question

In 2013, the World Bank reported that the GDP PPP per capita of China was $11,904 and the GDP PPP per capita of the U.S. was $53,143. This means that the:

answer

cost of living was lower in China

question

Strong legal protection of property rights is a requirement for a business environment to be conducive to innovation, entrepreneurial activity, and hence economic growth.

answer

True

question

Which of the following countries can be considered as the most attractive and economical market to expand your business?

answer

A country that has a well-developed body of business contract law

question

Which of the following is most likely to be involved in the deregulation of an economy?

answer

Privatizing the state-owned companies

question

Which of the following could be an indicator of low human development in a country?

answer

life expectancy at birth of 40 year old

question

Which of the following terms best represents in which a government does not attempt to influence through quotas or duties what its citizens can buy from another country, or what they can produce and sell to another country?

answer

Free trade

question

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

answer

Factor endowments

question

Aba is a country that heavily depends on domestic production. The government decides on the products that can be imported and ensures that any product that can be produced at home is not imported. Aba's trade is concentrated in exporting bananas and coffee beans. Which of the following influences Aba's approach to trade?

answer

Mercantilism

question

According to Michael Porter, the government can influence each of the four components of Porter's diamond - either positively or negatively.

answer

True

question

The product life-cycle theory argues that Xerox was first introduced in the U.S. to keep production facilities closer to the market and the company headquarters because:

answer

Of the uncertainty and risks inherent in introducing new products

question

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

answer

Differences in material culture between national economies.

question

Which of the following best illustrates the globalization of productio

answer

Tiffany buys diamonds from South Africa and exports them to India for the cutting process.

question

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

answer

Use of modern communications in technology.

question

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.

question

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.

question

Which of the following is most likely to be true about the overall attractiveness of a country as a potential market or investment site for an international business?

answer

The costs and risks associated with doing business in a foreign country tend to be greater in politically unstable nations

question

In practical terms, collectivism creates a more favorable environment for international business to operate in than individualism.

answer

True

question

In which countries are we likely to find free market economies?

answer

Countries where individual goals are given primacy over collective goals

question

in a pure _____ economy, the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold

answer

command

question

Which of the following is true about legal systems?

answer

The government of a country defines the legal framework within which firms do business

question

The common law system enjoys a degree of flexibility not found in other systems because:

answer

it is interpreted by the law courts with regard to tradition, precedent, and custom

question

Which of the following statements is most likely to be true about the risks of doing business in a country?

answer

One visible indicator of economic risk is the level of business and government debt in the country.

question

How does privatization help stimulate gains in economic efficiency?

answer

It provides incentives to new private owners to search for increases in productivity and to enter new markets.

question

If Nike, an American corporation, produces sneakers in Thailand this would:

answer

add to Thailand's GDP but not to U.S. GDP.

question

Which of the following factors is taken into consideration by David Ricardo's theory of comparative advantage in order to explain the pattern of international trade?

answer

International differences in labor productivity.

question

Which of the following is a correct inference from Adam Smith's theory of absolute advantage?

answer

A country that has an absolute advantage in the production of all goods might derive no benefits from international trade.

question

New trade theory argues that, through its impact on economies of scale, trade can:

answer

increase the variety of goods available to consumers

question

Which of the following is most likely to be an advantage that first-movers tend to have relative to last-movers

answer

Greater brand loyalty

question

Limits on imports are often in the interests of domestic consumers, but not domestic producers.

answer

false

question

Individuals try to maximize their own utility and, by doing so, society as a whole is better off. Any government intervention in the economy is not necessary because the market is said to have the ability to self-regulate itself.

answer

invisible hand

question

Its purpose is to ensure that international trade has few or no obstacles and that trade rules are as transparent and predictable as possible.

answer

WTO

question

Since the U.S. is the most capital-abundant country in the world, it is expected that the U.S. would specialize in exporting capital-intensive commodities.

answer

Heckscher-Ohlin Theory

question

If Japan, U.S., and Germany represent efficient markets, then an i-Phone should sell for the same price in these three countries.

answer

Theory of purchasing power parity

question

In 1998, Portugal Telecom, a private for-profit business, acquired Telesp, a Sao Paulo's state-owned telecommunications company.

answer

Privitization

question

Countries should simultaneously encourage exports and discourage imports.

answer

mercantilism

question

Businesses are state-owned since the government can direct businesses to make investments that are in the best interests of the nation as a whole rather than in the interests of private individuals.

answer

command economy

question

Distinct and separate nations merge into one huge global market.

answer

globalization of markets

question

Which of the following is true with regard to a free trade area?

answer

Each member country is allowed to determine its own trade policies with regard to nonmembers.

question

Concerns about _____ arise because close economic integration demands that countries give up some degree of their control over such key policy issues as monetary policy, fiscal policy, and trade policy.

answer

national sovereignty

question

A key advantage of adopting the euro is that it:

answer

lowers foreign exchange in Europe.

question

An argument against the North American Free Trade Agreement (NAFTA) is that the ratification would result in:

answer

mass exodus of jobs from the United States into Mexico

question

Which of the following is true of regional economic integration?

