chapter 5 understanding international...

Chapter 5 Understanding International Business1) According to the World Economic Forum, in 2006 the top three countries in terms of internationalcompetitiveness include:A) Brazil, United States and ChinaB) China, Japan and GermanyC) United States, Canada and MexicoD) Switzerland, Finland, and SwedenE) Canada, Italy, and Germany

Answer: DDiff: 2 Page Ref: 145

2) Imports are:A) goods and services that are made or grown in Canada and sold abroad.B) goods and services that are made or grown abroad and sold in Canada.C) products that are made or grown abroad and sold in Canada. Services cannot be imported.D) services that are created in Canada and sold abroad.E) products that are made or grown in Canada and sold abroad. Services cannot be imported.

Answer: BDiff: 2 Page Ref: 140

3) Exports are:A) products that are made or grown in Canada and sold abroad. Services cannot be exported.B) products that are made or grown abroad and sold in Canada. Services cannot be exported.C) goods and services that are made or grown in Canada and sold abroad.D) goods and services that are made or grown abroad and sold in Canada.E) services that are created in Canada and sold abroad.

Answer: CDiff: 2 Page Ref: 140

4) The world economy is fast becoming a single interdependent system. This process is called:A) multinational exchangeB) balance of tradeC) privatizationD) globalizationE) international exchange


5) Old Mack, a farmer, has grown a surplus of wheat. He would like to ship the extra to Europe where demandfor wheat is strong. He is interested in:A) exportingB) subsidiesC) a trade deficitD) foreign exchangeE) importing

Answer: ADiff: 1 Page Ref: 140

6) Susie lives in Vancouver and has noticed that there seems to be a rising interest in goods from the Chineseculture. To take advantage of this she should explore:A) exportingB) a trade deficitC) importingD) foreign exchangeE) subsidies


7) Your television set, your shoes, even the roast lamb on your dinner table is likely to be the result of:A) foreign exchangeB) exportingC) subsidiesD) a trade deficitE) importing

Answer: EDiff: 1 Page Ref: 140

8) Farmer Sal grows strawberries. The berries are shipped to a local manufacturing plant where they are madeinto jam, labeled "Country Recipe Strawberry Jam," and boxed for shipment overseas. This product ofOntario is also referred to as a(n):A) trade productB) absolute productC) competitive advantageD) importE) export


9) Which of the following is an example of importing a service?A) an accountant does financial statements for a Mexican companyB) a Toronto taxi driver takes an American from Pearson airport to a downtown Toronto hotelC) a Canadian engineer designs a bridge to be built in AustraliaD) a Canadian purchases a ticket to see a performance by a Spanish singerE) a Canadian lawyer goes to California to work on a litigation case


10) The annual volume of world trade is about:A) $3 trillionB) $100 billionC) $875 billionD) $8 trillionE) $5 trillion


11) The following are all forces that have combined to spark and sustain globalization except:A) new technologies make international travel, and commerce increasingly easier, faster, and cheaperthan ever before

B) dollarization of the currency across all countries around the worldC) competitive pressuresD) communication technologyE) governments and businesses have simply become more aware of the benefits of globalization to theircountries and shareholders


12) The three major marketplaces are:A) Europe, Asia-Pacific, United StatesB) North America, Europe, Asia-PacificC) South America, North America, Asia-PacificD) North America, Europe, JapanE) Japan, United States, Europe


13) According to the World Bank, high income countries include all of the following except:A) CanadaB) JapanC) South KoreaD) U.S.E) Greece


14) According to the World Bank, ________ is considered a middle-income country.A) IsraelB) SingaporeC) ArgentinaD) IndiaE) Hong Kong


15) Upper middle-income countries are defined as:A) those with per capita income between US$5210 and US$8210B) those with per capita income of less than US$21 345 but more than US$765C) those with per capita income between US$3255 to US$10 065D) those with per capita income of less than US$21 345 but more than US$205E) those with per capita income of less than US$9386 but more than US$205


16) Characteristics of developing countries include all of the following except:A) low literacy ratesB) starvationC) weak infrastructuresD) bad weatherE) unstable governments


17) The major reason(s) why Mexico has recently become a major manufacturing centre is:A) elimination of quotas and tariffs and low tax ratesB) cheap labour and elimination of quotas and tariffsC) low tax rates and cheap labourD) cheap labour and low transportation costsE) low transportation costs and low tax rates


18) What does NAFTA stand for?A) North American Free Tariffs ArrangementB) National American Free Trade AreaC) National American Free Trade ArrangementD) North American Free Trade AgreementE) North American Free Trade Arrangement


19) Examples of companies based in North America include all of the following except:A) Procter & GambleB) Alcan AluminumC) General MotorsD) NestleE) Nortel Networks


20) Countries that have dominated Western Europe include:A) PolandB) SpainC) RussiaD) GermanyE) Finland


21) Examples of companies based in Europe include all of the following except:A) Royal Dutch/ShellB) NestleC) Alcan AluminumD) UnileverE) Siemens


22) E-commerce and technology have become increasingly important in Europe. For example, ________ is amajor centre for biotech startups.A) London, EnglandB) Barcelona, SpainC) IrelandD) Strasbourg, FranceE) Frankfurt, Germany


23) Examples of companies based in Asia include all of the following except:A) Nippon SteelB) SiemensC) ToshibaD) ToyotaE) Samsung


24) In Asia, the emergence of technology firms has been hampered by all of the following except:A) weakness of technology firms in North America and Western EuropeB) a poorly developed electronic infrastructureC) currency crisisD) a higher percentage of lower-income consumersE) slower adoption of computers and information technology


25) The absolute advantage form of competitive advantage means:A) that a country can produce everything better or more cheaply than any other countryB) that a country can produce something better or more cheaply than any other countryC) that a country is the sole supplier of a product or serviceD) that a country does not belong to any free trade agreementsE) that a country can produce some products better or more cheaply than it can others


26) Saudi oil and Canadian timber are good examples of:A) relative advantageB) import advantageC) comparative advantageD) absolute advantageE) export advantage


27) Because of the high quality supply of coffee in Brazil, it enjoys a(n):A) export advantageB) import advantageC) comparative advantageD) absolute advantageE) relative advantage


