MKT 3500 Final Study Guide

Which of the following supports the economic case for regional economic integration?

Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement.

Which of the following are the two impediments to regional economic integration?

Costs and national sovereignty

Which of the following is true of the political case for regional economic integration?

Countries can enhance their political weight in the world by grouping their economies.

Which of the following is true of the relationship between trade and economic growth?

Countries open to international trade display higher growth rates than those that close their economies to trade.

Which of the following is a major issue confronting the North American Free Trade Agreement?

Expanding the membership of the agreement

3M, an American firm, manufactures adhesive tapes in St. Paul, Minnesota, and ships the tapes to South Korea for sale. According to this information, which of the following is being done by 3M?

Exporting

A firm that does not want to bear the costs of establishing production facilities in a foreign country should avoid:

FDI

Radical writers argue that:

FDI by the MNEs of advanced capitalist nations keeps the less developed countries of the world relatively backward.

Licensing is NOT attractive to which of the following firms?

Firms requiring tight control of operations for realizing experience curve and location economies

Which of the following helps a firm to preempt available demand, gain cost advantages related to volume, and build an enduring brand ahead of later competitors?

First-mover advantages

Which of the following refers to the amount of FDI undertaken over a given period (normally a year)?

Flow

Which of the following countries has adopted the euro as its currency?

France

Which of the following modes of entry into foreign markets can result in a lack of control over quality?

Franchising

Which of the following refers to an attempt to establish a free trade area between Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam?

Association of Southeast Asian Nations

Which of the following modes of entry is suitable for service firms where the risk of losing control over the management skills or technological know - how is not much of a concern, and where the firms' valuable asset is their brand name?

Franchising

Which of the following is a feature of a common market?

Free movement of factors of production between member nations

Which of the following is defined as a group of countries committed to removing all barriers to the free flow of goods and services between each other, but pursuing independent external trade policies?

Free trade area

Which of the following is an example of concerns over national sovereignty acting as an impediment to regional economic integration?

Great Britain refusing to adopt the common currency of the European Union, the euro

Which of the following is an example of concerns over national sovereignty acting as an impediment to regional economic integration?

Great Britain refusing to adopt the common currency of the European Union, the euro

If a firm is considering entering a country where incumbents exist, and if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, what would be the preferable mode of entry?

Greenfield venture

Which of the following statements is true regarding foreign direct investment?

Has grown more rapidly than world trade and world output.

Which of the following is true of Alexander Yeats's criticism of Mercosur?

He pointed out that Mercosur countries were insulated from outside competition by tariffs that run as high as 70 percent of value.

Which of the following is true of the euro since its establishment in 1999?

The euro has had a volatile trading history against the U.S. dollar.

Which of the following is an advantage of joint ventures as a mode of entry into foreign markets?

The foreign firm benefits from a local partner's knowledge of the host country

Which of the following is an advantage of franchising as a mode of entry into foreign markets?

The franchiser is relieved of many of the costs and risks of opening a foreign market on its own

Which of the following is one of the limitations of exporting that leads companies to prefer FDI over exporting?

The presence or threat of trade barriers

Which of the following is true of the costs and risks associated with doing business in a foreign country?

They are less pronounced in the case of licensing..

Which of the following is an expected consequence of the implementation of the North American Free Trade Agreement?

Some U.S. and Canadian firms would move production to Mexico to take advantage of lower labor costs.

The most important concerns regarding the costs of FDI for the home country center on the:

balance- of - payments and employment effects of outward FDI.

To encourage inward FDI, it is increasi ngly common for governments to

offer tax concessions to foreign firms that invest in their countries.

In terms of licensing, which of the following is an intangible property?

patent

A firm will favor FDI over exporting as an entry strategy when:

the transportation costs or trade barriers are high.

Once it undertakes FDI, a firm becomes a(n):

multinational enterprise

Which of the following is a reason why Mercosur was temporarily suspended in 2001?

An economic crisis in Argentina

Which of the following statements is most likely to be true regarding the effects of FDI on employment?