answer

By creating a single market, the EU aimed to lower the price for goods and services across the bloc.

question

Tariffs cause damage to _____ as they must pay more for certain imports.

answer

consumers

question

By lowering production costs, subsidies help domestic producers in:

answer

gaining export markets.

question

A(n) _____ requires that some specific fraction of a good must be produced domestically.

answer

local content requirement

question

In the context of international trade, _____ is defined as selling goods in a foreign market at a price below their costs of production or as selling goods in a foreign market at below their "fair" market price.

answer

dumping

question

Governments impose quotas to limit _____.

answer

importing

question

_____ involves producing goods at home and then shipping them to the receiving country for sale.

answer

exporting

question

Many services have to be produced where they are sold; hence _____ is not an option.

answer

exporting

question

Apple, a tech firm from the U.S., invests in a microprocessor manufacturing plant in China. This is an example of:

answer

foreign direct investment

question

Silicon Valley in California is the world center for the computer and semiconductor industry and has many of the world's major computer and semiconductor companies located close to each other, thus offering the location-specific advantage of:

answer

externalities

question

Which of the following caveats is most likely to discourage global expansion of businesses?

answer

trade barriers

question

A company can create more value for a product by:

answer

making the product more attractive.

question

Firms that compete in the global marketplace typically face two types of competitive pressure: pressures for _____ and pressures to _____.

answer

cost reductions; be locally responsive

question

Xerox had a monopoly on photocopiers for several years as the technology underlying the photocopier was protected by strong patents. As it served a universal need, this favorable position led Xerox to pursue a(n) _____ strategy.

answer

international, differentiation

question

Which of the following terms best represents the systematic reductions in production costs that have been observed to occur over the life of a product?

answer

experience curve

question

A _____ means the value of the currency is fixed relative to a reference currency, and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.

answer

pegged exchange rate

question

Which of the following poses a problem for international businesses in the long run?

answer

Volatility of global exchange rate regime

question

How are spot exchange rates determined?

answer

By the interaction between demand and supply of a currency relative to other currencies

question

Toyota is particularly vulnerable to currency exchange fluctuations. The company may adopt the following strategy to minimize the company's exchange risk:

answer

Adopt instruments like forward market with foreign buyers

question

In 2013, the exchange rate was 10 Mexican pesos per American dollar. Therefore, a cell phone that costs $100 in the U.S. will cost _______ in Mexico.

answer

1000 pesos

question

Which of the following is an example of a first-mover advantage?

answer

The ability to capture demand by establishing a strong brand name.

question

In a(n) _____,a mode of entry into foreign markets, a firm grants the rights to intangible property to another firm for a specified period, and in return, receives a royalty fee.

answer

licensing agreement

question

Establishing a _____ gives international firms a 100 percent share in the profits generated in a foreign market.

answer

wholly owned subsidiary

question

Which of the following types of entry into a foreign market allows a firm to learn about the foreign market while limiting the firm's exposure to that market?

answer

small scale entry

question

The attractiveness of a country as a potential market for an international business depends solely on the size of its consumer market.

answer

false

question

Exporting is generally a way to increase the revenue and profit base of a company because:

answer

The international market is much larger than the domestic market

question

Companies resort to countertrade of goods and services when:

answer

The goods and services cannot be traded for money

question

Which of the following is more likely to increase a firm's probability of exporting successfully?

answer

Entering a foreign market on a small scale

question

The Export-Import Bank provides financing aid to prospective U.S. exporters.

answer

true

question

Lack of trust in international trade is exacerbated by the distance between the two parties in space, language, and culture.

answer

true

question

_______ refers to the activity that controls the transmission of physical materials through the value chain, from procurement through production and into distribution.

answer

logistics

question

The basic philosophy behind just-in-time (JIT) inventory systems is to:

answer

economize on inventory holding costs.

question

Flexible manufacturing technologies enable companies to:

answer

produce customized products without a significant cost penalty

question

One of the strategic roles of establishing a foreign production facility is to produce labor-intensive products at as low a cost as possible.

answer

true

question

Since refined sugar has a low value-to-weight ratio, even if it is shipped halfway around the world, their transportation costs account for a very small percentage of total costs.

answer

false

question

The elasticity of demand for a product in a given country is determined by a number of factors, of which income level and competitive conditions are the two most important.

answer

true

question

Strategic pricing means that consumers in different countries are charged different prices for the same product, or for slightly different variations of the product.

answer

true

question

Which of the following is an advantage of longer distribution channels?

answer

greater market access

question

An expatriate manager is a citizen of one country who is working abroad in one of the firm's subsidiaries.

answer

true

question

A firm pursues an ethnocentric staffing policy because it:

answer

believes the host country lacks qualified individuals for senior management positions.

question

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

answer

advent of the internet

question

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

answer

homogeneity

question

An iPhone contains hundreds of parts, an estimated 90% of which are manufactured outside the U.S. Labor cost and the ability of its Chinese subcontractors to respond very quickly are the main drivers of location decision. This is an example of:

answer

globalization of production

question

In 1944, the IMF was established to:

answer

maintain order in the international monetary system

question

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.

answer

true

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