M Business OC Ferrell 6th Edition- Test Bank
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Sample Test
M: Business, 6e (Ferrell)
Chapter 3 Business in a BorderlessWorld
1) International business involves the buying, selling, and
trading of goods and services across national boundaries.
Answer: TRUE
Explanation: International business refers to the buying,
selling, and trading of goods and services across national boundaries. Falling
political barriers and new technology are making it possible for more and more
companies to sell their products overseas as well as at home.
Difficulty: 1 Easy
Topic: Definition of Business
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
2) Nations trade with other nations to obtain resources that
would otherwise be unavailable to them.
Answer: TRUE
Explanation: Nations and businesses engage in
international trade to obtain raw materials and goods that are otherwise
unavailable to them or are available elsewhere at a lower price than that at
which they themselves can produce.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
3) Most of the world’s population and two-thirds of its total
purchasing power are outside the United States.
Answer: TRUE
Explanation: As differences among nations continue to
narrow, the trend toward the globalization of business is becoming increasingly
important. Indeed, most of the world’s population and two-thirds of its
total purchasing power are outside the United States.
Difficulty: 1 Easy
Topic: Definition of Business
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4) Mario owns a company that manufactures bicycle parts. He
sells his goods to foreign markets. This is called importing.
Answer: FALSE
Explanation: Importing is the purchase of goods
and services from foreign sources.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
5) The United States imports more from China than it exports; it
has a positive balance of trade with China.
Answer: FALSE
Explanation: When a nation imports more than it exports,
it has a negative balance of trade, or trade deficit.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
6) Trade deficits can help businesses succeed, create more jobs,
and improve the standard of living.
Answer: FALSE
Explanation: Trade deficits are harmful because they can
mean the failure of businesses, the loss of jobs, and a lowered standard of
living.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
7) The country of Brachindi is very poor and not economically
advanced. This is considered an LDC.
Answer: TRUE
Explanation: Countries that are in general poorer and less
economically advanced than those in North America and Europe are often
called less-developed countries (LDCs).
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
8) Kankakee’s airport was aging and in dire need of repair, or
it would not be able to continue to operate. It needed a new source of income
for infrastructure.
Answer: TRUE
Explanation: Infrastructure is the physical facilities
that support economic activities, such as railroads, highways, ports,
airfields, utilities and power plants, schools, hospitals, communication
systems, and commercial distribution systems.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
9) Monica and Chandler went to Europe for their honeymoon. When
they returned, they had purchased a lot of souvenirs, so they had to pay a
tariff based on the value of the items. This is a fixed tariff.
Answer: FALSE
Explanation: A fixed
tariff is a specific amount of money levied on each unit of a
product brought into the country, while an ad valorem tariff is
based on the value of the item.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
10) A common reason for establishing quotas or tariffs is to
encourage dumping.
Answer:FALSE
Explanation: One common reason for setting quotas or
tariffs is to prohibit dumping, which occurs when a country or business sells
products at less than what it costs to produce them.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
11) Political unrest in countries often creates a hostile
environment for foreign businesses and can act as a barrier to international
trade.
Answer: TRUE
Explanation: Businesses engaged in international trade
must consider the relative stability of countries. Political unrest in
countries may create a hostile or even dangerous environment for foreign
businesses.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
12) Cultural differences, such as variations in body language
and personal space, usually have an almost negligible impact on international
business.
Answer: FALSE
Explanation: Variations in body language and personal
space, have an impact on international business. These cultural differences may
generate uncomfortable feelings or misunderstandings when business people of
different countries negotiate with each other.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
13) The General Agreement on Tariffs and Trade provided a forum
for tariff negotiations and a place where international trade problems could be
resolved.
Answer: TRUE
Explanation: The General Agreement on Tariffs and Trade
provided a forum for tariff negotiations and a place where international trade
problems could be discussed and resolved. GATT sponsored rounds of negotiations
aimed at reducing trade restrictions.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
14) The World Trade Organization agreements were rejected by
most of the world’s trading nations.
Answer: FALSE
Explanation: Key to the World Trade Organization are the
WTO agreements, which are the legal ground rules for international commerce.
The agreements were negotiated and signed by most of the world’s trading
nations and ratified by their parliaments.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
15) Many U.S. companies have taken advantage of Mexico’s low
labor costs and proximity to the United States to set up maquiladoras.
Answer: TRUE
Explanation: As a result of the North American Free Trade
Agreement (NAFTA), many U.S. companies have taken advantage of Mexico’s low
labor costs and proximity to the United States to set up production facilities,
called maquiladoras.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
16) The Association of Southeast Asian Nations (ASEAN)
effectively united Singapore, Britain, and Japan into one market.
Answer: FALSE
Explanation: The Association of Southeast Asian Nations
(ASEAN), established in 1967, promotes trade and economic integration among
member nations in Southeast Asia, including Malaysia, the Philippines,
Singapore, Thailand, Brunei Darussalam, Vietnam, Laos, Indonesia, Myanmar, and
Cambodia.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
17) The International Monetary Fund promotes trade among member
nations by eliminating trade barriers and fostering financial cooperation.
Answer: TRUE
Explanation: The International Monetary Fund (IMF) was
established in 1947 to promote trade among member nations by eliminating trade
barriers and fostering financial cooperation.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
18) Marbles is a toy company that wants to enter the
international marketplace without spending large amounts of money abroad. A
good option for Marbles is licensing.
Answer: TRUE
Explanation: Licensing and franchising enable a firm to
enter the international marketplace without spending large sums of money abroad
or hiring or transferring personnel to handle overseas affairs.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
19) Basecamp is a company that has a tool for web-project
development. It uses developers in India to supplement its U.S. staff because
it was less expensive than hiring in the U.S. This is an example of
outsourcing.