28) Due to its fertile land, Canada has a(n) ________ in farming.A) comparative advantageB) relative advantageC) absolute advantageD) export advantageE) import advantage


29) The comparative advantage form of competitive advantage means:A) that a country is the sole supplier of a product or serviceB) that a country can produce something better or more cheaply than any other countryC) that a country can produce some products better or more cheaply than it can othersD) that a country can produce everything better or more cheaply than any other countryE) that a country does not belong to any free trade agreements


30) South Korea has a(n) ________ in electronics manufacturing because of efficient operations and cheap labour.A) absolute advantageB) relative advantageC) export advantageD) import advantageE) comparative advantage


CUSTOMER

Highlight

31) The theory of national competitive advantage derives from all of the following conditions except:A) strategies, structures, and rivalriesB) supply conditionsC) demand conditionsD) related and supporting industriesE) factor conditions


32) A nation's balance of trade is:A) the difference in value between a country's total exports and its total importsB) the difference between money flowing into and out of a countryC) the relative difference between money flowing into and out of a countryD) the difference in exchange rates between two countriesE) the relative difference in value between a country's total exports and its total imports


33) The balance of merchandise trade that Canada has experienced has been:A) unfavourable for the last thirty yearsB) unfavourable since ConfederationC) favourable for the last thirty yearsD) favourable since ConfederationE) changing between favourable and unfavourable with about a seven year cycle


34) If Japan's total exports are $12 billion and total imports are $4 billion, then this is called:A) a comparative advantageB) capital mobilityC) an ex-trade deficitD) a trade deficitE) a positive balance of trade


35) For several years Japan has had a(n) ________ with Canada.A) absolute advantageB) trade surplusC) negative balance of tradeD) trade deficitE) relative advantage


36) The Congo imported $150 billion worth of goods and services while exporting $175 billion to othercountries. It has a:A) positive balance of paymentsB) negative balance of paymentsC) trade surplusD) trade deficitE) comparative advantage


37) The balance of payments refers to:A) the relative difference in value between a country's total exports and its total importsB) the relative difference between money flowing into and out of a countryC) the difference between money flowing into and out of a country as a result of trade and othertransactions

D) the difference in value between a country's total exports and its total importsE) the difference in exchange rates between two countries


38) If there is a favourable balance of payments, it means that:A) the country has more money flowing into it than out as a result of trade and other transactionsB) a country exports manufactured goods and imports raw materialsC) a country exports raw materials and imports manufactured goodsD) a country exports more than it imports for each country with which it tradesE) a country imports more than it exports for each country with which it trades


39) Trade ________ tend to create ________ balances of payments.A) exports, negativeB) imports, no effect onC) exports or imports, no effect onD) exports, positiveE) imports, positive


40) If the Canadian dollar becomes weak compared to the Japanese yen, which of the following is likely tooccur?A) Canadian products would become less expensive in JapanB) Japanese demand for goods from Canada would fallC) it would take fewer dollars to buy the same number of yenD) demand for goods would be unaffected by currency changesE) Japanese products would become cheaper in Canada


CUSTOMER

Highlight

CUSTOMER

Highlight

41) The balance of payments that Canada has experienced has been:A) changing between favourable and unfavourable with about a seven year cycleB) unfavourable since ConfederationC) favourable since ConfederationD) unfavourable for many yearsE) favourable for the last thirty years


42) Canada's multi year unfavourable balance of payments has been caused by all of the following except:A) Canadians leaving Canada to work in the United StatesB) tourists traveling out of Canada for vacationsC) few foreign investments in CanadaD) grand investments made by Canadian firms abroadE) foreigners making great earnings from their investments in Canada


43) Which of the following is likely to happen if the demand for Canadian goods increases?A) the demand for goods will have little or no effect on the dollarB) the demand for the dollar will decreaseC) the value of the dollar will decreaseD) it is not possible to sayE) the demand for the dollar will increase


44) If it takes five French francs to trade for one Canadian dollar the ________ is 5 to 1.A) trade surplusB) conversion rateC) balance of paymentsD) capital mobilityE) exchange rate


45) When the value of the Canadian dollar drops:A) both our imports and our exports become more expensiveB) both our imports and our exports become cheaperC) our imports become more expensive and our exports become cheaperD) our imports become cheaper and our exports become more expensiveE) there is no change in the price of our imports and our exports


CUSTOMER

Highlight

CUSTOMER

Highlight

46) When the value of the Canadian dollar rises:A) there is no change in the price of our imports and our exportsB) both our imports and our exports become more expensiveC) both our imports and our exports become cheaperD) our imports become more expensive and our exports become cheaperE) our imports become cheaper and our exports become more expensive


47) What is an expected result when a nation devalues its currency?A) no result is more likely than any otherB) export sales of its products increaseC) export sales of its products declineD) export sales of its products are unchangedE) the number of independent agents will decline


48) If the Canadian dollar were stronger in relation to the Japanese yen:A) the prices of all Canadian-made products would rise in Japan and the prices of all Japanese-madeproducts would rise in Canada

B) the prices of all Canadian-made products would fall in Japan and the prices of all Japanese-madeproducts would fall in Canada

C) the prices of all Canadian-made products would fall in Japan and the prices of all Japanese-madeproducts would rise in Canada

D) the prices of all Canadian-made products would rise in Japan and the prices of all Japanese-madeproducts would fall in Canada

E) there would be no effect on the prices of Canadian made products sold in JapanAnswer: DDiff: 2 Page Ref: 148

49) In the year 2006 the European Union consisted of ________ countries.A) 63B) 89C) 20D) 55E) 25


50) All of the following are questions that a company can ask before taking a product or service to internationalmarkets except for:A) is the business climate suited to imports?B) does the company have or can it get the necessary skills and knowledge needed to do businessabroad?

C) can the product be modified to fit a foreign market?D) is there international demand for the firm's product?E) can the product be marketed to get sales in a foreign market?


