International Business Ch. 1 - Flashcards

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As a result of globalization, we have been moving toward a world in which national economies are relatively self-contained entities. T/F

answer

FALSE

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By offering the same basic product worldwide, firms help to create a global market. T/F

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TRUE

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A company has to be the size of a multinational giant to facilitate, and benefit from, the globalization of markets. T/F

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FALSE

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As a result of globalization, companies rarely need to customize marketing strategies, product features, and operating practices in different countries. T/F

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FALSE

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Globalization has resulted in greater uniformity replacing diversity across national markets. T/F

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TRUE

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As firms follow each other around the world, they bring with them many of the assets that served them well in other markets. Thus, greater diversity replaces uniformity. T/F

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FALSE

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Substantial impediments, such as barriers to foreign direct investment, make it difficult to achieve the optimal dispersion of their productive activities to locations around the globe. T/F

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TRUE

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The WTO, the IMF, and its sister institution the World Bank, and the UN were all created by voluntary agreement between individual nation-states. T/F

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TRUE

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The IMF and the World Bank were both created in 1944 by 44 nations that met at Bretton Woods, New Hampshire. T/F

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TRUE

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The WTO is seen as the lender of last resort to nation-states whose economies are in turmoil and whose currencies are losing value against those of other nations. T/F

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FALSE

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The IMF is less controversial than its sister institution, the World Bank. T/F

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FALSE

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In return for loans, the IMF requires nation-states to adopt specific economic policies aimed at returning their troubled economies to stability and growth. T/F

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TRUE

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FDI occurs when a firm invests resources in business activities outside its home country. T/F

answer

TRUE

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After WWII, the advanced nations of the West committed themselves to increasing barriers to the free flow of goods, services, and capital between nations. T/F

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FALSE

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The Uruguay Round, held under the umbrella of GATT, extended GATT to cover services as well as manufactured goods. T/F

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TRUE

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The lowering of trade and investment barriers allows firms to base production at the optimal location for that activity. T/F

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TRUE

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As a result of international trade, the economies of the world's nation-states are becoming less intertwined. T/F

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FALSE

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The globalization of markets and production and the resulting growth of world trade, FDI, and imports all imply that firms are finding it easier to protect themselves from the attack of foreign competitors. T/F

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FALSE

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Containerization has revolutionized the transportation business, significantly lowering the costs of shipping goods over long distances. T/F

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TRUE

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WHile advances in telecommunications are creating a global audience, advances in transportation are creating a global villages. T/F

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TRUE

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The real costs of information processing and communication have fallen dramatically in the past two decades. T/F

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TRUE

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The Internet has been a major force facilitating international trade in services. T/F

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TRUE

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Countries that markedly increased their share of world output from 1960 to 2010 included Germany, France, and the UK. T/F

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FALSE

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The US accounted for a significantly larger share of the world economy in 2011 than it did in the 1960's. T/F

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FALSE

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Beginning in the 1970's, Japan and European firms began to shift labor-intensive manufacturing operations from developing nations to their home countries where labor costs were lower. T/F

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FALSE

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The stock of FDI refers to the total cumulative value of foreign investments in a country. T/F

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TRUE

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Throughout the 1990's, the amount of investment directed at both developed and developing nations increased dramatically. T/F

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TRUE

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Among developing nations, the largest recipient of FDI has been China. T/F

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TRUE

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Although most international trade and investment is still conducted by large firms, many medium-sized and small businesses are becoming increasingly involved in international trade and investment. T/F

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TRUE

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The rise of the internet is increasing the barriers that small firms face in building international sales. T/F

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FALSE

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Many of the former Communist nations of Europe and Asia seem to share a commitment to democratic policies and free market economies. T/F

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TRUE

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In the past quarter century, the volume of cross-border trade and investment has been growing less rapidly than global output. T/F

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FALSE

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One concern frequently voiced by globalization opponents is that falling barriers to international trade destroy manufacturing jobs in wealthy advanced economies such as the United States and western Europe. T/F

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TRUE

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It is possible that economic growth in developed nations has offset the fall in the share of national income enjoyed by unskilled workers, raising their living standards. T/F

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TRUE

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One concern of globalization opponents is that it undermines the influence of super national organizations and promotes the sovereignty of individual nation-states. T/F

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FALSE

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In general, as countries get richer, they enact tougher environmental and labor regulations. T/F

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TRUE

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Highly indebted poor countries (HIPCs) can bootstrap themselves out of poverty by pursuing retaliatory trade policies rather than free trade policies. T/F

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FALSE

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A firm has to become a multinational enterprise, investing directly in operations in other countries, to engage in international business. T/F

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FALSE

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Despite all the talk about the emerging global village, differences between countries such as cultures and political systems are very profound and enduring. T/F

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TRUE

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Differences among countries require that international business vary its practices country by country. T/F

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TRUE

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Which of the following has reduced as a result of globalization?

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Differences in material cultures between national economies.

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_____ refers to the shift toward a more integrated and interdependent world economy.

answer

Globalization

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Which of the following statements is true regarding the globalization of markets?

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There still exist significant differences among national markets along many relevant dimensions, including distribution channels, culturally embedded value systems, and legal regulations.

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Automobile companies promote different car models in different countries depending on factors such as demographics, local taste, local fuel costs, income levels, traffic congestion,a nd cultural values. This most likely demonstrates that:

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Significant differences still exist among national markets.

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Which of the following is most likely to be the best suited product for a global market?

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Microprocessors

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Which of the following statements best supports the claim that greater uniformity replaces diversity in the context of global markets?

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As rival global firms follow each other across countries, they bring with them their brand names, products, and marketing strategies from other national markets, thus creating homogeneity across markets.

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Globalization results in greater degree of _____ across markets than would be present otherwise.

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homogeneity

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The ________ refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and qaulity of factor such as labor, energy, land, and capital.

answer

globalization of production

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Which of the following best illustrates the globalization of production?

answer

Daily Diamonds inc buys diamonds from South Africa and exports them to India for the cutting process.

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West Electronic Corporation sources goods and services for its electronics products from different locations around the globe in an attempt to take advantage of differences in the cost and quality of labor and land. This process demonstrates:

answer

globalization of production.

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Which of the following statements is most likely to be true of outsourcing?

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Outsourcing production to foreign countries increases the chance for companies to gain significant orders for their orders for their products from those countries.

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A software company uses engineers in India to perform maintenance functions on software designed in the US, and Indian accountants to compile tax returns. This US based company is most likely using:

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outsourcing.

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Early outsourcing efforts were primarily confined to:

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manufacturing activities.

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Which of the following reasons has made outsourcing of service activities to low-cost producers in other nations possible?

answer

Use of modern communication technology.

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____ is an international treaty that committed signatories to lowering barriers to the free flow of goods across national borders and is the predecessor to the WTO.

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General Agreement on Tariffs and Trade

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The globalization of production mainly occurs due to the:

answer

national differences in the cost and quality of factors such as labor, energy, land, and capital.

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The World Bank was primarily created in 1944 to:

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promote economic development.

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In 1944, the IMF was established to:

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maintain order in the international monetary system.

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WHich of the following is an argument put forth by critics of the IMF?

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It usurps the sovereignty of nation-statesby telling governments what economic policies they must adopt.

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The ___ was established in 1945 by 51 countries committed to preserving peach through international cooperation and collective security.

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United Nations

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The ___ is the less controversial sister institution of the IMF which was created along with the IMF in 1944.

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World Bank

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According to the UN Carter, one of the four purposes of the UN is to:

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be a center for harmonizing the actions of nations.

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The G20 comprises the ___ of the 19 largest economies in the world, plus representatives of the EU and the European Central Bank.

answer

finance ministers and central bank governors

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The ___ was originally established in 1999 to formulate a coordinated policy response to financial crises in developing nations.

answer

G20

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In 2008-09, the G20 primarily worked to:

answer

provide a forum to launch a coordinated policy response to the global financial crisis.

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Which of the following is a macro factor underlying the trend toward greater globalization?

answer

Dramatic developments in recent years in information processing and other technologies.

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Which of the following best exemplifies FDI?

answer

Chivalry, a US based phone company, has set up its own assembly plant in Japan to cater to the needs of the Asian market.

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Michelle, an Italian fashion designer, sells her merchandise by exporting them to the US, UK, and Brazil. According to this info, Michelle is most likely involved in:

answer

international trade.

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If in the present time, an international company decides to do business with the former Communist nations of Europe and Asia it would most likely benefit from the:

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host of export and investment opportunities presented by these companies.

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For foreign direct investment (FDI) to occur, a firm should primarily:

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invest resources in business activities outside its home country.

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Gem Globe, a US company, has invested substantial capital in precious stones mining activities outside the US. This practice is referred to as:

answer

FDI.

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When a firm invests resources in business activities outside its home country, it is referred to as:

answer

FDI.

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The motive behind the high tariffs imposed by nations on imports of manufactured goods, prior to World War II, was to:

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protect domestic industries from foreign competition.

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The advanced industrial nations of the West committed themselves after World War II to removing barriers to the free flow of goods, services, and capital between nations. This goal was enshrined in the:

answer

General Agreement on Tariffs and Trade.

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Which of the following reasons contributed to the Great Depression of the 1930s?

answer

Countries progressively raising trade barriers against each other.

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Which of the following organizations was established at the 1992 Uruguay Round?

answer

WTO

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The 1992 Uruguay ROund:

answer

provided enhanced protection for patents, trademarks, and copyrights.

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Which of the following is a part of the agenda of the Doha Round of talks launched by the WTO?

answer

Limiting the use of antidumping laws

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Which of the following would be the biggest gain for the world's poor nations from the 2001 Doha WTO talks?

answer

Gain from reduced agricultural tariffs and subsidies

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The lowering of trade and investment barriers:

answer

allows firms to base production at optimal locations outside their home country.

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Which of the following is a benefit of lowering the barriers to international trade?

answer

Firms can view the world, rather than a single country, as their market.

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Which of the following has been declining in the developing nations of the world such as China, India, Russia, Indonesia, Thailand, South Korea, Mexico, and Brazil?

answer

Barriers to the free flow of goods, services, and capital

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While the lowering of trade barriers made globalization of markets and production a theoretical possibility, which of the following has made it a tangible reality?

answer

A. Major advances in communication, information processing, and transportation technologies

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Gerald gifted his son, David, a computer two years ago. Recently, he decided to gift his daughter, Julian, a computer of her own. In the context of the two year gap between the purchase of both the computers and Moore's law, it is most likely that:

answer

the microprocessor in Julian's computer will be more advanced in terms of power than that of David's.

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Development of the microprocessor is most likely to be considered the single most important innovation in technology because:

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it has enabled the explosive growth of low-cost computing.

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_____ predicts that the power of microprocessor technology doubles and the cost of production falls every 18 months.

answer

Moore's law

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Richard has recently purchased a computer for $600. Compared to the $900 computer which he had purchased way back in 2010, the new one seems to be more efficient in terms of the price he has paid and the power of the microprocessor technology. This phenomenon is best explained by:

answer

Moore's law.

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Which of the following statements is true about the Internet and World Wide Web?

answer

It makes it easier for buyers and sellers to find each other, wherever they may be located.

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The advent of containerization has:

answer

significantly lowered the costs of shipping goods over long distances.

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Which of the following has been detrimental to the globalization of markets and production?

answer

National differences in culture, consumer preferences, and business practices

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Since 1980, the world's containership fleet has more than quadrupled, reflecting in part the:

answer

growing volume of international trade.

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The _____ has been a major force facilitating international trade in services.

answer

advent of the Internet

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Which of the following statements is true about the implications of technological innovations for the globalization of markets?

answer

Though technological innovations are ushering in the "global village," significant national differences remain in consumer preferences, and business practices.

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Which of the following is most likely to be observed in today's global economy?

answer

Rapid rise in the share of world output accounted for by developing nations such as China and India

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_____ was the world's most dominant industrial power in the early 1960s.

answer

The United States

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Which of the following countries has seen a relative decline in its share of world output between 1960 and 2010?

answer

The United States

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Which of the following statements is true about the changing demographics of the global economy?

answer

U.S. dominance in export markets has waned as Japan, Germany, and a number of newly industrialized countries have taken a larger share of world exports.

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Which of the following has seen a positive change from 1960 to 2010?

answer

The share of world output accounted for by developing nations.

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In the context of the changing demographics of the global economy, which of the following has seen a decline?

answer

The U.S. share of world exports of goods and services

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Due to the changing economic geography, many of tomorrow's economic opportunities are most likely to be found in the:

answer

developing nations of the world such as China, India, and Brazil.

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The motivation for much of the foreign direct investment by non-U.S. firms was the desire to:

answer

disperse production activities to optimal locations.

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The _____ refers to the total cumulative value of foreign investments.

answer

stock of foreign direct investment

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Which of the following statements is true about the changing foreign direct investment picture of the global economy?

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The sustained flow of foreign investment into developing nations is an important stimulus for economic growth in those countries.

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The sustained flow of foreign investment into developing nations:

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has been increasing since the 1980s.

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_____ has experienced a decline in the share of FDI stock between 1980 and 2010.

answer

The United States

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Silver Fire Electric Inc., a U.S. company, has productive activities in more than two countries. As a result, it would be most appropriate to refer to Silver Fire Electric as a(n) _____ enterprise.

answer

multinational

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A notable trend in the demographics of the multinational enterprise since the 1960s is the:

answer

growth of mini-multinationals.

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In the global marketplace, the globalization of the world economy has resulted in a relative decline in the:

answer

dominance of U.S. firm.

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What are mini-multinationals?

answer

Medium-sized and small multinationals

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Which of the following statements is true about the trends in the changing nature of multinational enterprises?

answer

International business is conducted not just by large firms but also by medium-size and small enterprises.

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Universal Lingo, a UK based language translation company employing just 65 people worldwide, has an annual turnover of $1.5 million. In this context, Universal Lingo is most likely to be classified as a(n):

answer

mini-multinational firm.

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In the present times, many of the former Communist nations of Europe and Asia:

answer

are committed to democratic politics.

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Which of the following statements is true about the former communist nations of East Europe and central Asia?

answer

Businesses in these economies tend to be characterized by high risks as well as high returns.

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Which of the following conditions is most likely to act as a deterrent for foreign firms willing to do business with former Communist nations of East Europe and central Asia?

answer

The signs of growing unrest and totalitarian tendencies seen in these countries

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Which of the following statements is true about the implications of revolutions occurring in China for international businesses?

answer

China represents a huge and largely untapped market for international business.

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In the past two decades, majority of Latin American countries have:

answer

sold state-owned enterprises to private investors.

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Which of the following statements is true about the global economy of the twenty first century?

answer

Countries have extensively adopted liberal economic policies.

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Which of the following statements is true about the general implications of globalization?

answer

As a result of globalization, a severe crisis in one region of the world can affect the entire globe.

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An argument in support of the falling barriers to international trade and investment is that the falling barriers:

answer

drive the global economy toward greater prosperity.

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"Exporting jobs" to low-wage nations has contributed to:

answer

higher unemployment in wealthy advanced economies such as the United States.

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Which of the following statements is true about the implications of globalization on developing countries?

answer

The citizens of developing countries have achieved higher living standards due to globalization.

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As a result of globalization, the _____ in the United States has increased.

answer

unemployment rate

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Supporters of globalization insist that dislocation in the form of lost jobs is a trade-off that will ultimately lead to the economy being better off. Which of the following is being justified in this case?

answer

Free trade of goods and services.

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Which of the following must be true if the critics of globalization are correct?

answer

A decline in the labor's share of the economic pie means lower living standards.

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Globalization critics argue that the decline in unskilled wage rates in advanced economies is due to the:

answer

migration of low-wage manufacturing jobs offshore.

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Growing income inequality between the skilled and unskilled workers in advanced nations, such as the United States, is a result of the:

answer

wages for skilled workers being bid up by the labor market and the wages for unskilled workers being discounted.

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In the context of the environment, globalization critics argue that:

answer

adhering to labor and environmental regulations significantly increases the costs of manufacturing enterprises.

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The NAFTA was formed in 1994 between:

answer

Canada, Mexico, and the United States.

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Which of the following is the most appropriate solution to the problem of rising carbon dioxide emissions in developed economies?

answer

Get the nations of the world to agree to policies designed to limit pollutant emissions.

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A concern voiced by critics of globalization is that today's increasingly interdependent global economy shifts economic power toward:

answer

supranational organizations such as the World Trade Organization.

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As perceived by critics of globalization, the national sovereignty of democratic states and the ability to control their own destiny has been undermined due to the:

answer

policies imposed by the unelected bureaucrats of supranational organizations.

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Which of the following falls under the functions of the WTO?

answer

It can issue a ruling instructing a member-state to change trade policies that violate GATT regulations.

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Which of the following is a major reason for some of the world's poorest countries to have suffered from economic stagnation?

answer

Rapidly expanding population

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Free trade alone, some argue, is a necessary but not sufficient prerequisite to help the world's poorest countries bootstrap themselves out of poverty. They also recommend:

answer

large-scale debt relief.

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The minimum that a firm has to do to engage in international business is to:

answer

export or import products from other countries.

question

Ryan is the executive general manager of a U.S. multinational and Jacob is a manager in a similar position, but works for another U.S. company that operates only in its home country. In this context, which of the following business functions will be most typically exclusive to Ryan?

answer

Choosing an appropriate mode for entering a particular foreign country

International Business Ch. 1 – Flashcards

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