Answer: TRUE
Explanation: Outsourcing is transferring manufacturing or
other tasks (such as information technology operations) to companies in
countries where labor and supplies are less expensive.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
20) A strategic alliance is a partnership formed to create
competitive advantage on a worldwide basis.
Answer: TRUE
Explanation: A strategic alliance is a partnership formed
to create competitive advantage on a worldwide basis. In some industries, such
as automobiles and computers, strategic alliances are becoming the predominant
means of competing.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
21) Direct investment gives lesser control and is the least
expensive way to participate in foreign trade.
Answer: FALSE
Explanation: Companies that want more control and are
willing to invest considerable resources in international business may consider
direct investment, the ownership of overseas facilities.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
22) Multinational corporations (MNCs) rarely get targeted by
activists because they provide so many benefits to the countries in which they
do business.
Answer: FALSE
Explanation: Multinational corporations (MNCs) have been
targeted by antiglobalization activists at global business forums, and some
protests have turned violent. MNCs are criticized on the grounds that they
increase the gap between rich and poor nations, misuse and misallocate scarce
resources, exploit the labor markets in less-developed countries (LDCs), and
harm their natural environments.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
23) Companies doing business internationally have traditionally
used a globalization strategy.
Answer: FALSE
Explanation: Companies doing business internationally have
traditionally used a multinational strategy, customizing their products,
promotion, and distribution according to cultural, technological, regional, and
national differences.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-05 Contrast two basic strategies
used in international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
24) A global strategy involves standardizing products for the
whole world.
Answer: TRUE
Explanation: A global strategy involves standardizing
products (and, as much as possible, their promotion and distribution) for the
whole world, as if it were a single entity.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-05 Contrast two basic strategies
used in international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
25) Even when products are standardized, advertising often has
to be modified to adapt to local cultures.
Answer: TRUE
Explanation: Even when products are standardized,
advertising often has to be modified to adapt to language and cultural
differences.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-05 Contrast two basic strategies
used in international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
26) ________ exists when a country is the most efficient
producer of an item.
1. A) A
comparative advantage
2. B) A
comparative disadvantage
3. C) An
absolute advantage
4. D) An
absolute disadvantage
5. E) A
domestic advantage
Answer: C
Explanation: Some nations have a monopoly on the production
of a particular resource or product. Such a monopoly, or absolute advantage,
exists when a country is the only source of an item, the only producer of an
item, or the most efficient producer of an item.
Difficulty: 1 Easy
Topic: Competition
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
27) A mining company in Malyia that possesses the only mine
where a specialty ruby can be found has
1. A) a
comparative advantage.
2. B) a
comparative disadvantage.
3. C) an
absolute advantage.
4. D) an
absolute disadvantage.
5. E) a
domestic advantage.
Answer: C
Explanation: This is an example of absolute advantage,
which exists when a country is the only source of an item, the only producer of
an item, or the most efficient producer of an item.
Difficulty: 3 Hard
Topic: Competition
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
28) The country of Malyia can produce sugar more efficiently
than it can produce other items, giving it ________ advantage.
1. A) an
absolute
2. B) a
competitive
3. C) a
domestic
4. D) a
marginal
5. E) a
comparative
Answer: E
Explanation: This is an example of comparative advantage,
which occurs when a country specializes in products that it can supply more
efficiently or at a lower cost than it can produce other items.
Difficulty: 3 Hard
Topic: Competition
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
29) ________ is the transferring of manufacturing or other
tasks—such as data processing—to countries where labor and supplies are less
expensive.
1. A)
Importing
2. B)
Exporting
3. C)
Outsourcing
4. D)
Dumping
5. E)
Insourcing
Answer: C
Explanation: Outsourcing is the transferring of
manufacturing or other tasks to countries where labor and supplies are less
expensive. Outsourcing has become a controversial practice in the United States
because many jobs have moved overseas where those tasks can be accomplished for
lower costs.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
30) Why has outsourcing become a controversial practice in the
United States?
1. A)
Many jobs have moved overseas where certain tasks can be accomplished for lower
costs.
2. B) Outsourcing
empowers the outsourcing company with more managerial control.
3. C)
The losses incurred out of the hidden costs of outsourcing are making companies
go bankrupt.
4. D)
Delegation of several processes leaves the outsourcing company with much less
time to concentrate on its core business process.
5. E)
The outsourced products end up having sub-standard quality because their
producers lack expertise.
Answer: A
Explanation: Outsourcing has become a controversial
practice in the United States because many jobs have moved overseas where
certain tasks can be accomplished for lower costs.
Difficulty: 3 Hard
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
31) ________ is best described as the sale of goods and services
to foreign markets.
1. A)
Franchising
2. B)
Offshoring
3. C)
Outsourcing
4. D) Exporting
5. E)
Importing
Answer: D
Explanation: To obtain needed goods and services and the
funds to pay for them, nations trade by exporting and importing. Exporting is
the sale of goods and services to foreign markets.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
32) Sarah bought a new shirt at a U.S. boutique. When she
checked the tag, she saw that her shirt was made in China. This means her shirt
is a(n) ________ good.
1. A)
exported
2. B)
outsourced
3. C)
absolute
4. D)
imported
5. E)
domestic
Answer: D
Explanation: This is an example of an imported good.
Importing is the purchase of goods and services from foreign sources.
Difficulty: 3 Hard
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors within
the international trade environment that influence business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
33) A nation’s ________ can be best defined as the difference in
value between its exports and imports.
1. A)
balance of import
2. B)
balance of export
3. C)
balance of trade
4. D)
trade surplus
5. E)
trade deficit
Answer: C
Explanation: A nation’s balance of trade is the difference
in value between its exports and imports.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
34) U.S. exports to China have been rapidly increasing but not
fast enough to offset the imports from China. This means that the United States
has
1. A) a
domestic gain.
