers, and unison.
The oldest argument for government intervention in trade where developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument.
Infant industry
If the citizens of a country all had enough money to purchase anything they wanted, the demand for products across the country would increase. In response, the companies that supply products would raise the price. This demonstrates the idea of _____ in an economy.
Inflation
What name is given to the electronic systems that manage inventory, price products, track sales, and handle customer inquiries?
Information
Societal Business Ethics are ______ from Personal Ethics.
Not divorced
What are four of the determinants of ethical behavior?
Organizational culture Personal ethics Societal culture Leadership
Dynamic gains in both the stock of a country's resources and the efficiency with which resources are utilized will cause a country's
PPF lot shift outward.
Grease Payments
Payments to ensure receiving the standard treatment that a business ought to receive from a foreign government but might not due to the obstruction of a foreign official.
Internal Stakeholders
People who work for or own the business such as employees, directors, and stakeholders
What are two measures countries can employ to restrict foreign direct investment?
Performance requirements Ownership restraints
PPF
Product Possibility Frontier
Which theory was based on the belief that it was better to keep production facilities close to the market and to the firm's center of decision making, given the uncertainty and risks inherent in introducing new products?
Product life-cycle
What are two ways trade barriers hamper a firm's productive activities?
Quotas limit the ability to serve a country from outside locales. They raise the cost of exporting products.
The most significant consequence for investors using the global capital market versus the domestic market is that investors can diversify their portfolios internationally, which allows them to ______.
Reduce their risk
The Uruguay Round started in 1986 and eventually provided for which three provisions?
Reducing tariffs on industrial goods Reducing tariffs on manufactured goods Reducing agricultural subsidies
When considering constant returns to specialization, it is assumed that the units of resources required to produce one unit of a good will ______ no matter where a country is on the production possibilities frontier.
Remain the same
As demonstrated by the Nike example in the text, which working conditions situation is generally MOST preferred?
Requiring good conditions in home and foreign operations even when this results in a smaller profit margin.
What are two benefits of FDI for a host country?
Resource-transfer effects Economic growth
After the company decided to shift production out of the United States and into an overseas operation, Micah lost her job and didn't know what she would do because her skills were limited to the textile industry. This is evidence of how ______ are not always mobile and allow individuals to find new work when their jobs are compromised.
Resources
Organizational ______ is the name given to the values and norms that are shared among employees of an organization.
culture
The stock of foreign direct investment refers to the total ______.
accumulated value of foreign-owned assets at a given point in time
Governments implement ______ trade policies that are designed to make it difficult for imports to enter a country.
administrative
Porter argues that ______ factors are the most significant when determining competitive advantage for a country.
advanced
Tariff rates on ______ products are generally much higher than tariffs on manufactured products or services.
agricultural
The ASEAN Free Trade Area has cut tariffs on what two products to less than 5 percent?
agricultural manufacturing
Some ethics experts have proposed practical guides or ethical ______ to make ethical decisions in a systematic way.
algorithms
If the demand for dollars is greater than the supply of them and the supply of Indian rupee is greater than the demand for them, then the dollar will ______ against the rupee.
appreciate
A key cost of FDI for the home country is when the balance of payments are adversely affected by the initial ______ outflow that is necessary to finance FDI.
capital
What financial institution takes cash deposits and then lends to borrowers?
commercial bank
Ricardo's theory of ______ advantage states that it makes sense for a country to specialize in the production of those goods that it produces most efficiently and then purchase the goods that it produces less efficiently from other countries, even if this means buying goods from other countries that it could produce more efficiently itself.
comparative
Daniel's company adopted an international strategy when it introduced the single-cup coffeemaker. However, just nine months later, his company regretted the decision because four other companies came up with a similar product and began selling it at a lower cost and with additional features. What is the main reason Daniel's company's international strategy failed?
competitors
The US dollar and the Japanese yen are free to float against each other. This means that their exchange rates ______ fluctuate.
constantly
In 2003, Japan decided to ban imports of beef from America because of the threat of mad cow disease. This ban was implemented to directly protect ______.
consumers
Foreign exchange rates have been more volatile since 1973 due to the many ______ that have occurred in this period.
crises
