Chapter 5 International Business-not mine 57 terms

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Which of the following refers to the purchase, sale, or exchange of goods and services across national borders? A) Domestic trade B) Foreign direct investment C) International trade D) Mercantilism
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Answer: C
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________ occurs between different states, regions, or cities within a country. A) Domestic trade B) Foreign direct investment C) International trade D) Mercantilism
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Answer: A
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One way to measure the importance of trade to a nation is to examine ________. A) its human development index relative to its CPI B) the availability of natural resources and ease of extracting them C) its comparative advantage relative to those of its neighbors D) the volume of an economy’s trade relative to its total output
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Answer: D
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Which of the following statements is NOT true about the services trade today? A) Trade in services makes up about 20 percent of total world trade. B) Trade in services tends to be more important for emerging markets. C) The United States is a top exporter of services in the world. D) Trade in services is growing for many nations.
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Answer: B
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The U.S. Department of Commerce estimates that for every $1 billion increase in exports, ________ jobs are created in the United States. A) 22,800 B) 35,000 C) 42,500 D) 63,000
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Answer: A
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Most of the world merchandise trade is comprised of trade in ________. A) natural resources B) services C) manufactured goods D) knowledge-based goods
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Answer: C
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When a country has a weak currency relative to other nations, imports are ________ relative to domestic products. A) more expensive B) equal in price C) more attractive D) less expensive
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Answer: A
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The majority of total world merchandise trade occurs among ________. A) high-income countries and low- and middle-income nations B) high-income economies C) low- and middle-income nations D) emerging markets
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Answer: B
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Trade among the world’s high-income economies accounts for roughly ________ percent of total world merchandise trade. A) 20 B) 40 C) 60 D) 80
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Answer: C
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Merchandise trade between low- and middle-income nations accounts for about ________ percent of total world trade. A) 6 B) 23 C) 42 D) 61
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Answer: A
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The smallest portion of total world trade takes place between ________. A) high-income countries and low- and middle-income nations B) high-income economies C) low- and middle-income nations D) emerging markets
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Answer: C
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Which of the following countries is the most important trading partner of the Central and Eastern European nations that recently joined the European Union? A) Germany B) Hungary C) Japan D) United States
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Answer: A
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When doing business in the Pacific Rim, ________. A) carry business cards printed only in the home country language B) be persistent and aggressive, because Asians often take a while before they agree to a meeting C) don’t accept invitations to dine at someone’s house; go for a neutral location D) tone down the use of legal language
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Answer: D
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Companies are leaving Mexico for Asia and Europe because of differences in all of the following EXCEPT ________. A) education B) climate C) red tape D) taxes
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Answer: B
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According to ________, measures of a nation’s well-being are irrelevant. A) mercantilism B) absolute advantage theory C) factor proportions theory D) new trade theory
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Answer: A
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The most prominent mercantilist nations included all of the following EXCEPT ________. A) the Netherlands B) Spain C) the United States D) Portugal
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Answer: C
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The trade theory that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports is called ________. A) absolute advantage B) mercantilism C) comparative advantage D) factor proportions theory
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Answer: B
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The practice of mercantilism rested upon each of the following EXCEPT ________. A) enhanced trade deficits B) government intervention C) colonialism D) trade surpluses
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Answer: A
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The condition that results when the value of a nation’s exports is greater than the value of its imports is called ________. A) a trade deficit B) mercantilism C) a trade surplus D) absolute advantage
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Answer: C
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The condition that results when the value of a country’s imports is greater than the value of its exports is called ________. A) a trade deficit B) mercantilism C) a trade surplus D) absolute advantage
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Answer: A
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According to mercantilism, accumulation of national wealth depended on ________. A) increasing a nation’s trade surplus B) expanding a nation’s total value of trade C) expanding a nation’s total volume of trade D) increasing a nation’s trade deficit
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Answer: A
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Colonies were important to mercantilist nations for all the following reasons EXCEPT ________. A) to serve as sources of inexpensive raw materials B) to serve as markets for higher-priced finished goods C) to serve as a source of profits for mercantilist powers D) to serve as a source of military protection
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Answer: D
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Nations following the theory of ________ believed that the world’s wealth was limited and that a nation could increase its share of the pie only at the expense of its neighbors. A) absolute advantage B) comparative advantage C) mercantilism D) factor proportions
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Answer: C
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Which of the following refers to the ability of a nation to produce a good more efficiently than any other nation? A) Mercantilism B) Comparative advantage C) Absolute advantage D) Zero-sum game
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Answer: C
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Who proposed the theory of absolute advantage? A) David Ricardo B) Adam Smith C) Bertil Ohlin D) Raymond Vernon
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Answer: B
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Adam Smith believed which of the following? A) International trade should be restricted by tariffs and quotas. B) Governments should intervene to maintain a balance of exports and imports. C) Market forces should determine trade flows. D) Countries should produce most goods themselves and trade as little as possible.