A beneficial employment effect claimed for FDI is that it brings jobs to a host country that would otherwise not be created there.

Franchising

A contractual agreement between a franchisor and a franchisee that allows the franchisee to operate a business using a name and format developed and supported by the franchisor.

Which of the following is an example of an industry in which cross - licensing agreements are increasingly becoming common?

Biotechnology

According to Christopher Bartlett and Sumantra Ghoshal, how can local companies differentiate themselves from foreign multinationals?

By focusing on market niches..

Which of the following refers to an association of English - speaking Caribbean states that are attempting to establish a customs union?

CARICOM

Which of the following has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members?

Common market

Which of the following refers to a permanent bailout fund, worth about €500 billion, set up by the euro zone nations to restore confidence in the euro?

European Stability Mechanism

Which of the following states that combining location - specific assets or resource endowments and the firm's own unique assets often requires FDI, and it also requires the firm to establish production facilities where th ose foreign assets or resource endowments are located?

Eclectic paradigm

Which of the following levels of economic integration involves the use of a common currency, harmonization of members' tax rates, and a common monetary and fiscal policy?

Economic union

Where has the movement toward regional economic integration been most successful?

Europe

Which of the following is a threat facing the emergence of single markets?

Increased price competition throughout the European Union

Which of the following is true of the Treaty of Rome?

It committed the European Community to establish common policies in agriculture and transportation.

Which of the following is true of the European Free Trade Association (EFTA)?

It was founded by those western European countries that initially decided not to be part of the European Community.

Which of the following is true of the Asia - Pacific Economic Cooperation (APEC)?

It was founded in 1990 at the suggestion of Australia.

If a company were to draw from the ideas proposed in the various theories of international trade, from a profit perspective, how would it go about selecting locations for its businesses?

It would disperse its productive activities to those countries where they can be performed most efficiently.

Axiom International, an Australian company, wants to expand its operations to China, a country that is politically, culturally, and economically different. The firm needs to select a mode of entry that would give it access to local knowledge, allow sharing of development costs and risks, and also be politically acceptable. Which of the following modes of entry into foreign markets is most suitable for Axiom International?

Joint venture

Which of the following is a drawback of licensing as a mode of entry into foreign markets?

Licensing does not give a firm tight control over manufacturing, marketing, and strategy.

The ________ committed European Community members to adopt a common currency by January 1, 1999.

Maastricht Treaty

Which of the following indicates that a firm has a full outright stake in an acquisition?

Maximus Corporations acquires 100 percent of a company

Which of the following countries is NOT a member of the Central American Common Market?

Mexico

Australia is a major producer of agricultural and dairy products and exports coffee, tea, spices, and milk products to the United States. The United States is the world's third largest supplier of machinery and exports heavy machinery to Australia. What explains the trade equation between Australia and the United States?

Nations with an absolute advantage in producing certain goods trade them for goods produced by other countries.

Which of the following is true of the Andean Pact of 1969?

Political and economic problems seem to have hindered cooperation among member countries of the Andean Pact.

QFresh, a brand for energy drinks, launched a healthy lime - based drink without preservatives. Immediately after this another brand, Fast Fizz, which manufactures energy drinks, also announced the launch of a new refresh ing drink without preservatives. Then Ignite, a third brand of energy drinks, reduced the price of its apple - based drink. Which of the following is most likely to happen in this oligopolistic market setup?

QFresh and Fast Fizz will reduce the prices of their respective drinks.

Which of the following is true with regard to regional economic integration?

Regional economic integration is good for consumers because it lowers prices.

Which of the following suggests that consumers in all nations can consume more if there are no restrictions on trade?

Ricardo's theory of comparative advantage

The European Community was established with the signing in 1957 of the Treaty of:

Rome

Which of the following led to the collapse of the Central American Common Market in 1969?

War between Honduras and El Salvador after a riot at a soccer match between teams from the two countries

Which of the following entry modes into a foreign market best serves a high - tech firm?

