GLOBAL BUSINESS TODAY 6TH EDITION BY CHARLES W. L. HILL, G. TOMAS M. HULT, THOMAS MCKAIG TEST BANK

GLOBAL BUSINESS TODAY 6TH EDITION BY CHARLES W. L. HILL, G. TOMAS M. HULT, THOMAS MCKAIG TEST BANK Chapter 1-16 Answer are at the End of Each Chapter Chapter 1

Student name: 1)

According to the opening case, Bombardier is a good example of:

A) domestic markets B) foreign exchange C) globalization of production D) outsourcing E) deregulation

2) The trend toward a more integrated and interdependent global economic system that has been in place for many years is commonly referred to as:

A) market standardization B) cross-border integration C) globalization D) consumerism E) nationalization

3)

Sourcing goods and services from locations around the globe is known as

A) melding of markets B) integration of markets C) deregulation D) globalization of production E) globalization of markets

1

.

4)

Currently, most global markets are markets for what type of product?

A) Consumer goods B) Industrial goods C) National products D) Deregulated products E) Local goods

5) The globalization of refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors of production (such as labour, energy, land, and capital).

A) information technology B) process design C) markets D) production E) R&D

6)

The factors of production include:

A) information technology B) process design C) markets D) labour E) research and development

7) The Hampshire.

was created in 1944 by 44 nations that met in Bretton Woods, New

2

A) International bank B) World Monetary Fund C) World Trade Organization D) International Monetary Fund E) United Nations

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

A) International Monetary Fund B) International bank C) United Nations D) Canada's Export Development Corporation E) Bank of Canada

9)

Who is responsible for policing the world trading system?

A) International Monetary Fund B) The World Bank C) The World Trade Organization D) Canada's Export Development Corporation E) Bank of Canada

10)

What was created at the same time as the International Monetary Fund?

3

A) World Bank B) GATT C) United Nations D) Canada's Export Development Corporation E) Bank of Canada

11) Although this organization is perhaps best known for its peacekeeping role, one of its central mandates is the promotion of higher standards of living, full employment, and conditions of economic and social progress and development. What is it called?

A) World Bank B) GATT C) United Nations D) Canada's Export Development Corporation E) Bank of Canada

12) globalization.

are the two macro factors that seem to underlie the trend toward greater

A) The increase in global economic stability, and the slowdown in technological change B) The increase in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II, and global economic stability C) The decline in barriers to the free flow of goods, services, and capital that has occurred in the past 10 years, and the slowdown in technological change D) The decline in barriers to the free flow of goods, services, and capital that has occurred since the end of World War II, and technological change E) Technological change and the convergence of global product preferences

13) to as

A firm exports a number of products to users in other countries. This practice is referred .

4

A) world exchange B) international trade C) cross-national barter D) situational commerce E) multinational diversification

14) XYZ, Inc. is an auto parts distributing warehouse that exports many of its products to consumers in other countries. XYZ Inc. can be described as engaging in:

A) international trade.

B) cross-border investments.

C) product development.

D) trading barriers.

E) international procurement.

15) Which of the following refers to the exporting of goods or services to consumers in another country?

A) situational commerce B) world exchange C) international trade D) cross-national barter E) foreign investment

16) Although Inco is a Canadian company, it has invested substantial business resources in activities outside Canada. This practice is referred to as:

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A) transnational commerce B) foreign direct investment C) international trade D) organizational diversification E) outsourcing

17) The investing of resources in business activities outside a firm's home country is referred to as:

A) international trade B) domestic direct investment C) transnational barter D) foreign direct investment E) outsourcing

18) The is a treaty designed to remove barriers to the free flow of goods, services, and capital between nations.

A) Global Agreement on Tariffs and Commerce B) United Nations Treaty on Trade C) General Agreement on Tariffs and Trade D) Multinational Agreement on Tariffs and Commerce E) The ILO

19) After World War II, the West committed to removing trade barriers between nations because of what experience?

6

A) the loss of production from the war B) retaliatory trade policies leading to the Depression C) the General Agreement on Tariffs and Trade D) massive waves of immigrants seeking jobs E) the shift away from production to consumption

20) Under the umbrella of GATT there have been eight rounds of negotiations among member states. The was the most recent round of negotiations.

A) Uruguay Round B) Malaysian Symposium C) German Round D) New Zealand Symposium E) Cancun Round

21)

Which of the following was not an outcome of the Uruguay Round of the GATT?

A) reduced trade barriers B) extended GATT to cover services as well as manufactured goods C) established the World Trade Organization D) provided extended protection for patents, trademarks, and copyrights E) reduced agricultural subsidies

22)

If the Doha talks are ever completed, the biggest gain will come from what?

7

A) trademarks B) agriculture C) intellectual property D) consumer goods E) manufactured goods

23) The agency established at the 1993 Uruguay Round to police the international trading system is the .

A) Global Trade Enforcement Administration B) World Tariff and Trade Bureau C) International Trade Enforcement Agency D) World Trade Organization E) The European bank of Reconstruction and Development

24) Suppose Petro Canada, an international oil company, had a complaint about a trade issue.

The , a governing body established at the Uruguay Round in 1993 to police the international trading system, is an organization that Petro Canada could take its complaint to.

A) World Trade Organization B) International Trade Monitoring Bureau C) World Tariff and Trade Agency D) International Trade Monitoring Agency E) The United Nations

25)

The acronym WTO stands for:

8

A) Western Trade Organization B) World Tax Organization C) World Trade Organization D) World Tariff Organization E) World Trade Operations

26) In the past decades, many countries, in addition to reducing trade barriers, have done what?

A) decreased production B) increased wages C) removed restrictions to FDI D) increased tariffs E) joined the United Nations

27)

Since 1992, most of the world's changes to FDI have done what?

A) blocked FDI B) created a more favourable environment for FDI C) had no impact on FDI D) decreased production E) decreased wealth

28) Which of the following is a major cause for lowering the trade barriers of markets and production?

9

A) Technological change B) Increased labour mobility C) Elastic demand D) Corporate greed E) Consumer demand

29) is the theory that predicts that the number of transistors on a computer chip doubles every 24 months.

A) Brennan's Theorem B) Bailey's Law C) Moore's Law D) Ivan's Law E) Global Micro Accelerant (GMA) Law

30)

By 2019 the number of Internet users around the world was estimated to be what?

A) 5 million B) 100 million C) 1 billion D) 4 billion E) 5 billion

31)

The Web is viewed as a global what?

10

A) equalizer B) way of decreasing production C) force for decreasing FDI D) way of reaching businesses at the expense of consumer E) way for government to market to its population

32) technology.

was not mentioned in our textbook as a major innovation in transportation

A) Commercial jet aircraft B) Super freighters C) E-commerce D) The introduction of containerization E) Both containerization and e-commerce were not mentioned

33) As a result of a variety of innovations, the real costs of information processing and communication have over the past two decades.

A) fallen slightly B) increased slightly C) remained constant D) fallen dramatically E) had no impact on the cost of international business

34) According to your textbook, between 1930 and 1990, the cost of a three-minute phone call between New York and London fell from $244.65 to $3.32. This decrease can be mainly contributed to

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A) open communication between governments.

B) the advent of the microprocessor.

C) continuing efforts to globalize.

D) high corporate ethical standards.

E) the deregulation of the telecommunications industry.

35)

Over the past fifty years, which country dominated the world trade picture?

A) China B) Canada C) The United Kingdom D) The United States E) India

36) The globalization of markets and production and the resulting growth of world trade, foreign direct investment, and imports all imply that firms are finding their home markets under attack from foreign competitors. This is most true in which country?

A) China B) Canada C) The United Kingdom D) The United States E) India

37) Many of the changes that countries have made pertaining to foreign direct investment regulations have:

12

A) made it harder for foreign companies to enter their markets B) made it easier for foreign companies to enter their markets C) had no effect on the ease upon which foreign companies can enter their markets D) made it easier to foreign producers of raw materials to enter their markets but more difficult for foreign producers of finished products to enter their markets E) prevented the expropriation of business assets by a foreign government

38)

The steep drop in world trade occurred when?

A) 1950-1951.

B) 1955-1956.

C) 1995-1996.

D) 2005-2006.

E) 2008-2009.

39)

According to our textbook, the growing integration of the world economy is:

A) increasing the intensity of competition within the home market of a company in a wide range of manufacturing and service industries B) decreasing the intensity of global competition in manufacturing industries, and increasing the intensity of domestic competition in services C) increasing the intensity of global competition in manufacturing industries, and decreasing the intensity of domestic competition in services D) narrowing the scope of global competition in a wide range of service, commodity, and manufacturing industries E) Widening the opportunities for competing with manufacturing companies within their home market and narrowing the opportunities for competing with service companies in their home market.

13

40) Although the characteristics of the global economy have changed dramatically over the past 50 years, as late as the 1960s all of the following demographic characteristics were true except:

A) the U.S. dominated the world economy B) small, U.S. entrepreneurial firms dominated the international business scene C) the U.S. dominated the world foreign direct investment picture D) the U.S. was the world's largest industrial power E) the U.S. dominated world trade

41)

Since the 1960s, what has been a notable trend regarding multinational enterprises?

A) the decline of the multinational enterprise B) the decline of the Canadian multinational enterprise C) the rise of non-U.S. multinationals D) the decline of the Japanese multinational enterprise E) the rise of U.S. multinationals

42) What kind of enterprise is a business that has productive activities in two or more countries?

A) cross-cultural B) multinational C) varied-national D) diverse-national E) multi-domestic

43)

Recently there has been

in the number of smaller firms that are multinationals.

14

A) a significant growth B) no change C) a significant decline D) some growth E) some decline

44) General Electric Corporation has productive activities in a number of countries. As a result, it would be appropriate to refer to General Electric as a corporation.

A) transnational B) diverse-national C) cross-national D) multinational E) global

45)

Iceculture Inc., of Ontario exports around the world. It would be considered to be a company

A) multinational B) transnational C) cross-border national D) mini-multinational E) U.S.- dominated

46) Since the 1960s, there have been two notable trends in the demographics of the multinational enterprise. These two trends have been:

15

A) the rise of non-U.S. multinationals and the disappearance of mini-multinationals B) the decline of non-U.S. multinationals and the decline of mini-multinationals C) the decline of non-U.S. multinationals and the growth of mini-multinationals D) the rise of non-U.S. multinationals and the growth of mini-multinationals E) the rise of U.S. multinationals and the growth of mini-multinationals

47) If we look into the future, most forecasts now predict a in world output accounted for by developing nations such as China, India, Indonesia, and South Korea, and a in the share enjoyed by rich industrialized countries such as Britain, Japan, and the United States.

A) rapid rise; rapid decline B) slight rise; slight decline C) rapid decline; rapid rise D) rapid rise; slight decline E) stay the same; slight decline

48)

The relative decline of the developed countries' share of world output

A) will reduce the living standards of the citizens of developed countries.

B) will increase competition for scarce resources and create political instability.

C) reflects the growing economic and industrial strength of developing countries.

D) will decrease prices but also reduce wages in Canada E) will decrease job opportunities in Canada

49)

Which of the following is an example of a developing nation?

16

.

A) Thailand B) Britain C) Japan D) United States E) Canada

50)

In the 1960s, what was then seen as an economic threat to Europe?

A) The dominance of U.S. firms B) Technological innovations C) Low-cost transportation D) Low-cost global communication networks E) Reduction in trade barriers

51) Throughout the 1990s, the amount of investment directed at both developed and developing nations did what?

A) stayed the same B) decreased C) increased D) was highly variable E) decreased, then increased

52) Among developing nations, the largest recipient of foreign direct investment has been which country?

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A) China B) India C) Japan D) Canada E) the United States

53)

The economies of most of the former Communist countries can best be described as:

A) in poor condition with high risk associated with doing business there B) steady growth, especially since 2009 C) dominated by multinationals D) robust and growing stronger E) closed to many international businesses due to high tariffs

54) Which of the following statements is not true regarding the majority of Latin American countries?

A) governments are selling state-owned enterprises to private investors B) foreign investment is welcome C) debt and inflation are down D) neither democracy nor free market reforms have seemed to take hold E) None of these answers is correct

55)

The last quarter of the 20

th

century experienced

in the global economy.

18

A) increased stability B) slow-moving C) virtually no changes D) rapid changes E) great concerns over potential disruptions

56) Economists argue that increased international trade and cross-border investments will result in prices for goods and services.

A) higher B) stable C) lower D) unstable E) variable

57)

is not a benefit of globalization.

A) Lowering prices for goods B) Raising the incomes of consumers C) Slowing economic growth D) Helping to create jobs in all countries that choose to participate E) More leisure time

58)

Benefits of globalization include:

19

A) Falling barriers to trade and investment drive prosperity B) Increased trade and investment will lower prices for goods and services C) Increased income of consumers D) Creates jobs in all countries that participate in global trade E) All of these options

59) One frequently voiced concern about globalization is that it destroys manufacturing jobs in wealthy advanced economies such as Canada. The basic thrust of the critics' argument is:

A) developing nations will recruit employees from the more advanced economies, thereby depleting their labour pools B) globalization increases the pace of the shift from a world economy based on manufactured goods to a world economy based on services C) falling trade barriers allows firms to move their manufacturing activities offshore to countries where wage rates are much lower D) the governments of developing countries will heavily subsidize their primary industries, making competing products produced in advanced economies less attractive E) Canadian workers are overpaid and the true value of a manufacturing job is much lower

60)

Outsourcing has even extended to the Canadian

industry.

A) auto B) mineral extraction C) services D) home construction E) lumber

61) Critics use the following argument to suggest that globalization is a contributing factor to an increase in pollution.

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A) globalization results in an increase in the amount of activity that takes place in companies that do not have adequate pollution controls B) globalization results in increased commerce between countries, which results in an increase in the amount of transportation activity (e.g. trains, barges, air cargo, trucks, etc.)

C) firms that operate in countries that have adequate pollution regulations have a tendency to move their manufacturing operations to countries that have less stringent or no pollution controls to avoid the cost of regulation D) globalization results in increased production, which has the undesirable side-effect of increased pollution E) people in developing countries are used to coping with more pollution

62)

What does the CUSMA stand for?

A) Canada-US-Mexico free trade agreement B) North American free trade agreement 2.0 C) Canadian Union of Shop Manufacturing Associations D) US-Canada-Mexico free trade agreement E) Canadian-American-Mexican free trade agreement

63) Many critics of globalization argue that outsourcing leads to increased use of labour practices in developing countries.

A) exploitive B) fair C) underground D) neo-colonialist E) non-competitive

64)

What is the primary purpose of the World Trade Organization?

21

A) arbitrate of trade disputes B) act as a "watchdog" for countries that lower their pollution standards in an effort to attract more foreign manufacturing activity C) set tariffs for countries that signed the GATT agreement D) monitor the implementation of trade agreements such as NAFTA E) reduce the number of job losses in member countries

65)

Supranational organizations such as the WTO are criticized for

A) interfering in the regulation of prices of a country's natural resources.

B) ruling in favour of rich western countries at the expense of poor developing countries.

C) focusing on economics and not on democracy and environmental responsibility.

D) limiting its actions to what the WTO member states agree to.

E) encouraging economic stagnation in poor countries so that rich countries can grow faster.

66)

The world's poorest nations have also faced

.

A) standardization B) alignment C) global simplification D) economic stagnation E) consumerization

67) Managing an international business is different from managing a purely domestic business for all of the following reasons except:

22

A) countries are different B) international transactions involve converting money into different currencies C) the range of problems confronted by a manager in an international business are narrower than those confronted by a manager in a domestic business D) an international business must find ways to work within the limits imposed by government intervention in the international trade and investment system E) different languages have to be learned

68)

The closing Tim Hortons case study is an example of what?

A) how easily Canadian firms can enter the US market B) the similarity of Canadian and US consumer tastes C) Canadian firms buying up US firms D) protests against globalization E) the difficulty of Canadian firms expanding internationally

69) The Sustainability in Practice section focuses on measures that the Adidas Group has taken to sustainability regarding:

A) supply chain management and supplier labour standards B) Supply chain management C) labour standards D) materials used in production E) efficient water and stormwater management

70) Describe the concept of globalization. What are the major opportunities and challenges that globalization has created for business organization?

23

71) Describe the two main facets of globalization. Explain how each of these components of globalization has helped create the shift towards a more integrated world economy.

72) Describe the meaning of the term "trade barriers"? What measures have been taken by the world community to reduce the impact of trade barriers on international trade?

73)

Describe the impact of the development of the World Wide Web on global commerce.

74) Define the term "foreign direct investment (FDI)." How does the term "foreign direct investment" differ from the term "international trade?"

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75) You manage a company that produces and sells cameras that work under water. The camera bodies are made in China, in a facility your company owns, and which employs about 500 people. The electronics for the camera are bought from a supplier in South Korea. The lens and optics are made in your own facility in Japan, which employs about 300 people. The final product is also assembled and packaged at this facility in Japan. Your company currently employs about 350 people in Canada (head office functions, advertising, legal, and sales). You are a successful company, in business for many years, and you hope to expand your sales around the globe.

What is this type of company called?

76) You manage a company that produces and sells cameras that work under water. The camera bodies are made in China, in a facility your company owns, and which employs about 500 people. The electronics for the camera are bought from a supplier in South Korea. The lens and optics are made in your own facility in Japan, which employs about 300 people. The final product is also assembled and packaged at this facility in Japan. Your company currently employs about 350 people in Canada (head office functions, advertising, legal, and sales). You are a successful company, in business for many years, and you hope to expand your sales around the globe.

What are some other examples of this type of firm?

77) You manage a company that produces and sells cameras that work under water. The camera bodies are made in China, in a facility your company owns, and which employs about 500 people. The electronics for the camera are bought from a supplier in South Korea. The lens and optics are made in your own facility in Japan, which employs about 300 people. The final product is also assembled and packaged at this facility in Japan. Your company currently employs about 350 people in Canada (head office functions, advertising, legal, and sales). You are a successful company, in business for many years, and you hope to expand your sales around the globe.

What have been the two most notable trends in these types of enterprises since the 1960s?

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78) Discuss the primary advantages and disadvantages of globalization. Do you believe the advantages outweigh the disadvantages? How can the effects of the disadvantages of globalization be reduced?

79) Country competitiveness is not something that is permanent or fixed. The dominant features of the global economy are the rapid changes relative economic and competitive status of different countries. Canada is not immune to these changes. We have seen our total share of the global economy decrease and the loss of many industries. The anti-globalization movement has been active in Canada. In particular they have been critical of multinational corporate power and argued against global and regional agreements on economic growth and the lowering of trade barriers. Others feel that globalization is inevitable and contributes to the well being of people around the world. a. Consider the overall impact of globalization on Canada from the perspective of a software developer-has it been positive or negative? Explain your answer. b. What kinds of strategies could a Canadian developer of software employ to reduce the negative impacts and take advantage of the positive aspects? Explain your answer.

80)

Why is international trade important to Canada?

26

81) What measures can global companies take to prove a commitment to sustainability?

Provide an example of a real company's practices.

82) The global economy is moving progressively towards a world in which national economies are relatively isolated from each other. ⊚ ⊚

true false

83) The volume of goods, services and investment crossing national borders expanded faster than did world output every year during the last two decades of the 20 th century. ⊚ ⊚

84)

Currently global markets are mostly markets for consumer products. ⊚ ⊚

85)

true false

true false

To benefit from the globalization of markets, a company has to be a multinational firm. ⊚ ⊚

true false

27

86) Currently most global markets are for industrial goods and materials that serve a universal need the world over. ⊚ ⊚

true false

87) Although many companies have lowered their overall cost structure and have improved the quality of their products by dispersing their production activities to locations around the world, this activity is confined primarily to large firms. ⊚ ⊚

true false

88) Sourcing goods and services from locations around the globe is known as the globalization of markets. ⊚ ⊚

89)

true false

General Agreement on Tariffs and Trade is what the acronym GATT stands for. ⊚ ⊚

true false

90) As markets globalize and an increasing proportion of business activity transcends national borders, there is a need for institutions to help manage, regulate and police the global market place. ⊚ ⊚

true false

28

91) The International Monetary Fund and the World Bank were both created in 1944 by 44 nations that met at Bretton Woods, New Hampshire. ⊚ ⊚

true false

92) The International Monetary Fund (IMF) is often seen as the leader of last resort to nation states whose economies are in economic turmoil. ⊚ ⊚

93)

true false

FDI occurs when a firm invests resources in business activities outside its home country. ⊚ ⊚

true false

94) In addition to reducing trade barriers, many countries have also been progressively removing restrictions on barriers to foreign direct investment. ⊚ ⊚

true false

95) The advanced nations of the East committed themselves after World War II to removing barriers to the free flow of goods, services, and capital between nations. ⊚ ⊚

true false

96) There is very little evidence that suggests that the lowering of trade barriers has facilitated the globalization of production.

29

⊚ ⊚

true false

97) Surprisingly, despite the importance of technology in our everyday lives, technological change has played only a minor role in the globalization of markets. ⊚ ⊚

98)

true false

Since the 1960s, the U.S. has dominated the world economy ⊚ ⊚

true false

99) Most forecasts now predict a rapid rise in world output accounted for by developing nations such as China, India, and South Korea, and a rapid decline in the share enjoyed by rich industrialized countries such as Canada and the United States. ⊚ ⊚

true false

100) Many of tomorrow's economic opportunities may be found in the developing nations of the world. ⊚ ⊚

true false

101) In the 1960s global business activity was dominated by large Japanese multinational corporations.

30

⊚ ⊚

true false

102) Beginning in the 1970s, European and Japanese firms began to shift labour-intensive manufacturing operations from their home markets to developing nations. ⊚ ⊚

true false

103) Although most international trade and investment is still conducted by large firms, small to medium sized firms are increasingly involved in international trade and investment. ⊚ ⊚

104)

true false

An MNE is any firm that invests outside of its home country. ⊚ ⊚

true false

105) Between 1995 and 2000 most countries in Eastern Europe saw their Communist governments collapse. ⊚ ⊚

true false

106) If what is occurring in China continues for two more decades, China may move from a developing to an industrial superpower status even more rapidly than Japan did. ⊚ ⊚

true false

31

107) The volume of cross-border trade and investment has been growing more rapidly than global output. ⊚ ⊚

true false

108) Economists argue that increased international trade and cross-border investments will result in higher prices for goods and services, although there are many benefits to globalization. ⊚ ⊚

true false

109) It is commonly believed that globalization stimulates economic growth, creates jobs, and raises income levels. ⊚ ⊚

true false

110) The United Kingdom's vote to withdraw from the European Union in 2016, known as "Brexit" can be seen as a popular protest vote. ⊚ ⊚

true false

111) If critics of globalization are correct, the decline in labour's share of national income must be due, in part, to moving production to low-wage countries. ⊚ ⊚

true false

32

112) A concern by some is that free trade encourages the movement of manufacturing from developed countries to less developed countries. ⊚ ⊚

113)

Free trade agreements can be tied to tougher environmental and labour laws. ⊚ ⊚

114)

true false

National sovereignty is not a concern for those critical of globalization. ⊚ ⊚

116)

true false

Some Canadian firms have outsourced jobs to developing countries. ⊚ ⊚

115)

true false

true false

Economic stagnation in some countries is caused in part by their form of government. ⊚ ⊚

true false

117) Managing an international business is not that different from running a purely domestic business.

33

⊚ ⊚

118)

true false

Members of the Fair Labour Association are not subject to independent monitoring. ⊚ ⊚

true false

34

Answer Key Test name: chapter 1 1) C 2) C 3) D 4) B 5) D 6) D 7) D 8) A 9) C 10) A 11) C 12) D 13) B 14) A 15) C 16) B 17) D 18) C 19) B 20) A 21) E 22) B 23) D 24) A 25) C 26) C 35

27) B 28) A 29) C 30) D 31) A 32) C 33) D 34) B 35) D 36) A 37) B 38) E 39) A 40) B 41) C 42) B 43) A 44) D 45) D 46) D 47) A 48) C 49) A 50) A 51) C 52) A 53) A 54) D 55) D 56) C 36

57) C 58) E 59) C 60) C 61) C 62) A 63) A 64) A 65) C 66) D 67) C 68) E 69) A 82) FALSE 83) TRUE 84) FALSE 85) FALSE 86) TRUE 87) FALSE 88) FALSE 89) TRUE 90) TRUE 91) TRUE 92) TRUE 93) TRUE 94) TRUE 95) FALSE 96) FALSE 97) FALSE 98) TRUE 37

99) TRUE 100) TRUE 101) FALSE 102) TRUE 103) TRUE 104) FALSE 105) FALSE 106) TRUE 107) TRUE 108) FALSE 109) TRUE 110) TRUE 111) TRUE 112) TRUE 113) TRUE 114) TRUE 115) FALSE 116) TRUE 117) FALSE 118) FALSE

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Chapter 2 Student name: 1)

According to the opening case, China is no longer dependent on Hong Kong for:

A) supply chain management B) high tech goods C) the manufactured goods D) the service economy E) a links to international trade

2)

Collectively, we refer to political, economic, and legal systems as constituting the economy of a country.

A) domestic B) civic C) administrative D) political E) governing

3)

The economy and legal systems of a country are shaped by its what?

A) civil system B) political economy C) political system D) judicial economy E) governance structure

4)

Political systems can be assessed according to two related dimensions:

Version 1

39

A) the degree to which they emphasize individualism opposed to totalitarian and the degree to which they are individualistic verses democratic B) the degree to which they are market orientated opposed to production orientated and the degree to which they are democratic verses individualistic C) the degree to which they emphasize social democracy opposed to communism and the degree to which they emphasize collectivism opposed to individualism D) the degree to which they emphasize collectivism opposed to individualism and the degree to which they are democratic or totalitarian E) the degree to which they emphasize capitalism as opposed to communism and the degree to which they emphasize cultural freedom as opposed to cultural monitoring

5)

The two dimensions of political systems are interrelated; systems that emphasize tend towards totalitarianism, while systems that place a high value on tend to be democratic.

A) individualism; collectivism B) collectivism; individualism C) socialism; individualism D) individualism; socialism E) theocracy; capitalism

6) individual goals.

refers to a system that stresses the primacy of collective goals over

A) Collectivism B) Capitalism C) Individualism D) Totalitarian E) Democracy

Version 1

40

7) When is practiced, the needs of society as a whole are generally viewed as being more important than individual freedoms.

A) totalitarianism B) collectivism C) individualism D) capitalism E) theocracy

8) is consistent with the notion that an individual's right to do something may be restricted because it runs counter to "the good of society" or "the common good."

A) Totalitarian B) Collectivism C) Autocratic D) Capitalism E) Platonism

9)

Modern

trace their intellectual roots to Karl Marx.

A) Separatists B) Capitalists C) Individualists D) Socialists E) Federalists

10) The group that believed that socialism could be achieved only through violent revolution and totalitarian dictatorship were referred to as:

Version 1

41

A) Communists B) Fascists C) Political democrats D) Collectivists E) Mensheviks

11) Followers of socialist ideology who commit themselves to achieving socialism through democratic reforms are called:

A) Communists B) Social democrats C) Individualists D) Political democrats E) New democrats

12)

The communist version of socialism reached its high point in the late

.

A) 1940s B) 1950s C) 1960s D) 1970s E) 1980s

13)

What country is the last major Communist power left?

Version 1

42

A) Russia B) China C) Vietnam D) North Korea E) Cuba

14)

Social democracy has had its greatest influence in the following group of countries:

A) Canada, United States, Mexico, and Spain B) India, Pakistan, Burma, Nepal, Sri Lanka, and Bhutan C) Brazil, Chile, Uruguay, Ecuador, Columbia, and French Guiana D) Australia, Britain, France, Germany, Norway, Spain, and Sweden E) Australia, Columbia, Venezuela, Cambodia, Brazil

15)

Experience has demonstrated that state ownership of the means of production:

A) often runs in parallel with the public interest B) is the most profitable way to organize production C) is the most efficient way to organize production D) often runs counter to the public interest E) leads to increased inefficiency, higher prices and higher taxes

16)

Which of the following definitions best describes the concept of individualism?

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A) Political system in which an individual is governed by laws created to limit corruption and exploitation.

B) Political system in which government is by the people, exercised either directly or through elected representatives.

C) Political system that stresses the primacy of collective goals over individual goals.

D) Form of government in which one person or political party exercises absolute control over all spheres of human life and in which opposing political parties are prohibited.

E) Political philosophy that an individual should have freedom over his or her economic and political pursuits.

17)

Which of the following can be traced to an ancient Greek philosopher, Aristotle?

A) collectivism B) individualism C) socialism D) totalitarianism E) theocracy

18) In contrast to collectivism, stresses that the interests of the individual should take precedence over the interests of the state.

A) totalitarianism B) socialism C) individualism D) collectivism E) tribalism

19)

Individualism is built on two central themes:

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A) socialism is the preferred political philosophy and an emphasis on the importance of collective interests over individual interests B) an emphasis on the importance of collective interests over individual interests and the belief that the welfare of society is best served by letting a collective body determine what is in society's best interest rather than individuals C) the needs of society as a whole are more important than individual freedoms and the welfare of society is best served by letting a collective body determine what is in society's best interest rather than individuals D) the public good is more important than corporate profits and the people exist to serve the state E) an emphasis on the importance of guaranteeing individual freedom and selfexpression and the belief that the welfare of society is best served by letting people pursue their own economic self-interest

20) The Cold War was essentially a war between , championed by the nowdefunct Soviet Union, and , championed by the United States.

A) collectivism; individualism B) democracy; socialism C) socialism; totalitarianism D) individualism; collectivism E) Stalinism; Reaganism

21) Which of the following is the political system in which government is by the people, exercised either directly or through elected representatives?

A) despotism B) democracy C) totalitarianism D) collectivism E) tribalism

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22) is a form of government in which one person or political party exercises absolute control over all spheres of human life, and opposing political parties are prohibited.

A) Capitalism B) Totalitarianism C) Democracy D) Collectivism E) Theocracy

23)

go "hand in hand."

A) Anarchy and individualism B) Collectivism and individualism C) Totalitarianism and democracy D) Democracy and collectivism E) Democracy and individualism

24) A political system in which citizens periodically elect individuals to represent them is referred to as a .

A) participatory collective B) totalitarianism democracy C) representative democracy D) socialistic democracy E) parliamentary democracy

25) In a representative democracy, if elected representatives fail to perform their job adequately, what will happen?

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A) a socialist democracy will take over B) a federalist republic will take over C) a collectivist federation will take over D) they will be voted out of office in the next election E) they will hold their offices for life

26) To guarantee that elected representatives can be held accountable for their actions by the electorate, an ideal representative democracy has a number of safeguards. Which of the following is not an example of a safeguard in an ideal representative democracy?

A) a fair court system that is independent from the political system B) universal adult suffrage C) an individual's right to freedom of expression, opinion, and organization D) a political police force and armed services E) regular elections

27) is a form of totalitarianism that advocates achieving socialism through totalitarian dictatorship.

A) Tribal totalitarianism B) Democratic totalitarianism C) Communist totalitarianism D) Collective totalitarianism E) Theocratic totalitarianism

28)

There are four major forms of totalitarianism in the world today. These are:

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A) collective, Marxist, right-wing, and ancestral B) theocratic, democratic, tribal, and communist C) communist, theocratic, tribal, and right-wing D) ancestral, Marxist, left-wing, and compiled E) tribal, Maoist, right-wing, and dictatorial

29)

All of the following are forms of totalitarianism except:

A) right-wing B) ancestral C) theocratic D) tribal E) communistic

30) A form of totalitarianism in which political power is monopolized by a party, group, or individual that governs according to religious principles is called .

A) right-wing totalitarianism B) theocratic totalitarianism C) ancestral totalitarianism D) tribal totalitarianism E) fundamental totalitarianism

31)

In which region of the world is tribal totalitarianism found?

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A) Africa B) Australia C) South America D) Asia E) Central America

32) Right-wing generally permits individual economic freedom, but restricts individual political freedom on the grounds that it would lead to a rise of communism.

A) socialism B) collectivism C) capitalism D) totalitarianism E) tribalism

33)

Which of the following are the three broad types of economic systems?

A) market economy, combined economy, production economy B) market economy, post-industrial economy, industrial economy C) combined economy, separate economy, mixed economy D) ordinance economy, production economy, political economy E) market economy, command economy, mixed economy

34)

All of the following are types of economic systems except:

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A) market economy B) command economy C) mixed economy D) progressive economy E) none of the answers are an example of a type of economic system

35) In a pure economy the good and services that a country products, and the quantity in which they are produced, is not planned by anyone. Rather it is determined by the interaction of supply and demand and signaled to producers through the price system.

A) ordinance B) market C) command D) combined E) free

36) In a pure command economy, the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold are all planned by:

A) private industry B) local trade associations C) individual entrepreneurs D) the government E) citizen committees

37) A is an economic system in which the goods and services produced, the quantity in which they are produced, and the prices at which they are sold are all planned by the government.

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A) civic economy B) administrative economy C) command economy D) market economy E) post-industrial economy

38) In a pure economy all businesses are state owned so the government can direct them to make investments that are in the best interests of the nation as a whole, rather than in the interest of private individuals.

A) command B) mixed C) market D) state-directed E) new

39) In a economy, certain sectors of the economy are left to private ownership and free market mechanisms, while in other sectors there is significant state ownership and government planning.

A) command B) combined C) mixed D) political E) socialist

40) What kind of economies were once very common throughout much of the world, although they are becoming less so?

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A) mixed B) state-directed C) command D) market E) regulated

41)

Canada could be described as having elements of both a economy.

economy and a

A) command; mixed B) mixed; regional C) market; regional D) command; regional E) market; mixed

42)

The

is influenced by the prevailing political system.

A) corporate system B) economic system C) technological system D) market system E) democratic

43) The of a country refers to the rules that regulate behaviour, along with the processes by which the laws of a country are enforced and through which redress for grievances is obtained.

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A) political system B) administrative system C) economic structure D) legal system E) ethical system

44) The system evolved in England over hundreds of years and is based on tradition, precedent, and custom.

A) civil B) theocratic C) common law D) economic law E) contract law

45) A codes.

law system is based on a very detailed set of laws organized into

A) judicial B) theocratic C) common D) traditional E) civil

46)

A law system that is based primarily on religious teachings, refers to a

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A) civil law system.

B) theocratic law system.

C) common law system.

D) traditional law system.

E) canon law system.

47)

Quebec is the only province in Canada to use the

law system.

A) common B) French C) canon D) civil E) judicial

48) Phillip is in the process of writing up a document that states his company will provide consulting on network applications for the next two weeks, for a specified amount of money.

Phillip is in the process of creating what?

A) a contract B) a contract law C) property law D) private action suit E) a memorandum of understanding

49) The parties to an agreement normally resort to the other has violated either the letter of the spirit of the agreement.

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when one party feels

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A) property law B) arbitration C) third-party mediator D) contract law E) the courts

50) The establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers.

A) United Nations Convention on Contracts for the International Sale of Goods B) The foreign practices act C) State directed economy D) The United Nations Human Development E) The Canadian Government

51) The bundle of legal rights over the use to which a resource is put; and over the use made of any income that may be derived form that resource are called rights.

A) statutory B) asset C) taxable D) property E) users

52) The violation of and through public action.

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can be violated in two ways—through private action

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A) patents B) copyrights C) warrants D) property rights E) individual rights

53) The Canadian legislation that makes bribery of a foreign official by a Canadian business person a criminal offense is known as what?

A) Foreign Corrupt Practices Act B) Copyright infringement C) Corruption Perceptions Index D) Law OECD 1998 E) Bill S-21

54)

Which of the following describes the concept of intellectual property?

A) Exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit.

B) Property, such as computer software, screenplays, musical scores, or chemical formulas for new drugs, that is the product of intellectual activity.

C) Designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products.

D) Document giving the inventor of a new product or process exclusive rights to the manufacturer, use, or sales of that invention.

E) Property that can be digitized and copied

55) Suppose you invent a new product and want to obtain the exclusive rights to manufacture the product. To protect yourself, you should apply for a on the product.

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A) trust B) patent C) copyright D) trademark E) logo

56) Suppose Apple corporation develops a new type of phone. Apple can protect its invention through what kind of protection?

A) warrant B) patent C) copyright D) trademark E) contract

57) are the exclusive legal rights of authors, composers, playwrights, artists, and publishers to publish and dispose of their work as they see fit.

A) Patents B) Copyrights C) Trusts D) Licenses E) Franchises

58) A composer is able to protect an original musical score from being copied and sold by someone else through protection.

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A) patent B) warrant C) trademark D) copyright E) logo

59) are designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products.

A) Copyrights B) Patents C) Warrants D) Trademarks E) Logos

60) As a result of protection, the Nike "swoosh" logo is protected from being used by any other shoe manufacturer.

A) logo B) copyright C) patent D) warrant E) trademark

61)

Patents, copyrights, and trademarks are examples of

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property laws.

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A) intellectual B) administrative C) official D) central E) individual

62) "Windows" is a computer operating system that is an exclusive Microsoft corporation.

of the

A) sticker B) hallmark C) registry D) trademark E) brand

63)

Generally speaking, international laws about intellectual property rights are

.

A) Not part of TRIPS B) Not affected by the lobbying of specific firms C) Roughly the same as they were two decades ago D) Being weakened E) Being strengthened

64)

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set certain safety standards to which a product must adhere.

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A) Turnout safety laws B) Product liability laws C) Product safety laws D) Contract liability laws E) Civil laws

65) liability involves holding a firm and its officers responsible when a product causes injury, death, or damage.

A) Turnout B) Contract C) Product D) Outcome E) Business

66) According to the textbook, the shadow economy includes the following unofficial transactions

A) Unrecorded cash B) Barter agreements C) Unreported assets D) A and B E) All of these options

67) countries.

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allows for a more direct comparison of living standards in different

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A) PPP B) UPN C) EOC D) IOF E) GNI

68)

GNP is increasingly being replaced by

.

A) PPP B) Atlas conversion C) GNI D) Atlas methodology E) IOF

69)

What does the acronym GNP stand for?

A) gross national profile B) gross national product C) gradual notational profile D) general natural productivity E) government natural product

70)

PPP is an acronym that stands for:

A) power purchasing procedures B) procurement priority procedures C) priority patent procedures D) purchasing power parity E) parallel parametric purchasing

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71)

In 2001, the World Bank has chosen to replace GNP with

.

A) GDP B) aggregate demand and aggregate supply C) GRP D) PPP E) GNI

72) The United Nations index is based on life expectancy, literacy rates, and whether average incomes are sufficient to meet the basic needs of life in a country.

A) Human Development B) Standard of Living C) Quality of Life D) Economic Development E) UNICEF

73)

Amartya Sen believed that development should be assessed more by measures such as .

A) Aggregate demand B) Aggregate supply C) PPP D) HDI E) GNP

74)

The Human Development Index is scaled from 0 to 1. Countries scoring less than are classified as low human development (the quality of life is poor).

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A) 25 B) 50 C) 75 D) 33 E) 65

75) There is fairly wide agreement that run economic growth.

and

are the engines of long-

A) small business; free markets B) government; consumer demand C) innovation; entrepreneurship D) agriculture; manufacturing E) exports; domestic sales

76) What is the process through which people create new products, new processes, new organization, new management practices, and new strategies called?

A) bureaucracy B) administration C) development D) innovation E) invention

77) It has been argued that the economic freedom associated with a creates greater incentives for innovation than either a planned or mixed economy.

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A) production B) market C) commercial D) manufacturing E) consumer

78) Besides a country's political and economic systems, another driver of economic development includes?

A) PPP B) Geography C) History D) UN E) ITB

79) Since the late 1980s two major trends have emerged in the political economies of many of the world's national states. These are:

A) a wave of communist revolutions have swept the world and there has been a strong move away from free market economies toward more centrally planned economies.

B) a wave of socialistic revolutions have swept the world and there has been a strong move away from free market economies toward more centrally planned and mixed economies.

C) a wave of democratic revolutions have swept the world and there has been a strong move away from centrally planned and mixed economies toward more free market economies.

D) a wave of totalitarian revolutions have swept the world and there has been a strong move away from centrally planned and mixed economies toward more free market economies.

E) a wave of consumer empowerment and there has been a strong move away from common law and towards civil code.

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80) Which of the following is one of the three main reasons for the spread of democracy worldwide?

A) the spread of democracy has been unchallenged worldwide B) in many countries the economic advances of the past 25 years have led to the emergence of increasingly prosperous middle and working classes, which have pushed for democratic reforms C) geography D) privatization E) intellectual property rights

81) Political scientist believes there is no universal civilization based on widespread acceptance of Western liberal democratic ideals.

A) Samuel Huntington B) Francis Fukuyama C) Michael Porter D) Paul Krugman E) John Maynard Keynes

82)

Privatization refers to:

A) the selling of state-owned enterprises to private investors B) the selling of public corporations to private investors C) guarding company secrets from the general public D) transferring political power from the government to private citizens E) reducing regulation of private business

83)

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is the process of selling state-owned enterprises to private investors.

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A) Political-economic divestiture B) Privatization C) Downsizing D) Ownership-transfer E) Nationalization

84) The shift to system typically involves deregulation, privatization and a legal system that protects property rights.

A) a democratic B) a market-based economic C) privatized D) a state-ownership E) Communist

85) Which of the following involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate?

A) privatization B) simplification C) deregulation D) socialism E) competition

86) The movement started in Britain in the early 1980s when then-Prime Minister Margaret Thatcher started to sell state-owned assets.

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A) modification B) simplification C) privatization D) deregulation E) anti-nationalization

87) individuals.

transfers the ownership of state property into the hands of private

A) Privatization B) Simplification C) Deregulation D) Socialism E) Nationalization

88) Without a the incentive to engage in economic activity can be reduced substantially by private and public entities.

A) Political system B) Legal system C) Freedom system D) Accounting system E) Property system

89)

An example of an institutional weakness that undermines contract enforcement is what?

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A) Monetary systems B) Freedom indices C) Entrepreneurship D) Privatization E) Court capacity

90) A World Bank study suggests that post-Communist states that successfully transformed their economies followed what type of economic policy?

A) Monetary policy B) Privatization C) Changing political economy D) Shock therapy E) Socialism

91) Around the world, the tide has turned against command economies in favour of free markets and what?

A) Monetary policy B) Socialism C) Dictatorships D) Fiscal policy E) Democracy

92) What is meant by the term "political system?" What are the two related dimensions by which a political system can be assessed?

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93) Describe the difference between collectivism and individualism. Are these two ideologies compatible or in direct conflict? Which ideology seems to be gaining ground and which ideology is waning? Is this good news or bad news for international commerce? Explain your answer.

94) A political system can be described in terms of whether it is more oriented towards collectivism or individualism. Is Canada oriented more towards collectivism or individualism?

95) Draw a distinction between democracy and totalitarianism. Which political system facilitates the development of a free market economic system? Why?

96) What is intellectual property? What is the philosophy behind intellectual property law?

Why is it so important to protect intellectual property rights? Are the laws that protect intellectual property rights fairly consistent across nations, or do they vary widely? Is this a problem?

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97) A Canadian developer of software for automated coal mining equipment has been approached by a Russian mining conglomerate with an offer to cooperate on adapting the software to the Russian market. If the Canadian company agreed to work with the Russian company, they would have to reveal the software's source code (the source code is the key to software and is used to protect proprietary technology).

What are the "pros" of entering such an agreement?

98) How important is innovation in economic progress? Does innovation have a better chance of catching hold in a market economy or a planned economy? Explain your answer.

99) The closing case on Tunisia's legacy of corruption describes how it led to continued restrictions on domestic and foreign investment. What are the costs to the country of restricting FDI and of corruption? What changes would be needed to address the costs?

100)

The political, economic, and legal systems of a country are called the political economy. ⊚ ⊚

true false

101) A system that stresses the primacy of collective goals over individual goals is called collectivism.

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⊚ ⊚

102)

Many social democratic governments nationalize private companies. ⊚ ⊚

103)

true false

true false

There is essentially no relationship between collectivism and socialism. ⊚ ⊚

true false

104) Individualism is opposite to collectivism. In a political sense, individualism refers to a philosophy that an individual should have freedom in his or her economic and political pursuits. ⊚ ⊚

true false

105) A form of government in which one person or political party exercises absolute control over all spheres of human life, and opposing political parties are prohibited is referred to as totalitarianism. ⊚ ⊚

true false

106) The four major forms of totalitarianism are: communist totalitarianism, theocratic totalitarianism, tribal totalitarianism, and right-wing totalitarianism. ⊚ ⊚

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true false

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107) Tribal totalitarianism is found in states where political power is monopolized by a party, group, or individual that governs according to religious principles. ⊚ ⊚

108)

true false

The rise of totalitarianism is a notable development of the last 30 years. ⊚ ⊚

true false

109) In a market economy the goods and services that a country produces, and the quantity in which they are produced, is not planned by anyone. Rather, it is determined by the interaction of supply and demand and signaled to producers through the price system. ⊚ ⊚

110)

true false

There must be no restrictions on supply for a pure market economy to work. ⊚ ⊚

true false

111) In a pure command economy, the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold are all planned by the government. ⊚ ⊚

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true false

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112) Command economies are relatively common among the states of Western Europe, although they are becoming less so. France, Italy, and Canada can all be classified as command economies. ⊚ ⊚

113)

true false

There has been a shift away from mixed economies as democracy spread since the 1980s. ⊚ ⊚

true false

114) Laws protecting private property rights and providing mechanisms for contract enforcement are not required for a well-functioning market economy. ⊚ ⊚

true false

115) Contract law, civil law, and theocratic law are the three main types of legal systems in use around the world. ⊚ ⊚

116)

true false

Laws that protect property rights are important for a market economy to function. ⊚ ⊚

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true false

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117) Property rights refer to the bundle of legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource. ⊚ ⊚

118)

true false

Public action of property rights refers to theft, piracy, and blackmail. ⊚ ⊚

true false

119) In Canada, the Foreign Corrupt Practices Act was passed during the 1960s following revelations that Canadian companies had bribed government officials in foreign countries in an attempt to win lucrative contracts. ⊚ ⊚

true false

120) Bill S-21 entered into force in 1999 to prevent foreign companies from paying bribes to Canadian government officials for lucrative contracts. ⊚ ⊚

true false

121) The U.S. law enacted in 1977 that prohibits U.S. companies from making "corrupt" payments to foreign officials for the purpose of obtaining or retaining business is the Foreign Corrupt Practices Act. ⊚ ⊚

122)

true false

The extortion of income from property holders by public officials is called private action.

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⊚ ⊚

true false

123) A copyright grants the inventor of a new product or process exclusive right to the manufacture, use, or sales of that invention. ⊚ ⊚

true false

124) A patent grants the investor of a new product or process exclusive rights to the manufacture, use, or sale of that invention. ⊚ ⊚

true false

125) Designs and names, often officially registered, by which merchants or manufacturers designate and differentiate their products (e.g., Christian Dior clothes) are called patents. ⊚ ⊚

true false

126) Historically, the enforcement of intellectual property rights has been fairly consistent across countries. ⊚ ⊚

true false

127) The Paris Convention for the Protection of Industrial Property is an international agreement signed by countries to protect intellectual property rights.

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⊚ ⊚

true false

128) Product liability involves holding a firm and its officers responsible when a product causes injury, death, or damage. ⊚ ⊚

true false

129) Three of the most important factors for global firms when deciding where to locate are political, economic, and legal systems of a country. ⊚ ⊚

true false

130) A purchasing power parity adjustment allows for a more direct comparison of living standards in different countries. ⊚ ⊚

true false

131) The Human Development Index is based on three measures: per capita income, life expectancy, and poverty rate. ⊚ ⊚

132)

true false

There is a strong relationship between economic freedom and economic growth. ⊚ ⊚

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true false

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133)

A growth factor that has received recent attention is geography. ⊚ ⊚

true false

134) Free market economics have been supported in part by the shift toward democracy in many countries. ⊚ ⊚

true false

135) The failure of totalitarian regimes to deliver economic progress helped democracy to spread. ⊚ ⊚

true false

136) Francis Fukuyama sees a world split into different civilizations, each with its own value system and ideology. ⊚ ⊚

true false

137) Since the 1980s there has been a widespread transformation from market-based economies to centrally planned economics. ⊚ ⊚

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true false

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138)

Privatization transfers the ownership of private property into the hands of the state. ⊚ ⊚

139)

Deregulation is the transfer of ownership of state property to individuals ⊚ ⊚

140)

true false

true false

The ownership structure of newly privatized firms is important. ⊚ ⊚

true false

141) A problem with many former Communist states is the lack of a legal system that protects property rights ⊚ ⊚

true false

142) Most Eastern European countries began to liberalize their economies beginning in the 1970s. ⊚ ⊚

true false

143) An implication of the growth of market-based economies is the opening up of many new global markets. ⊚ ⊚

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true false

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Answer Key Test name: chapter 2 1) E 2) D 3) C 4) D 5) B 6) A 7) B 8) B 9) D 10) A 11) B 12) D 13) B 14) D 15) E 16) E 17) B 18) C 19) E 20) A 21) B 22) B 23) E 24) C 25) D 26) D Version 1

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27) C 28) C 29) B 30) B 31) A 32) D 33) E 34) D 35) B 36) D 37) C 38) A 39) C 40) A 41) E 42) B 43) D 44) C 45) E 46) B 47) D 48) A 49) D 50) A 51) D 52) D 53) E 54) B 55) B 56) B Version 1

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57) B 58) D 59) D 60) A 61) A 62) D 63) E 64) C 65) C 66) D 67) A 68) C 69) B 70) D 71) E 72) A 73) D 74) B 75) C 76) D 77) B 78) B 79) C 80) B 81) A 82) A 83) B 84) B 85) C 86) C Version 1

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87) A 88) B 89) E 90) D 91) E 100) TRUE 101) TRUE 102) TRUE 103) FALSE 104) TRUE 105) TRUE 106) TRUE 107) FALSE 108) FALSE 109) TRUE 110) TRUE 111) TRUE 112) FALSE 113) TRUE 114) FALSE 115) FALSE 116) TRUE 117) TRUE 118) FALSE 119) FALSE 120) FALSE 121) TRUE 122) FALSE 123) FALSE 124) TRUE Version 1

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125) FALSE 126) FALSE 127) TRUE 128) TRUE 129) TRUE 130) TRUE 131) FALSE 132) TRUE 133) TRUE 134) TRUE 135) TRUE 136) FALSE 137) FALSE 138) FALSE 139) FALSE 140) TRUE 141) TRUE 142) FALSE 143) TRUE Chapter 3 Student name: 1)

According to the opening case:

A) Uber will soon expand in China.

B) Uber has no competition in China.

C) Uber has not been successful in Japan.

D) Consumers act the same way in all countries.

E) Expansion into China is not easy.

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2) defined culture as "the collective programming of the mind which distinguishes the members of one human group from another."

A) David Ricardo B) Michael Porter C) Geert Hofstede D) Raymond Vernon E) Zvi Namenwirth

3) A is a system of values and norms that are shared among a group of people and that when taken together constitute a design for living.

A) society B) clique C) fraternity D) culture E) more

4)

A group of people who share a common set of values and norms is known as what?

A) clique B) society C) organization D) anthropocentrism E) culture

5) A desirable.

is an abstract idea about what a group believes to be good, right, and

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A) criterion B) value C) culture D) norm E) more

6)

A

is a group of people who share a common set of values and norms.

A) cohort B) society C) fellowship D) fraternity E) community

7)

are the two central components of culture.

A) Ethics and laws B) Values and norms C) Religious beliefs and family tradition D) Class consciousness and social mobility E) Language and religious beliefs

8) Beth Green, a manager at Beth's Poutine Corporation, believes in empowerment, upward mobility and motivating her employees. This describes her

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A) criterion B) values C) norms D) culture E) ethics

9) Which of the following are social rules and guidelines that prescribe appropriate behaviour in particular situations?

A) ethics B) norms C) principles D) models E) folkways

10)

An act as simple as shaking hands when meeting new people is an example of practicing

A) values B) customs C) culture D) criterion E) norms

11)

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form(s) the bedrock of culture.

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A) Values B) Norms C) Personality D) Criterion E) Religion

12)

Folkways are a form of

.

A) conduct B) culture C) norms D) values E) society

13)

are the two major categories of norms.

A) Routines and values B) Conduct and culture C) Rites and rituals D) Values and mores E) Folkways and mores

14) are social conventions concerning things such as the appropriate dress code in a particular situation, good social manners, eating with the correct utensils, neighbourly behaviour, and the like.

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A) Rites B) Rituals C) Mores D) Folkways E) Etiquette

15)

are norms that are central to the functioning of a society and to its social life.

A) Mores B) Codes C) Procedures D) Policies E) Norms

16) Appropriate dress code, good social manners, eating with the correct utensils, and neighbourly behaviour are all examples of

A) norms.

B) folkways.

C) values.

D) culture.

E) etiquette.

17)

Nation states:

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A) are political creations.

B) can contain one culture.

C) can contain several cultures.

D) are political creations that can contain one or several cultures.

E) None of these answers are correct.

18) and

Although there are many different aspects of social structure, two main dimensions---stand out when explaining differences between cultures.

A) the degree to which the basic unit of social organization is the group; the degree to which the basic unit of society is a clique B) the degree to which the basic unit of social organization is the individual; the degree to which a society is heterogeneous C) the degree to which the basic unit of social organization is the extended family; the degree to which the basic unit of society is heterogeneous D) the degree to which the basic unit of social organization is the individual; the degree to which a society is stratified into classes or castes E) the degree to which there are different languages the degree to which there are income differences

19)

Culture is formed by a country's:

A) Political philosophy B) Economic philosophy C) Social structure D) Dominant religion E) All of these options

20)

A society's

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A) "social bureaucracy" B) "social regime" C) "social structure" D) "social hierarchy" E) "social mobility"

21) Which of the following is an association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other's behaviour?

A) assemblage B) group C) norm D) society E) community

22) In a family, individuals interact together to create a sense of identity and character. A family would be an example of

A) a society.

B) a norm.

C) a group.

D) an assembly.

E) community.

23) According to our textbook, while groups are found in all societies, societies differ according to the degree to which the group is viewed as:

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A) the primary means of social mobility B) the primary means of determining social psychology C) the primary means of determining social norms D) the primary means of interpersonal communication E) the primary means of social organization

24) The high level of entrepreneurial activity in Canada and the United States can be attributed in part to the high level of emphasis placed on the in those societies.

A) group B) cadre C) community D) individual E) innovation

25) A focus on the "individual" rather than the "group" is evident in many cultures.

A) Asian B) Western C) South American D) African E) Developed country

26)

In contrast to the Western emphasis on the is the primary unit of social organization.

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, in many other societies the

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A) individual; group B) group; clan C) coterie; individual D) clan; group E) individual; karoshi

27)

The importance attached to

is a central value of the Japanese culture.

A) individualism B) group membership C) personal distinctiveness D) personal individuality E) haiku

28)

All societies are stratified on a hierarchical basis into social categories, or:

A) social strata B) norm based strata C) social segments D) norm based associations E) class based hierarchies

29) Which of the following refers to the extent to which individuals can move out of the strata into which they are born?

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A) vertical mobility B) social potential C) social mobility D) vertical potential E) social democracy

30)

A caste system is a rigid system of:

A) family esteem B) social potential C) social segments D) norm based associations E) social mobility

31)

The most rigid system of stratification is a

system.

A) degree B) caste C) cross-cultural D) class E) Indian

32) A system is a closed system of stratification in which social position is determined by the family into which a person is born, and change in that position is usually not possible during an individual's lifetime.

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A) rank B) caste C) criterion D) position E) socioeconomic

33) Although the number of societies with caste systems has diminished rapidly during the 20 th century, one major example still remains. This example is:

A) China B) Japan C) Britain D) India E) Indonesia

34) A form of in which the position a person has by birth can be changed through his or her own achievements or luck is a class system.

A) horizontal stratification B) closed stratification C) open stratification D) vertical stratification E) indirect stratification

35) Individuals born into a at the bottom of the hierarchy can work their way up, while individuals at the top can work their way down.

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A) class system B) caste system C) mobile system D) indirect system E) open system

36)

Historically, British society has been divided into three main classes:

A) the upper class, the middle class, and the working class B) the topmost class, the central class, and the bottom class C) the preferred class, the medium class, and the lower class D) the higher class, the central class, and the lower class E) the monarchy, the aristocracy, and the commoners

37) The class system in greater.

is less extreme than in

and mobility is

A) Germany; Canada B) The United States; Great Britain C) Japan; the United States D) Great Britain; the United States E) Great Britain; Canada

38) What type of consciousness refers to a condition where people perceive themselves in terms of their class background, and this shapes their relationships with members of other classes?

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A) social B) rank C) class D) norm E) collective

39)

The

in Canada is less extreme than in Britain and mobility is greater.

A) social system B) class system C) norm system D) rank system E) caste system

40) A form of has been played out in British society in the traditional hostility between-upper-middle class managers and their working class employees.

A) class consciousness B) denominational awareness C) social awareness D) category mindfulness E) labour unrest

41) The system of shared beliefs and rituals that are concerned with the realm of the sacred is referred to as .

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A) religion B) persuasion C) norming D) divinity E) spirituality

42) systems refer to a set of moral principles, or values, that are used to guide and shape behaviour.

A) Class B) Ethical C) Social D) Norming E) Moral

43)

Most of the world's ethical systems are the product of:

A) economic heritage B) political heritage C) historical norms D) philosophies E) religion

44) are:

While there are thousands of different religions in the world, the four that are the largest

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A) Christianity, Islam, Confucianism, and Shinto B) Judaism, Islam, Shinto, and Confucianism C) Christianity, Islam, Hinduism, and Buddhism D) Confucianism, Shinto, Taoism, and Islam E) Islam, Judaism, Evangelism, Fundamentalism

45)

The largest faith based group in Canada is

.

A) Sikhism B) Islam C) Judaism D) Hinduism E) Christianity

46) The relationship between religion and ethical systems on the one hand and business practice on the other is probably: .

A) large compared to the impact of economic policy B) large compared to the impact of culture C) small compared to the impact of economic policy D) small compared to the impact of culture E) large and growing

47)

The most widely practiced religion in the world, according to the textbook, is probably .

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A) Christianity B) Buddhism C) Islam D) Confucianism E) Hinduism

48)

The vast majority of Christians live in:

A) Europe and the Americas B) Asia and Australia C) North and South America D) Eastern Europe and Asia E) Oceania and Africa

49) In 1904, a German sociologist, and "the spirit of capitalism."

, made a connection between Protestant ethics

A) Abraham Maslow B) Max Weber C) George Williams D) John Wesley E) Martin Luther

50) In 1904, Max Weber, a German sociologist, made a connection between Protestant ethics and "the spirit of ."

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A) specialization B) capitalism C) communism D) socialism E) entrepreneurship

51) Max Weber argued that the promise of salvation in the next world, rather than this world, did not foster the same work ethic as Protestantism.

A) Hindu B) Islam C) Confucian D) Buddhist E) Catholic

52) With estimates of about 1.7 billion adherents, world's major religions.

is the second largest of the

A) Christianity B) Confucianism C) Islam D) Buddhism E) Hinduism

53)

According to your text, Islam dates back to

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A) 415 A.D. B) 569 A.D. C) 610 A.D. D) 705 A.D. E) 435 A.D.

54)

is not one of the major principles of Islam.

A) Being pretentious B) Being generous but not a squanderer C) Avoiding killing except for justifiable causes D) Dealing justly and equitably with other E) Monotheism

55) Who lives in a social structure that is shaped by Islamic values and norms of moral conduct?

A) Buddhist B) Christian C) Confucian D) Muslim E) Catholic

56)

The country in which the Islamic fundamentalists have been the most successful is .

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A) China B) India C) Iran D) South Korea E) Afghanistan

57)

Which of the following principles is not consistent with the teachings of the Koran?

A) the protection of the rights of private property B) earning a legitimate profit through trade C) free enterprise D) earning profit through the exploitation of others E) ownership of property is a trust given by God

58) The Koran and commerce.

of free enterprise and of earning legitimate profit through trade

A) speaks approvingly B) does not address the issue C) speaks critically D) forbids the practice E) limits the use

59) As long as international business to those businesses.

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A) employ Islamic people B) have property in an Islamic nation C) behave in a manner that is consistent with Islamic ethics D) adhere to Islamic beliefs E) adheres to Sharia law

60) One economic principle of that has received particular attention is the prohibition of the payment or receipt of interest, which is considered usury.

A) Islam B) Christianity C) Hinduism D) Confucianism E) Buddhism

61)

Which of the following religions prohibits the payment or receipt of interest?

A) Christianity B) Islam C) Confucianism D) Hinduism E) Buddhism

62)

What is the world's oldest major religion?

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A) Buddhism B) Islam C) Confucianism D) Hinduism E) Christianity

63) subcontinent.

has approximately 1.1 billion adherents, most of them in the Indian

A) Confucianism B) Buddhism C) Islam D) Hinduism E) Shintoism

64) believe there is a moral force in society that requires the acceptance of certain responsibilities, called dharma.

A) Muslims B) Hindus C) Christians D) Confucians E) Agnostics

65)

The terms dharma, karma, and nirvana are associated with the

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A) Hindu B) Christian C) Buddhist D) Islamic E) Jewish

66) The most able individuals in a business organization may find their route to the higher levels of the organization blocked simply because they come from lower castes, under the teachings of .

A) Hinduism B) Christianity C) Islam D) Buddhism E) Shintoism

67) was founded in India in the sixth century BC by Siddhartha Gautama, an Indian prince who renounced his wealth to pursue an ascetic lifestyle and spiritual perfection.

A) Confucianism B) Islam C) Christianity D) Hinduism E) Buddhism

68)

Buddhists are found primarily in the following areas:

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A) The Middle East and Eastern Africa B) Central and Southeast Asia, China, Korea, and Japan.

C) Western Europe and North America D) South America E) Southern Africa and the Persian Gulf region

69) was the official ethical system of China for more than 2,000 years until the 1949 Communist revolution.

A) Buddhism B) Hinduism C) Confucianism D) Christianity E) Shintoism

70)

Individuals that following the teaching of Confucius are found primarily in:

A) North America and Western Europe B) Eastern Europe and the republics of the former Soviet Union C) The Middle East and Eastern Africa D) China, South Korea, and Japan E) Cambodia, Myanmar, Thailand

71) The religion that is built around a comprehensive ethical code that establishes guidelines for relationships with others is called .

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A) Buddhism B) Hinduism C) Confucianism D) Christianity E) Islam

72) Central to the obligations, and honesty.

system of ethics are the values of loyalty, reciprocal

A) Buddhist B) Islamic C) Hindu D) Confucian E) Socialism

73)

The "mother tongue" of the most number of people in the world is:

A) German B) English C) French D) Spanish E) Chinese

74)

The language of international business is increasingly becoming:

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A) Spanish B) English C) French D) Japanese E) Chinese

75) Based on recent trends in international business, when Japanese and German businesspeople get together to do business, it is almost certain that they will communicate in:

A) French B) German C) Japanese D) English E) Esperanto

76)

Unspoken language is referred to as:

A) discrete communication B) nonverbal communication C) silent communication D) passive communication E) invisible communication

77)

Michael Porter's analysis attributes Japan's post-war success to:

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A) a strong work ethic B) educated, literate and skilled human resources C) a strong value system D) investment in IT E) a strong supply chain

78)

Geert Hofstede isolated five dimensions that he claimed summarized different cultures. is not one of Hofstede's dimensions.

A) Capitalistic versus socialistic B) Masculinity versus femininity C) Power distance D) Uncertainty avoidance E) long-term versus short-term

79) by:

The most famous study of how culture relates to values in the workplace was undertaken

A) Geert Hofstede B) Thomas Peters C) Michael Porter D) George Baker E) Sigmund Freud

80) Countries that let inequalities grow over time into inequalities of power and wealth were considered to have

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A) low uncertainty avoidance.

B) low power distance.

C) high uncertainty avoidance.

D) high power distance.

E) short-term orientation.

81) In his studies, Hofstede isolated four dimensions that he claimed summarized different cultures. These were:

A) individualism versus collectivism, power distance, tolerant versus intolerant, and aggressive verses passive B) uncertainty avoidance, masculinity versus femininity, individual versus group oriented, forward versus reserved C) aggressive verses passive, tolerant versus intolerant, power distance, and individual versus group oriented, junior versus senior D) uncertainty avoidance, masculinity versus femininity, innovative versus stereotypical, forward versus reserved E) power distance, individualism versus collectivism, uncertainty avoidance, and masculinity versus femininity

82) A strong need for rules and regulations, with a premium of job security, career patterns, and retirement benefits, would best describe a culture with

A) low uncertainty avoidance.

B) low power distance.

C) high uncertainty avoidance.

D) high power distance.

E) masculine values.

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83) Which of Hofstede's dimensions focuses on how a society deals with the fact that people are unequal in physical and intellectual capabilities?

A) individualism versus collectivism B) uncertainty avoidance C) power distance D) masculinity versus femininity E) time orientation

84) Canada's masculinity rating is 52 as compared to Japan's which is 95. This means that Canada than Japan.

A) has many more women staying at home in the traditional role of housewife and mother B) accepts males as being better adapted to be supervisors and managers C) is less willing to accept high levels of risk D) is more focused on saving money and sticking to a task E) is more liberated and sex roles are not as sharply defined

85) Hofstede's his or her followers.

dimension focused on the relationship between the individual and

A) individualism versus collectivism B) aggressive versus passive C) masculinity versus femininity D) power distance E) time orientation

86) Hofstede's dimension measured the extent to which different cultures socialized their members into accepting ambiguous situations.

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A) masculinity versus femininity B) power distance C) individualism versus collectivism D) time orientation E) uncertainty avoidance

87) Which of Hofstede's dimensions looked at the relationship between gender and work roles?

A) power distance B) masculinity versus femininity C) individualism versus collectivism D) uncertainty avoidance E) time orientation

88) According to Hofstede's Model, which group of nations score high on the individualism scale and low on the power distance scale?

A) advanced western nations such as the United States, Canada, and Britain B) South American nations such as Brazil, Peru, and Ecuador C) Asian nations such as Japan, South Korea, and Singapore D) African nations such as Zaire, Sudan, and Chad E) Middle East countries such as Turkey, Syria and Iran

89) According to Hofstede's Model, what country stands out as having a culture with strong uncertainty avoidance and high masculinity?

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A) United States B) Japan C) Australia D) Germany E) Canada

90)

Which attitude according Hofstede, is not captured by Confucian dynamism?

A) persistence B) protection of face C) time orientation D) personal initiative E) respect for tradition

91)

Cultures many change due to what?

A) initiative B) economic progress C) intolerance D) individualism E) domestic superiority

92) Describe what is meant by the term "culture." Differentiate between the terms culture, values, and norms.

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93) What are the two dimensions of a society's social structure that stand out as being of particular importance when explaining differences between cultures?

94) Describe the concept of social mobility. Does social mobility vary significantly from society to society? Describe the extremes in terms of a society that has low social mobility and a society that has high social mobility. Would you rather live in a society with a high level or a low level of social mobility? Why?

95) What is meant by the term "class consciousness?" Under what circumstances can class consciousness be bad?

96) What is meant by the Protestant work ethic? What impact has the Protestant work ethic had on the emergence of modern day capitalism?

97) What are some of the similarities between Islam and Christianity as they related to the practice of business?

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98)

Explain the term "guanxi" and its importance in doing business in China.

99) Hofstede isolated four dimensions that he claimed characterized the cultures of different countries. Briefly describe each of Hofstede's four dimensions. Should Hofstede's dimensions be used by managers to determine how cultures differ and what that might mean for management practices?

100) What was the fifth dimension added to Hofstede's four dimensions? In which countries would this dimension be most useful?

101) You have just been hired by the Canadian head office to review management styles in various countries around the world. Prior to undertaking this review, you are briefed on key problem areas. Among the key areas in Japan that are of concern to the head office is the influence of the keiretsu system that may keep the Canadian company on the margins.

There are other problems, but these seem to be the most acute. As an international business management expert, you know that many of the problems you have been told about relate to cultural values. How could the Canadian company make inroads in Japan?

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102) A system of values and norms that are shared among a group of people and that when taken together constitute a design for living is referred to as culture. ⊚ ⊚

103)

A society refers to a group of people who share a common set of values and norms. ⊚ ⊚

104)

true false

Norms are abstract ideas about what a group believes to be good, right, and desirable. ⊚ ⊚

105)

true false

true false

Folkways are the routine conventions of everyday life. ⊚ ⊚

true false

106) Norms that are central to the functioning of a society and to its social life are called mores. ⊚ ⊚

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true false

117

107) In terms of social structure, Western societies tend to emphasize the primacy of the group, while individuals tend to figure much larger in many other societies. ⊚ ⊚

108)

true false

Values and norms of a culture emerge fully formed. ⊚ ⊚

true false

109) Two dimensions are particularly important when explaining differences between cultures—the degree to which the basic unit of social organizations is the individual, as opposed to the group; and the degree to which a society is stratified into classes. ⊚ ⊚

true false

110) A group is an association of two or more individuals who have a shared sense of identity and who interact with each other in structured ways on the basis of a common set of expectations about each other's behaviour. ⊚ ⊚

true false

111) The primacy of the value of group identification discourages managers and workers from moving from company to company. ⊚ ⊚

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true false

118

112) Social strata refer to the extent to which individuals can move out of the strata into which they are born. ⊚ ⊚

true false

113) A class system is a more rigid form of social stratification in which social mobility is less possible. ⊚ ⊚

true false

114) Class consciousness refers to a condition where people tend to perceive themselves in terms of their class background, and this shapes their relationships with members of other classes. ⊚ ⊚

true false

115) The relationship among religion, ethics, and society is straightforward and relatively easy to discern. ⊚ ⊚

true false

116) Religion is a system of shared beliefs and rituals that are concerned with the realm of the sacred. ⊚ ⊚

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true false

119

117) Some sociologists have argued that of the two main branches of Christianity-Catholicism and Protestantism-the former has the most important economic implications. ⊚ ⊚

true false

118) Islam is the second largest of the world's major religions, with about 1.7 billion adherents. ⊚ ⊚

true false

119) The past two decades have witnessed a growth of a social movement often referred to as "Islamic fundamentalism." ⊚ ⊚

120)

true false

Many of the economic principles of Islam are anti-free enterprise. ⊚ ⊚

true false

121) The prohibition of the payment or receipt of interest is one economic principle of Islam that has received particular attention. ⊚ ⊚

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true false

120

122) According to Max Weber, the ascetic principles embedded in Hinduism do not encourage the kind of entrepreneurial activity found in Protestantism. ⊚ ⊚

true false

123) Because Buddhists, like Hindus, stress spiritual achievement rather than involvement in the world, the emphasis on wealth creation that is embedded in Protestantism is not found in Buddhism. Thus, in Buddhist societies we do not see the same kind of cultural stress on entrepreneurial behaviour that we see in the Protestant West. ⊚ ⊚

124)

Typically, countries that have more than one language have only one culture. ⊚ ⊚

125)

true false

Nonverbal communication is referred to as unspoken language. ⊚ ⊚

126)

true false

true false

An educated workforce is a key determinant of national competitive advantage. ⊚ ⊚

true false

127) The most famous study of how culture relates to values in the workplace was undertaken

by Geert Hofstede.

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121

⊚ ⊚

true false

128) Hofstede's study isolated four dimensions that he claimed summarized different cultures: aggressive versus passive, power distance, individualism versus collectivism, and masculinity versus femininity. ⊚ ⊚

true false

129) According to Hofstede, high power distance cultures are found in countries that let inequalities grow over time into inequalities of power and wealth. ⊚ ⊚

130)

true false

Culture changes over time. ⊚ ⊚

true false

131) The closing case shows how Japan's keiretsu system is based on fostering competition within a group. ⊚ ⊚

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true false

122

Answer Key Test name: chapter 3 1) E 2) C 3) D 4) B 5) B 6) B 7) B 8) B 9) B 10) E 11) A 12) C 13) E 14) D 15) A 16) B 17) D 18) D 19) E 20) C 21) B 22) C 23) E 24) D 25) B 26) A Version 1

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27) B 28) A 29) C 30) E 31) B 32) B 33) D 34) C 35) A 36) A 37) B 38) C 39) B 40) A 41) A 42) B 43) E 44) C 45) E 46) C 47) A 48) A 49) B 50) B 51) E 52) C 53) C 54) A 55) D 56) C Version 1

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57) D 58) A 59) C 60) A 61) B 62) D 63) D 64) B 65) A 66) A 67) E 68) B 69) C 70) D 71) C 72) D 73) E 74) B 75) D 76) B 77) B 78) A 79) A 80) D 81) E 82) C 83) C 84) E 85) A 86) E Version 1

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87) B 88) A 89) B 90) D 91) B 102) TRUE 103) TRUE 104) FALSE 105) TRUE 106) TRUE 107) FALSE 108) FALSE 109) TRUE 110) TRUE 111) TRUE 112) FALSE 113) FALSE 114) TRUE 115) FALSE 116) TRUE 117) FALSE 118) TRUE 119) TRUE 120) FALSE 121) TRUE 122) TRUE 123) TRUE 124) FALSE 125) TRUE 126) TRUE Version 1

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127) TRUE 128) FALSE 129) TRUE 130) TRUE 131) FALSE Chapter 4 Student name: 1) The opening case on notes four business sectors that are generally the most corrupt. They include:

A) banking B) legal C) transportation D) printing E) government

2) is/are a course of action, which international businesses take that does not violate a company's accepted principles.

A) Ethical strategy B) Business ethics C) Ethical dilemmas D) Ethical issues E) Ethical relativism

3) Many of the ethical issues and dilemmas in international business are rooted in the fact of differences in all BUT which one of the following?

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A) political systems B) culture C) monetary values D) economic development E) law

4) In the international business setting, the most common ethical issues involve all EXCEPT which one of the following?

A) employment practices B) human rights C) corruption D) border control E) environmental protection

5) The way working conditions are maintained by a business refers to the that business.

of

A) culture B) human rights C) human code of behaviours D) employment practices E) corporate culture

6)

Which one of the following is NOT considered to be a valued human right?

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A) Freedom of speech B) Freedom condoning political oppression C) Freedom of assembly D) Freedom of movement E) Freedom of religion

7) What was the multinational organization that adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions in 1997?

A) WTO B) GATT C) World Bank D) United Nations E) OECD

8) In order for the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions to be truly effective, what must happen?

A) further UN actions must be taken B) the convention must be translated into laws by each signatory nation C) the OECD ethical code must be implemented D) The Friedman Doctrine must be signed into law E) Facilitation payments must be outlawed

9) According to your text, which Canadian province has become a lightning rod of criticism regarding corruption?

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A) Ontario B) Quebec C) Alberta D) Saskatchewan E) British Columbia

10) In , member states of the OECD adopted the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions.

A) 1863 B) 1993 C) 1997 D) 2001 E) 1999

11) The criminal offence.

oblige(s) member states to make the bribery of foreign public officials a

A) Foreign Corrupt Practices Act B) Sullivan Principles C) Universal Declaration of Human Rights D) United Nations Convention on Fair Labour Practices E) Convention on Combating Bribery of Foreign Public Officials in International Business Transactions

12) Some economists have argued that and leads to low economic growth.

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reduces the returns on business investment

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A) human rights B) corruption C) ethical behaviour D) the social structure of culture E) environmental pollution

13) Gift-giving between parties to a business negotiation is considered right and proper in many cultures.

A) Latin B) Western C) Asian D) European E) Turkish

14)

According to the textbook, some people believe the rise of social media has improved:

A) How employees communicate with each other B) How well-informed employees are about the goals of the business C) Employee professionalism D) The costs of communication infrastructure E) Management models and structures

15) Currency fluctuations and economies today.

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are playing a larger role in national and regional

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A) Inflation rates B) International NGOs C) Interest rates D) Government debt E) Terms of trade

16) When outsourced firms provide products at a lower cost, a consideration is how the provider:

A) Is doing it better B) Is doing it cheaper C) Is funded D) Is likely to stay in business E) Is in a Western country

17)

Expatriate managers may experience more than the usual degree of what?

A) ethical imperialism B) cultural ethics C) public ethics D) ethical dilemmas E) cultural imperialism

18) acceptable.

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are situations in which none of the available alternatives seem ethically

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A) Ethical behaviours B) Moral obligations C) Social responsibilities D) Ethical dilemmas E) Personal crises

19) Generally accepted principles of right and wrong governing individual conduct are known as what?

A) ethical dilemmas B) ethical imperialism C) personal ethics D) corruption E) moral obligations

20) Of the following, which one would NOT be considered a rationale for why managers may behave in a manner that is unethical?

A) Business ethics are not divorced from an individual's personal ethics B) Personal ethical codes exert profound influence on the way we behave as businesspeople C) The company exerts pressure on individuals to achieve unrealistic goals D) The personal ethical code of the individual staunchly recognizes the difference between right and wrong E) That is the norm in the country the manager is operating in

21)

Home-country managers working abroad in multinational organizations may experience than the usual degree of pressure to violate their personal ethics.

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A) less B) more C) lower D) fewer E) a smaller amount

22) Which one of the statements below would be considered a reason why business people may NOT realize they are behaving in an unethical manner?

A) They fail to question if the business decision is ethical B) They acknowledge the need for human rights C) They are aware of the cultural differences between countries D) They are driven by the acquisition of profits E) They have a personal code of ethics that they believe does not apply in the country

23) All of the following EXCEPT are reasons why expatriate managers may experience increased pressure to violate their personal ethical standards.

A) they are away from their ordinary social context B) they place a high value on adherence to human rights C) they are geographically away from the parent company D) they are challenged by exorbitant goals set by the company E) they recognize that there is an accepted code of behaviour in the country that is different from their own

24) The first step to establishing a strong sense of business ethics is for a company to emphasize .

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A) strong personal ethics B) advantages of deriving profit maximization C) immorality D) amoral conduct E) religious faith

25) An individual with a strong sense of personal ethics is manner in a business setting.

to behave in an unethical

A) less probable B) less likely C) more likely D) more unlikely E) likely

26) Which one of the following could be considered a reason why organizations may make decisions that ultimately lead to unethical business actions being undertaken?

A) They are governed by the laws of the home and host countries B) They are appreciative of human rights concerns C) They do not incorporate ethics into business decision making D) They do not solely base decisions on business variables such as input cost per unit of output E) They have a CEO and a Chief Ethics Officer

27) Which one of the following could be considered a reason why organizations may make decisions that ultimately lead to unethical business actions being undertaken?

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A) They have based the decision on economic logic only B) They are appreciative of human rights concerns C) They address environmental concerns and issues D) They do not solely base decisions on business variables such as cost and product quality E) They have strong leadership that supports personal ethics

28) organization.

refers to the values and norms that are shared among employees of an

A) Organization culture B) Social responsibility C) Cultural relativism D) Just distribution E) Personal Ethics

29) What is considered by some to be the root cause contributing to the demise of the unethical organizations?

A) concern for workers B) open communication C) control throughout the organization D) organization culture E) exposure to foreign cultural differences

30) is one of the most disruptive factors for company managers that need to make ethical decisions.

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A) "Fake news" B) Start-ups C) Innovation hubs D) New ways of communicating E) The number of options for communicating

31) The internet has had a significant influence on business ethics. Which of the following factors are not a major influence, according to our textbook?

A) Speed B) Quality C) Quantity D) Impact E) Variety

32) but

The closing case about Etch-a-Sketch example shows that it is not just profit that matters, .

A) ethical considerations impact a company's reputation and bottom line B) ethical dynamism is attached to decisions C) most works support revenue-led decisions D) that ethical considerations aren't that important E) where a company's marketing has the most impact

33)

"When in Rome, do as the Romans do" is an example of which "ethical trap"?

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A) Rights theory B) Just distribution C) Cultural relativism D) The Friedman Doctrine E) Moral expediency

34)

Fundamental human rights form the basis of what?

A) The Friedman doctrine B) Rights theory C) The drug lord problem D) Collective goods E) Cultural relativism

35) Article 23 of the Universal Declaration of Human Rights conveys all EXCEPT which one of the following?

A) Everyone has the right to work.

B) Everyone has the right to join trade unions.

C) Everyone has the right to expect remuneration.

D) Everyone has the right to work under unsafe working conditions.

E) Everyone has the right to equal pay

36) The Universal Declaration of Human Rights is a basic principles of human rights that should be adhered to.

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document that lays down the

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A) United Nations B) United States C) Canadian D) World Health Organization E) International Labour Organization

37) Article 1 of the Universal Declaration of Human Rights is thought to echo ethics.

A) utilitarian B) Friedman C) Kantian D) cultural relativism E) social democratic

38) Developed in the 20 th century, recognize(s) that human beings have fundamental rights and privileges that transcend national boundaries and cultures.

A) righteous morality B) cultural relativism C) just distribution D) the Sullivan doctrine E) rights theories

39)

Along with rights comes what?

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A) ethics B) profits C) society D) culture E) obligations

40) Moral theorists argue that fundamental human rights form the basis for the managers should use when making decisions that have an ethical component.

that

A) immoral compass B) moral compass C) amoral compass D) mortality compass E) personal compass

41) Which of the following is NOT one of the five things an international business and its managers can do to make sure ethical issues are considered in business decisions?

A) Favour hiring and promoting people with a well-grounded sense of personal ethics.

B) Develop moral courage.

C) Build an organizational culture that has a high value on ethical behaviour.

D) Promote individuals with a proven track record of unethical behaviours.

E) Make sure that leaders within the company not only speak about ethical behaviour, but also practice it.

42) Businesses can make sure they are hiring individuals who match well with their established ethical guidelines if they undertake all EXCEPT which one of the following?

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A) Administer psychological tests.

B) Check former employer and personal references.

C) Talk with former coworkers of the job candidate.

D) Hire only relatives of current organizational employees.

E) Hire employees with a strong sense of personal ethics

43)

A

is a formal statement of the ethical priorities a business adheres to.

A) cultural relativism B) declaration of code C) code of ethics D) business policy E) strategic plan

44) Having articulated values in a code of ethics or some other document, leaders in the business must give life and meaning to those words by .

A) terminating those who deviate from them B) repeatedly emphasizing their importance C) challenging those who present opposition D) holding annual seminars about ethics E) hiring people who promise to follow them

45) Of the following, which assist organizations to think through the ethical implications of decision in a systematic way?

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A) Kant's principles and Rawls' theory of justice.

B) Rights theories and Hume's principles.

C) Cultural relativism and Rawls' theory of justice.

D) Rights theories and Rawls' theory of justice.

E) Utilitarian moralists and Friedman's principles

46) A firm's are individuals or groups that have an interest or claim in what the company does and in how well it performs:

A) box holders B) stakeholders C) righteous moralists D) naturalists E) employees

47) People who work for or own the company such as employees, board of directors, and stockholders are better identified as .

A) internal stakeholders B) venture capitalists C) external stakeholders D) external shareholders E) direct stakeholders

48)

Stakeholder analysis involves a certain amount of what has been called

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A) moral imagination B) immoral imagination C) moral magnetism D) amoral magnetism E) ethical morality

49) External stakeholder groups would most likely be comprised of all but which one of the following?

A) unions B) suppliers C) government D) employees E) local communities

50)

Step 2 of a stakeholder analysis would NOT involve which one of the following?

A) Judging the ethics of the proposed decision.

B) Determine whether the proposed decision would violate fundamental rights.

C) Providing information to workers about potentially hazardous working conditions.

D) Establish moral intent.

E) Determine the rights involved

51) At which step of a stakeholder analysis would an organization's managers establish moral intent?

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A) Step 1 B) Step 2 C) Step 3 D) Step 4 E) Step 5

52) At which step of a stakeholder analysis would an organization to audit its decisions to see if they were consistent with ethical principles?

A) Step 4 B) Step 3 C) Step 5 D) Step 7 E) Step 6

53) are responsible for making sure that all employees are trained to be ethically aware and that ethical considerations enter the business decision-making process.

A) Righteous moralists B) Guidance counsellors C) Ethics officers D) Board of directors E) Line Managers

54) When an employee says no to a supervisor because what he or she was asked to do was unethical, it is that provides the employee with the strength to say no.

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A) moral courage B) righteous moralism C) cultural relativism D) moral intent E) naive moralism

55)

All of the following are examples of moral courage except

.

A) whistle blowing B) saying no to supervisors who want an employee to act unethically C) walking away from profit making deals D) competing with your colleagues for promotions E) all of these answers are correct

56) The idea that managers should consider the social consequences of economic actions when making business decisions is known as what?

A) justice theory B) corporate social responsibility C) moral outrage D) moral courage E) ethics officers

57) A company that makes it difficult for people to effectively complain about an unethical situation is doing what?

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A) showing moral courage B) displaying righteous moralism C) showing cultural relativism D) displaying moral intent E) taking an obstructionist stance

58) According to the textbook, an example of an obstructionist stance was taken by what company?

A) McDonalds B) Barrick Gold C) Toyota D) Enron E) Conrad Black Inc.

59) and

Companies may take a defensive stance when they obey the law, but don't take into account.

A) profits; loss B) profile; publicity C) rights; obligations D) stakeholders; customers E) fairness; compassion

60) Differentiate and describe business ethics and ethical business strategy. Discuss how the two interrelate. Describe what impact having an ethical organizational strategy can have on international business transactions.

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61) Identify the most common ethical issues that may arise in the international business setting. Discuss the roots of these issues. Discuss how managers of international firms should address such issues.

62) Describe the nature of ethical dilemmas. Provide one example of an ethical dilemma that an international organization may face. Discuss how organizations and their managers can successfully address such dilemmas.

63) Identify the rationales for why mangers of businesses may act or react in a manner that reflects unethical behaviour.

64) Identify and discuss why the internet has such a big influence on business ethics. Provide examples.

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65) Identify and discuss the five things that an international business and its managers can do to make sure ethical issues are considered in business decisions.

66) Many of the ethical issues that arise when companies do business in different nations manifest themselves because of differences, such as is found in the economic environment, political systems, and laws of those nations. ⊚ ⊚

true false

67) The course of action that a business opts to take and which does not violate accepted principles is known as an ethical strategy. ⊚ ⊚

true false

68) In our society as well as many others, ethical principles never factor into the making of formal laws. ⊚ ⊚

true false

69) There is insignificant variation found in the political systems, laws, and cultures of differing nations. Hence, ethical dilemmas are rare to appear in international business dealings. ⊚ ⊚

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true false

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70)

Basic human rights are still not respected in many other nations. ⊚ ⊚

true false

71) Expatriate managers must interpret a local cultural practice in the way such behaviour would be understood in their own home culture. ⊚ ⊚

true false

72) Corruption has been a problem in almost every society in history with the exception of Western nations. ⊚ ⊚

true false

73) The trade and finance ministers of the OECD followed the lead of the U.S. in 1997 and adopted a convention on bribery in international business. ⊚ ⊚

true false

74) Some economists have argued that corruption reduces the returns on business investment and leads to low economic growth. ⊚ ⊚

75)

true false

In a country where corruption is common, businesses have a reduced incentive to invest.

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⊚ ⊚

76)

true false

Fake news is information sourced from opinion sites that lack journalistic integrity. ⊚ ⊚

true false

77) International NGOs are playing a more significant role in national and regional economies than in the past. ⊚ ⊚

true false

78) Ethical issues arise when environmental regulations in host countries are inferior to those in the home nation. ⊚ ⊚

79)

An ethical dilemma is a situation where there is no ethically acceptable solution. ⊚ ⊚

80)

true false

true false

Business ethics are separate and different from personal ethics. ⊚ ⊚

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true false

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81)

Cultural relativism is typically associated with managers from developed nations. ⊚ ⊚

82)

true false

The internet has had a significant impact on modern business ethics. ⊚ ⊚

true false

83) There isn't much that businesses can do to make sure they do not hire people who have poor personal ethics. ⊚ ⊚

true false

84) Organization culture refers to the vales and norms that are shared among employees of an organization. ⊚ ⊚

85)

true false

A code of ethics is a formal statement of the ethical priorities a business adheres to. ⊚ ⊚

true false

86) The ethical obligations of a multinational corporation toward employment conditions, human rights, and corruption are not always clear-cut.

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⊚ ⊚

true false

87) The concept of corporate social responsibility refers to the idea that businesspeople should consider the social consequences of economic actions when making business decisions. ⊚ ⊚

88)

Ethical decision-making isn't always a matter of applying five steps. ⊚ ⊚

89)

true false

Moral courage is an important factor in the success of a business. ⊚ ⊚

90)

true false

true false

Managers have to fully rely on their own judgement and ethics when making decisions. ⊚ ⊚

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Answer Key Test name: chapter 4 1) C 2) A 3) C 4) D 5) D 6) B 7) E 8) B 9) B 10) C 11) E 12) B 13) C 14) A 15) B 16) B 17) D 18) D 19) C 20) D 21) B 22) A 23) B 24) A 25) B 26) C Version 1

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27) A 28) A 29) D 30) A 31) B 32) A 33) C 34) B 35) D 36) A 37) C 38) E 39) E 40) B 41) D 42) D 43) C 44) B 45) D 46) B 47) A 48) A 49) D 50) D 51) C 52) C 53) C 54) A 55) D 56) B Version 1

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57) E 58) C 59) E 66) TRUE 67) TRUE 68) FALSE 69) FALSE 70) TRUE 71) FALSE 72) FALSE 73) TRUE 74) TRUE 75) TRUE 76) TRUE 77) TRUE 78) TRUE 79) TRUE 80) FALSE 81) FALSE 82) TRUE 83) FALSE 84) TRUE 85) TRUE 86) TRUE 87) TRUE 88) TRUE 89) TRUE 90) FALSE

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Chapter 5 Student name: 1) According to the opening case study, what did US President Donald Trump call "the worst trade deal maybe ever signed anywhere"?

A) The EU B) NAFTA C) The TPP D) China E) India

2) Which of the following international trade scholars was the first to explain why unrestricted free trade is beneficial to a country?

A) Adam Smith B) Bertil Ohlin C) Eli Heckscher D) Paul Krugman E) David Ricardo

3) refers to a situation where 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.

A) Autonomous trade B) Free trade C) Clear commerce D) Unencumbered commerce E) NAFTA

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4) Propagated in the 16 th and 17 th centuries, simultaneously encourage exports and discourage imports.

advocated that countries should

A) ethnocentrism B) capitalism C) collectivism D) nationalism E) mercantilism

5)

The theory of

was advanced by Adam Smith.

A) absolute advantage B) capitalism C) similar opportunity D) mercantilism E) comparative advantage

6)

The benefits of trade, according to Ricardo and Heckscher-Ohlin focus on

A) effectiveness B) specialization C) diversification D) outsourcing E) mercantilism

7)

Product life cycle theory builds most directly on the work of

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A) Heckscher-Olin B) Porter C) Vernon D) Krugman E) Smith

8)

Smith, Ricardo and Heckscher-Olin make a case for

A) Light intervention on the part of government B) Strong interventionist policy C) Limited free trade D) Unrestricted free trade E) Strong government policy to manage free trade

9)

Which of the following statements accurately characterizes mercantilism?

A) It is a new but largely discredited doctrine B) It is a new, highly credible doctrine C) It is an old yet highly credible doctrine D) It is an old and largely discredited doctrine E) It still influences many governments

10) , the first theory of international trade, principal assertion was that gold and silver were the mainstays of national wealth and essential to vigorous commerce.

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A) Collectivism's B) Mercantilism's C) Capitalism's D) Economic conservatism's E) Market capitalism

11) a(n):

The main tenet of mercantilism was that it was in a country's best interest to maintain

A) export and import trade balance B) import trade embargo C) export trade surplus D) export trade deficit E) large reserve of gold

12)

The flaw with mercantilism was that it viewed trade as a

.

A) zero-sum game B) economic necessity C) non essential economic activity D) threat to a government's independence E) luxury for consumers

13)

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is consistent with the central beliefs of mercantilism.

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A) Government should intervene to achieve a surplus in the balance of trade B) Policies should be put in place to encourage exports and discourage imports C) Imports should be limited by tariffs and quotas D) Exports should be subsidized E) Local manufacturing companies should be protected from foreign competition

14) According to David Hume, if England had a balance-of-trade surplus with France, the resulting inflow of gold and silver would:

A) have no effect on England's economic conditions B) increase the money supply and cause inflation in England C) England's prices would fall D) France's prices would rise E) increase the wealth of the monarchy

15)

A situation in which a gain by one party results in a loss by another is called a(n) .

A) transfer of wealth B) unbalanced scorecard C) zero-sum game D) positive-sum game E) transaction

16) Hagelstam observed that in most trade negotiations, the approach of individual negotiating countries has been to press for trade in areas where their own comparative competitive advantages are the strongest, and to resist in areas where they are less competitive and fear that imports would replace domestic production.

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A) socialization; liberalization B) capitalization; socialization C) liberalization; liberalization D) capitalization; capitalization E) equality; growth

17) Which of the following is a situation in which all countries can benefit, even if some benefit more than others?

A) Near equivalent-result game B) Positive-sum game C) Balanced scorecard D) Zero-sum game E) Economic progression

18) In his 1776 landmark book, The Wealth of Nations, assumption that trade is a zero-sum game.

attacked the mercantilist

A) Geert Hofstede B) Max Weber C) Michael Porter D) Adam Smith E) David Ricardo

19) Which of the following international management scholars first argued that countries differ in their ability to produce goods efficiently?

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A) David Ricardo B) Eli Heckscher C) Michael Porter D) Adam Smith E) Raymond Vernon

20) According to Smith, countries should specialize in the production of goods for which they have an absolute advantage and then:

A) retain these goods for strictly domestic sales B) trade these goods for the goods produced by other countries C) sell these goods to the highest domestic or international bidder D) prohibit the import of these goods from other countries E) stockpile these goods until international demand increases

21) basic argument, articulated through the theory of absolute advantage, is that a country should never produce goods at home that it can buy at a low cost from another country.

A) David Ricardo's B) Michael Porter's C) Bertil Ohlin's D) Adam Smith's E) John Vernon's

22) is a situation in which one country is more efficient at producing a product than any other country.

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A) Absolute advantage B) Relative advantage C) Comparative advantage D) Pertinent advantage E) Favourable factor endowment

23) In his 1817 book entitled Principles of Political Economy, theory of comparative advantage.

introduced the

A) Adam Smith B) David Ricardo C) Raymond Vernon D) Max Weber E) Michael Porter

24) A situation in which a country specializes in producing the goods it produces most efficiently and buys the products it produces less efficiently from other countries, even if it could produce the good more efficiently itself is referred to as:

A) comprehensive advantage B) pertinent advantage C) comparative advantage D) absolute advantage E) inherent advantage

25) The theory of comparative advantage, advanced by of the modern argument for unrestricted free trade.

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, is the intellectual basis

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A) Michael Porter B) David Ricardo C) Bertil Ohlin D) Adam Smith E) Wassily Leontief

26)

is the basic message of the theory of comparative advantage.

A) Potential world production is greater with unrestricted free trade than it is with restricted trade.

B) Potential world production is not significantly affected by trade policy.

C) Potential world production is greater with restricted trade.

D) It makes sense for a country to specialize in the production of those goods that it produces most efficiently and to buy the goods that it products less efficiently from other countries, unless this means buying goods from other countries that it could produce more efficiently itself.

E) None of these answers is correct.

27) In terms of explaining why some countries export automobiles, consumer electronics, and machine tools, while other countries export chemicals, watches, and jewellery, David Ricardo's theory of comparative advantage offer an explanation in terms of

A) international differences in intellectual capital.

B) international differences in labour productivity.

C) the interplay between the proportions in which the factors of production (such as land, labour, and capital) are available in different countries and the proportions in which they are needed for producing particular goods.

D) the cultural histories of the exporting nations.

E) the geographic location of potential trading partners.

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28)

To an even greater degree than the theory of absolute advantage, the theory of suggests that trade is a positive-sum game in which all gain.

A) total advantage B) mercantilism C) comparative advantage D) paradoxical advantage E) eclectic paradigm

29) Ricardo's theory of comparative advantage suggests that consumers in all nations can consume more if there are

A) trade restrictions on services only.

B) no trade restrictions.

C) severe trade restrictions.

D) trade restrictions on manufactured goods only.

E) restrictions on currencies.

30)

The theory of comparative advantage

A) provides a strong rationale for encouraging international trade.

B) provides a strong rationale for discouraging international trade.

C) neither encourages nor discourages international trade.

D) provides a weak rationale for discouraging international trade.

E) is considered wrong by many.

31)

One of the limitations to the theory of comparative advantage is that it assumes:

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A) inflation B) constant returns to scale C) new government regulations and higher taxes.

D) new product development E) excessive transportation costs

32) One of the limitations to the theory of comparative advantage is that resources do not always move easily from one economic activity to another and the process creates:

A) inflation B) friction and human suffering C) new government regulations and higher taxes D) new product development E) excessive transportation costs and retraining concerns

33) Governments often ease the transition toward free trade by jobs as a result.

those who lose their

A) offering welfare to B) creating new jobs for C) giving government jobs to D) putting up temporary trade barriers E) helping to retrain

34)

Which of these occurs if an economy is opened to trade?

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A) Free trade might increase the efficiency with which a country uses its resources.

B) Economies of small-scale production would not be available as trade expands the size of the total market available to domestic firms.

C) Free trade would decrease a country's stock of resources as increased supplies of labour and capital from abroad become available for use within the country.

D) Domestic producers would be stimulated to look for new ways to increase their productivity.

E) Prices for consumer goods may increase

35) Dynamic gains in both the stock of a country's resources and the efficiency with which resources are utilized will cause a country's PPF to:

A) shift inward B) shift outward C) make no appreciable change D) no longer be influential E) reflect new technologies

36)

The Paul Samuelson critique looks at what happens when a rich country enters into a(n) with a poor country.

A) small scale production B) free trade agreement C) technology transfer D) government policy change E) increase in employment

37) endowments.

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argued that comparative advantage rises from differences in national factor

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A) Heckscher and Ohlin B) Smith C) Sachs and Warner D) Ricardo E) Porter

38) Swedish economists, and , advanced a theory of trade that argued that comparative advantage arises from differences in national factor endowments.

A) Durbin; Coles B) Heckscher; Ohlin C) Delhomme; Rivette D) Mouton; Penn E) Borg; Abba

39) Which theory predicts that countries will export those goods that make intensive use of those factors that are locally abundant, while importing goods that make intensive use of factors that are locally scarce?

A) Heckscher-Cormier B) Ricardo-Ohlin C) Heckscher-Ohlin D) Carrier-Roller E) Smith-Ricardo

40) Which of the following statements is a fair comparison of the Heckscher-Ohlin theory and the Ricardo theory (i.e. comparative advantage) of free trade?

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A) both theories argues that the pattern of international trade is determined by currency exchange rates B) the Heckscher-Ohlin theory argues that the pattern of international trade is determined by trade endowments, while the Ricardo theory argues that the pattern of international trade is determined by differences in productivity C) both theories argue that the pattern of international trade is determined by differences in productivity D) the Heckscher-Ohlin theory argues that the pattern of international trade is determined by differences in productivity, while the Ricardo theory argues that the pattern of international trade is determined by trade endowments E) the Heckscher-Ohlin theory argues that the pattern of international trade is determined by differences in demand conditions, while the Ricardo theory argues that the pattern of international trade is determined by national competitive advantages

41) Most economists, according to the textbook, prefer the Heckscher-Ohlin theory to Ricardo's theory (i.e. comparative advantage) because which of the following two factors?

A) It makes fewer simplifying assumptions and it has been subjected to many empirical tests B) It has been subjected to many empirical tests and it has stood the test of time C) It makes fewer simplifying assumptions and it has been acknowledged by the World Trade Organization as the better of the two theories D) It has been acknowledged as the better of the two theories by the World Trade Organization, and it has stood the test of time E) Ricardo's theory is almost 200 years old, while Heckscher-Ohlin's theory is quite modern

42) The Heckscher-Ohlin theory argues that the pattern of international trade is determined by differences in:

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A) productivity B) political interests C) factor endowments D) national priorities E) first mover advantages

43)

The Heckscher-Ohlin theory has a(n)

appeal.

A) political B) commonsense C) economic D) cost efficiency E) historical

44) Contrary to what the Heckscher-Ohlin theory would predict, the United States has been a primary importer rather than an exporter of capital goods. This phenomenon is referred to as the paradox.

A) Theler B) Leontief C) Cormier D) Ricardo E) Porter

45)

What is a possible explanation for observing the Leontief paradox?

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A) The Leontief paradox makes perfect sense.

B) The U.S. has a special advantage in producing new products or goods made with innovative technologies.

C) Other countries don't have the technologies that the U.S. has.

D) Labour costs are much lower in developing countries.

E) For many products the market size is much larger in India and China.

46) One early response to the failure of the Heckscher-Ohlin theory to explain the observed pattern of international trade was the .

A) theory of rising costs B) product life-cycle theory C) theory of comparative advantage D) theory of cultural constraints E) the Leontief Paradox

47) Which of the following choices correctly matches a scholar with the theory that he or she proposed?

A) Adam Smith/Comparative Advantage B) David Ricardo/New Trade C) Raymond Vernon/Product Life Cycle D) Eli Heckscher/Absolute Advantage E) Michael Porter/Factor Endowment

48)

Who initially proposed the product life-cycle theory in the mid-1960s?

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A) Cormier B) Heckscher C) Vernon D) Smith E) Porter

49) Vernon's product life-cycle theory was based on the observation that for most of the 20 th century a very large proportion of the world's new products had been developed by U.S. firms and sold first in the market.

A) Japanese B) Western European C) U.S. D) Canadian E) South American market

50) As the market in the U.S. and other advanced nations matures, the product becomes more standardized and price becomes:

A) governmentally regulated B) greater C) unimportant D) the main competitive weapon E) more differentiated

51) theory of international trade suggests that the production of products is likely to switch from advanced countries to developing countries over time.

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A) New trade B) Comparative advantage C) Heckscher-Ohlin D) Product life-cycle E) Competitive advantage

52)

According to the textbook, historically the product-life-cycle theory is an:

A) accurate explanation of international trade patterns for manufactured goods but not for services B) accurate explanation of international trade patterns C) accurate explanation of international trade patterns in some countries but not in others D) inaccurate explanation of international trade patterns E) accurate explanation of international travel and transportation volumes

53)

is/are unit cost reductions associated with a large scale of output.

A) Product life-cycle B) Economies of scale C) Learning effects D) First-mover advantage E) Late-mover volumes

54) Because of substantial economies of scale, the industries there are increasing returns to specialization.

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theory argues that in many

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A) Leontief's paradox B) product life-cycle C) new trade D) Heckscher-Ohlin E) Porter

55) The theory argues that due to the presence of substantial scale economies, world demand will support only a few firms in many industries.

A) Heckscher-Ohlin B) Leontief's paradox C) product life-cycle D) new trade E) Porter

56) Which theory of international trade directly explains why there are only two to three producers of airlines in the world today?

A) absolute advantage B) new trade C) comparative advantage D) product life cycle E) mercantilism

57)

Trade is thus mutually beneficial because

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A) it allows the specialization of production B) the realization of scale economies C) the production of a greater variety of products D) lower prices E) all of these options

58) The economic and strategic advantages that accrue to early entrants in an industry are called:

A) first-mover advantages B) initial-class advantages C) early-entrant advantages D) first-stage benefits E) initial-entrant advantage

59) The new trade theorists argue that the United States leads in exports of commercial jet aircraft not because it is better endowed with the factors of production required to manufacture aircraft, but because:

A) U.S. built commercial jet aircraft have the best safety record B) the U.S. commercial jet aircraft industry has a lower wage rate than foreign competitors C) the World Trade Organization has given preferential treatment to the U.S. commercial jet aircraft industry D) one of the first movers in the industry was DeHavilland E) one of the first movers was Boeing

60) According to the new trade theorists, because early entrants are able to gain the early entrants into an industry may get a lock on the world market that discourages subsequent entry.

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A) high brand awareness B) highly skilled employees C) high legitimacy D) economies of scale E) market penetration

61) Economies of scale increases the efficiency of resource utilization, therefore increasing what?

A) costs B) capital C) factor endowments D) productivity E) profitability

62) New trade theorists stress the role of the following three variables in giving firm firstmover advantages?

A) availability of capital, entrepreneurship, and favourable government policies B) entrepreneurship, favourable foreign exchange rates, and innovation C) luck, entrepreneurship, and innovation D) modernization, luck, and the availability of capital E) availability of capital, low labour costs and innovation

63) Which theory stresses that in some cases countries specialize in the production and export of particular products not because of underlying differences in factor endowments but because in certain industries the world market can support only a limited number of firms?

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A) Balanced trade B) Heckscher-Olin C) New trade D) Product life-cycle E) National competitive advantage

64) The theory of , developed by Michael Porter, focuses on the importance of country factors such as domestic demand and domestic rivalry in explaining a nation's dominance in the production and export of particular products.

A) new trade B) absolute advantage C) comparative advantage D) national competitive advantage E) factor endowments

65) Which of the following two theories justify some limited and selective government intervention to support the development of certain export-oriented industries?

A) The theory of national competitive advantage and the Heckscher-Ohlin theory B) The theory of absolute advantage and the new trade theory C) The Heckscher-Ohlin theory and theory of comparative advantage D) The theory of mercantilism and the Heckscher-Ohlin theory E) The new trade theory and theory of national competitive advantage

66) In 1990, who published the results of an intensive research effort that attempted to determine why some nations succeed and others fail in international competition?

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A) Eli Heckscher B) Michael Porter C) Bertil Ohlin D) Raymond Vernon E) Wassily Leontief

67) Porter's thesis was that four broad attributes of a nation shape the environment in which local firms compete, and that these attributes promote or impede the creation of competitive advantage. All of the following is/are attributes except:

A) factor endowments B) customs C) firm strategy, structure, and rivalry D) related and supporting industries E) demand conditions

68) , according to Michael Porter, are a nation's position in factors of production such as skilled labour or the infrastructure necessary to compete in a given industry.

A) Demand endowments B) Factor endowments C) Factor competencies D) Demand conditions E) National resources

69) Porter argued that in regard to factor endowments, factors are the most significant for competitive advantage in his study dealing with the competitive advantage of nations.

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A) standard B) basic C) advanced D) complementary E) exclusive

70) Unlike the naturally endowed basic factors, advanced factors are a product of investment by all of the following except

A) companies.

B) governments.

C) demographics.

D) individuals.

E) none of these answers is correct.

71) In his study dealing with the competitive advantage of nations, Porter argued that in regard to demand conditions, a nation's firms' gain competitive advantage if their domestic consumers are and .

A) unpretentious; passive B) modest; passive C) exacting; unpretentious D) sophisticated; demanding E) fractious; unsatisfied

72) Who argued that successful industries within a country tend to be grouped into "clusters" of related industries?

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A) Porter B) Vernon C) Ricardo D) Heckscher E) Sachs

73) The conditions governing how companies are created, organized, and managed and the nature of domestic rivalry is referred to as

A) relating and supporting industries.

B) demand conditions.

C) factor endowments.

D) firm strategy, structure, and rivalry.

E) corporate regulations.

74)

Domestic rivalry creates pressure to do all of the following except:

A) to innovate.

B) to reduce costs.

C) to improve employee relations.

D) to invest in upgrading advanced factors.

E) to improve efficiency

75)

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, by its choice of policies, can detract from or improve national advantage.

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A) A company B) Government C) A market D) Individuals.

E) Shareholders

76) Porter argues that the presence of all components is usually required for the "diamond" to boost:

A) international recognition.

B) competitive performance.

C) corporate social responsibility.

D) employee morale.

E) national export surpluses.

77)

We would expect Porter's model to predict

, if he is correct.

A) currency exchange rates B) membership in the World Trade Organization C) the pattern of international trade D) factor endowments E) trade costs

78)

When does free trade occur?

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79) What is meant by the term "free trade? Was Adam Smith an advocate or critic of free trade? Is free trade compatible with the concept of mercantilism? Explain your answer.

80)

Describe Adam Smith's concept of absolute advantage.

81) Describe the Heckscher-Ohlin theory of international trade. Is the Heckscher-Ohlin theory consistent with the notion of free trade? Why or why not?

82) While diamonds are mined all over the world, including in Canada, the diamond trade is centered on Antwerp Belgium in an area known as the Diamond Quarter, or the Square Mile.

Diamonds are cut and polished in lower wage countries such as India (which accounts for about 90% of all diamond cutting and polishing) but they are traded in Antwerp. There are almost 4,000 dealers, brokers and financial intuitions serving this industry, all located in an area of only several blocks. Antwerp has been the centre of the diamond industry for several centuries since Lodewyk van Berken, a Flemish jeweler invented a device for polishing diamonds around the year 1450.

How does the Heckscher-Ohlin theory help to explain this scenario?

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83)

Describe the central tenant of the product life-cycle theory.

84) Describe the new trade theory. How does the new trade theory help us to understand why the United States is dominant in the world market for commercial aircraft exports?

85)

Describe what is meant by first-mover advantages?

86) In an extensive study that was published in a book entitled The Competitive Advantage of Nations, Michael Porter concluded that four broad attributes of a nation shape the environment in which local firms compete, and that these attributes promote or impede the creation of competitive advantage. Identify and describe the four attributes advanced by Porter.

What did Porter conclude from his analysis?

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87) While diamonds are mined all over the world, including in Canada, the diamond trade is centered on Antwerp Belgium in an area known as the Diamond Quarter, or the Square Mile.

Diamonds are cut and polished in lower wage countries such as India (which accounts for about 90% of all diamond cutting and polishing) but they are traded in Antwerp. There are almost 4,000 dealers, brokers and financial intuitions serving this industry, all located in an area of only several blocks. Antwerp has been the centre of the diamond industry for several centuries since Lodewyk van Berken, a Flemish jeweler invented a device for polishing diamonds around the year 1450.

Michael Porter considered four factors of production in developing his theory of international trade. These four factors help determine the difference in production between different countries.

Describe and explain the four factors. Explain which factor would be more important in this scenario.

88) In the first years of the expansion of NAFTA to include Mexico many companies had compelling reasons for opening a plant in Mexico. The Mexican government was enticing some businesses with incentives such as no taxes and free land. What international trade theory could justify this action? Explain.

89) While diamonds are mined all over the world, including in Canada, the diamond trade is centered on Antwerp Belgium in an area known as the Diamond Quarter, or the Square Mile.

Diamonds are cut and polished in lower wage countries such as India (which accounts for about 90% of all diamond cutting and polishing) but they are traded in Antwerp. There are almost 4,000 dealers, brokers and financial intuitions serving this industry, all located in an area of only several blocks. Antwerp has been the centre of the diamond industry for several centuries since Lodewyk van Berken, a Flemish jeweler invented a device for polishing diamonds around the year 1450.

Which of Michael Porter's four factors of production would help explain why the diamond cutting industry is now centered in India?

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90) Globalization is described as the creation of a single world market. You can see evidence of globalization in every store, and in most products. You can also see it in the shifting of labour intensive industry to low wage cost countries. As Canadians we are generally in support of free trade. Using appropriate trade theories explain why freer trade is particularly beneficial to Canada and to our trading partners.

91) The closing case discusses how India signed an agreement with the WTO in 2005 that brought it into compliance with WTO rules on intellectual property rights, and in response Indian companies stopped producing counterfeit products. Why was this important for India's international trade?

92) Free trade refers to a situation 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. ⊚ ⊚

true false

93) Smith, Ricardo, and Heckscher-Ohlin show why it is beneficial for a country to engage in international trade.

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⊚ ⊚

94)

true false

The product life-cycle theory was introduced by Paul Krugman. ⊚ ⊚

true false

95) Most theorists and experts recommend that governments use the same policy approaches to international trade. ⊚ ⊚

true false

96) Propagated in the 16 th and 17 th centuries, mercantilism advocated that countries should discourage both imports and exports. ⊚ ⊚

true false

97) Most theorists included in the textbook agree that there are only a set number of government policies that can support international trade ⊚ ⊚

98)

true false

The flaw with mercantilism was that it viewed trade as a zero-sum gain. ⊚ ⊚

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true false

186

99) A situation in which a gain by one country results in a loss by another is a positive-sum game. ⊚ ⊚

true false

100) When a country is more efficient than any other country in producing a product, it has an absolute advantage in the production of that product. ⊚ ⊚

true false

101) In his 1776 landmark book, The Wealth of Nations, Adam Smith supported the mercantilist assumption that trade is a zero-sum game. ⊚ ⊚

true false

102) Smith's basic argument was that a country should never produce goods at home that it can buy at a lower cost from other countries. ⊚ ⊚

true false

103) Ricardo's theory of competitive advantage says that it is logical for a country to specialize in the product of goods that it produces most efficiently and to export goods that it produces less efficiently. ⊚ ⊚

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true false

187

104) The theory of absolute advantage suggests that trade is a positive-sum game in which all can gain to an even greater degree than the theory of comparative advantage. ⊚ ⊚

true false

105) The potential world production is greater with unrestricted free trade than it is with restricted free trade is the basic message of the theory of comparative advantage. ⊚ ⊚

true false

106) When a movement toward a free trade regime occurs, the pain is a long-term phenomenon, while the gains from trade, once the transition has been made, are both insignificant and short-term. ⊚ ⊚

true false

107) The Paul Samuelson critique looks at what happens when a rich country enters into a free trade agreement with a poor country. ⊚ ⊚

true false

108) Like Ricardo's theory, the Heckscher-Ohlin theory argues that free trade is beneficial.

Unlike Ricardo's theory, however, the Heckscher-Ohlin theory argues that the pattern of international trade is determined by differences in factor endowments, rather than differences in productivity.

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⊚ ⊚

true false

109) The Heckscher-Ohlin theory would predict that the United States should be a primary importer of capital goods. ⊚ ⊚

true false

110) Because it makes fewer simplifying assumptions, and it has been subjected to many empirical tests, most economists prefer the Heckscher-Ohlin theory to Ricardo's theory. ⊚ ⊚

true false

111) The Heckscher-Ohlin theory has been one of the least influential in international economics. ⊚ ⊚

true false

112) Because of substantial economies of scale, the Leontief Paradox theory argues that in many industries there are increasing returns to specialization. ⊚ ⊚

true false

113) The product life-cycle theory stresses that in some cases, countries specialize in the production and export of particular products not because of underlying differences in factor endowments but because in certain industries the world market can support only a limited number of firms.

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⊚ ⊚

true false

114) Raymond Vernon's theory of the Product Life-Cycle was based on the observation that for most of the 20 th century a very large proportion of the world's new products were developed

by U.S. firms and sold first in the U.S. market. ⊚ ⊚

true false

115) The new trade theorists argue that in those industries where the existence of substantial economies of scale imply that the world market will profitable support only a few firms, countries may export certain products simply because they have a firm that was an early entrant into that industry. ⊚ ⊚

true false

116) Trade offers an opportunity for mutual gain even when countries do not differ in their resource endowments or technology. ⊚ ⊚

true false

117) Economies of scale increases the efficiency of resource utilization, but do not affect productivity. ⊚ ⊚

118)

true false

New trade theory identifies an important source of comparative advantage.

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⊚ ⊚

true false

119) Porter theorizes that eight broad attributes of a nation shape the environment in which local firms compete, and these attributes promote or impede the creation of competitive advantage. ⊚ ⊚

true false

120) According to Porter, the four broad attributes of a nation that shape the environment in which local firms compete and that promote or impede the creation of competitive advantage are demand conditions, firm strategy, structure, and rivalry, factor endowments, and relating and supporting industries. ⊚ ⊚

true false

121) A firm should invest in upgrading advanced factors of production because it is in the best interest of business for a firm, according to Porter's theory. ⊚ ⊚

true false

122) Successful industries within a country tend to be grouped into clusters of related industries. ⊚ ⊚

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true false

191

123) National competitive advantage in Porter's model includes the rivalry of firms within a nation. ⊚ ⊚

true false

124) In sum, Porter's argument is that the degree to which a nation is likely to achieve international success in a certain industry is a function of the combined impact of factor endowments, domestic demand conditions, related and supporting industries, and degree of government support. ⊚ ⊚

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true false

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Answer Key Test name: chapter 5 1) B 2) A 3) B 4) E 5) A 6) B 7) A 8) D 9) E 10) B 11) C 12) A 13) B 14) B 15) C 16) C 17) B 18) D 19) D 20) B 21) D 22) A 23) B 24) C 25) B 26) A Version 1

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27) B 28) C 29) B 30) A 31) B 32) B 33) E 34) A 35) B 36) B 37) A 38) B 39) C 40) B 41) A 42) C 43) B 44) B 45) B 46) B 47) C 48) C 49) C 50) D 51) D 52) B 53) B 54) C 55) D 56) B Version 1

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57) E 58) A 59) E 60) D 61) D 62) C 63) C 64) D 65) E 66) B 67) B 68) B 69) C 70) C 71) D 72) A 73) D 74) C 75) B 76) B 77) C 92) TRUE 93) TRUE 94) FALSE 95) FALSE 96) FALSE 97) FALSE 98) TRUE 99) FALSE 100) TRUE Version 1

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101) FALSE 102) TRUE 103) FALSE 104) FALSE 105) TRUE 106) FALSE 107) TRUE 108) TRUE 109) FALSE 110) TRUE 111) FALSE 112) TRUE 113) FALSE 114) TRUE 115) TRUE 116) TRUE 117) FALSE 118) TRUE 119) FALSE 120) TRUE 121) TRUE 122) TRUE 123) TRUE 124) FALSE Chapter 6 Student name: 1) Which of the following refers to a situation where a government does not attempt to restrict what its citizens can buy from another country or what they can sell to another country?

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A) free trade B) unencumbered trade C) sovereign trade D) autonomous trade E) open trade

2) Which of the following is not an example of one of the main instruments in trade policy used by governments around the world?

A) tariffs B) political mandate C) subsidies D) import quotas E) local content requirements

3) Components of include tariffs, subsidies, import quotas, voluntary export restraints, local content requirements, administrative policies, and antidumping duties.

A) trade policy B) ad valorem C) trade reconciliation D) sociocultural dimension E) national economic development

4)

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are the oldest and simplest instrument of trade policy.

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A) Subsidies B) Administrative policies C) Tariffs D) Voluntary export restraints E) Price discrimination

5)

A

is a tax levied on imports.

A) tariff B) special assessment C) penalty D) globalization assessment E) GST

6)

are levied as a fixed charge for each for each unit of a good imported.

A) Specific tariffs B) General tariffs C) Ad valorem tariffs D) Global tariffs E) Sales taxes

7)

While tariffs are levied as a fixed charge for each unit of a good imported, tariffs are levied as a proportion of the value of the imported good.

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A) general; special B) ad valorem; special C) global; special D) specific; ad valorem E) predatory; percentage

8)

Tariffs fall into two categories

and

.

A) specific tariffs and ad valorem tariffs.

B) global tariffs and domestic tariffs.

C) general tariffs and specific tariffs.

D) flexible tariffs and ad valorem tariffs.

E) domestic tariffs and GATT

9)

Tariffs cause the most damage to whom?

A) trade associations B) governments C) retailers D) producers E) consumers

10)

According to the author of the textbook, tariffs benefit the following two groups:

A) government and producers B) consumers and trade associations C) government and consumers D) producers and consumers E) retailers and wholesalers

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11) A study by Japanese economists calculated that tariffs on imports of food, cosmetics and chemicals into Japan cost the average Japanese consumer about how much per year?

A) $198 B) $527 C) $557 D) $890 E) $1000

12)

What do tariffs do?

A) reduce the price of foreign goods B) reduce efficiency because a protective tariff encourages domestic firms to produce products at home C) create efficient utilization of resources D) are unambiguously pro-consumer and anti-producer E) help domestic producers increase their efficiency and resist foreign competition

13)

According to the author of the textbook, tariffs are

and

.

A) pro-producer and pro-consumer B) anti-consumer and pro-producer C) anti-consumer and anti-producer D) pro-producer and anti-consumer E) pro-government and pro-consumer

14)

Which of the following is a government payment to a domestic producer?

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A) duty B) subsidy C) quota D) tariff E) grant

15) By lowering production costs, foreign imports.

help domestic producers compete against

A) tariffs B) duties C) quotas D) ad valorems E) subsidies

16)

Lowering production costs helps domestic producers

A) gain export markets.

B) develop trade reconciliation.

C) create voluntary export subsidy.

D) determine specialized quotas.

E) increase their value

17) countries.

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tends to be one of the largest beneficiaries of subsidies in most

201

A) Technology B) Agriculture C) Commodities D) Domestic product E) Consumers

18) According to emerging industry.

, subsidies can help a firm achieve a first-mover advantage in an

A) strategic trade policy B) antidumping policies C) consumers D) importers E) farmers

19) The main gains from subsidies accrue to competitiveness is increased as a result of them.

, whose international

A) traders B) consumers C) governments D) importers E) domestic producers

20)

An import quota is a direct restriction on the quantity of some good that may be

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A) subsidized by a country.

B) imported into a country.

C) exported out of a country.

D) produced in a country.

E) qualified for tariff relief.

21) A quota on trade imposed by the exporting country, typically at the request of the importing country's government is referred to as a(n)

A) voluntary export restraint.

B) involuntary export restraint.

C) trade reconciliation.

D) refereed export restraint.

E) limited market access.

22) One of the most famous examples of a(n) is the limitation on auto exports to the United States enforced by Japanese automobile producers in 1981.

A) involuntary import restraint B) voluntary export restraint C) trade reconciliation D) referred export restraint E) limited market access

23)

VER stands for:

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A) Very economic reversal.

B) Voluntary economic report.

C) Voluntary economic restraint.

D) Voluntary export restraint.

E) Voluntary economic reversal.

24) Both import quotas and VERs benefit they result in higher prices, which hurts

by limiting import competition, but .

A) domestic producers; consumers B) governments; consumers C) consumers; foreign producers D) foreign producers; governments E) balance of trade; consumers

25)

An export tariff is:

A) Very common B) A tax placed on the export of a good C) Meant to favour exporting D) A subsidy E) A tax placed on imports of a good

26)

An export ban is:

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A) A policy that partially restricts export of a good B) A policy that entirely restricts the export of a good C) A policy that partially or entirely restricts the export of a good D) A policy that permits some restriction on a good E) A policy that restricts imports of good

27) Local content requirements benefit the raise prices of imported components, which hurts

of component parts, but they .

A) consumers; producers B) producers; governments C) consumers; governments D) producers; consumers E) users; importers

28)

What demands that some specific fraction of a good be produced domestically?

A) international content requirement B) local content requirement C) specific content requirement D) ad valorem content requirement E) WTO local content convention

29) If a company decided to produce paper in Spain, and the Spanish government stipulated that 50% of the component parts that went into Westvaco's paper must be produced locally, that requirement would be an example of a(n)

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A) ad valorem content requirement.

B) international content requirement.

C) specific content requirement.

D) local content requirement.

E) barter content.

30) If Apple won an order to sell 500 of its new minicomputers to Australia, but the Australian government stipulated that 20 percent of the component parts of the minicomputers that it purchased must be produced in Australia, that stipulation would be an example of a(n)

A) ad valorem content requirement.

B) specific content requirement.

C) ad hoc content requirement.

D) local content requirement.

E) domestic producer content.

31) Local content regulations have been widely used by to shift their manufacturing base from the simple assembly of products whose parts are manufactured elsewhere into the local manufacture of component parts.

A) United Nations B) developed nations C) developing nations D) 1 st world countries E) Canadian governments

32)

Some would argue that

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is the masters of administrative trade policies.

206

A) United States B) Japan C) France D) Germany E) Canada

33) Bureaucratic rules that are designed to make it difficult for imports to enter a country are referred to as

A) situational trade policies.

B) ad valorem trade policies.

C) supplemental trade policies.

D) administrative trade policies.

E) public service intransigence.

34) Consider the following scenario. The Netherlands exports tulip bulbs to almost every country in the world except Japan. The reason is that Japanese customs inspectors insist on checking every tulip bulb by cutting it down the middle (which destroys the bulb). The insistence on the part of the Japanese to inspect the bulbs in this manner (which makes it impractical for the Netherlands to export to Japan) is an example of a(n)

A) administrative trade policy.

B) ad valorem trade policy.

C) contingent trade policy.

D) supplemental trade policy.

E) Plant Protection Law.

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35) At one time, the French government required that all imported videocassette recorders arrive in France through a small customs entry point that was both remote and poorly staffed.

This policy, which in effect made it impractical for a foreign company to import videocassette recorders to France, is an example of a(n)

A) supplemental trade policy B) contingent trade policy C) administrative trade policy D) ad valorem trade policy E) administrative cost reduction strategy

36) An example of a(n) that limits imports is if a country restricted the import of a particular good to a remote seaport that made it extremely difficult for any other country to import the good profitably.

A) ad valorem trade policy B) administrative trade policy C) situational trade policy D) directional trade policy E) anti-dumping policy

37) An administrative policy is an informal instrument or bureaucratic rule that can be used to restrict imports and boost exports. Such policies benefit but hurt .

A) trade associations; producers B) consumers; producers C) consumers; trade associations D) producers; consumers E) consumer lobbyists; farmers

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38) 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.

A) slicing B) dumping C) slashing D) subsidizing E) skimming

39)

If

exist, a charge of "dumping" can be levied against a foreign firm.

A) goods are being sold that do not meet local content requirements or goods are being sold that do not meet local quality standards B) goods are being sold at predatory prices or goods are being sold that do not meet local product safety standards C) goods are being sold without the consent of the host government or goods are being sold that do not meet local quality standards D) goods are being sold at below their cost of production or goods are being sold at below their "fair" market value E) goods are being sold at a price that domestic producers cannot match and workers are losing jobs

40) An alleged example of occurred in 1997, when two Korean manufacturers of semiconductors, LG Semicon and Hyundai Electronics, were accused of selling dynamic random access memory chips in the U.S. market at below their costs of production.

A) dumping B) forcing C) slicing D) subsidizing E) skimming

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41)

are designed to punish foreign firms that engage in dumping.

A) Antidumping policies B) Counterdumping policies C) Statutory dumping policies D) Civil dumping policies E) Punitive dumping tariffs

42)

What is the ultimate objective of antidumping policies?

A) protect consumers from predatory pricing B) protect host governments from the loss of legitimate tax revenue C) protect domestic producers from "unfair" foreign competition D) protect foreign producers from "unfair" local competition E) promote "fair" trade

43)

Antidumping duties are often called

.

A) import duties B) export duties C) special duties D) government duties E) countervailing duties

44) In general, what are two types of arguments for government intervention into the free flow of trade?

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A) Patriotic and sociocultural B) Sociocultural and legal C) Political and economic D) Legal and patriotic E) Socioeconomic and legal

45) Perhaps the most common political argument for government intervention into the free flow of trade is that

A) it protects national pride.

B) politicians and their constituents tend to think that domestically produced products are. superior to products produced in another country.

C) it is necessary for protecting jobs and industries from foreign competition.

D) it is necessary to maintain domestic economic stability.

E) it is important for national security.

46)

An indirect effect of protecting consumers from "unsafe" products is to

A) decrease the costs of the products.

B) decrease the prices of the products.

C) limit or ban the importation of the products.

D) both A and C are correct.

E) A, B and C are correct.

47) arguments for government intervention into international trade are typically concerned with furthering the security of its citizens.

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A) economic B) political C) legal D) sociocultural E) constitutional

48)

A priority sector in Canada for protecting national security is:

A) Defense B) Industrial C) Agricultural D) Technology E) Tele-comm

49)

Canada sometimes uses trade policy to:

A) Further foreign policy goals B) Protect and promote human rights C) Protect consumers D) Retaliate E) All of these options

50)

The text focuses on international trade law. One area not discussed in depth is:

A) Retaliation B) Counterfeiting C) Human rights D) Consumer protection E) Foreign policy

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51) arguments for government intervention into international trade are typically concerned with boosting the overall wealth of a nation.

A) economic B) political C) legal D) sociocultural E) constitutional

52) By far, the oldest economic argument for government intervention into the free flow of trade is the argument.

A) mature industry B) infant industry C) declining industry D) proprietary industry E) mercantilist

53) According to the argument, many developing countries have a potential comparative advantage in manufacturing, but new manufacturing industries there cannot initially compete with well-established industries in developed countries. To allow manufacturing to get a toehold, the argument is that governments should temporarily support new industries (with tariffs, import quotas, and subsidies) until they have grown strong enough to meet international competition.

A) proprietary industry B) strategic trade policy C) mature industry D) infant industry E) strategic industry

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54) Primarily as a result of pressure from the developing world, it was recognized the argument was a legitimate reason for protectionism.

A) declining industry B) infant industry C) strategic trade policy D) mature industry E) strategic industry

55) The infant industry argument has been recognized as a legitimate reason for protectionism by the .

A) GATT B) North Atlantic Treaty Organization C) United Nations D) International Monetary Fund E) World Bank

56) A government should use subsidies to support promising firms that are active in newly emerging industries, according to the argument.

A) strategic trade policy B) infant industry C) declining industry D) mature industry E) strategic industry

57) According to the strategic trade policy argument, a government should use subsidies to do what?

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A) support promising firms in emerging industries B) support established firms in key industries C) support the import of goods that a country cannot produce domestically D) support the export of agricultural products E) support large employers

58) An important component of is that it might pay governments to intervene in an industry if it helps domestic firms overcome the barriers to entry created by foreign firms that have already reaped first-mover advantages.

A) tactical trade policy B) strategic trade policy C) administrative trade policy D) comparative trade policy E) infant industry policy

59) The strategic trade policy argument of the new trade theorists advances an justification for government intervention in international trade.

A) technological B) sociocultural C) economic D) political E) legal

60) arguments challenges the rationale for unrestricted free trade found in the work of classic trade theorists such as Adam Smith and David Ricardo.

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A) Technological justification B) Sociocultural justification C) Strategic trade policy D) Political justification E) National Security

61) According to the textbook, Paul Krugman, a professor at MIT, predicts that a country that attempts to use strategic trade policy to establish a domestic firm (or firms) in a dominant position in a global industry will probably

A) succeed fairly smoothly.

B) be viewed favorable in the international community.

C) provoke retaliation.

D) be successful if the policy is in force for at least three years.

E) experience strong foreign opposition, but succeed in the long-run.

62)

Governments do not just intervene for economic reasons, but also for political reasons.

A) Never B) Rarely C) Sometimes D) Often E) In response to specific issues and interest groups

63) When the British Parliament repealed the policy was first officially embraced by Great Britain in 1846.

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, free trade as a government

216

A) Corn Laws B) Steel Laws C) Coal Laws D) Apparel Laws E) Child Labour Laws

64)

The Corn Laws:

A) were repealed after record harvests in Britain B) placed a high tariff on corn imported into Britain C) were repealed after a stinging speech in parliament by David Ricardo where he outlined the theory of comparative advantage D) were enacted by Britain after the shortages of corn during the Crimean War E) were repealed to reduce the production of non-quota corn

65) Aimed at avoiding rising unemployment by protecting domestic industry and diverting consumer demand away from foreign products, the tariff erected an enormous wall of tariff barriers.

A) Smoot-Hawley Act B) Porter-Ricardo Act C) Heckscher-Ohlin D) Smith-Krugman E) Vernon-Weimar

66)

In what year was the General Agreement on Tariffs and Trade (GATT) established?

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A) 1867 B) 1908 C) 1947 D) 1983 E) 1944

67) The was a multilateral agreement whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like.

A) General Agreement of Tariffs and Trade B) World Trade Supervisory Authority C) United Nations D) International Trade Organization E) International Labour Organization

68) The was a multilateral agreement whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like.

A) Multinational Agreement on Globalization B) United Nations Charter on Free Trade C) World Agreement on Trade and Free Commerce D) International Market Fund E) General Agreement on Trade and Tariffs

69)

GATT was, by most measures,

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in its early years.

218

A) very unsuccessful B) slightly unsuccessful C) slightly successful D) very successful E) ineffective

70) is not one of the main reasons that protectionist pressures arose around the world during the 1980s.

A) Many countries found ways to get around GATT regulations B) The opening of Japanese markets to imports C) The economic successes of Japan D) The persistent trade deficit in the United States E) The growing resentment towards the U.S.

71) The , which is the latest completed round of the GATT agreement, was launched in 1986 and completed in December 1993.

A) Uruguay Round B) German Round C) Japanese Round D) Brazilian Round E) Doha Round

72) In 1986 GATT members embarked on their eighth round of negotiations to reduce tariffs.

The negotiations were referred to as the Round (so named because they took place in this country).

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A) German B) Australian C) Brazilian D) Uruguay E) Quebec

73)

Which of the following is not a component of the Uruguay Round agreement?

A) GATT rules will be much clearer and stronger B) GATT fair trade and market access rules will be extended to cover a wider range of services C) agricultural subsidies will be substantially reduced D) tariffs on industrial goods will be increased by more the one-half E) GATT rules will provide more protection against piracy

74) The World Trade Organization was created by the negotiations.

of the GATT

A) Cyprus Round B) Canadian Round C) Norway Round D) Uruguay Round E) Doha

75) The was created to arbitrate trade disputes and monitor the trade policies of member countries as a result of the Uruguay Round agreement.

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A) United Trade Authority B) World Trade Organization C) Global Commerce Authority D) International Trade Authority E) International Market Fund

76)

The acronym WTO stands for

A) World Trade Organization.

B) World Technology Outlook.

C) Western Trade Alliance.

D) World Trade Outlook.

E) World Treaty Operation.

77) The WTO's policing and enforcement mechanisms are having trade, according to the textbook.

on world

A) a positive effect B) a negative effect C) no effect D) a very slight effect E) adverse effects

78)

What economic sector did the WTO tackle first?

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A) financial services B) agriculture C) telecommunications D) manufacturing E) retail

79) In late 2001 the WTO launched a new round of talks at Doha. The goals of this round of talks were to .

A) liberalize protection of intellectual property and reduce barriers to investment B) enhance the enforcement of the Paris Convention and allow global banking C) deregulation of transportation and the liberalizing of the textile market D) further protect intellectual property and reduce agricultural subsidies E) further liberalization of the global trade and investment framework

80)

Which of the following is not a disadvantage of government intervention in trade policy?

A) Intervention can be self-defeating, since it tends to protect the inefficient rather than help firms become efficient global competitors B) Intervention in the form of tariffs, quotas, and subsidies can help firms and industries establish a competitive advantage in the world economy C) Intervention is unlikely to be well executed, since it may invite retaliation and trigger a trade war D) Intervention is dangerous, since it may invite retaliation and trigger a trade war E) None of these answers is correct

81) Due to , according to our textbook, government intervention in trade policy is unlikely to be well executed.

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A) inexperience B) the costs associated with intervention C) the impact of special interest groups D) because of the high turnover of officials in government industries E) opposition from other countries

82) As a fairly new Canadian manufacturer of medium and high-end barbeques located in Nova Scotia, you have been under severe price pressure from a Chinese low cost manufacturer.

In fact the Chinese manufacturer has been successfully convincing various large retail organizations to order low-end barbeque lines that are specially designed and branded with the retail organization's name. Your company has therefore hired a lobbyist to present your case to the federal government.

What is the simplest trade policy that you can lobby for? Explain how this would be applied in this scenario.

83) As a fairly new Canadian manufacturer of medium and high-end barbeques located in Nova Scotia, you have been under severe price pressure from a Chinese low cost manufacturer.

In fact the Chinese manufacturer has been successfully convincing various large retail organizations to order low-end barbeque lines that are specially designed and branded with the retail organizations name. Your company has therefore hired a lobbyist to present your case to the federal government.

What are all of the trade policy instruments that your company can lobby for?

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84) As a fairly new Canadian manufacturer of medium and high-end barbeques located in Nova Scotia, you have been under severe price pressure from a Chinese low cost manufacturer.

In fact the Chinese manufacturer has been successfully convincing various large retail organizations to order low-end barbeque lines that are specially designed and branded with the retail organizations name. Your company has therefore hired a lobbyist to present your case to the federal government.

Your lobbyist is looking for some political arguments to make in favour of the federal government intervening in this matter. What do you tell her to argue?

85) As a fairly new Canadian manufacturer of medium and high-end barbeques located in Nova Scotia, you have been under severe price pressure from a Chinese low cost manufacturer.

In fact the Chinese manufacturer has been successfully convincing various large retail organizations to order low-end barbeque lines that are specially designed and branded with the retail organizations name. Your company has therefore hired a lobbyist to present your case to the federal government.

Your lobbyist is looking for some economic arguments to make in favour of the federal government intervening in this matter. What do you tell her to argue?

86)

What is a tariff? Describe the difference between specific tariffs and ad valorem tariffs.

87) Who gains and who losses from the imposition of a tariff on an imported goods? How can it be determined whether the net gain from the tariff exceeds the net loss?

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88) What is a subsidy? Provide some examples of the forms that subsidies take. How do subsidies help domestic producers?

89) What is a voluntary export restraint? Can countries use voluntary export restraints to avoid trade retaliation? Explain your answer.

90) What is a local content requirement? How are local content requirements typically expressed?

91) What are administrative trade policies? Are these trade policies deliberately designed to restrict the flow of imports into a country, or do they simply reflect the complexity of the bureaucracies in many foreign countries? Provide at least one example of an "administrative trade policy."

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92) The World Trade Organization (WTO) completed the Uruguay Round of negotiations as part of the GATT framework. According to the textbook, has the WTO gotten off to a good start or a poor start? Do you believe that the WTO will be effective in the long run? Why or why not?

93)

What was on the agenda for the Doha round of talks? Has it been successful?

94) Today, Britain and the U.S. are no longer seen to be leaders in the push toward greater global free trade. ⊚ ⊚

true false

95) According to the opening, South Korea and the U.S. came to agree that South Korea would be exempt from a 25 percent tariff on steel imports. ⊚ ⊚

true false

96) Free trade refers to a situation where a government does not attempt to restrict what its citizens can buy from another country or what they can sell to another country. ⊚ ⊚

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true false

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97)

Tariffs are relatively new instruments of trade policy. ⊚ ⊚

98)

true false

A tax levied on imports is referred to as non-tariff barriers. ⊚ ⊚

true false

99) Specific tariffs are leveled as a proportion of the value of the imported good (for example, 5% of the value of a new car). ⊚ ⊚

100)

A tariff reduces the cost of imported products relative to domestic products. ⊚ ⊚

101)

true false

true false

Ad valorem tariffs are levied as a proportion of the value of the imported good. ⊚ ⊚

true false

102) Tariffs increase the overall efficiency of the world economy because a protective tariff encourages domestic firms to produce products at home, in theory, which could be produced more efficiently abroad.

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⊚ ⊚

true false

103) The main gains from subsidies accrue to importers, whose international competitiveness is increased as a result of them. ⊚ ⊚

true false

104) A direct restriction on the quantity of some good that may be imported into a country is an import quota. ⊚ ⊚

105)

true false

A voluntary export restraint is a quota on trade imposed by the exporting country. ⊚ ⊚

true false

106) Typically at the request of the importing country, a quota on trade imposed by the exporting country is referred to as a voluntary export restraint. ⊚ ⊚

107)

true false

Consumers are benefited by quotas. ⊚ ⊚

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228

108)

Export tariffs are less common than import tariffs. ⊚ ⊚

true false

109) A local content requirement demands that some specific fraction of a good be produced domestically. ⊚ ⊚

true false

110) Administrative trade policies are bureaucratic rules that are designed to make it easy for imports to enter a country. ⊚ ⊚

111)

Selling goods in a foreign market at above their costs of production is called dumping. ⊚ ⊚

112)

true false

true false

Government intervention includes tariffs, quotas, anti-dumping actions and subsidies. ⊚ ⊚

true false

113) One common political argument for government intervention is that it is necessary for protecting jobs and industries from "unfair" foreign competition.

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⊚ ⊚

true false

114) Countries sometimes argue that it is important to protect certain industries for reasons of national security. ⊚ ⊚

115)

true false

Counterfeiting is a significant issue in trade law. ⊚ ⊚

true false

116) Protecting consumers from "dangerous" products and furthering the goals of foreign policy are types of economic arguments for intervention. ⊚ ⊚

true false

117) The infant industry argument is the oldest economic argument for government intervention. ⊚ ⊚

true false

118) GATT has not yet recognized the infant industry argument as a legitimate reason for protectionism. ⊚ ⊚

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119)

Paul Krugman points out that strategic trade policy may not work in practice. ⊚ ⊚

120)

true false

Politically important interest groups can influence governments. ⊚ ⊚

true false

121) A lack of trust between nations is a reason that governments are sometimes unwilling to lower trade barriers. ⊚ ⊚

true false

122) The intellectual case for free trade goes back to the late 18 th century and the work of Adam Smith and David Ricardo. ⊚ ⊚

123)

true false

In its early years GATT was by most measures unsuccessful. ⊚ ⊚

true false

124) Against the background of rising pressures for protectionism, in 1986 the members of the GATT embarked on their eighth round of negotiations to reduce tariffs, the Brussels Round.

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⊚ ⊚

true false

125) GATT rules had applied only to manufactured goods and commodities until the Uruguay Round. ⊚ ⊚

126)

The WTO now has 50 member countries ⊚ ⊚

127)

true false

true false

Trade barriers have no effect on the cost of exporting products to a country. ⊚ ⊚

true false

128) Four issues at the forefront of the agenda of the WTO today are anti-dumping policies, the high level of protectionism in agriculture, the lack of strong protection for intellectual property rights in many nations, and continued high tariff rates on nonagricultural goods and services in many nations. ⊚ ⊚

true false

129) Multilateral and bilateral trade agreements are designed to capture gain from trade beyond those agreements currently attainable under WTO treaties.

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⊚ ⊚

130)

true false

Britain and the U.S. continue to be strongly viewed as global free trade advocates. ⊚ ⊚

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Answer Key Test name: chapter 6 1) A 2) B 3) A 4) C 5) A 6) A 7) D 8) A 9) E 10) A 11) D 12) B 13) D 14) B 15) E 16) A 17) B 18) A 19) E 20) B 21) A 22) B 23) D 24) A 25) B 26) C Version 1

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27) D 28) B 29) D 30) D 31) C 32) B 33) D 34) A 35) C 36) B 37) D 38) B 39) D 40) A 41) A 42) C 43) E 44) C 45) C 46) C 47) B 48) A 49) E 50) B 51) A 52) B 53) D 54) B 55) A 56) A Version 1

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57) A 58) B 59) C 60) C 61) C 62) E 63) A 64) B 65) A 66) C 67) A 68) E 69) D 70) B 71) A 72) D 73) D 74) D 75) B 76) A 77) A 78) C 79) E 80) B 81) C 94) TRUE 95) TRUE 96) TRUE 97) FALSE 98) FALSE Version 1

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99) FALSE 100) FALSE 101) TRUE 102) FALSE 103) FALSE 104) TRUE 105) TRUE 106) TRUE 107) FALSE 108) TRUE 109) TRUE 110) FALSE 111) FALSE 112) TRUE 113) TRUE 114) TRUE 115) TRUE 116) FALSE 117) TRUE 118) FALSE 119) TRUE 120) TRUE 121) TRUE 122) TRUE 123) FALSE 124) FALSE 125) TRUE 126) FALSE 127) FALSE 128) TRUE Version 1

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129) TRUE 130) FALSE Chapter 7 Student name: 1)

According to the opening case, Geely has profited from what

A) Increasing store sizes B) tariffs C) subsidies D) FDI E) local content rules

2) When a firm invests directly in new facilities to produce and/or market a product in a foreign country, occurs.

A) reciprocal foreign investment B) cross-border international investment C) international capital investment D) international expansion E) foreign direct investment

3)

FDI is an acronym that stands for

A) Federation of Direct Investors.

B) Federal Diversification Initiative.

C) Foreign Direct Investment.

D) Formal Direct Internationalization.

E) Fund for Direct Investment.

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4) occurs, according to the U.S. Department of Commerce, whenever a U.S. citizen, organization, or affiliated group takes an interest of 10 percent or more in a foreign business entity.

A) Cross-border international investment B) Foreign direct investment C) Reciprocal foreign investment D) International capital investment E) International currency transfer

5) If TransCanada Pipelines, a Canadian based corporation, purchased a 50% interest in a company in Italy, that purchase would be an example of

A) multinational investment.

B) reciprocal foreign investment.

C) foreign direct investment.

D) cross-boarder international investment.

E) foreign joint venture

6) If Siemens, a German firm, purchased a 20% interest in a manufacturing firm in Canada, Siemens would be engaging in

A) foreign direct investment.

B) global entrepreneurship.

C) cross-border international investment.

D) multinational investment.

E) minority interest acquisition.

7)

The establishment of a wholly new operation in a foreign country is referred to as a(n):

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A) outplacement B) greenfield investment C) new venture D) exporting E) turn-key investment

8) The of foreign direct investment refers to the amount of FDI undertaken over a given period (normally a year). The of foreign direct investment refers to the total accumulated value of foreign-owned assets at any time.

A) portfolio; current B) flow; stock C) stock; flow D) stockpile; portfolio E) annual accumulation; total accumulation

9)

The flow of foreign direct investment out of a country is

A) forfeiture of national investment.

B) loss of national investment.

C) expenditure of FDI. D) outflow of FDI. E) a reflection of the loss of jobs.

10)

The flow of foreign direct investment into a country is referred to as the

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A) inflow of FDI. B) FDI capture.

C) FDI gain.

D) accrual of FDI. E) FDI wealth accrual.

11)

Generally speaking, there has been a(n)

in the past 35 years.

A) increase in the stock but not in the flow of FDI in the world economy B) marked increase in both the flow and stock of FDI in the world economy C) marked decrease in both the flow and stock of FDI in the world economy D) increase in flow but not the stock of FDI in the world economy E) greater restrictions on the outflow, while liberalization of the inflow of FDI

12) Which of the following two statements accurately reflects the trend in foreign direct investments over the past 35 years?

A) There has been a rapid increase in the total volume of FDI undertaken and there has been a change in the importance of various countries as sources for FDI B) There has been a rapid increase in the total volume of FDI undertaken and the countries that have been instrumental as sources of FDI have remained the same C) There has been a rapid decrease in the total volume of FDI undertaken and there has been a change in the importance of various countries as sources for FDI D) There has been a rapid decrease in the total volume of FDI undertaken and the countries that have been instrumental as sources of FDI have remained the same E) There has been a slow increase in the total volume of FDI undertaken and there has been no change in the importance of various countries as sources for FDI

13)

For the most part FDI flows have

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A) shrunk B) stayed the same C) varied D) grown E) averaged $1.2 billion

14)

has not contributed to the increase in FDI over the past several years.

A) Globalization of the world economy B) The desire to have production facilities close to major customers C) A strong U.S. economy D) Dramatic shifts towards socialist and communist political institutions E) Increasing corporate profits

15)

Historically, most FDI has been directed at

.

A) developed nations B) developing nations C) China D) India E) the Middle East

16)

Since World War II, the largest source country for FDI outflows has been , though this is not true today.

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A) Canada B) China C) United States D) United Kingdom E) Japan

17)

Besides the United States, the other important source country for FDI today is

.

A) China B) Spain C) Greece D) India E) Japan

18) Which of the following is not true about why firms prefer to acquire existing assets rather than undertake greenfield investments?

A) Foreign firms are acquired because those firms have valuable strategic assets.

B) Firms make acquisitions because they believe they can increase the efficiency of the acquired unit by transferring capital, technology, or management skills.

C) Firms make acquisitions because they believe it will make more profits for the home firm and home country.

D) Mergers and acquisitions are quicker to execute than greenfield investments.

E) Mergers and acquisitions are cheaper than greenfield investments.

19)

For the most part Canadian FDI outflow in last few years went to

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A) the U.S. multinational corporations B) Chinese manufacturers C) Canadian affiliates and subsidiaries D) British domestic companies E) Japanese autoparts manufacturers

20)

The eclectic paradigm theory of FDI includes:

A) Why a firm will favour direct investment to enter a foreign market B) A range of electric ideas to explain a firm's choices C) Taking the best aspects of other theories and combining them into one explanation D) Combining the least compelling aspects of other theories and combining them into one explanation E) Why firms in the same industry always undertake FDI at different times

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

A) Foreign direct investment B) Licensing C) Franchising D) Exporting E) Offshoring

22) If 3M, an American firm, produces adhesive tape in St. Paul, Minnesota, and ships the tape to South Korea to be sold, that is an example of:

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A) exporting B) licensing C) franchising D) cross-border investing E) international trade

23) Which of the following involves granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit sold?

A) franchising B) exporting C) licensing D) foreign direct investment E) merger

24) When transportation costs are added to production costs, it becomes unprofitable to ship some products over a large distance. This is particularly true of products that have a(n):

A) high value-to-weight ratio B) moderate value-to-weight ratio C) low value-to-weight ratio D) extremely high value-to-weight ratio E) value to weight ratio

25)

FDI is often undertaken as a response to:

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A) exporting B) FDI outflows C) FDI inflows D) threatened import tariffs E) high GDP levels

26)

The licensor

in return for licensing one of its products to a foreign firm.

A) gets preferential trade treatment from the country of the licensee B) gets a special subsidy from the country of the licensee C) collects a royalty fee on every unit the licensee sells D) gets a one time payment from the licensee E) protects their local market

27) Some of Toyota's competitive advantage is due to its superior ability to manage the design, engineering and manufacturing of its automobiles. Despite the fact that some of its products could be licensed for production by another company it does not do so because .

A) Toyota does not want to lose control over its technology B) Toyota are strong believers in the internalization theory C) Toyota does not want to share profits and it is a large enough company to enter every market D) another company could not be as efficient a producer of cars as Toyota E) all of these answers are correct

28) , a branch of economics, seeks to explain why firms often prefer foreign direct investment to licensing as a strategy for entering foreign markets.

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A) Comparative advantage theory B) Globalization theory C) Cosmopolitan theory D) Internalization theory E) Patterns of FDI

29) According to internalization theory, licensing has three major drawbacks as a strategy for exploiting foreign market opportunities. Each of the following is a drawback of licensing except:

A) licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor.

B) licensing does not give a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability.

C) licensing helps a firm avoid making a direct foreign investment in a foreign country.

D) when a firm's competitive advantage is based not so much on its products as on the management, marketing, and manufacturing capabilities that produce those produces, licensing fails to capture those advantages.

E) none of these answers is correct.

30)

Control over manufacturing, marketing, and strategy is granted to a licensee in return for:

A) increased taxation.

B) decreased taxation.

C) a royalty fee.

D) company stock given to the government.

E) profit sharing.

31) High transportation costs and/or tariffs imposed on imports help explain why many firms prefer over .

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A) foreign direct investment or licensing; exporting B) foreign direct investment or licensing; joint ventures C) exporting; foreign direct investment or licensing D) strategic alliances; foreign direct investment or licensing E) licensing; foreign direct investment

32) When according to the textbook.

, a firm will favor FDI over exporting as an entry strategy,

A) interest rates or government policy make exporting unattractive B) transportation costs or trade barriers make exporting unattractive C) cultural barriers or trade barriers make exporting unattractive D) cultural barriers or government policy make exporting unattractive E) internalization theory is not applicable

33) According to the textbook, a firm will favor over when it wishes to maintain control over its technological know-how, or over its operations and business strategy.

A) foreign direct investment; exporting B) licensing; foreign direct investment C) foreign direct investment; licensing D) exporting; foreign direct investment E) exporting; licensing

34)

Much foreign direct investment is undertaken as a response to actual or threatened

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A) trade barriers.

B) economic sanctions.

C) legal action.

D) international appeals.

E) market opportunities.

35) One theory used to explain foreign direct investment patterns is based on the idea that firms follow their domestic competitors overseas. First expounded by , this theory has been developed with regard to oligopolistic industries.

A) F.T. Knickerbocker B) William P. Smith C) Michael Porter D) Eli Heckscher E) Roy Thompson

36) An industry composed of a limited number of large firms (i.e. an industry in which four firms control 80 percent of a domestic market) is referred to as a(n):

A) syndicate B) cartel C) oligopoly D) monopoly E) stratified polity

37) If one firm in a(n) cuts prices, this can take market share away from its competitors, forcing them to respond with similar price cuts in order to retain their market share.

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A) monopoly B) oligopoly C) multipoint competition D) cartel E) price fixing agreement

38) Studies of U.S. enterprises suggest that firms based in imitate each other's foreign direct investment patterns.

industries tend to

A) oligopolistic B) monopolistic C) syndicated D) munificent E) related

39) When two or more enterprises encounter each other in different regional markets, national markets, or industries, arises.

A) a monopoly B) an oligopoly C) a cartel D) multipoint competition E) international competition

40) Camelot Baby Carriages decided to enter the European market. Sam's Strollers followed to ensure that Camelot would not gain competitive advantage in Europe that could lead to the same thing occurring in Asia. Sam's then decides to enter the Australian market, and Camelot follows. This is an example of:

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A) monopoint competition.

B) multipoint competition.

C) lead and follow competition.

D) competition life cycle.

E) oligolopolic competition.

41)

The eclectic paradigm has been championed by the British economist

.

A) John Dunning B) Edward Luty C) William Spencer D) Andrew Ferguson E) Francis Knickerbocker

42) Advantages that arise from using resource endowments or assets that are tied to a particular location and that a firm finds valuable to combine with its own unique assets are referred to as:

A) geographic specific preferences B) unique geographic advantages C) locale-specific preferences D) location-specific advantages E) factor endowment advantages

43) Combining location specific assets or resource endowments and the firm's own unique capabilities often requires:

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A) mergers B) FDI C) local production D) home country training E) cross cultural literacy

44) are knowledge spillovers that occur when companies in the same industry locate in the same area.

A) Inward overflows B) Cognitive overflows C) Concentric overflows D) Synergy E) Externalities

45) The theory.

view of FDI traces its roots to Marxist political and economic

A) radical B) free market C) pragmatic nationalism D) conservative E) social democratic

46) Radical writers believe that extract profits from the host country and take them to their home country, giving nothing of value to the host country in exchange.

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A) FDI B) MNEs C) SNEs D) PNCs E) MNCs

47) Which of the following is NOT a reason that the radical position of MNEs was in retreat by the end of the 1980s?

A) The strong economic performance of those developing countries that embraced capitalism rather than radical ideology B) The collapse of communism in Eastern Europe C) The rise of democracy in the Western countries D) A growing belief by many radical countries that FDI can be an important source of technology and job and can stimulate economic growth E) The move to deregulate Western economies

48) The view argues that international production should be distributed among countries according to the theory of comparative advantage.

A) conservative B) pragmatic nationalism C) free market D) radical E) liberal

49) The MNE is seen as an instrument for dispersing the production of goods and services to those locations around the globe where they can be produced most efficiently, according to the view.

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A) radical B) liberal C) capitalist D) pragmatic nationalism E) free market

50)

The

view is that FDI has both benefits and costs.

A) radical B) conservative C) free market D) pragmatic nationalist E) liberal

51) In a costs.

view, FDI should be allowed only if the benefits outweigh the

A) communist B) socialist C) pragmatic nationalism D) radical E) liberal

52) An increasing number of countries are gravitating toward the free market end of the spectrum and liberalized their foreign investment regime including:

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A) Japan and South Korea B) Italy and Spain C) Many Eastern European countries D) Many Latin American countries E) All of these options

53)

are three main benefits of inward FDI for a host country.

A) The resource-transfer effect, the employment effect, and the balance-of-payments effect B) The capital-transfer effect, the technology effect, and the currency exchange effect C) The cultural awareness effect, the technology effect, and the balance-of-payments effect D) The resource-transfer effect, the technology effect, and the currency exchange effect E) Balance of payments effect, currency exchange effect, and the technology effect

54) The beneficial effects of FDI may be reduced if most management and highly skilled jobs in the subsidiaries of foreign firms are reserved for nationals.

A) host-country B) third-country C) home-country D) local E) expatriate

55) A country's countries.

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255

A) pluses and minuses account B) debits and credits account C) checks and balances account D) balance-of-payments account E) current account

56)

What is the record of a country's export and import of goods and services referred to as?

A) Current account B) Foreign account C) Internal account D) Tariff account E) National account

57) The establishment of Japanese automakers' branch plants in Canada does not help the U.S. in terms of its .

A) current account B) international accounts C) national account D) foreign currency account E) balance-of-payments accounts

58)

Three main costs of inward FDI concern host countries. These are:

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A) the employment effect, the perceived loss of national sovereignty and autonomy, and the resource transfer effect B) the possible adverse effects of FDI on competition with the host country, the resource transfer effect, and the perceived loss of national sovereignty and autonomy C) the resource transfer effect, the employment effect, and the possible adverse effects of FDI on competition within the host country D) the possible adverse effects of FDI on competition within the host country, adverse effects on the balance of payments, and the perceived loss of national sovereignty and autonomy E) Loss of national sovereignty, increased materialism, increased income and wealth inequities

59) Which is a possible adverse effect of FDI on a host country's balance-of-payments position?

A) When a foreign subsidiary exports a substantial number of its outputs abroad.

B) When a foreign subsidiary gets a substantial number of its inputs from its hostcountry.

C) When most of the foreign subsidiary's management team is from the home country.

D) Set against the initial capital inflow that comes with FDI must be the subsequent outflow of income as the foreign subsidiary repatriates earnings to its parent company.

E) the increased competition weakens domestic companies reducing local production and increasing imports

60)

FDI's impact on competition in domestic markets is particularly important in the case

A) High speed rail B) Telecommunications services C) Retail services D) A&B E) B&C

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61) Regarding the costs of FDI for the home country, the most important concerns center around:

A) the balance-of-payments and employment effects of outward FDI B) the technology capture effect and the perceived loss of national sovereignty C) the resource transfer effect and the inflationary pressures caused by FDI D) the perceived loss of national sovereignty and inflationary pressures caused by FDI E) the technology transfer loss and increased competition

62) If a Canadian corporation decides to create FDI in Mexico because the new plant site has lower costs, this can cause Canada to:

A) lose out on taxes because Mexico will receive them for the new site.

B) deteriorate its trade position.

C) have an increase in its unemployment rate.

D) have a decrease in its unemployment rate.

E) experience increased corporate profits.

63) International trade theory tells us that home country concerns about the negative economic effects of offshore production:

A) are typically right on B) may be misplaced C) are typically irrelevant D) are typically negligible E) should be addressed

64)

International trade theory tells us that home country concerns may be misplaced as FDI

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A) can stimulate economic growth B) can stimulate job creation C) benefits consumers D) involves the long view E) involves all of these options

65) Many investor nations now have government backed insurance programs to cover major types of foreign investment risk. The types of risks insurable through these programs include all of the following except:

A) the risk of expropriation B) war losses C) the inability to transfer profits back home D) strategic business blunders E) currency restrictions

66) Countries have been known to occasionally manipulate encourage their firms to invest at home.

to try to

A) safety regulations B) tax rules C) environmental rules D) the stock market E) the media

67)

Canada continues to restrict FDI into

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A) railroads B) nuclear power generation C) the Alberta tar sands D) airlines E) land

68)

It is increasingly common for governments to:

A) offer incentives to firms that invest in their countries B) penalize firms that invest in their countries C) offer incentives to firms from developed countries to invest in their countries, but not to firm from developing countries D) offer incentives to firms from developing countries to invest in their countries, but not to firms from developed countries E) restrict the use of incentives to foreign investors to level the playing field for their local industries

69) is (are) not a common incentive that governments offer foreign firms to invest in their countries.

A) Grants or subsidies B) Free media advertising C) Low-interest loans D) Tax concessions E) None of these answers is correct

70)

Host governments use a range of controls to restrict FDI. The two most common are

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A) monetary restraints and performance requirements.

B) technology transfer restraints and employment restraints.

C) ownership restraints and performance requirements.

D) employment restraints and repatriation limitations.

E) foreign corporate tax levies and ownership restraints.

71) A Paris-based intergovernmental organization of "wealthy" nations whose purpose is to provide its 34 member states with a forum in which governments can compare their experiences, discuss the problems they share, and seek solutions that can be applied within their own national contexts is referred to as

A) Council for Economic Strength.

B) Federation of Emerging Nations.

C) Organization for Economic Cooperation and Development.

D) Organization for Economic Strength and Global Leadership.

E) Organization for Economic Equality and Development.

72)

McDonalds has expanded into foreign markets primarily through

A) franchising.

B) licensing.

C) FDI. D) exporting.

E) turn-key.

73) Although it normally involves much longer-term commitments, franchising is essentially the service industry version of:

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A) exporting B) licensing C) FDI D) turnkey projects E) business system transfer

74) Because they , the product life-cycle theory and Knickerbocker's theory of FDI tend to be less useful from a business perspective.

A) are descriptive rather than analytical B) have not stood the test of time C) are not widely known D) have not been empirically validated E) have not been widely used

75) You are a Member of Parliament (MP) in Canada. There is currently a debate concerning a growing number of U.S. and other firms entering the Canadian market. Some MPs have stated that "enough is enough" and that they are tired of having "foreign companies steal Canadian jobs." You have to make a speech on this issue.

What are the benefits of inward FDI (i.e. FDI coming into a country from foreign sources) for Canada?

76) You are a Member of Parliament (MP) in Canada. There is currently a debate concerning a growing number of U.S. and other firms entering the Canadian market. Some MPs have stated that "enough is enough" and that they are tired of having "foreign companies steal Canadian jobs." You have to make a speech on this issue.

Are the benefits of Foreign Direct Investment (FDI) compelling?

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77) You are a Member of Parliament (MP) in Canada. There is currently a debate concerning a growing number of U.S. and other firms entering the Canadian market. Some MPs have stated that "enough is enough" and that they are tired of having "foreign companies steal Canadian jobs." You have to make a speech on this issue.

How does a potential host government's attitude toward FDI affect a company's willingness to engage in FDI in that country? Should a host government's attitude toward FDI be a major consideration when making a FDI decision? Why?

78) What is meant by the term Foreign Direct Investment? Describe the difference between the flow of foreign direct investment and the stock of foreign direct investment.

79) Why do firms prefer to acquire existing assets rather than undertake greenfield investments?

80) Despite its advantages, FDI has been described as an "expensive" and "risky" international growth strategy. Other things being equal, why is FDI expensive and risky?

Compare the risks involved with FDI to the risks involved with exporting and licensing.

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81)

How do transportation costs affect the attractiveness of exporting?

82)

Name three reasons that licensing may not be an attractive option.

83) How are the actions of an oligopoly like some of the actions found in foreign direct investment?

84) Describe what is meant by the eclectic paradigm? Who is its principle champion? Does this paradigm make sense as a rationale for FDI?

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85) Chinese state-owned companies have recently been blocked from buying into large American corporations because of concerns over national security. State owned companies are not always free to act solely from the perspective of business interests. There may be times when their owners the government will tell them to act to support the national interests of the country.

Should the attitude towards state owned companies particularly those from non-democratic countries?

86) According to this chapter's closing case, why were changes needed in the Indian retail sector?

87)

When a firm exports to a foreign country, foreign direct investment occurs. ⊚ ⊚

true false

88) The stock of foreign direct investment refers to the total accumulated value of foreignowned assets at a given time. ⊚ ⊚

true false

89) The flow of foreign investment refers to the number of countries a firm is investing in at any given point in time. ⊚ ⊚

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90)

There has been a rapid decrease in the total volume of FDI over the past 35 years. ⊚ ⊚

91)

During the 1980s and 1990s, the U.S. was a favourite target for FDI inflows. ⊚ ⊚

92)

true false

true false

Historically, there have been high levels of FDI outflows from the United States. ⊚ ⊚

true false

93) Most FDI has been directed at the developed nations of the world as firms based in advanced countries invested in the others' markets. ⊚ ⊚

94)

The largest source country for FDI is Japan. ⊚ ⊚

95)

true false

true false

A greenfield investment is a type of FDI.

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⊚ ⊚

true false

96) For much of Canada's recent history FDI inflows have been far greater than FDI outflows. ⊚ ⊚

true false

97) One theory of FDI seeks to explain why firms in the same industry often undertake FDI at the same time. ⊚ ⊚

true false

98) Granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit the foreign entity sells is called FDI. ⊚ ⊚

true false

99) In general, foreign direct investment is less expensive and less risky than either licensing or exporting. ⊚ ⊚

true false

100) Because a firm must establish production facilities in a foreign country or acquire a foreign enterprise, FDI is expensive.

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⊚ ⊚

true false

101) Because of the problems associated with doing business in a different culture where the "rules of the game" may be very different, FDI is risky. ⊚ ⊚

true false

102) There is a branch of economic theory known as internationalization theory that seeks to explain why firms often prefer exporting to foreign direct investment. ⊚ ⊚

true false

103) A rationale for wanting control over the operations of a foreign entity is that the firm might wish to take advantage of differences in factor costs across countries, producing only part of its final product in a given country, while importing other parts from where they can be produced at a lower cost. ⊚ ⊚

true false

104) A firm will favor foreign direct investment over exporting as an entry strategy when transportation costs or trade barriers make exporting unattractive. ⊚ ⊚

105)

true false

An industry composed of a large number of large firms is referred to as an oligopoly.

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⊚ ⊚

true false

106) The eclectic paradigm has come under sharp criticism by British economist John Dunning. ⊚ ⊚

true false

107) Externalities are knowledge spillovers that occur when companies in the same industry locate in the same area. ⊚ ⊚

108)

An oligopoly is an industry composed of a limited number of large firms. ⊚ ⊚

109)

true false

The pragmatic nationalist view is that FDI has both benefits and costs. ⊚ ⊚

110)

true false

true false

The radical view traces its roots to Marxist political and economic theory. ⊚ ⊚

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111) In practice, many countries have adopted neither a radical policy nor a free market policy toward FDI, but instead a policy that can best be described as pragmatic nationalism. ⊚ ⊚

112)

Pragmatic nationalism is a radical political ideology. ⊚ ⊚

113) FDI.

true false

true false

In some developed nations, there is increasing evidence of hostile reactions to inward

⊚ ⊚

true false

114) The three main benefits of inward FDI for a host country are the resource-transfer effect, the government effect, and the balance-of-payment effect. ⊚ ⊚

115)

true false

Technology takes jobs away from a host country that would otherwise remain there. ⊚ ⊚

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270

116) Regarding FDI, many host governments are concerned that key decisions that can affect the host country's economy will be made by a local instead of foreign parent. ⊚ ⊚

117)

true false

There are possible adverse effects of FDI on a host country's balance of payments. ⊚ ⊚

true false

118) FDI's impact on competition in domestic markets may be particularly important in the case of services. ⊚ ⊚

119)

true false

Benefits to a home country from outward FDI arise from employment effects. ⊚ ⊚

true false

120) The most important concerns of a home country centre on the balance-of-payments and employment effects of outward FDI. ⊚ ⊚

121)

true false

The term offshore production refers to FDI undertaken to serve the home market. ⊚ ⊚

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122)

Host countries have very few policy instruments they can use to regulate FDI. ⊚ ⊚

true false

123) Ownership restraints and profit requirements are the two most common ways host governments restrict FDI. ⊚ ⊚

true false

124) In 1995, the OECD initiated talks to draft a Multilateral Agreement on Investment that would make it illegal for signatory states to discriminate against foreign investors. ⊚ ⊚

true false

125) Other things being equal, investing in countries that are permissive to FDI is preferable to investing in countries that restrict FDI. ⊚ ⊚

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Answer Key Test name: chapter 7 1) D 2) E 3) C 4) B 5) C 6) A 7) B 8) B 9) D 10) A 11) B 12) A 13) D 14) D 15) A 16) C 17) A 18) C 19) C 20) C 21) D 22) A 23) C 24) C 25) D 26) C Version 1

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27) D 28) D 29) C 30) C 31) A 32) B 33) C 34) A 35) A 36) C 37) B 38) A 39) D 40) B 41) A 42) D 43) B 44) E 45) A 46) B 47) C 48) C 49) E 50) D 51) C 52) E 53) A 54) C 55) D 56) A Version 1

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57) E 58) D 59) D 60) E 61) A 62) B 63) B 64) C 65) D 66) B 67) D 68) A 69) B 70) C 71) C 72) A 73) B 74) A 87) FALSE 88) TRUE 89) FALSE 90) FALSE 91) TRUE 92) TRUE 93) TRUE 94) FALSE 95) TRUE 96) FALSE 97) TRUE 98) FALSE Version 1

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99) FALSE 100) TRUE 101) TRUE 102) FALSE 103) TRUE 104) TRUE 105) FALSE 106) FALSE 107) TRUE 108) TRUE 109) TRUE 110) TRUE 111) TRUE 112) FALSE 113) TRUE 114) FALSE 115) FALSE 116) FALSE 117) TRUE 118) TRUE 119) TRUE 120) TRUE 121) TRUE 122) FALSE 123) FALSE 124) TRUE 125) TRUE

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Chapter 8 Student name: 1)

The opening case shows:

A) the growth of trading blocks around the world B) The CUSMA protects Canada's cultural industries C) The CUSMA benefits Mexico more than the other partners D) The subsidies put forward by the Trump administration E) the unintended consequences of government actions to restrict trade

2) An agreement between countries in a geographic region to reduce tariff and non-tariff barriers to the free flow of goods, services, and factors of production between each other is referred to as

A) regional economic integration.

B) cross-cultural economic integration.

C) geographic economic-political integration.

D) cross-cultural economic-political integration.

E) transnational economic integration.

3)

The European Union effectively became a single market in

A) 1992.

B) 1998.

C) 1994.

D) 1993.

E) 2001.

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4) According to the textbook, by entering into , groups of countries aim to reduce trade barriers more rapidly than can be achieved under the WTO.

A) regional agreements B) synergistic agreements C) global agreements D) transnational agreements E) free trade zones

5) Nowhere has the movement toward regional economic integration been more successful than in .

A) Africa B) South America C) Asia D) Europe E) North America

6) On January 1, 1993, the________________ effectively became a single market with 340 million consumers.

A) European Union B) South American Union C) North American Union D) Southeast Asia Union E) British Commonwealth

7) The following three countries implemented the North American Free Trade Agreement (NAFTA):

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A) Panama, Mexico, and the United States B) Canada, Brazil, and the United States C) United States, Argentina, and Mexico D) Canada, Mexico, and the United States E) United States, Canada and Costa Rica

8)

NAFTA stands for:

A) North Asian Free Trade Agreement.

B) North African Free Trade Association.

C) North Atlantic Free Trade Agreement.

D) North American Free Trade Association.

E) Northern Arctic Free Trade Association.

9) As predicted by the theory of comparative advantage, there should be a from regional trade agreements.

A) substantial net gain B) minor net gain C) no economic impact D) substantial net loss E) substantial trade diversion

10) Which of the following selections accurately depicts the levels of economic integration from least integrated to most integrated?

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A) Common market, economic union, full political union, free trade area, and customs union B) Free market, economic union, full political union, free trade area, and customs union C) Free trade area, customs union, common market, economic union, and full political union D) Full political union, free trade area, common market, customs union, and economic union E) Free trade area, common market, customs union, economic union, and full political union

11) In a , theoretically, there are no discriminatory tariffs, quotas, subsidies, or administrative impediments distorting trade between members.

A) free trade area B) collective bargaining act C) common exchange policy D) customs exchange committee E) free trade zone

12)

In a free trade area

A) barriers to the trade of goods and services among member nations are removed.

B) a common currency is adopted.

C) a single Parliament determines political and foreign policy.

D) a common external trade policy is adopted.

E) a common labour policy is followed.

13)

The most enduring free trade area in the world is the

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A) Asian Free Trade Association.

B) MERCOSUR. C) European Free Trade Association.

D) North American Trade Association.

E) European Union.

14) In a theoretically ideal , no discriminatory tariffs, quotas, subsidies, or administrative impediments are allowed to distort trade between member nations. Each country, however, is allowed to determine its own trade policies with regard to non-members.

A) common market B) economic union C) political union D) free trade area E) customs union

15)

The European Free Trade Association (EFTA) is

A) the largest free trade area in the world.

B) the most affluent free trade area in the world.

C) founded by Western European countries that were not initially part of the European Community.

D) newest free trade area in the world.

E) open to any European country.

16)

The European Free Trade Association currently includes the following four countries:

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A) Ireland, Iceland, Denmark, and Belgium B) Norway, Iceland, Switzerland, and Liechtenstein C) Finland, Great Britain, Belgium, and Denmark D) Sweden, Norway, Austria, and Finland E) Romania, Bulgaria, Turkey, Croatia

17)

The European Free Trade Association's emphasis has been on free trade in what area?

A) services B) agricultural products C) industrial goods D) consumer goods E) capital

18) A eliminates trade barriers between member countries and adopts a common external trade policy.

A) free trade area B) global union C) tariff union D) common market E) customs union

19)

The Andean Pact is a(n)

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A) political union B) free trade area C) customs union D) economic union E) common market

20) Like a customs union, the theoretically ideal between member countries and a common external trade policy.

has no barriers to trade

A) free trade area B) common market C) tariff union D) external market E) regional market

21)

A common market includes all of the following characteristics except

A) factors of production are allowed to move freely between members.

B) there are no restrictions on immigration between members.

C) full economic integration.

D) there are no restrictions on the cross-border flow of capital between members.

E) a common external trade policy.

22) Establishment of a trade policy necessitates significant administrative machinery to oversee trade relations with non-members.

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A) political B) free-customs C) tariff D) common external E) common internal

23) Like the common market, a(n) involves the free flow of products and factors of production between members and the adoption of a common external trade policy.

A) free trade area B) economic union C) global union D) customs union E) currency union

24)

Which of the following is not an attribute of an economic union?

A) Political union B) Common currency C) Harmonization of members' tax rates D) Free flow of products and factors of production between member countries E) Common external trade policy

25)

Which of the following statements is true in regard to economic unions?

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A) The NAFTA is the only successful economic union in the world today B) The popularity of economic unions has increased over the years, and there are now more than 10 Successful economic unions in existence C) The EU is the only successful economic union in the world today D) There are no true economic unions in the world today E) The EU has decided to limit the strength of the economic union

26) According to your textbook, the , which is playing an even more important role in the EU, has been directly elected by citizens of the EU countries since the late 1970s.

A) North Atlantic Parliament B) North Atlantic Trade Commission C) European Parliament D) European Trade Commission E) European Union Commission

27) According to the textbook, most attempts to achieve regional economic integration have been what?

A) extremely successful B) amicable and friendly C) contentious and halting D) uneventful E) failures

28) Economic theories suggest that free trade and investment is a positive-sum game, in which

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A) participating countries lose a little.

B) more participating countries gain than lose.

C) at least one participating country gains.

D) most participating countries lose.

E) all participating countries stand to gain.

29)

According to the textbook, in regard to international trade, the theoretical ideal is

A) barriers to trade for developing nations, but not for industrial nations.

B) an absence of barriers to the free flow of goods, services, and factors of production among nations.

C) barriers to trade for industrial nations, but not for developing nations.

D) heavy barriers to the free flow of goods, services, and factors of production among nations.

E) an absence of barriers to the free flow of goods, services and factors of production among the member nations of a free trade agreement.

30) Because many governments have accepted part or all of the case for intervention, unrestricted free trade and FDI have proved to be

A) only an ideal.

B) a reality.

C) a goal which should be realized soon.

D) a goal that there is no rationale for.

E) a goal for the WTO.

31)

The European Community was established in

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A) 1945.

B) 1957.

C) 1966.

D) 1979.

E) 1961.

32) The political case for regional has also loomed large in most attempts to establish free trade areas, customs unions, and the like.

A) free trade areas B) political organizations C) customs unions D) economic integration E) economic spheres

33) The two main reasons that have made concerns over national sovereignty.

difficult to achieve are cost and

A) political integration B) sociological integration C) religious integration D) cultural integration E) economic integration

34)

The two main reasons that have made economic integration difficult to achieve are

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A) concerns over the safety of travel from one nation to another and concerns over dissimilar political ideologies.

B) concerns over costs and concerns over national sovereignty.

C) concerns over immigration and emigration and concerns over economic and political ideologies.

D) concerns over the safety of travel from one nation to another and concerns over national sovereignty.

E) concerns over revenue sharing and political interdependence.

35) In the context of regional trade integration, concern 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.

A) cost B) national sovereignty C) financial stability D) cultural uniformity E) tax sharing

36) Mexico's concerns about maintaining control of its oil interests resulted in an agreement with Canada and the United States to exempt the Mexican oil industry from any liberalization of foreign investment regulations achieved under NAFTA. This is an example of

A) a concern of national sovereignty.

B) concern over costs.

C) concern over safety.

D) concern over political ideologies.

E) concern over job losses.

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37) occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.

A) Trade alteration B) Trade qualification C) Trade diversion D) Trade creation E) Trade diversification

38) The phenomenon that occurs when high-cost domestic producers are replaced by lowcost producers within the free trade area is called

A) trade alteration.

B) trade qualification.

C) trade diversification.

D) trade diversion.

E) trade creation.

39) occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area.

A) Trade diversion B) Trade qualification C) Trade synergy D) Trade creation E) Trade diversification

40) A the amount it diverts.

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A) regional free trade agreement B) trade diversion C) trade synergy D) trade creation E) trade development

41) occurs when high-cost domestic producers are replaced by low-cost producers. occurs when lower-cost external suppliers are replaced by higher-cost suppliers within the free trade area.

A) Trade synergy; Trade qualification B) Trade qualification; Trade synergy C) Trade creation; Trade diversion D) Trade diversion; Trade creation E) Trade growth; Trade manipulation

42) In theory, result in trade diversion.

rules should ensure that a free trade agreement does not

A) International Monetary Fund B) World Bank C) United Nations D) World Trade Organization E) GATT

43) Many now see the as the emerging economic and political superpower of the same order as the United States and Japan.

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A) European Federation B) North Atlantic Trade Block C) European Union D) North Atlantic Federation E) European Free Trade Area

44) The European Union is the product of two political factors. The devastation of two world wars on Western Europe and

A) the European nations' desire to hold their own on the world's political and economic stage.

B) the unawareness of potential economic benefits.

C) the removal of barriers to other countries.

D) the emergence of an economic superpower.

E) the threat of Soviet aggression.

45) Of the two trade blocks in Europe, the is by far the more significant, not just in terms of membership, but also in terms of economic and political influence in the world economy.

A) European Free Trade Association B) North Atlantic Trade Block C) European Union D) European Federation E) Mediterranean common market

46) The original forerunner of the EU, the was formed in 1951 by Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands.

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A) European Union B) European Coal and Steel Community C) European Agricultural and Energy Union D) European Textiles and Agricultural Community E) European Community

47) The objective of the coal, iron, steel, and scrap metal.

was to remove barriers to intragroup shipments of

A) European Federation B) European Coal and Steel Community C) European Union D) North Atlantic Trade Area E) European Community

48)

With the signing of the Treaty of Rome in 1957, the

was established.

A) European Community B) European Free Trade Association C) European Coal and Steel Community D) European Textiles and Coal Community E) European Common Market

49) With the signing of the established.

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in 1957, the European Community was

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A) Treaty of Paris B) Treaty of Brussels C) Treaty of Switzerland D) Treaty of Rome E) Treaty of Zurich

50)

The EU was initially composed of

member states.

A) 4 B) 5 C) 7 D) 15 E) 27

51)

The

is directly elected by the populations of the member states.

A) European Committee B) European Parliament C) European Union D) European Task Force E) European Joint Commission

52) The was born of a frustration among EC members that the community was not living up to its promises.

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A) European Unification Act B) Single European Act C) European Free Trade Act D) European Common Commerce Act E) European Market Integration Act

53) To signify the importance of the , the European Community decided to change its name to the European Union once the act took effect.

A) European Unification Act B) European Common Commerce Act C) Single European Act D) European Free Trade Act E) European Market Integration Act

54)

Which of the following was created to end the EC's economic divisions?

A) The Delors Commission B) The North Atlantic Trade Federation C) North Atlantic Community D) European Commission E) Blair-Prodi Commission

55) The purpose of the 31, 1992.

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was to have a single market in place by December

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A) North Atlantic Sovereignty Act B) Single European Act C) European Primacy Act D) European Sovereignty Act E) European Market Integration Act

56)

Which of the following was NOT one of the purposes of the Single European Act?

A) Remove all frontier controls between EU countries B) Remove the principle of "mutual recognition" as it pertains to product standards C) Open public procurement to non-national suppliers D) Lift barriers to competition in the EC's retail banking and insurance businesses E) Remove all restrictions on foreign exchange transactions between members

57)

The implications of the Single European Act are

A) unknown.

B) enormous.

C) negligible.

D) moderately important.

E) positive and negative.

58) In 1999, the move toward a adoption of a common currency,

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in the EU was given a further push by the , among a majority of the EU's member states.

295

A) single market; the Euro B) regional economic market; Pound Sterling C) cross-cultural market; Franc D) global market; the Rupee E) transparent border; the Ecu

59)

According to our textbook, the move to a single currency in Europe should

A) have no effect on the cost of doing business in Europe.

B) significantly increase the cost of doing business in Europe.

C) significantly decrease the cost of doing business in Europe.

D) moderately increase the cost of doing business in Europe for North American nations, and significantly increase the cost of doing business in the EU for the rest of the world.

E) increase the cost of doing business with Europe.

60)

For participating countries, a drawback of a single currency in Europe is that

A) costs for doing business will increase.

B) it will be more difficult to attract imports.

C) national authorities will lose control over monetary policy.

D) it will be more difficult to compare prices across Europe.

E) foreign currency exchanges will have to be made through the European Central Bank in Frankfurt.

61) No other attempt at regional integration comes close to(the) boldness or its potential implications for the world economy.

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in its

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A) EU B) NAFTA C) Andean Pact D) MERCOSUR E) APEC

62)

In 1988 the governments of the United States and Canada agreed to enter in a , which went into effect on January 1, 1989.

A) economic union B) common market C) political union D) free trade agreement E) customs union

63) The agreement that was designed to abolish within 10 years tariffs on 99 percent of the goods traded between Mexico, Canada, and the United states is called the:

A) North American Free Trade Agreement B) American Federation C) American Community D) North Atlantic Trade Federation E) North American Trade Federation

64) According to the textbook, one likely short-term effect of NAFTA would be that many U.S. and Canadian firms will move some production to Mexico to take advantage of

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A) cheaper transportation costs.

B) lower interest rates.

C) lower labour costs.

D) a higher skilled labour force.

E) the Mexican market.

65)

According to our textbook, the first year that NAFTA became a reality turned out to be

A) a largely positive experience for all three countries.

B) a largely negative experience for all three countries.

C) a largely positive experience for Mexico, and largely negative experience for the U.S. and Canada.

D) a largely positive experience for the U.S. and Canada, and a largely negative experience for Mexico.

E) a largely positive one for Mexico and Canada and a somewhat negative one for the U.S.

66) The principle argument of those that opposed NAFTA centered around the fear that ratification would result in:

A) higher interest rates in the U.S. B) many Canadian and U.S. jobs transferred to Mexico C) the move towards a common currency for NAFTA member nations D) retaliation from the European Union E) devalued currencies

67)

Economic theory predicted that Canadian and U.S. producers would soon benefit from .

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A) increased B2B demand in the expanding Mexican industries that were geared toward export B) increased demand for transportation products due to increased exports and imports C) there would be no benefit because economic benefits would only be realized in the long-run D) from lower labour costs once they moved to Mexico E) increased consumer demand in Mexico, because of better wages

68) The was formed in 1969 when Bolivia, Chile, Ecuador, Columbia, and Peru signed the Cartagena Agreement.

A) Andean Pact B) Bolivian Pact C) NW South America Group D) South American Federation of Independent States E) Cartagena Pact

69) The Andean Pact was formed in 1969 when Agreement.

signed the Cartagena

A) Bolivia, Chile, Argentina, French Guiana, and Venezuela B) Brazil, Venezuela, Argentina, and Peru C) Bolivia, Chile, Ecuador, Colombia, and Peru D) Argentina, Chile, Ecuador, Columbia, and Guyana E) Brazil, Columbia, Venezuela, Ecuador and Chile

70)

The initial principles of The Andean Group included all of the following EXCEPT what?

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A) internal tariff reduction program.

B) common external tariff.

C) transportation policy.

D) common currency among member nations.

E) common industrial policy.

71)

MERCOSUR originated in 1988 as a free trade pact between

.

A) Mexico and Brazil B) Peru and Brazil C) Brazil and Argentina D) Venezuela and Peru E) Paraguay and Uruguay

72) The pact reportedly helped bring about an 80 percent increase in trade between Brazil and Argentina in the 1980s.

A) Andean B) NW Group C) MERCOSUR D) CARICOM E) FTAA

73)

In 1990, the MERCOSUR pact was expanded to include

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A) Mexico and Brazil.

B) Peru and Brazil.

C) Paraguay and Uruguay.

D) Venezuela and Peru.

E) Chile and Peru.

74)

Currently, the four member states of MERCOSUR include

A) Peru, Chile, Brazil, and Mexico.

B) Columbia, Chile, Brazil, and Paraguay.

C) Argentina, Mexico, Chile, and Brazil.

D) Brazil, Argentina, Paraguay, and Uruguay.

E) Brazil, Argentina, Chile, and Peru.

75)

Mercosur ran into difficulties in 1998 when

.

A) Its members refused to give up any more sovereignty B) Argentina and Chile almost went to war over a border dispute C) A socialist was elected president of Brazil and refuted the pact D) Brazil became more interested in joining NAFTA E) Its members slipped into recession

76)

The Golden BRICS countries are

A) The five largest national economies outside the OECD B) The four largest national economies outside the OECD C) Are all in the OECD D) All have small domestic markets E) Have as much more political importance than economic importance in world affairs

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77) Several Central American countries formed a trade agreement to lower trade barriers with the U.S., called the

A) CARICOM B) CAFTA C) Common Market D) CSME E) C&D

78)

Formed in 1967, ASEAN currently includes

A) Indonesia, Hong Kong, Singapore, Taiwan, Thailand, Malaysia, and Japan.

B) Brunei, Indonesia, Malaysia, Philippines, Singapore, Thailand, and Vietnam.

C) Japan, Taiwan, Hong Kong, Singapore, China, Thailand, and Malaysia.

D) Brunei, Indonesia, Hong Kong, Thailand, Cambodia, Malaysia, and Japan.

E) Japan, Indonesia, Malaysia, Hong Kong, Taiwan, and Philippines.

79)

The most recent countries to become a members of ASEAN are:

A) China, Vietnam, and Cambodia B) Vietnam, Laos, and Malaysia C) Brunei, China, and Thailand D) Japan, South Korea, and Thailand E) Vietnam, Laos, and Myanmar

80) According to the textbook, Countries in have been, mostly unsuccessfully, experimenting with regional trade blocks for 50 years.

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A) Europe B) Asia C) Africa D) South America E) North America

81)

The term "Fortress Europe" refers to:

A) the military prowess of European nations B) the perception that the European Union is designed to protect the European continent from the import of foreign produced goods C) the unwillingness of European nations to consider forming trade relationships D) the economic stability of the European continent E) the economic strength and mercantilist attitude of European governments

82) The lowering of between countries is likely to lead in increased price competition throughout the EU and NAFTA.

A) barriers to trade B) military stability C) perception of EU stability D) single market solutions E) administrative barriers

83)

In extending microcredit to the neediest, the Grameen Bank does not rely on:

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A) Accountability B) Supervision C) Collateral D) Participation E) Creativity

84) You run a small company that manufactures plastic injection molded pieces for the construction industry. Currently, you manufacture your product in Windsor, Ontario and a small plant in Texas. You sell your products in both Canada and the United States. You are aware that NAFTA presented your company with increased access to the American market. You want to expand, and are aware of something called the "European Union", but are unsure of what it means, whether Canada can join (or has joined) and what your firm can do to get access to this large market. You are also interested to know whether there are other "groups of countries like NAFTA or the EU" out there.

What are the primary impediments to integration of countries? Are these impediments difficult to overcome? Explain your answer.

85) Describe the concept of regional economic integration. Do you believe that regional economic integration is a good thing? Explain your answer.

86)

Describe the difference between a free trade area and a common market.

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87) Define trade creation and trade diversion with respect to regional economic integration.

Given that integration can both create and divert trade, under what circumstances will regional integration be in the best interest of the world economy?

88) From the standpoint of business and international trade, what are the advantages of a single currency within a trade block (like the EU)?

89) Describe the arguments for and against the North American Free Trade Agreement (NAFTA). In your opinion, is the recent ratification of NAFTA a positive development or a negative development for the citizens of the countries involved?

90)

What is meant by the term "Fortress Europe?" Is this term fair, or is it an exaggeration?

91) What has made it difficult to realize the gains from trade that could flow from an expanded single market in Africa?

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92) Agreements among countries in a region to reduce and ultimately remove tariff and nontariff barriers are known as regional economic integration. ⊚ ⊚

93)

true false

By 2008 few of the WTO's members were participating in regional trade agreements. ⊚ ⊚

true false

94) The last few years has witnessed an unprecedented proliferation of regional trade agreements. ⊚ ⊚

95)

true false

Europe has been the most successful example of regional economic integration. ⊚ ⊚

true false

96) Several levels of economic integration are possible in theory. From most integrated to the least integrated they are area free trade area, a common market, a customs union, an economic union, and finally, a full political union. ⊚ ⊚ Version 1

true false 306

97) In a free trade area all barriers to the trade of goods and services among member countries are removed. ⊚ ⊚

98)

true false

The most enduring free trade area in the world is the European Free Trade Association. ⊚ ⊚

true false

99) A customs union eliminates trade barriers between member countries and adopts a common external trade policy. ⊚ ⊚

true false

100) A full common market requires a common currency, harmonization of the member countries' tax rates, and a common monetary and fiscal policy. ⊚ ⊚

true false

101) In a theoretically ideal common market, labour and capital are free to move, as there are no restrictions on immigration, emigration, or cross-border flows of capital between markets. ⊚ ⊚

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307

102) Although the European Union is the best known, a number of successful common markets exist throughout the world. ⊚ ⊚

true false

103) An economic union entails even closer economic integration and cooperation than a common market. ⊚ ⊚

true false

104) An economic union involves the free flow of products and factors of production between members and the adoption of a common external trade policy. ⊚ ⊚

true false

105) The European Committee has been directly elected by citizens of the EU countries since the late 1970s. ⊚ ⊚

106)

true false

Most attempts to achieve regional economic integration have been very amicable. ⊚ ⊚

true false

107) Economic theories suggest that free trade and investment is a positive-sum game, in which participating countries lose a little.

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⊚ ⊚

true false

108) Because many governments have accepted part or all of the case for intervention, unrestricted free trade and FDI have proved to be only an ideal. ⊚ ⊚

true false

109) The two main reasons that have made economic integration difficult to achieve are concerns over costs and concerns over national sovereignty. ⊚ ⊚

true false

110) Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area. ⊚ ⊚

true false

111) Trade diversion occurs when higher-cost external suppliers replace lower-cost suppliers within the free trade area. ⊚ ⊚

true false

112) Europe now has two trade blocs: the European Union and the European Free Trade Association.

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⊚ ⊚

true false

113) Throughout the more recent years, the European Commission's role in competition policy has become less important. ⊚ ⊚

true false

114) The Single European Act was born out of frustration among EC member countries that the community was not living up to its promise. ⊚ ⊚

true false

115) To signify the importance of the Single European Act, the European Union decided to change its name to the European Community once the Act took effect. ⊚ ⊚

true false

116) For participating countries, a drawback of a single currency in Europe is that national authorities will lose control over monetary policy. ⊚ ⊚

true false

117) No other attempt at regional integration comes close to the EU in its boldness or its potential implications for the world economy.

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⊚ ⊚

true false

118) The first year after NAFTA turned out to be a largely negative experience for all three countries. ⊚ ⊚

true false

119) The Andean Pact was formed in 1969 when Bolivia, Chile, Ecuador, Colombia, and Peru signed the Cartagena Agreement. ⊚ ⊚

120)

Mercosur originated as a customs union between Brazil and Peru ⊚ ⊚

121)

true false

true false

The acronym BRIC stands for Britain, Russia, India, and China. ⊚ ⊚

true false

122) Several Central American countries formed a trade agreement to lower trade barriers with the U.S., called the CAFTA. ⊚ ⊚

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311

123)

The TPP agreement began in the late 1960s ⊚ ⊚

124)

true false

ASEAN was founded at the suggestion of Australia. ⊚ ