Test 2

The act that outlaws paying of bribes to foreign government officials to gain business is known as

Foreign Corrupt Practices Act

Using your knowledge of New Trade Theory, choose the reason why Boeing has not challenged Airbus for market share in the super large capacity aircraft sector.

The global market is not big enough to support multiple producers of this type of aircraft.

Porter argues that a nation's firms should

adopt policies that promote strong competition within domestic markets.

The government of Bangladesh has not invested in infrastructure. According to Michael Porter, infrastructure is an example of a(n) _____ factor of endowment.

advanced

The WTO argues that by removing all tariff barriers and subsidies to agriculture

global economic growth would rise

The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, and environmental pollution are

not always clear-cut.

The tariffs and floor price in the U.S. sugar industry

protect U.S. producers at the expense of U.S. consumers.

An economic argument put forth for speed money is that it

removes bureaucracy.

Tariffs fall into two categories:

specific and ad valorem.

The policies protecting 4,700 U.S. sugar producers cost U.S. consumers about ______ per year.

$3 Billion

Match the correct theory with its corresponding description and time period in the evolution of international trade theory.

1. Established in 1776, Adam Smith stated in this theory that countries should specialize in the production of goods and services for which they can produce most efficiently and then trade these for goods produced by other countries: ABSOLUTE ADVANTAGE THEORY 2. In 1817, David Ricardo stated that it makes sense for a country to specialize in the production of those goods that it produces most efficiently and to buy the goods that it produces less efficiently from other countries: COMPARATIVE ADVANTAGE THEORY 3. In the early 1900s, this theory predicts that countries will export those goods that make intensive use of factors that are locally abundant and import goods that make intensive use of factors that are locally scarce: HECKSCHER-OHLIN THEORY 4. In the mid-1960s, a theory initially proposed by Raymond Vernon, points out that where a new product is introduced is important. Over time, cost considerations start playing a greater role in the competitive process: PRODUCT LIFE STYLE THEORY 5. Emerging in the 1970s, this theory states that through its impact on economies of scale, trade can increase the variety of goods available to consumers while decreasing the average cost of those goods: NEW TRADE THEORY 6. The most current theory was developed by Michael Porter and states that four broad attributes of a nation shape the environment in which local firms compete, and these attributes promote or impede the creation of competitive advantage: NATIONAL COMPARATIVE ADVANTAGE THEORY

Match the various trade milestones to the correct description.

1. Free trade as a government policy was first officially embraced by Great Britain by the repeal of this particular tariff: Corn Laws 2. Established in 1947, its objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like: GATT 3. Put in place to avoid rising unemployment by protecting domestic industries and diverting consumer demand away from foreign products: Smoot-Hawley Act 4. Among other things, negotiations that took place here reduced tariffs on industrial goods, reduced agricultural subsidies, and offered more protection for intellectual property rights: Uraguay Round 5. Between 1995 and 2015, more than 415 trade disputes between member countries were handled by this group whose members collectively account for 98 percent of world trade: WTO 6. By the end of this in 1979, average tariff declined by nearly 92 percent in the United States: Tokyo Round

Place the steps involved in the decision-making process, surrounding the creation of an organization's ethical culture in the correct order.

1. Identify stakeholder's decisions 2. Judge the ethics of strategic decisions Judge the ethics of strategic decisions 3. Establish moral intent Establish moral intent 4. Engage in ethical behavior Engage in ethical behavior 5. Audit decisions Audit decisions

Read the hypothetical company situations and drop them into the correct determinants of ethical behavior. Use the roll-over hints to help understand each term and company situation.

1. Personal ethics: Gift-giving 2. Organizational Culture: Values 3. Unrealistic performance expectations: Eliminates 4. Leadership: CEO 5. Decision-making processes: Considerations

The ________ benefits inefficient farmers and the politicians in the EU who rely on the farm vote, but not consumers in the European Union, who end up paying more for their foodstuffs.

Common Agricultural Policy (CAP)

__________ refers to selling goods in a foreign market at below their cost of production or as selling goods in a foreign market at below their "fair" market value.

Dumping

Governments always act in the national interest of their countries when they intervene in the economy.

False

Using Hofstede's dimensions of social culture, research has shown that companies headquartered in cultures where masculinity and power distance are important attributes were more likely to emphasize the importance of behaving ethically

False

Which argument best explains why the United States imposed tariffs on imports of Chinese steel?

Government intervention is necessary for protecting jobs and industries from unfair foreign competition.

When a rich country enters into a free trade agreement with a poor country, the poor country benefits more than the rich country. This is the concept behind

Paul Samuelson's critique

Roll over each of the elements on the left to read a description. Determine which of these elements is a political or economic argument for intervention. Then, drag the element to the appropriate box.

Political Arguments for Intervention: protecting jobs, national security, protecting consumers, protecting the environment Economic Arguments for Intervention: infant industry argument, promote investment inflows, essential argument, import subsitution

What principle or theory argues that it is in a country's best interests to maintain a trade surplus?

