International Business Midterm (set 2/2)

Country A produces a ton of coffee using one unit of resources. Country B produces two tons of coffee using one unit of resources. Which of the following is true regarding Country A and Country B?

Country B has an absolute advantage in producing coffee.

________ refers to the unwanted cultural influence in a nation that can cause great distress and lead governments to block imports it believes to be harmful.

Cultural imperialism

Which of the following statements is true of tariffs?

Export tariffs are used by countries when they believe an export's price is lower than it should be.

Which of the following financial companies in the United States is involved in activities of selling of goods abroad, and offers insurance on foreign accounts receivable?

Export-Import Bank

The major purpose of foreign trade zones is to implement barriers to trade and commerce.

False

Which of the following statements is true of local content requirements?

It forces companies from other countries to employ local resources in their production processes.

________ says that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports.

Mercantilism

Which of the following statements is incorrect with regard to the importance of colonies for mercantilist nations?

They served as a source of military protection.

International trade is the purchase, sale, or exchange of goods and services across national borders.

True

Which of the following refers to the ability of a nation to produce a good more efficiently than any other nation?

absolute advantage

Which theory suggests that a country should export those goods and services for which it is more productive than other countries and import those goods and services for which other countries are more productive?

absolute advantage

Government trade promotion agencies ________.

advertise in other countries to promote the nation's exports

A product's components are manufactured in a country that can produce them at a very low cost while maintaining its quality. These components are then assembled in another country where productivity in assembly is high. This process resembles the theory of ________.

comparative advantage

When a country is not able to produce a good more efficiently than other nations, but produces the good more efficiently than it does any other good, it is said to have a(n) ________.

comparative advantage

A(n) ________ is calculated to offset the advantage an exporter receives from a subsidy.

countervailing duty

Using tariffs to generate government revenue is most common among ________.

developing countries

The importance of trade for a nation can be measured by ________.

examining the volume of its trade relative to its total output

Which of the following is an instrument that governments use to promote trade?

export financing

A(n) ________ is a geographic area where imported or exported goods receive preferential tariff treatment.

foreign trade zone

The theory of absolute advantage measures a nation's wealth by determining the ________.

living standards of its people

The purpose of ________ is to force companies from other nations to use local resources in their production processes, particularly labor.

local content requirements

Which of the following is a method of restricting trade?

local content requirements

The smallest portion of the total world trade comprises trade between ________.

low-income and middle-income nations

Which of the following is an assumption made by the comparative advantage theory?

maximization of production and consumption

Nations following the theory of ________ believed that the world's wealth was limited and that a nation could increase its share of the pie only at the expense of its neighbors.

mercantilism

The danger of trade dependency is that ________.

political turmoil in a country might affect all dependent countries

According to mercantilism, what should a country's primary goal be?

promoting exports to enlarge gold and silver holdings

Which of the following is the main cultural motive behind government intervention in trade?

protection of national identity

A(n) ________ tariff (or duty) is levied as a particular fee for each unit of an imported product.

specific

Managers should understand the effect of trade protectionism because ________.

trade protectionism may make it difficult for a company to buy what it needs from foreign suppliers

According to Adam Smith, international trade should not be restricted by tariffs and quotas in order to give a country an absolute advantage.

true

Industries considered essential to national security often receive government-sponsored protection.

true

Mercantilist countries used to amass wealth by acquiring less-developed territories around the world.

true

Nations often restrict trade in goods and services to achieve cultural objectives, the most common being protection of national identity.

true

Tariffs are taxes placed on goods being imported into a country. A tariff can act as a barrier to trade by increasing the cost of the imported goods to the consumers.

true

The protection of infant industries by a nation's government can cause domestic companies to become complacent toward innovation.

true

The protection of infant industries by a nation's government can cause more economic harm than good.

true

Trade in services tends to be relatively more important for the world's richest countries.

true

When a country's currency is stronger relative to other nations, domestic products are more expensive than imports.

true

The theory of absolute advantage destroys the mercantilist idea that international trade is a ________.

zero-sum game