2. B) a
trade surplus.
3. C) a
trade deficit.
4. D) an
absolute advantage.
5. E) a
comparative advantage.
Answer: C
Explanation: U.S. exports to China have been rapidly
increasing but not fast enough to offset the imports from China, meaning that
the United States has a trade deficit. A trade deficit is defined as a nation’s
negative balance of trade, which exists when that country imports more products
than it exports.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
35) Which of the following is one of the possible results of
trade deficits?
1. A)
the success of businesses
2. B)
the import of more products
3. C)
the loss of jobs
4. D)
the export of more services
5. E) a
higher standard of living
Answer: C
Explanation: A trade deficit is defined as a nation’s
negative balance of trade, which exists when that country imports more products
than it exports. Trade deficits are harmful because they can mean the failure
of businesses, the loss of jobs, and a lowered standard of living.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
36) A favorable balance of trade exists when a country
1. A)
imports more than it exports.
2. B)
exports more than it imports.
3. C)
has more debt liabilities than assets.
4. D)
spends more than it saves.
5. E)
saves more than it spends.
Answer: B
Explanation: When a nation exports more goods than it
imports, it has a favorable balance of trade, or trade surplus.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
37) Which of the following is most likely to cause a trade
surplus?
1. A)
inefficient manufacturing systems
2. B)
plentiful imports from other countries
3. C)
insufficient natural resources
4. D) an
abundance of natural resources
5. E)
healthy economies in other countries
Answer: D
Explanation: Until about 1970, the United States had a
trade surplus due to an abundance of natural resources and the relative
efficiency of its manufacturing systems.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
38) The difference between the flow of money into and out of a
country is called its
1. A)
balance of trade.
2. B)
domestic gain.
3. C)
balance of payments.
4. D)
credit balance.
5. E)
exchange rate.
Answer: C
Explanation: The difference between the flow of money into
and out of a country is called its balance of payments. A country’s balance of
trade, foreign investment, foreign aid, loans, military expenditures, and money
spent by tourists comprise its balance of payments.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-01 Explore some of the factors
within the international trade environment that influence business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
39) Which of the following statements is true about
less-developed countries (LDCs)?
1. A)
Many countries in Europe are LDCs.
2. B) In
LDCs, consumers tend to purchase more nonessential products.
3. C)
Many businesses avoid doing business in LDCs.
4. D)
LDCs represent a potentially huge and profitable market for many businesses.
5. E)
LDCs are characterized by high per-capita income.
Answer: D
Explanation: Many countries in Africa, Asia, and South
America are less economically advanced than those in North America and Europe.
These less-developed countries (LDCs) are characterized by low per-capita
income, which means consumers are less likely to purchase nonessential items.
Nonetheless, LDCs represent a potentially huge and profitable market for many
businesses because they may be buying technology to improve their
infrastructures, and much of the population may desire consumer products.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
40) A certain country has low per-capita income and is not
economically advanced. This country would be considered ________.
1. A) an
agrarian economy
2. B) a
manufacturing nation
3. C) an
industrialized nation
4. D) an
underdeveloped country
5. E) a
less-developed country
Answer: D
Explanation: Many countries in Africa, Asia, and South
America are in general poorer and less economically advanced than those in
North America and Europe; they are often called less-developed countries
(LDCs).
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02Investigate some of the economic,
legal, political, social, cultural, and technological barriers to international
business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
41) Thelisia has abundant railroads, highways, ports, airfields,
utilities and power plants, schools, hospitals, communication systems, and
commercial distribution systems to support its economic activities. This means
Thelisia has a strong
1. A)
business structure.
2. B)
economic structure.
3. C)
infrastructure.
4. D)
exchange rate.
5. E)
consumer base.
Answer: C
Explanation: A country’s level of development is
determined in part by its infrastructure, the physical facilities that support
its economic activities, such as railroads, highways, ports, airfields,
utilities and power plants, schools, hospitals, communication systems, and
commercial and distribution systems.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
42) ________ can be best defined as the ratio at which one
nation’s currency can be exchanged for another nation’s currency.
1. A)
Exchange rate
2. B)
National rate
3. C)
Exchange ratio
4. D)
Value ratio
5. E)
Currency ratio
Answer: A
Explanation: The ratio at which one nation’s currency can
be exchanged for another nation’s currency is the exchange rate. Exchange rates
vary daily.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
43) If the United States were to devalue its currency,
the most likely result
would be
1. A) an
increase in its imports.
2. B) an
increase in its exports.
3. C) a
decrease in the number of foreign tourists to the United States.
4. D) a
decrease in the sale of domestic goods abroad.
5. E) an
increase in the cost of American goods abroad.
Answer: B
Explanation: Devaluation decreases the value of currency
in relation to other currencies. Devaluation encourages the sale of domestic
goods and tourism, causing an increase in exports.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
44) Rarely, a country will decide to increase the value of its
currency in relation to other currencies. This is called
1. A) a
negative exchange.
2. B) a
positive exchange.
3. C)
dumping.
4. D)
devaluation.
5. E)
revaluation.
Answer: B
Explanation: Revaluation increases the value of a currency
in relation to other currencies, but occurs rarely.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
45) Which of the following is a true statement about about laws
and regulations in international business?
1. A)
The U.S. does not participate in treaties with other nations.
2. B)
Currency flows freely between borders everywhere.
3. C)
Legal and ethical requirements for successful business are decreasing globally.
4. D)
Many of the legal rights that Americans take for granted do not exist in other
countries.
5. E)
The United States’ copyright laws are the most lenient in the world.