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Answer: C
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The theory of absolute advantage measures a nation’s wealth by determining the ________. A) gold it has on reserve B) silver it has on reserve C) cash it has on reserve D) living standards of its people
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Answer: D
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The theory of absolute advantage destroys the mercantilist idea that international trade is a ________. A) positive-sum game B) zero-sum game C) negative-sum game D) no-win game
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Answer: B
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The theory of ________ measures a nation’s wealth by the living standards of its people. A) mercantilism B) factor proportions C) absolute advantage D) advanced factors
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Answer: C
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When there are gains to be had by both countries that are party to an exchange, international trade is considered a(n) ________. A) positive-sum game B) zero-sum game C) negative-sum game D) equal-sum game
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Answer: A
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When a country is not able to produce a good more efficiently than other nations, but produces the good more efficiently than it does any other good, it is said to have a(n) ________. A) absolute advantage B) resource advantage C) first-mover advantage D) comparative advantage
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Answer: D
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Which of the following developed the theory of comparative advantage? A) David Ricardo B) Adam Smith C) Bertil Ohlin D) Raymond Vernon
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Answer: A
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To complete his business bookkeeping each month, a small business owner spends about 20 hours and gives up $2,000 in income. If he hired a bookkeeper to do the work, the job would be completed in 15 hours and would cost $600. Should the owner hire the bookkeeper or continue to do the work himself? A) He should hire the bookkeeper because the bookkeeper has an absolute advantage in completing the books. B) He should do the bookkeeping himself because he has an absolute advantage in completing the books. C) He should hire the bookkeeper only if the bookkeeper agrees to give him a discount on the service price. D) He should hire the bookkeeper only if the bookkeeper is willing to complete the books more quickly.
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Answer: A
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Country A produces one ton of coffee using one unit of resources. Country B produces two tons of coffee using one unit of resources. Which of the following is true regarding Country A and Country B? A) Country A has an absolute advantage in producing coffee. B) Neither Country A nor Country B has an absolute advantage in producing coffee. C) Country B has an absolute advantage in producing coffee. D) Both Country A and Country B have an absolute advantage in producing coffee.
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Answer: C
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According to the theory of ________, trade is still beneficial even if one country is less efficient in the production of two goods, as long as it is less inefficient in the production of one of the goods. A) absolute advantage B) mercantilism C) comparative advantage D) factor proportions
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Answer: C
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Which of the following is NOT a limitation of the absolute and comparative advantage theories? A) The theories assume that there are only two countries engaged in the production and consumption of just two goods. B) The theories assume that there are no costs for transporting traded goods from one country to another. C) The theories consider labor the only resource used in the production process. D) The theories assume that specialization in the production of one particular good results in gains in efficiency.