Principle of mercantilism

For decades, there have been just two producers of large commercial aircraft, Boeing and Airbus. Which statement best explains how new trade theory views this situation from a manufacturing perspective?

The economies of scale required to be a profitable manufacturer effectively limit the size of the global market.

Which of the following statements is true about the righteous moralist approach to ethics?

The righteous moralist approach is typically associated with managers from developed nations.

Tariff barriers raise the costs of exporting products to a country (or of exporting partly finished products between countries). Which of the following is a likely consequence of these barriers?

This may put a firm at a competitive disadvantage to indigenous competitors in that country.

Building an organizational culture that places a high value on ethical behavior requires incentive and reward systems that reward people who engage in ethical behavior.

True

China produces more potatoes than any other country. This means it has an absolute advantage in potato production.

True

Dumping is viewed as a method by which firms unload excess production in foreign markets.

True

In industries where economies of scale are important, both the variety of goods that a country can produce and the scale of production are limited by the size of the market.

True

Paul Samuelson's critique looks at what happens when a rich country enters into a free trade agreement with a poor country.

True

The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade.

True

Theories of international trade claim that promoting free trade is generally in the best interests of a country, although it may not always be in the best interest of an individual firm.

True

Free trade refers to a situation where

a government does not try to influence what its citizens can buy from global markets.

A lobbyist from California argues that the U.S. government needs to protect the U.S. semiconductor industry from foreign competition. She argues that semiconductors are now such important components of defense products that it would be dangerous to rely primarily on foreign producers for them. This is an example of ________ argument for government intervention.

a political

The farm bill that passed the U.S. Congress in 2007 contained subsidies of $289 billion for the next 10 years. This is an example of

a subsidy.

In response to claims from U.S. steel producers that Chinese producers were dumping their product in the U.S. market, the United States responded by imposing tariffs on steel imports from China. A tariff is

a tax levied on imports.

Which of the following accurately describes the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions?

allows facilitating payments

Which of the following is an accurate depiction of facilitating payments?

also known as speed money

The government is considering placing additional taxes on foreign steel imports that are a proportion of the value of the imported steel. This is an example of

an ad valorem tariff.

The practice of "gift-giving" between the parties in a business negotiation is considered right and proper behavior in many Asian cultures, while some Westerners view the practice as a form of bribery. What is this an example of?

an ethical dilemma

U.S. candy makers have responded to the tariffs and price floor policies in the U.S. sugar industry

by moving production to foreign markets.

Suppose a company sets up production in a developing economy where it is common to dump manufacturing waste directly into the river. Even though the company would never follow this practice at its domestic facility, and regardless of whether it ignores the Sustainable Development Goals established by UNCTAD, the company decides to follow the local practice. This approach to business ethics is consistent with

cultural relativism.

Who are the losers as a result of the tariffs on SUVs imported to the United States?

domestic consumers

Who benefits from the tariffs assessed on SUVs imported to the United States?

domestic producers

Companies can help to ensure they do their part toward achieving the Sustainable Development Goals set out by UNCTAD by

drafting a corporate code of ethics.

Factor endowments refer to the

extent to which a country is gifted with such resources as land, labor, and capital.

Which factor helps Bangladesh's goods stay competitive when compared to goods from China?

fear of relying on a single country

If the policies supporting the sugar industry in the United States were discontinued, U.S. producers would

have to become more efficient.

Because of the reduction of tariff barriers under GATT and WTO, the GDP of the United States since 1947 has been

higher

According to Hecksher-Ohlin theory, which of the following gives Bangladesh a cost advantage?

labor-intensive production

The threat of antidumping action affects a firm by

limiting its ability to use aggressive pricing to gain market share in a country.

One of the drawbacks to universal free trade in the United States mentioned in the video was

loss of employment.

Bangladesh's textile industry relies on inputs from other industries within the country. This supports which one of Michael Porter's attributes when it comes to competitive advantage?

related and supporting industries

Free trade refers to a situation in which a government does not attempt to

restrict imports and exports.

Sweden is leading the way in achieving the Sustainable Development Goals set forth by UNCTAD. Suppose a Swedish manager has just been asked to oversee his company's new plant in a developing economy. The manager wants to be sure that the new facility follows Swedish ethical principles. The manager's behavior is consistent with the ______ approach to business ethics.

righteous moralist

General Motors' stand against apartheid in South Africa was based upon what came to be known as

the Sullivan principles.

The All-Emissions Corporation moved its automobile production plant to a country in South America because it could freely dump waste products into the nearby ocean. By doing this, the corporation was contributing to the concept of

the tragedy of the commons.

In the 1986 Uruguay Round, GATT negotiations extended global trading rules to cover

trade in services.

As a philosophy for business ethics, utilitarianism focuses attention on the need to

weigh carefully all social benefits and costs of a business action.