Answer: D
Explanation: Many of the legal rights that Americans take
for granted do not exist in other countries, and a firm doing business abroad
must understand and obey the laws of the host country.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
46) A specific amount of money levied on each unit of a product
brought into a country is ________ tariff.
1. A) an
ad valorem
2. B) a
value-added
3. C) a
fixed
4. D) a
prohibitive
5. E) a
zero
Answer: C
Explanation: A fixed tariff is a specific amount of money
levied on each unit of a product brought into a country, while an ad valorem
tariff is based on the value of the item. Most countries allow citizens
traveling abroad to bring home a certain amount of merchandise without paying
an import tariff.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the economic,
legal, political, social, cultural, and technological barriers to international
business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
47) A fixed tariff differs from an ad valorem tariff because an
ad valorem tariff
1. A) is
a specific amount of money levied on each unit of a product sold by a country.
2. B) is
a specific amount of money levied on each unit of a product brought into a
country.
3. C) is
based on the value of an item.
4. D)
prohibits trade in a particular product.
5. E)
limits the number of units of a particular product that can be imported into a
country.
Answer: C
Explanation: A fixed tariff is a specific amount of money
levied on each unit of a product brought into a country, while an ad valorem
tariff is based on the value of an item.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
48) A U.S. citizen may bring $200 worth of merchandise into the
United States duty free. After that, U.S. citizens must pay a(n) ________ based
on the cost of the item and the country of origin.
1. A)
sales tax
2. B)
transactional tax
3. C) ad
valorem tariff
4. D)
fixed tariff
5. E)
export tariff
Answer: C
Explanation: A U.S. citizen may bring $200 worth of
merchandise into the United States duty free. After that, U.S. citizens must
pay an ad valorem tariff based on the cost of the item and the country of
origin. Thus, identical items purchased in different countries might have
different tariffs.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
49) Which of the following statements is true about tariffs and
trade restrictions?
1. A)
Countries are not allowed to levy tariffs for political reasons.
2. B)
Protective tariffs allow more expensive domestic goods to compete with foreign
ones.
3. C)
Protective tariffs encourage free trade and competition.
4. D)
Countries cannot allow citizens traveling abroad to bring home merchandise
without paying an import tariff.
5. E)
Quotas cannot be established by voluntary agreements.
Answer: B
Explanation: Protective tariffs allow more expensive
domestic goods to compete with foreign ones. For example, the United States has
lost a significant number of steelworks over the past few decades to foreign
competition in places such as China. Other markets can produce steel more
cheaply than the United States. Many people and special interest groups in the
United States, such as unions, would like to see tariffs placed on Chinese
steel, which is significantly less expensive, in order to protect remaining
U.S. steel production.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
50) Which of the following is a measure that does not yield
revenue for the government of Malyia but can effectively limit the quantity of
a particular good being imported from Thelisia to Malyia?
1. A)
quota
2. B)
value-added tax
3. C)
tariff
4. D)
embargo
5. E)
subsidy
Answer: A
Explanation: A quota limits the number of units of a
particular product that can be imported into a country.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
51) A(n) ________ is best defined as a prohibition on trade in a
particular product.
1. A) ad
valorem tariff
2. B)
excise
3. C)
cartel
4. D)
quota
5. E)
embargo
Answer: E
Explanation: An embargo prohibits on trade in a particular
product.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
52) Because of an unfavorable political situation between the
countries, the country of Thelisia has placed a government order to prohibit
the trade of private vehicles with the country of Calibria. Thelisia has
maintained a(n) ________ with Calibria.
1. A)
trade tariff
2. B)
trade embargo
3. C)
quota limit
4. D) fixed
tariff
5. E) ad
valorem tariff
Answer: B
Explanation: An embargo prohibits trade in a particular
product. Embargoes are generally directed at specific goods or countries and
may be established for political, economic, health, or religious reasons.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
53) ________ can be best defined as the act of a country or
business selling products at less than what it costs to produce them.
1. A)
Dumping
2. B)
Offshoring
3. C)
Outsourcing
4. D)
Exporting
5. E)
Importing
Answer: A
Explanation: Dumping is the act of a country or business
selling products at less than what it costs to produce them.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-02 Investigate some of the economic,
legal, political, social, cultural, and technological barriers to international
business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
54) All of the following are nations that have been subject to
economic sanctions for political reasons in recent years EXCEPT
1. A)
the United States.
2. B)
Cuba.
3. C)
Iran.
4. D)
Syria.
5. E)
North Korea.
Answer: A
Explanation: In recent years, Cuba, Iran, Syria, and North
Korea have been subject to economic sanctions for political reasons.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
55) Political concerns may lead a group of nations to form a(n)
________, a group of firms or nations that agrees to act as a monopoly and not
compete with each other.
1. A)
embargo
2. B)
conglomerate
3. C) economic
sanction
4. D)
cartel
5. E)
franchise
Answer: D
Explanation: This describes a cartel. The Organization of
Petroleum Exporting Countries (OPEC), the most famous cartel, was founded in
the 1960s to increase the price of petroleum throughout the world and to
maintain high prices in order to enhance the economies of its member nations.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
56) The Organization of Petroleum Exporting Countries (OPEC) is
1. A) an
embargo.
2. B) a
conglomerate.
3. C) a
multinational corporation (MNC).
4. D) a
cartel.
5. E) a
franchise.
Answer: D
Explanation: The Organization of Petroleum Exporting
Countries (OPEC), the most famous cartel, was founded in the 1960s to increase
the price of petroleum throughout the world and to maintain high prices in
order to enhance the economies of its member nations.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
57) Which of the following statements is true about dumping?
1. A)
Dumping occurs when the country of origin has products with the latest
technology that are in high demand in overseas markets.