Wholly owned subsidiaries

Cadmia and Rhodia specialize in the production of textiles and agricultural products respectively. They are the best at their respective specializations. Cadmia trades textiles with Rhodia in exchange for agricultural products. Which of the following is illustrated by this form of trade between Cadmia and Rhodia?

absolute advantage (A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it. According to Smith, countries should specialize in the production of goods for which they have an absolute advantage and then trade these for goods produced by other countries.)

If one firm in an oligopoly cuts prices, then most likely, its competitors will:

also respond with similar price cuts.

A zero-sum game is a situation in which

an economic gain by one country results in an economic loss by another.

incumbents

an individual who is responsible for a specific office within a corporation or government position; this person has an obligation to the position or office she holds.

Which of the following statements regarding the free market view is true?

argues that FDI is a benefit to both the source country and the host country.

The Andean Community now operates as a(n):

customs union.

One of the rebuttals to Samuelson's critique of the free trade model is that:

developing nations are unlikely to upgrade the skill level of their workforce rapidly enough

The European Council is considered to be the ultimate controlling authority within the European Union (EU) because:

draft legislation from the European Commission can become EU law only if the council agrees.

As an incentive to encourage domestic firms to undertake FDI, many countries have:

eliminated double taxation of foreign income.

Direct effects of FDI on employment in the host country arise when a foreign MNE:

employs a number of host country citizens

3M, an American firm, manufactures adhesive tape in St. Paul, Minnesota, and ships the tape to South Korea for sale. According to this information, which of the following is being done by 3M?

exporting

According to the Heckscher-Ohlin theory, the pattern of international trade is determined by differences in:

factor endowments

A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan. This is an example of:

foreign direct investment

Firms for which licensing is not a good option include those in

global oligopolies.

Firms for which licensing is not a good option include those in:

global oligopolies.

The interdependence between firms in an oligopoly leads to

imitative behavior.

Governments impose quotas to limit:

importing

Vernon predicts that as the demand for a new product starts to grow in other advanced countries, in the long run

it begins to limit the potential for exports from the United States.

According to internalization theory, one of the drawbacks of licensing is that:

it does not give a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability.

Which of the following is a home-country policy for limiting outward FDI?

manipulating tax rules to encourage the firms to invest at home

An argument against the North American Free Trade Agreement centered on the fear that ratification would result in:

mass exodus of jobs from the United States into Mexico.

Omega, Inc., a maker of personal fitness trackers (like Fitbit) was the first mover into the country of Malnesia. As the first mover in a new product area, Omega, Inc. had to spend a lot of money educating the population of Malnesia about fitness and tracking one's fitness. In addition, they also had to spend money in developing a distribution channel. The costs that Omega, Inc. incurred in Malnesia as the first mover are called

pioneering costs.

In international business, an advantage of being a late entrant in a foreign market is the ability to

ride on an early entrant's investments in learning and customer education.

What triggers the conflict of interest over strategy and goals in joint ventures?

shifts in relative bargaining power of venture partners

The United States has been an attractive target for FDI partly because of its:

stable and dynamic economy.

Turnkey projects being short - term propositions can be disadvantageous for a firm if a country subsequently proves to be a major market for the output of the process that has been exported. The firm can get around this problem by:

taking a minority equity interest in the operation

A firm is most likely to favor foreign direct investment over exporting when:

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

A current account deficit is also known as a(n):

trade deficit.

Suppose the country of Ceria and Lithinia imposed tariffs on imports from all countries, and then they set up a free trade area, scrapping all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Now, Ceria begins to import sugar from Lithinia. However, Ceria had previously been importing sugar from another country, Cadnia, which produced sugar more cheaply than Ceria or Lithinia. This is known as:

trade diversion

Countries such as the United States, the United Kingdom, France, Germany, the Netherlands, and Japan dominate in the share of total global stock of FDI and FDI outflows and in rankings of the world's largest multinationals because they:

were the most developed countries postwar and home to the largest and best capitalized enterprises.