CUSTOMER

Highlight

CUSTOMER

Highlight

51) The first decision in deciding on whether to market your products internationally is to:A) check the exchange rates to see if they are favourableB) check the competition to see what your situation would beC) determine what the costs would beD) check the business climate to see if the foreign country would be positiveE) determine whether your product has international demand


52) The second decision in deciding whether or not to market your product internationally is to:A) conduct market research to determine potential salesB) assess the business climate for reaction to foreign productsC) determine what competition would be encounteredD) locate a local business to form a joint ventureE) determine if the product needs to be modified to fit the foreign market


53) Which areas represent the three major market places for international business?A) South America, Europe and AfricaB) South America, Africa and Asia-PacificC) North America, Asia-Pacific and AfricaD) North America, South America and Asia-PacificE) North America, Europe and Asia-Pacific


54) What key question must have a positive (yes) answer before a company begins international operations?A) Is there a favourable balance of trade?B) What is the currency exchange rate?C) Is there a favourable balance of payments?D) Is local culture compatible?E) Is there international demand for the firm's products abroad?


55) How will a business firm know if there is a demand for its product in another nation?A) a firm cannot know if such a demand existsB) there is a positive balance of paymentsC) the product is very successful in the company's home nationD) the successful Prior entry of a competitor firm with a similar product in the international marketE) the company is willing to discuss royalty fees with other international firms


56) Algoma Treasures, a gift-wrap manufacturer, is considering expanding its business into the internationalmarket. What key question must have a positive answer before a company begins international operations?A) Is there a favourable balance of trade?B) Is there a demand for its products abroad?C) What is the currency exchange rate?D) Is local culture compatible?E) Is there a favourable balance of payments?


57) Clement is the owner of Dills Distillery, which makes and bottles fruit wine. In his planning to export thewine, Clement should consider all of the following except:A) legal aspects of the target countryB) cultural aspects of the target countryC) the target country's balance of tradeD) demand for the wineE) economic road blocks


58) Clement has found that there is definitely overseas demand for his fruit wine. Now he must consider:A) the balance of payments in the overseas marketB) how to adapt the product to meet the special demands of foreignersC) when he can travel overseas to assess his competition in personD) how other Canadian firms have done in the overseas marketE) the amount of royalty fees


59) Crossing you legs during a business meeting in ________ is considered in appropriate.A) FranceB) TaiwanC) Saudi ArabiaD) PortugalE) Brazil


60) In France McDonald's restaurants sell wine, this is a classic example of:A) importingB) foreign exchangeC) balance of paymentsD) adapting to customer needsE) misreading demand for the product


CUSTOMER

Highlight

CUSTOMER

Highlight

61) ________ is an example of an export of a service.A) An advertising agency in Montreal making a TV commercial for a company in FranceB) Vacations taken by Canadians in a foreign countryC) Purchasing a camera made in JapanD) A Canadian tourist having a camera repaired in EgyptE) Obtaining information from a foreign database


62) A firm who conducts a significant portion of its business abroad, who has some facilities overseas, and whoimports a significant portion of goods from other countries is best described as:A) mininationalB) a multinational firmC) an importerD) an exporterE) an international firm


63) Herald Inc. is a French newsprint manufacturer. Herald Inc. is geared towards international markets butdoes not have specific domestic and international divisions. This firm is a(n):A) exporterB) purely domestic firmC) independent agentD) multinational firmE) customs broker


64) Which type of firm is one in which its management doesn't think of itself as having domestic andinternational operations but rather a firm that designs, makes, and markets products in many nations?A) mininationalB) an importerC) an exporterD) a multinational firmE) an international firm


65) In which international structure would royalties likely be paid to the exporter?A) in a joint ventureB) by a branch officeC) in a strategic allianceD) by a subsidiary manufacturing plantE) under a licensing arrangement


CUSTOMER

Highlight

66) The following characteristics describe an independent agent except:A) is a foreign individual or organizationB) often makes sure that customers are happyC) often represents only one firmD) often sells the exporter's productsE) often collects payments


67) Levi Strauss has an organization in a foreign country who has agreed to sell their products, to collectpayments from the buyers, and to make sure that the buyers are satisfied. The organization is not part ofLevi Strauss and may represent several non-competing firms at the same time. The organizational structurethat Levi Strauss has selected is called:A) licensing agreementsB) branch officesC) independent agentsD) strategic alliancesE) direct investments


68) Computers-B-Us sent some of its managers abroad to gain more control over the operations and provide amore visible public presence. This type of organizational structure is known as:A) licensing arrangementsB) strategic alliancesC) branch officesD) direct investmentsE) independent agents


69) When a firm gives a company in a foreign country exclusive rights to make or market its product in returnfor ongoing fees, the firm is using:A) strategic alliancesB) direct investmentsC) licensing arrangementsD) independent agentsE) branch offices


70) Can-Eng Manufacturing, Canada's largest supplier of industrial furnaces, exports its furnaces to companiesin Japan, Brazil, Germany, Korea, Taiwan and Mexico. Can-Eng has an agreement with foreign companies inthese countries called a(n):A) independent agencyB) export agreementC) licensing arrangementD) international mandateE) strategic alliance


CUSTOMER

Highlight

CUSTOMER

Highlight

CUSTOMER

Highlight

71) Greencorp Ltd. sold the rights for production of 4 Star Soil to Soil X of Italy who now produces the specialmix of fertilized soil and sells it in Italy. This arrangement is called a(n):A) equality relationshipB) branch officeC) independent agentD) strategic allianceE) licensing arrangement


72) Mega Computers has decided to expand operations overseas. In order to give foreign customers a sense ofsecurity Mega has chosen to send several of its own managers and technicians to the country as part of thestart-up operations. In addition, this will give Mega more control over making sure that top quality serviceis given to the new customers. Mega has chosen the organizational strategy known as:A) independent agentsB) strategic alliancesC) licensing arrangementsD) branch officesE) direct investments


73) Licensing arrangements are arrangements:A) by an owner of a process or product to allow another business to produce, distribute, or market it for afee or royalty

B) by an owner of a patent to allow another business to produce, distribute, or market the productcovered by the patent for a fee or royalty

C) by a general contractor to allow international subcontractors to build a building for a fee or royaltyD) by a creator of a musical or artistic work to allow another person to use, produce, distribute, or marketit for a fee or royalty

E) by a supplier to allow another company the right to install or modify products produced by thesupplier for a fee or royalty


74) Bob's Barbecue has expanded its operations to include several foreign countries. Bob has given individualsor organizations in those countries exclusive rights to market Bob's products. He has shared his secret recipeand trade secrets on how to produce the products. In return for this Bob will receive a percentage of therevenues generated in each of the countries. Bob's arrangements are best described as:A) licensing arrangementsB) strategic alliancesC) direct investmentsD) independent agentsE) branch offices


CUSTOMER

Highlight

75) Investment Canada's mandate is:A) to focus on attracting foreign investment to Canada.B) to focus on the promotion of Canadian goods to other countries.C) to focus on aiding Canadian businesses in collecting money from their customers in foreign countries.D) to promote the investment of Canadian dollars into foreign business operations.E) to track investment money to oversea banks.