2. B)
Dumping occurs when a business sells products at much more than what it costs
to produce them.
3. C)
Dumping occurs when the domestic market for a firm’s product is too big to
match the level of production.
4. D)
Quotas cannot be imposed based on suspicion of dumping unless proven.
5. E)
Dumping permits quick entry into a market.
Answer: E
Explanation: Dumping is the act of a country or business
selling products at less than what it costs to produce them. Dumping permits
quick entry into a market.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
58) Agro Corp., based in the country of Arahonia, is a company
that produces agricultural products. The domestic market of Arahonia is not
sufficient to support Agro Corp.’s large-scale level of production because
Arahonia is a small, but highly industrialized, country. Thus, Agro Corp.
decides to sell its products to the agriculture-based country of Petinberg at
less than its cost, so it doesn’t have to cut production. This process is
termed
1. A)
dumping.
2. B)
offshoring.
3. C)
outsourcing.
4. D)
monopolizing.
5. E)
franchising.
Answer: A
Explanation: The given scenario is an example of the
process of dumping. Dumping is the act of a country or business selling
products at less than what it costs to produce them. Sometimes dumping occurs
when the domestic market for a firm’s product is too small to support an
efficient level of production.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
59) A sudden change in power can result in a regime that is
hostile to foreign investment. This is a primary example of a(n) ________
barrier.
1. A)
political
2. B)
cultural
3. C)
exchange
4. D)
language
5. E)
geographic
Answer: A
Explanation: A sudden change in power can result in a
regime that is hostile to foreign investment. This is a primary example of a
political barrier.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
60) A catastrophic flood crippled Malyia’s government. In an
effort to help local businesses rebuild, the government forced foreign
businesses out of the country. This is an example of a(n) ________ barrier to
trade.
1. A)
political
2. B)
social
3. C)
economic
4. D)
ethical
5. E)
legal
Answer: A
Explanation: This is an example of a political barrier to
trade. Natural disasters can cripple a country’s government, making the region
unstable. Forcing businesses out of a country altogether is a drastic example
of international politics.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
61) Auto Corp. learned that in order to sell more cars in
Thelisia, it needed a bold and strategic advertising plan; while in Malyia, it
needed more attentive customer service. These are examples of ________
barriers.
1. A)
technological
2. B)
political
3. C)
legal
4. D)
social
5. E)
economic
Answer: D
Explanation: The given scenario is an example of how Auto
Corp. overcame a social barrier. Most businesspeople engaged in international
trade underestimate the importance of social and cultural differences; but
these differences can derail an important transaction.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
62) Understanding that Arab businessmen tend to stand
face-to-face when holding a conversation reveals the importance of
understanding another culture’s use of
1. A)
language.
2. B)
dialect.
3. C)
religious practices.
4. D)
ethics.
5. E)
body language.
Answer: E
Explanation: Differences in body language and personal
space affect international trade. Body language is nonverbal, usually
unconscious communication through gestures, posture, and facial expression.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Diversity
Accessibility: Keyboard Navigation
63) All of the following are true about gestures that are viewed
as rude or unacceptable in particular countries EXCEPT
1. A)
summoning with an index finger is unacceptable in Japan, Hong Kong, and the
Middle East.
2. B)
pointing with the index finger is unacceptable in the Middle and Far East.
3. C)
sitting with the soles of the shoes showing is unacceptable in Brazil and
Germany.
4. D)
patting someone on the head is unacceptable in Buddhist countries.
5. E)
forming a circle with the fingers is unacceptable in Brazil and Germany.
Answer: C
Explanation: Summoning with the index figure is
unacceptable in Japan, Hong Kong, and the Middle East. Pointing with the index
finger is unacceptable in the Middle and Far East. Sitting with the soles of
the shoes showing is unacceptable in Thailand, Japan, and France. Forming a
circle with fingers (the “O.K.” sign) is unacceptable in Brazil and Germany.
Winking means “I love you” in Japan. Patting someone on the head is
unacceptable in Buddhist countries.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Diversity
Accessibility: Keyboard Navigation
64) The effective translation of product names can be crucial to
success in foreign markets because of
1. A)
political barriers.
2. B)
cultural barriers.
3. C)
legal barriers.
4. D)
the presence of export quotas.
5. E)
the differences in body language.
Answer: B
Explanation: Cultural differences include differences in
spoken and written language. Although it is certainly possible to translate
words from one language to another, the true meaning is sometimes
misinterpreted or lost.
Difficulty: 2 Medium
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
65) Many countries do not allow children to be used in
advertising. This is an example of ________ barrier.
1. A) a
political
2. B) a
cultural
3. C) an
economic
4. D) a
geographic
5. E) a
religious
Answer: B
Explanation: Cultural differences include differences in
spoken and written language, body language, personal space, family roles,
perceptions of time, national and religious holidays, local customs, and
measurement systems. Family roles also influence marketing activities. Many
countries do not allow children to be used in advertising, for example.
Difficulty: 1 Easy
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Remember
AACSB: Diversity
Accessibility: Keyboard Navigation
66) Auto Corp. released an advertisement showing fair-skinned
people driving their cars into an indigenous Malyian village while the
indigenous people watched in awe. Malyian activists claimed this ad reinforced
negative stereotypes of the indigenous people and called for their government
to issue sanctions against Auto Corp. This is an example of a(n) ________
barrier.
1. A)
economic
2. B)
cultural
3. C)
legal
4. D)
ethical
5. E)
political
Answer: B
Explanation: This is an example of a cultural barrier.
Companies should guard against marketing that could be perceived as reinforcing
negative stereotypes.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
67) Many countries with poor telephone infrastructure have seen
an increase in the use of cell phones, providing opportunities for companies to
market their products to more people. This is an example of overcoming ________
barriers.