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Answer: D
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Comparative advantage theory focuses on which of the following? A) Maximization of production and consumption B) Logistics planning C) Resource assessment D) Creation of trade surpluses
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Answer: A
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Both absolute and comparative advantage theories assume that ________ is the only resource used in the production process. A) land B) labor C) capital D) information
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Answer: B
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The ________ theory states that countries produce and export goods that require resources that are abundant and import goods that require resources in short supply. A) new trade B) absolute advantage C) international product life cycle D) factor proportions
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Answer: D
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The focus of factor proportions theory is on the ________. A) productivity of the production process B) cost-effectiveness of the production process C) use of abundant production factors D) use of expensive production factors
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Answer: A
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Factor proportions theory was developed by ________. A) Smith and Ricardo B) Ricardo and Ohlin C) Hecksher and Ohlin D) Hecksher and Smith
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Answer: C
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Under factor proportions theory, a nation’s resources include all of the following EXCEPT ________. A) labor B) land C) information D) capital equipment
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Answer: C
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Factor proportions theory argues that a country should produce and export goods ________. A) that require factors of production that are most abundant B) where it is most productive to do so C) where it is most efficient to do so D) that require factors of production that are most advanced
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Answer: A
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Country X is a small country with a large population. Most of its land is devoted to housing and commercial developments; agricultural land is in short supply. According to the factor proportions theory, which of the following would Country X most likely import? A) Software B) Crops such as wheat and corn C) Fiber optic cables D) Consulting services
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Answer: B
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The Leontief paradox describes evidence ________. A) that U.S. exports require more labor-intensive production than its imports B) in support of factor proportions theory C) that U.S. exports require more capital-intensive production than its imports D) that the assumptions of new trade theory are invalid
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Answer: A
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The international product life cycle theory was developed by ________. A) Milton Friedman B) Karl Marx C) Michael Porter D) Raymond Vernon
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Answer: D
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The international product life cycle theory was put forth for which type of goods? A) Service goods B) Knowledge-based goods C) Manufactured goods D) Natural resources
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Answer: C
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During which stage of the international product life cycle theory does high purchasing power and buyer demand in an industrialized nation encourage a company to design and introduce a product concept? A) Idiosyncratic stage B) New product stage C) Maturing product stage D) Standardized product stage
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Answer: B
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During which stage of the international product life cycle theory does demand rise and remain sustained over a fairly lengthy period of time? A) Idiosyncratic stage B) New product stage C) Maturing product stage D) Standardized product stage
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Answer: C
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During which stage of the product life cycle are companies looking for low-cost production bases in developing nations to supply a growing worldwide market? A) Idiosyncratic stage B) New product stage C) Maturing product stage D) Standardized product stage
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Answer: D
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A product’s components are made in a country that can produce them at a high level of productivity and assembled in another country where productivity in assembly is high. This process resembles the theory of ________. A) comparative advantage B) advantage savings C) the international product life cycle D) factor proportions
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Answer: A
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Much production in the world today closely resembles what is predicted by the ________. A) new trade theory B) international product life cycle C) theory of comparative advantage D) theory of factor proportions
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Answer: C
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Which of the following is NOT an argument offered by the new trade theory? A) Gains can arise from diversification and managed growth. B) Gains can arise from specialization and increasing economies of scale. C) Companies first to enter a market can create barriers to entry. D) Government may play a role in assisting its home companies.
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Answer: A
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New trade theory is in line with the theory of ________ but at odds with ________ theory. A) international product life cycle; comparative advantage B) comparative advantage; factor proportions C) national competitive advantage; international product life cycle D) factor proportions; absolute advantage
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Answer: B
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National competitive advantage theory states that a nation’s competitiveness in an industry depends on ________. A) the capacity of the industry to innovate and upgrade B) the level of government subsidy available C) obtaining first-mover status D) practicing neomercantilism
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Answer: A
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The Porter diamond consists of all the following EXCEPT ________. A) factor conditions B) demand conditions C) supply conditions D) firm strategy, structure, and rivalry
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Answer: C
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Which element of national competitive advantage theory divides resources into two groups: basic and advanced? A) Demand conditions B) Factor conditions C) Related and supporting industries D) Firm, strategy, structure, and rivalry
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Answer: B

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