76) Laura's Lights, Inc. has decided to expand business into Vietnam. Laura is looking for help with funding theoperation and to share in the risk. She knows little about the customs and how to get things done inVietnam. The best international structure for her is probably:A) direct investmentsB) strategic alliancesC) branch officesD) licensing arrangementsE) independent agents


77) Some governments require foreign companies to have a local partner. This has significantly increased the useof ________ as an international organization structure.A) licensing arrangementsB) branch officesC) independent agentsD) strategic alliancesE) direct investments


78) Lack of knowledge of foreign customs has lead most Canadian companies doing business in Japan to selectthis form of international organization. What is it?A) direct investmentsB) strategic alliancesC) branch officesD) independent agentsE) licensing arrangements


79) In this international structure the firm locates a partner who shares in the risk and in the profits. Thisstructure is called:A) independent agentsB) direct investmentsC) strategic alliancesD) branch officesE) licensing arrangements


CUSTOMER

Highlight

CUSTOMER

Highlight

CUSTOMER

Highlight

80) Toyota's opening of a major manufacturing plant in Georgetown, Kentucky, Exxon's expansion of an oilrefinery in Thailand, and Texas Instruments' building of a semiconductor plant in Italy are good examples of:A) licensing arrangementsB) foreign direct investmentsC) strategic alliancesD) branch officesE) independent agents


81) Which of the following social or cultural differences would a Canadian exporter of refrigerators to Europehave to deal with?A) foreign consumers are shorter and slimmer than Canadian consumersB) consumers shop on a daily basisC) the average age of the population is olderD) the average age of the population is youngerE) adjusted menus, ingredients, and hours of operation


82) Among the social and cultural differences that the textbook mentions are the following except:A) Japanese and French people are shorter and slimmer than CanadiansB) in Taiwan it is a sign of appreciation for a meal to tap one's fingers on the tableC) many Europeans regularly shop every day for foodD) the "thumbs up" sign is an obscene gesture in New ZealandE) in Portugal it is rude to discuss business during dinner


83) Which of the following social or cultural differences would a Canadian exporter of clothes have to deal with?A) the average age of the population is olderB) foreign consumers are shorter and slimmer than Canadian consumersC) the average age of the population could be youngerD) consumers shop on a daily basisE) adjusted menus, ingredients, and hours of operation


84) Some restrictions on international trade include all of the following except:A) protectionist tariffsB) quotasC) quantitative tariffsD) embargoesE) revenue tariffs

Answer: CDiff: 1 Page Ref: 157-158

CUSTOMER

Highlight

85) When Bob began exporting his famous barbecue beef he found that one country would let him bring only 1000 pounds of beef into the country each year. Bob had just discovered a(n):A) embargoB) tariffC) quotaD) subsidyE) local content law


86) Laura's Lights began shipping products to its new partner in a foreign nation only to find out that before theproducts would be let into the country a tax of $1.00 per unit had to be paid. This tax is known as a(n):A) tariffB) subsidyC) embargoD) quotaE) local content law


87) Canada prohibits the importing of ivory from any foreign nation. This is a(n):A) quotaB) tariffC) subsidyD) local content lawE) embargo


88) In marketing its new product in a foreign nation Mega Computer was surprised to see the very low prices onits local competitor's models. Subsequent investigation uncovered that the domestic businesses had receivedmoney from the government. Mega now knows what a(n) ________ is.A) quotaB) subsidyC) embargoD) local content lawE) tariff


89) Arguments for and against protectionism include all of the following except:A) tariffs and quotas are in response to actions of other governmentsB) tariffs and quotas reduce competition and drive up pricesC) tariffs and quotas adversely affect the exchange rateD) tariffs and quotas protect domestic firms and jobsE) that while some jobs and industries would be protected with tariffs and quotas, all countries would bebetter off without them as jobs in other industries would expand


90) Local content laws state that:A) an imported product must fit with the local culture before it can be brought inB) an imported product must include some raw materials from the domestic countryC) products sold in a country should be at least partially made in that countryD) an imported product must meet local standards before it can be brought inE) an imported product must fit with local bylaws before it can be brought in


91) If the Mexican government put a limit on the ounces of tequila being imported into Mexico, what hasoccurred?A) the government installed an embargo and a protection planB) the government has installed both a protection plan for its own tequila producers and a quotaC) the government is encouraging imports and installed an embargoD) the government has installed a protection plan for its own tequila producers and is encouragingimports

E) the government has installed a quota and an embargoAnswer: BDiff: 1 Page Ref: 157-158

92) The diamond cartel:A) is the most famous cartel in the worldB) has not been very successful over the past ten yearsC) is associated with OPECD) keeps the prices charged to consumers artificially highE) is legal in Canada


93) Dumping involves selling products at:A) "less than fair value"B) "lower price than competitors"C) "less than domestic producers"D) "less than what is reasonable"E) "less in one country than another"


94) Sometimes foreign companies have many problems in complying with stringent and often changingregulations and bureaucratic obstacles. This is called:A) local content lawsB) business practice lawsC) local practicesD) dumpingE) cartels


CUSTOMER

Highlight

CUSTOMER

Highlight

95) Which of the following is true about dumping?A) it is legal in CanadaB) it means selling a product abroad for less than the comparable price at homeC) in 2000, the Canada Customs and Revenue Agency determined that cars produced by Toyota andHonda in Japan were being "dumped" in Canada

D) results in benefiting domestic industriesE) Canadian firms sell their goods in the U.S. for less than cost


96) The successor to GATT is:A) NAFTAB) WTOC) the European UnionD) ASEAN Free Trade AreaE) WHO


97) The General Agreement on Tariffs and Trade is one in which its signatories agreed to:A) reduce nontariff barriersB) reduce subsidiesC) reduce foreign exchangeD) reduce tariffsE) reduce embargoes


98) On several occasions when the World Trade Organization has held talks on trade liberalization, protestorshave disrupted the meetings. The textbook mentions that protestors have included all of the followingexcept:A) environmentalistsB) fishermenC) labour unionsD) farmersE) social activists

Answer: BDiff: 2 Page Ref: 161-162

99) What does Canada's free trade agreement with the United States and Mexico do?A) eliminates all tariffs on manufactured goods immediatelyB) will eventually eliminate all tariffs on manufactured goodsC) will allow Canadian travelers to bring more goods back to Canada duty freeD) will eventually eliminate all tariffs on manufactured goods and allow Canadian travelers to bringmore goods back to Canada duty free

E) eliminates all tariffs on manufactured goods immediately and will allow Canadian travelers to bringmore goods back to Canada duty free


100) Canadians who were opposed to free trade feared all of the following except:A) Canada would lose control over its energy resourcesB) Canadian cultural sovereignty would be lostC) jobs would be lost to other countriesD) the U.S. might take our natural resourcesE) Canada would lose the right to control its own environmental standards


101) Supporters of free trade in Canada argued all of the following except:A) the environment is not covered in free trade agreementsB) there is nothing in the free trade agreements that threatens Canada's control over its energy resourcesC) access to U.S. markets is guaranteed by free trade and is therefore crucial to protecting Canadianemployment

D) the free trade agreements are about trade and tariffs, not cultural sovereigntyE) Canadian imports would increase because of free trade


102) The results for Canada from the North American Free Trade Agreement include all of the following except:A) U.S. imports from (and exports) to Mexico increasedB) Canada has become an exporting powerhouseC) Canada now exports 40 percent of its GDPD) Canada is the least trade-intensive country in the G7 groupE) direct foreign investment increased


103) Several other free trade agreements exist in the Americas including:A) The G-5 GroupB) The Andean Common MarketC) The Central American Trade PactD) The Caribbean Islands Free Trade ArrangementE) Mercosur


104) ________ is a trade agreement signed shortly after World War II.A) The World BankB) The European UnionC) GATTD) ASEANE) NAFTA


CUSTOMER

Highlight

CUSTOMER

Highlight

CUSTOMER

Highlight

105) ________ is a trade agreement that removes tariffs and other trade barriers among the United States, Canada,and Mexico.A) GATTB) The World BankC) NAFTAD) ASEANE) The European Union


106) Which of the following countries is not considered a part of Pacific Asia?A) IndonesiaB) ChinaC) South KoreaD) AustraliaE) Saudi Arabia


107) What organization was founded in Pacific Asia in 1967 for economic, political, social, and culturalcooperation?A) SEATOB) NATOC) CENTOD) ASEANE) Warsaw Pact


108) Which of the following exists when a country can produce something more cheaply and/or of higher qualitythan any other country?A) balance of paymentsB) monopolyC) absolute advantageD) oligopolyE) comparative advantage


109) South African diamonds are an example ofA) absolute advantage.B) competitive advantage.C) monopoly power.D) comparative advantage.E) oligopoly advantage.


CUSTOMER

Highlight

110) An absolute advantage exists whenA) a country can produce a product more cheaply and/or of higher quality than any other country.B) a country has more natural resources than all other countries.C) a country has lower labor costs than all other countries.D) a country has a superior political system.E) a country can make almost all products more efficiently than other countries.


111) A country has a(n) ________ in goods it can produce more efficiently than other goods.A) comparative advantageB) balance of payment deficitC) absolute advantageD) monopolistic advantageE) none of the above


112) Which of the following is NOT an attribute of national competitive advantage?A) related and supporting industriesB) strategies, structures, and rivalriesC) demand conditionsD) weather conditionsE) factor conditions


113) Which of the following is NOT included in the balance of payments?A) money paid for importsB) money paid by domestic corporations for taxesC) money paid for exportsD) money spent by touristsE) money spent on foreign aid

Answer: BDiff: 2 Page Ref: 146-147

114) The rate at which the currency of one nation can be exchanged for that of another is called a(n)A) floating interest rate.B) trade deficit.C) balance of payments.D) exchange rate.E) trade surplus.


115) With a(n) ________ exchange rate, the value of a country's currency remains constant relative to that ofanother country.A) adjustedB) demandC) fixedD) indexedE) floating


116) When the value of one country's currency relative to that of another varies with market conditions, it has a(n)A) floating exchange rate.B) pegged exchange rate.C) various exchange rate.D) fixed exchange rate.E) international exchange rate.


117) The ________ is a common currency for EU members.A) euroB) francC) pesoD) poundE) oreo


118) As the value of a country's currency rises,A) domestic companies will have a harder time selling their products in foreign markets.B) foreign companies will find it easier to sell their products in local markets.C) imports and exports will remain relatively constant.D) both A and BE) all of the above


119) As the value of a country's currency falls, its balance of trade shouldA) improve.B) remain the same.C) either increase or decrease.D) decline.E) none of the above


CUSTOMER

Highlight

120) Which of the following is necessary for a firm to consider international expansion?A) product can be modified to fit the foreign marketB) international demand exists for the firm's productC) firm has or can get the necessary international business skillsD) foreign business climate is suited to importsE) all of the above


121) A firm that makes products in one country and then distributes and sells them in others is a(n)A) financier.B) exporter.C) investment banker.D) multinational firm.E) importer.


122) A(n) ________ buys products in foreign markets and then sells them for resale in its home country.A) direct investorB) international firmC) investment bankerD) exporterE) importer


123) Lionel Polaine's primary method of international operation isA) franchising.B) strategic alliance.C) importing.D) exporting.E) direct investment.


124) Which of the following type of firm conducts a significant portion of its business abroad?A) the U.S. governmentB) a domestic firmC) an exporterD) an importerE) an international firm


CUSTOMER

Highlight

125) Which of the following is an example of an international firm?A) Skaggs Department StoresB) Consumers SupermarketsC) Wal-MartD) Sunrise Computer SystemsE) Bill's Gas and Oil


126) Wal-Mart is an example of a(n)A) strategic alliance.B) government agency.C) exporter.D) multinational firm.E) international firm.


127) Which of the following types of firms have planning and decision-making functions that are geared tointernational markets?A) domestic firmsB) international firmsC) exporting firmsD) multinational firmsE) none of the above


128) Which of the following is NOT an international organizational structure?A) licensing arrangementsB) domestic headquartersC) independent agentsD) strategic allianceE) branch offices


129) A foreign individual or organization that agrees to represent an exporter's interest in foreign markets iscalled a(n)A) independent agent.B) licensing arrangement.C) strategic alliance.D) branch office.E) headquarters arrangement.


CUSTOMER

Highlight

CUSTOMER

Highlight

130) Which of the following international organizational strategies often represent several firms at once andusually do not specialize in a particular product or market?A) royalty arrangementB) licensing arrangementC) independent agentD) strategic allianceE) branch office


131) Firms give individuals or companies in a foreign country exclusive rights to manufacture or market theirproducts through which of the following international organizational strategies?A) direct investmentB) independent agentsC) branch officesD) strategic alliancesE) licensing arrangements


132) Which of the following types of payments are usually received by an exporter as an ongoing paymentcalculated as a percentage of the license holder's sales?A) flat feesB) agent feesC) quantity discountsD) direct investmentsE) royalties


133) A company sending some of its own managers overseas to conduct business is practicing the internationalorganizational strategy ofA) joint venture arrangements.B) strategic alliances.C) direct investment.D) matching.E) branch offices.


134) Using a(n) ________ strategy, the company finds a partner in the country in which it would like to conductbusiness.A) direct investmentB) independent agencyC) strategic allianceD) replicationE) branch office


135) Microsoft has used ________ to expand operations into India and China.A) branch officesB) strategic alliancesC) importersD) direct investmentE) cartels


136) Which of the following international organizational strategies means buying or establishing tangible assetsin another country?A) providing licensing arrangementsB) opening branch officesC) direct investmentD) independent agencyE) forming strategic alliances


137) Tariffs that are imposed strictly to raise money for the government are referred to as ________ tariffs.A) revenueB) quotaC) protectionistD) subsidyE) union


138) Which of the following is a government payment to help a domestic business compete with foreign firms?A) quotaB) protectionist tariffC) subsidyD) revenue tariffE) embargo


139) The practice of protecting domestic business at the expense of free market competition is calledA) protectionism.B) putting an embargo on exports.C) local content laws.D) adding tariffs.E) imposing quotas.


CUSTOMER

Highlight

140) In some South American countries, it may be legal to bribe other businesses and government officials, whilethis practice is illegal in the U.S. This barrier to international trade is known asA) quotas.B) local content laws.C) imposing tariffs.D) business practice laws.E) cartelling.


141) Associations of producers that control supply and prices are calledA) independent agents.B) foreign direct investments.C) business offices.D) quotas.E) cartels.


142) Selling a product abroad for less than the cost of production is referred to asA) setting up quotas.B) imposing tariffs.C) direct foreign investment.D) setting up a business office.E) dumping.


143) Sam lives in Malaysia and his country is part of the ASEAN Free Trade Area. It also consists of all of thefollowing countries except:A) SingaporeB) VietnamC) IndonesiaD) ChinaE) the Philippines


144) Countries tend to export products that they can produce better or less expensive than other countries andimport products they cannot produce as effectively.Answer: TRUEDiff: 1 Page Ref: 144

145) If a Canadian architect designs a house in Brazil, this is an example of an import of a service.Answer: FALSEDiff: 2 Page Ref: 151

146) The contemporary world economy revolves around the major marketplaces of North America, Europe andAsia-Pacific.Answer: TRUEDiff: 1 Page Ref: 141

147) The Mexico dominates the North American business region.Answer: FALSEDiff: 1 Page Ref: 141

148) According to the World Bank, low-income countries are those with per capita income of less than US$825.Answer: TRUEDiff: 2 Page Ref: 141

149) According to the World Bank, Canada, South Korea and Kuwait are all considered high-income countries.Answer: TRUEDiff: 2 Page Ref: 141

150) The East African nation of Somalia, plagued by drought, civil war, and starvation, plays virtually no role inthe world economy.Answer: TRUEDiff: 1 Page Ref: 141

151) Many Canadian firms such as Nortel Networks and Procter & Gamble, are major international competitors.Answer: FALSEDiff: 2 Page Ref: 142

152) According to the North American Free Trade Agreement, Canada, the U.S. and Mexico will graduallyeliminate tariffs and other major trade barriers by 2010.Answer: FALSEDiff: 2 Page Ref: 162

153) The United States accounts for about 85 percent of Canada's merchandise exports.Answer: TRUEDiff: 2 Page Ref: 146

154) Free trade agreements are not restricted to the Americas.Answer: TRUEDiff: 1 Page Ref: 163

155) A major centre for biotech start-ups is Strasbourg, France.Answer: TRUEDiff: 2 Page Ref: 142

156) Government instability has hampered economic development in Eastern Europe, especially Russia, Albaniaand Romania.Answer: TRUEDiff: 2 Page Ref: 142

157) General Motors and Nestle have manufacturing plants in Eastern Europe.Answer: TRUEDiff: 1 Page Ref: 142

158) Asia-Pacific includes Japan, China, Thailand, Taiwan and Australia.Answer: TRUEDiff: 1 Page Ref: 143

159) In Asia, the emergence of technology firms has been hampered by a poorly developed electronicinfrastructure, slower adoption of computers and information technology, a higher percentage oflower-income consumers, and a currency crisis.Answer: TRUEDiff: 1 Page Ref: 143

160) The Association of Southeast Asian Nations (ASEAN) was founded in 1945 as an organization for economic,political, social and cultural cooperation.Answer: FALSEDiff: 3 Page Ref: 143

161) Asia-Pacific is a major source of competition for North American firms.Answer: TRUEDiff: 1 Page Ref: 143

162) An absolute advantage exists when a country can produce something more cheaply and/or of higher qualitythan any other country.Answer: TRUEDiff: 1 Page Ref: 144

163) A country has an absolute advantage in goods that it can produce more efficiently or better than othergoods.Answer: FALSEDiff: 1 Page Ref: 144

164) If Trinidad could produce mangoes cheaper and better tasting than any other country due to its climate, thenit would have a comparative advantage over any other country.Answer: FALSEDiff: 3 Page Ref: 144