1. A)
economic
2. B)
technological
3. C)
legal
4. D)
ethical
5. E) political
Answer: B
Explanation: Technological advances are creating
additional global marketing opportunities.
Difficulty: 3 Hard
Topic: Barriers to International Trade
Learning Objective: 03-02 Investigate some of the
economic, legal, political, social, cultural, and technological barriers to
international business.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
68) Which of the following is true about the General Agreement
on Tariffs and Trade (GATT)?
1. A)
More than 100 nations abided by its rules.
2. B) It
was originally signed by 27 nations in 1947.
3. C) It
sponsored rounds of negotiations aimed at increasing trade restrictions.
4. D)
The Uruguay Round promoted dumping.
5. E)
The most recent round was the Paraguay Round.
Answer: A
Explanation: The General Agreement on Tariffs and Trade
(GATT), originally signed by 23 nations in 1947, provided a forum for tariff
negotiations and a place where international trade problems could be discussed
and resolved. More than 100 nations abided by its rules. GATT sponsored rounds
of negotiations aimed at reducing trade restrictions. The most recent round,
the Uruguay Round, further reduced trade barriers for most products and
provided new rules to prevent dumping.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
69) Which of the following is the international organization
based in Geneva, Switzerland, that was created in 1995 by the Uruguay Round of
the General Agreement on Tariffs and Trade (GATT)?
1. A)
the European Union
2. B)
the World Trade Organization
3. C)
the World Bank
4. D)
the Association of Southeast Asian Nations
5. E)
the Asia-Pacific Economic Cooperation
Answer: B
Explanation: The World Trade Organization (WTO), an
international organization dealing with the rules of trade between nations, was
created in 1995 by the Uruguay Round of the General Agreement on Tariffs and
Trade (GATT). Based in Geneva, Switzerland, the WTO has also adopted a
leadership role in negotiating trade disputes among nations.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
70) Which of the following were merged into one market by the
North American Free Trade Agreement (NAFTA)?
1. A)
Canada and Alaska
2. B)
Brazil, Mexico, and the United States
3. C) Chile,
Brazil, and the United States
4. D)
Canada, Mexico, and the United States
5. E)
Canada and the EU
Answer: D
Explanation: The North American Free Trade Agreement
(NAFTA) merged Canada, the United States, and Mexico into one market. NAFTA
virtually eliminated all tariffs on goods produced and traded among Canada,
Mexico, and the United States to create a free trade area.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
71) ________ is the single largest trading partner of the United
States.
1. A)
Mexico
2. B)
India
3. C)
China
4. D)
Japan
5. E)
Canada
Answer: E
Explanation: Canada’s nearly 35 million consumers are
relatively affluent, with a per capita GDP of $45,000 Trade between the United
States and Canada totals approximately $575 billion. Canada is the single
largest trading partner of the United States.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements, alliances,
and organizations that may encourage trade across international boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
72) Which of the following is a true statement about the
European Union?
1. A) It
is trying to create opportunities to trade with South America.
2. B) It
is working toward the creation of a standardized currency.
3. C) It
is striving to impose customs checks within Europe.
4. D) It
is working toward the abolition of import duties.
5. E) It
is trying to increase value-added taxes.
Answer: B
Explanation: The European Union (EU) is an economic and
political union of member nations located primarily in Europe. To facilitate
free trade among members, the EU is working toward standardization of business
regulations and requirements, import duties, and value-added taxes; the
elimination of customs checks; and the creation of a standardized currency for
use by all members.
Difficulty: 2 Medium
Topic: International Trade Agreements and the Organizations
that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
73) Which member of the European Union recently decided to leave
the trade bloc?
1. A)
Germany
2. B)
the United Kingdom
3. C)
Greece
4. D)
Spain
5. E)
the Netherlands
Answer: B
Explanation: The United Kingdom recently voted to leave
the EU.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
74) Which of the following is an international trade alliance
between 21 nations with 57 percent of world GDP that promotes open trade and
economic and technical cooperation among its member nations?
1. A)
the General Agreement on Tariffs and Trade (GATT)
2. B)
the Asia-Pacific Economic Cooperation (APEC)
3. C)
the North American Free Trade Agreement (NAFTA)
4. D)
the European Union (EU)
5. E)
the Association of Southeast Asian Nations (ASEAN)
Answer: B
Explanation: The Asia-Pacific Economic Cooperation (APEC),
established in 1989, promotes open trade and economic and technical cooperation
among member nations. The 21-member alliance represents approximately 2.8
billion people, 47 percent of world trade, and 57 percent of world GDP.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
75) Which of the following countries was a member nation of
Asia-Pacific Economic Cooperation (APEC) when it was established in 1989?
1. A) Vietnam
2. B)
Japan
3. C)
China
4. D)
Hong Kong
5. E)
Chile
Answer: B
Explanation: The initial member nations of APEC included
Australia, Brunei Darussalam, Canada, Indonesia, Japan, South Korea, Malaysia,
New Zealand, the Philippines, Singapore, Thailand, and the United States. Since
then, the alliance has grown to include Chile, China, Hong Kong, Mexico, Papua
New Guinea, Peru, Russia, Chinese Taipei, and Vietnam.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
76) Which of the following is true about the Association of
Southeast Asian Nations (ASEAN)?
1. A) It
will not have fully-free labor flows between member-nations.
2. B) In
1993, it began to increase tariffs among countries.
3. C) It
will have a common currency.
4. D) It
has a 21-member alliance.
5. E) It
was established in 1989.
Answer: A
Explanation: The Association of Southeast Asian Nations
(ASEAN) plans to increase economic integration by 2015, but unlike the European
Union, it will not have a common currency or fully free labor flows between
member-nations. In this way, ASEAN plans to avoid some of the pitfalls that
occurred among nations in the EU during the latest worldwide recession.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
77) Which of the following was established by the industrialized
nations in 1946 to loan money to underdeveloped and developing countries?
1. A)
the Foreign Credit Insurance Association
2. B)
the Exim Bank
3. C)
the World Bank
4. D)
the World Trade Organization
5. E)
the International Monetary Fund
Answer: C
Explanation: The World Bank, more formally known as the
International Bank for Reconstruction and Development, was established by the
industrialized nations, including the United States, in 1946 to loan money to
underdeveloped and developing countries.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
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78) Which of the following is true of the World Bank?
1. A) It
funds the member nations of the NAFTA and EU.
2. B) It
provides aid to industrialized nations in times of financial crisis.
3. C) It
acts as a global police force.
4. D) It
finances construction projects in underdeveloped and developing countries.
5. E) It
helps developed nations obtain money to start businesses.
Answer: D
Explanation: The World Bank loans its own funds or borrows
funds from member countries to finance projects ranging from road and factory
construction to the building of medical and educational facilities. The World
Bank and other multilateral development banks are the largest source of advice
and assistance for developing nations.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Understand
AACSB: Analytical Thinking
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79) The ________ is the closest thing the world has to an
international central bank.
1. A) International
Monetary Fund
2. B)
World Bank
3. C)
Citicorp Bank
4. D)
Organization for Economic Cooperation and Development
5. E)
World Trade Organization
Answer: A
Explanation: The International Monetary Fund (IMF) makes
short-term loans to member countries that have balance-of-payment deficits and
provides foreign currencies to member nations, and is the closest thing the
world has to an international central bank.
Difficulty: 1 Easy
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
80) The usefulness of the International Monetary Fund (IMF) for
developed countries is limited because
1. A)
these countries rely extensively on the public market.
2. B)
the IMF does not provide short-term loans.
3. C)
the IMF does not aid countries with balance-of-payment deficits.
4. D)
the IMF was forced to decrease its funds to emerging economies.
5. E)
these countries use private markets as a major source of capital.
Answer: E
Explanation: The usefulness of the International Monetary
Fund (IMF) for developed countries is limited because these countries use
private markets as a major source of capital. The global economic crisis
created many challenges for the IMF as it was forced to significantly increase
its loans to both emerging economies and more developed nations.
Difficulty: 2 Medium
Topic: International Trade Agreements and the
Organizations that Facilitate Trade
Learning Objective: 03-03 Specify some of the agreements,
alliances, and organizations that may encourage trade across international
boundaries.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
81) An intermediary who handles international transactions for
other firms is acting as
1. A) a
licensing agent.
2. B) a
franchising agent.
3. C) an
export agent.
4. D) a
contract manufacturer.
5. E) a
direct investor.
Answer: C
Explanation: Export agents are intermediaries who seldom
produce goods themselves; instead, they usually handle international
transactions for other firms. Export agents either purchase products outright
or take them on consignment.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
82) Which of the following is an advantage of using an export
agent?
1. A)
The firm does not have to deal with a middleman.
2. B)
The firm is not responsible for the procurement and storage of raw materials.
3. C)
The firm does not have to deal with paying tariffs and handling paperwork.
4. D)
The firm does not need to worry about product pricing.
5. E)
The firm does not need to invest in research and development.
Answer: C
Explanation: An advantage of trading through an agent
instead of directly is that the company does not have to deal with foreign
currencies or the red tape (paying tariffs and handling paperwork) of
international business.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
83) Exporting may occur through ________, which involve bartering
products for other products rather than currency.
1. A)
export agencies
2. B)
free-trade agreements
3. C)
direct selling contracts
4. D)
countertrade agreements
5. E)
outsourcing agreements
Answer: D
Explanation: Exporting sometimes takes place through countertrade
agreements, which involve bartering products for other products instead of for
currency.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
84) Approximately what percentage of international trade
agreements contain countertrade provisions?
1. A) 5%
2. B)
10%
3. C)
40%
4. D)
60%
5. E)
75%
Answer: C
Explanation: An estimated 40 percent or more of all
international trade agreements contain countertrade provisions.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
85) Auto Corp. buys engines from Malyia and resells them in its
stores in Thelisia. This is an example of
1. A)
exporting.
2. B)
countertrading.
3. C)
bartering.
4. D)
outsourcing.
5. E)
importing.
Answer: E
Explanation: This is an example of importing, which is how
many companies first get involved in international trade. Companies import
goods from other countries for resale in their own businesses.
Difficulty: 3 Hard
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Apply
AACSB: Knowledge Application
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86) Which of the following is true regarding trading companies?
1. A)
They buy and sell goods in only one country.
2. B)
They handle all activities required to move products from one country to
another.
3. C)
They rarely offer warehousing facilities.
4. D)
They are very different from export agents.
5. E)
They refrain from handling consulting activities.
Answer: B
Explanation: A trading company buys goods in one country
and sells them to buyers in another country. Trading companies handle all
activities required to move products from one country to another, including
consulting, marketing research, advertising, insurance, product research and
design, warehousing, and foreign exchange services to companies interested in
selling their products in foreign markets. They are similar to export agents,
but their role in international trade is larger.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
87) Which of the following can be best defined as a trade
agreement in which one company allows another company to use its company name,
products, patents, brands, trademarks, raw materials, and/or production
processes in exchange for a fee or royalty?
1. A)
direct investment
2. B)
strategic alliance
3. C)
joint venture
4. D)
outsourcing
5. E)
licensing
Answer: E
Explanation: Licensing is a trade agreement in which one
company—the licensor—allows another company—the licensee—to use its company
name, products, patents, brands, trademarks, raw materials, and/or production
processes in exchange for a fee or royalty.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
88) What type of company benefits the most from licensing?
1. A) a
large manufacturer that wants to launch a new brand internationally
2. B) a
small manufacturer that wants to launch a well-known brand internationally
3. C) a
small manufacturer that wants to launch a new brand internationally
4. D) a
large manufacturer that wants to transform a less-known brand into a well-known
brand internationally
5. E) a
small manufacturer that wants to launch a well-known brand locally
Answer: B
Explanation: Licensing is especially advantageous for
small manufacturers wanting to launch a well-known brand internationally.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Knowledge Application
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89) Which of the following can be best defined as a form of
licensing in which a company agrees to provide another company with its name,
logo, methods of operation, advertising, products, and other elements
associated with it in return for a financial commitment and the agreement to
conduct business in accordance with its standard of operations?
1. A)
franchising
2. B)
outsourcing
3. C)
joint venture
4. D)
strategic alliance
5. E)
direct investment
Answer: A
Explanation: Franchising is a form of licensing in which a
company—the franchiser—agrees to provide a franchisee the name, logo, methods
of operation, advertising, products, and other elements associated with a
franchiser’s business, in return for a financial commitment and the agreement
to conduct business in accordance with the franchiser’s standard of operations.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
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90) If GloboTron hires a Thelisian company to manufacture many
of its stereo components, and these products carry GlobalTron’s name, this
business arrangement is called
1. A)
contract manufacturing.
2. B)
licensing.
3. C)
direct investment.
4. D)
exporting.
5. E)
importing.
Answer: A
Explanation: This is an example of contract manufacturing,
which occurs when a company hires a foreign company to produce a specified
volume of the firm’s product to specification; the final product carries the
domestic firm’s name.
Difficulty: 3 Hard
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Apply
AACSB: Knowledge Application
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91) Offshoring is different from outsourcing because
1. A) in
offshoring, the company subcontracts to a different company.
2. B) in
offshoring, the company retains control of the process.
3. C) in
offshoring, a subsidiary cannot relocate a business process to another country.
4. D) in
outsourcing, tasks cannot be transferred to countries where supplies are less
expensive.
5. E)
outsourced jobs cannot be brought back for concerns like foreign workers not
adding enough value.
Answer: B
Explanation: Offshoring is the relocation of a business
process by a company, or a subsidiary, to another country. Offshoring is
different than outsourcing: the company retains control of the process because
it is not subcontracting to a different company.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
92) Which of the following is true of offshoring?
1. A)
Companies may choose to offshore to take advantage of lower wages, skilled
labor, or time zone differences.
2. B)
Some banks have chosen not to offshore because of concerns about data security
in other countries.
3. C)
Offshoring prevents companies from controlling international operations.
4. D)
Companies often choose not to offshore to avoid having to pay higher wages and
deal with time zone differences.
5. E)
Offshore offices are subcontracted to different companies.
Answer: A
Explanation: Companies may choose to offshore to take
advantage of lower wages, skilled labor, or time zone differences that allow
them to offer services around the clock. Institutions may engage in offshoring
instead of outsourcing because it allows them to have more control over
international operations; the offshore office is an extension of the company.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
93) DMC Inc., headquartered in Malyia, has completely
transferred its tax services to Apex Corp in Thelisia because there are many
well-educated workers and lower labor costs. This is an example of
1. A)
licensing.
2. B)
franchising.
3. C)
offshoring.
4. D)
insourcing.
5. E)
outsourcing.
Answer: E
Explanation: The given process is known as outsourcing.
Outsourcing is the transfer of manufacturing or other tasks (such as
information technology operations) to companies in countries where labor and
supplies are less expensive. Many U.S. firms have outsourced tasks to India,
Ireland, Mexico, and the Philippines, where there are many well-educated
workers and significantly lower labor costs.
Difficulty: 3 Hard
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
94) Which of the following is likely to be a reason for some
U.S. companies to bring their outsourced production processes back to the
United States?
1. A)
increasing labor unionization in the United States
2. B)
increased government regulation of business in the United States
3. C)
increasingly strict enforcement of intellectual property rights in Asian
countries
4. D)
high cost of transporting products to the home country
5. E)
increase in labor turnover rates in the United States
Answer: D
Explanation: Companies such as General Electric and
Caterpillar are bringing outsourced processes back to the United States due to
increasing labor costs in places such as China, the expense of shipping
products across the ocean, and fears of fraud or intellectual property theft.
Difficulty: 2 Medium
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
95) ________ can be best defined as the sharing of the costs and
operations of a business in a foreign country with a local partner.
1. A) Exporting
2. B)
Licensing
3. C) A
direct investment
4. D)
Contract manufacturing
5. E) A
joint venture
Answer: E
Explanation: The sharing of the costs and operation of a
business in a foreign country with a local partner is a joint venture.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
96) In industries where international competition is so fierce
and the costs of competing on a global basis are so high that only a few firms
have the resources to do it alone, a company may collaborate with other
companies to form a
1. A)
direct investment.
2. B)
greenfield venture.
3. C)
franchise.
4. D)
joint venture.
5. E)
strategic alliance.
Answer: E
Explanation: In industries where international competition
is so fierce and the costs of competing on a global basis are so high that only
a few firms have the resources to do it alone, they collaborate with other
companies to form a strategic alliance. A strategic alliance is a partnership
formed to create a competitive advantage on a worldwide basis.
Difficulty: 1 Easy
Topic: Trade Strategies Used in Reaching Global Markets
Learning Objective: 03-04 Summarize the different levels
of organizational involvement in international trade.
Bloom’s: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
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