165) National competitive advantage derives from four conditions: factor conditions, supply conditions,strategies/structures/rivalries, and related and supporting conditions.Answer: FALSEDiff: 2 Page Ref: 144

166) A nation's balance of trade is calculated by subtracting the total imports from the total exports.Answer: TRUEDiff: 1 Page Ref: 145

167) When a country imports more than it exports it has a favourable balance of trade.Answer: FALSEDiff: 1 Page Ref: 146

168) If Canada exported $8 billion last year and imported $12 billion last year then its balance of trade would be asurplus of $4 billion dollars.Answer: FALSEDiff: 1 Page Ref: 145

169) Canada exports more to the United States than it imports from the United States.Answer: TRUEDiff: 2 Page Ref: 146

170) When a country's exports exceed its imports, it suffers a trade deficit.Answer: FALSEDiff: 2 Page Ref: 146

171) When a country's exchange rate falls, that country's exports become less expensive to other countries.Answer: TRUEDiff: 2 Page Ref: 148

172) Exchange rates started out floating but are now fixed.Answer: FALSEDiff: 1 Page Ref: 148

173) When a country's exchange rate increases, that country's exports become more expensive to other countries.Answer: TRUEDiff: 2 Page Ref: 149

174) The rate of exchange of a nation's currency has little effect upon the competitive advantages ordisadvantages of its companies.Answer: FALSEDiff: 1 Page Ref: 148

175) The first decision in determining whether a company should go international or not, is to determine if thereis an international demand for its products.Answer: TRUEDiff: 1 Page Ref: 150

176) Marketing a specific product to two or more countries is relatively easy since the same marketing strategywill usually work for both countries.Answer: FALSEDiff: 1 Page Ref: 150

177) An importer is a firm that makes products in one country and then distributes and sells them in othercountries.Answer: FALSEDiff: 1 Page Ref: 151

178) A licensing arrangement exists where the owner of a product or process allows another business to produce,distribute, or market it for a fee or royalty.Answer: TRUEDiff: 1 Page Ref: 153

179) The Foreign Investment Review Agency (FIRA) was designed to ensure that foreign direct investmentbenefited Canadians.Answer: TRUEDiff: 1 Page Ref: 154

180) An embargo is really a quota of zero.Answer: TRUEDiff: 1 Page Ref: 157

181) Quotas and tariffs can be used to control the export of goods and services as well as the import of goods andservices.Answer: FALSEDiff: 1 Page Ref: 157

182) The aim of NAFTA is to create a free trade area for Canada, U.S. and Western Europe.Answer: FALSEDiff: 1 Page Ref: 162

183) The North American Free Trade Agreement has lead to increases in business growth in Canada.Answer: TRUEDiff: 2 Page Ref: 162

184) Define the term globalization.Answer: Globalization refers to the process by which the world economy is becoming a single interdependent

system.Diff: 2 Page Ref: 140

185) What countries are covered under NAFTA?Answer: United States, Canada, and Mexico.Diff: 2 Page Ref: 162

186) What are the three major marketplaces in the contemporary world economy?Answer: North America, Western Europe, and Pacific Asia.Diff: 2 Page Ref: 141

187) Give an example of an absolute advantage.Answer: (Answers will vary.) Saudi oil, Brazilian coffee beans, and Canadian timber are examples given in the

text.Diff: 2 Page Ref: 144

188) What is a trade deficit?Answer: A trade deficit is a situation in which a country's imports exceed its exports, creating a negative

balance of trade.Diff: 2 Page Ref: 146

189) What is a trade surplus?Answer: A trade surplus is a situation in which a country's exports exceed its imports, creating a positive

balance of trade.Diff: 2 Page Ref: 146

190) Define the term exchange rate.Answer: An "exchange rate" is the rate at which one nation's currency can be exchanged for that of another.Diff: 2 Page Ref: 148

191) What is an exporter?Answer: An exporter is a business that makes products in one country for sale in another.Diff: 2 Page Ref: 151

192) What is an independent agent?Answer: An independent agent is a foreign individual or organization that agrees to represent an exporter's

interests.Diff: 2 Page Ref: 153

193) What is foreign direct investment?Answer: Foreign direct investment is an arrangement in which a firm buys or establishes tangible assets in

another country.Diff: 2 Page Ref: 154

194) How does a quota influence international trade?Answer: A quota restricts the number of products of a certain type that can be imported into a country.Diff: 2 Page Ref: 157

195) What is a tariff?Answer: A tariff is a tax on imported products.Diff: 2 Page Ref: 157

196) Define the term protectionism.Answer: Protectionism is the practice of protecting domestic business against foreign competition.Diff: 2 Page Ref: 158

197) What is a cartel?Answer: A cartel is an association of producers whose purpose is to control supply and prices.Diff: 2 Page Ref: 160

198) What is product dumping?Answer: ∙ Selling a product abroad for less than the comparable price charged at home.Diff: 1 Page Ref: 160

199) The World Bank, an agency of the United Nations, uses per capita income as a measure to divide countriesinto one of four groups. Distinguish among the four groups and identify the countries in each group.Answer: ∙ High-income countries are those with per capita income greater than US$10 065. These include

Canada, the United States, most countries in Europe, Australia, New Zealand, Japan, South Korea,Kuwait, the United Arab Emirates, Israel, Singapore, and Taiwan.∙ Upper Middle-income countries are those with per capita income of less than US$10 065 but more thanUS$3255. Some of the countries in this group are the Czech Republic, Greece, Hungary, Poland, mostcountries comprising the former Soviet Bloc, Turkey, Mexico, Argentina, and Uruguay.∙ Middle-income countries are those with per capita income between U.S. $825 and U.S. $3255.Among countries in this group are Columbia, Guatemala, Samoa and Thailand. Some of these, suchas China and India, have huge populations and are seen as potentially attractive markets forinternational business.∙ Low-income countries (developing countries) are those with per capita income of less than US$825.Due to low literacy rates, weak infrastructures, unstable governments, and related problems, othercountries in this group are less attractive to international business These countries are less attractive tointernational business an example Somalia is plagues by drought, civil war and starvation..

Diff: 3 Page Ref: 141

200) What are the two forms of competitive advantage? Provide two examples of each.Answer: ∙ absolute advantage - nation's ability to produce something more cheaply or better than any other

country∙ examples Saudi oil, Brazilian coffee beans, Canadian timber∙ comparative advantage - nation's ability to produce some products more cheaply or better than it canothers∙ examples - farming in Canada, electronics manufacturing in Korea


201) Discuss the theory of national competitive advantage.Answer: ∙ National competitive advantage- country will be inclined to engage in international trade when

factor conditions, demand conditions, related and supporting industries, andstrategies/structures/rivalries are favourable.∙ National competitive advantage derives from four conditions: ∙ factor conditions are the factors of production that were identified in Chapter 1. ∙ demandconditions reflect a large domestic consumer base that promotes strong demand for innovativeproducts. ∙ related and supporting industries include strong local or regional suppliers and/or industrialcustomers. ∙ strategies, structures, and rivalries refer to firms and industries that stress cost reduction, productquality, higher productivity, and innovative new products.∙ when all of these conditions exist, a country will be inclined to engage in international business.


202) Discuss the impact of trade deficits and trade surpluses on the balance of payments.Answer: ∙ trade deficits create negative balances of trade which lead to negative balances of payments

∙ trade surpluses create positive balances of trade which lead to positive balances of paymentsDiff: 2 Page Ref: 145-146

203) What are the four steps that firms should go through when deciding on whether or not to go international?Answer: ∙ Is there international demand for the firm's product?

∙ Can the product be modified to fit a foreign market?∙ Is the foreign business climate suited to imports? ∙ Does the firm have or can it get the necessary skills and knowledge to do business abroad?


204) What are the various basic levels of involvement in international business?Answer: ∙ exporting goods and services

∙ importing goods and services∙ organize as an international firm ∙ operate as a multinational firm

Diff: 1 Page Ref: 151-152

205) Different levels of involvement in international business require different kinds of organizational structure.Identify and explain the spectrum of international organizational strategies.Answer: ∙ Independent agent- foreign individual, or organization, who agrees to represent an exporter's interests

in foreign markets∙ Licensing arrangement -an arrangement by an owner of a process or product to allow another businessto produce, distribute, or market it for a fee or royalty∙ Branch office-a location that an exporting firm establishes in a foreign country in order to sell itsproducts more effectively∙ Strategic alliance-an enterprise in which two or more persons or companies temporarily join forces toundertake a particular project ∙ Foreign direct investment-buying or establishing tangible assets in another country


206) Why would two companies, both earning large profits and expanding into Japan, form a strategic alliance?Answer: ∙ share the costs and risks of new ventures

∙ gaining access to new markets or customers∙ limits financial aid needed for the venture


207) What are the advantages of forming a strategic alliance?Answer: ∙ gaining access to new markets or customers

∙ sharing costs and risks∙ obtaining financing to supplement a firm's debt capacity


208) Identify and describe the three potential barriers to international trade.Answer: ∙ social and cultural differences

∙ economic differences∙ legal and political∙ quotas, tariffs, and subsidies∙ local-content laws∙ business-practice laws


209) Identify the different means a government may take to discourage trade. Explain each.Answer: ∙ quota-restriction on number of products that can be imported

∙ embargo-forbids exportation/importation of a particular product∙ tariff-tax on imported products


210) What are local-content laws? What do they imply for a country wanting to do business?Answer: ∙ laws requiring that products sold in a particular country be at least partly made in that country

∙ act just like trade barriers∙ usually implies that firms seeking to do business in a country must either invest directly in thatcountry or have joint-ventures with another business from that country∙ creates a sharing of profits


211) What has actually happened since NAFTA took effect?Answer: ∙ Canada is becoming an exporting powerhouse

∙ direct foreign investment has increased∙ U.S. imports from (and exports) to Mexico have increased∙ exports are 40% of GDP∙ Canada's international competitiveness has improved


212) Other than the Canada-U.S. Free Trade Agreement and NAFTA, identify some of the other free tradeagreements in the Americas.Answer: ∙ Mercosur-Argentina, Brazil, Uruguay, and Paraguay-by 2005, tariffs will be eliminated on 80 percent

of the goods traded between those four countries∙ The Andean Pact-Bolivia, Ecuador, Colombia, Peru, and Venezuela∙ The Central American Common Market-Costa Rica, El Salvador, Guatemala, Honduras, and Nicaragua∙ The G-3 Group Colombia, Mexico, and Venezuela∙ The Caribbean Common Market-many of the island nations of the Caribbean


213) Identify some of the free trade agreements located outside of the Americas and the countries involved inthem.Answer: ∙ ASEAN Free Trade Area-Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, and

Vietnam∙ Asia-Pacific Economic Cooperation-many nations of the Pacific Rim, as well as the U.S., Canada, andMexico∙ Economic Community of Central African States-many nations in equatorial Africa∙ Gulf Cooperation CouncilBahrain, Kuwait, Oman, Qatar, Saudi Arabia, and United Arab Emirates


214) Describe the forces that have combined to spark and sustain globalization?Answer: Several forces have combined to spark and sustain globalization. First, governments and businesses

are more aware of the benefits of globalization to businesses and shareholders. Second, newtechnologies have made international travel, communication, and commerce much faster and cheaper.Third, competitive pressures often play a role in the decision to go global. Finally, various legalagreements (GATT, NAFTA) have also sparked international trade.


215) What is protectionism? List and describe four protectionist measures.Answer: Protectionism is the practice of protecting domestic businesses at the expense of free market

competition. Protectionist measures include quotas, embargoes, tariffs, subsidies, local content laws,and business practice laws. Quotas are restrictions on the number of a certain type of product that canbe imported into a country. An embargo is a government order banning exportation and/orimportation of a particular product or all products from a particular country. Tariffs are taxes onimported products. Subsidies are government payments to help domestic businesses compete withforeign firms. Local content laws require that products sold in a particular country be at least partlymade there. Finally, business practice laws govern business practices in a given country.


216) "All this talk about a global economy is relevant only for big firms. My company is too small for that type ofthinking." Agree or disagree and support your position.Answer: ∙ varies but should include a discussion of technology, opportunities, and ease of entry into

international marketsDiff: 3 Page Ref:

chapter 5 understanding international...

Documents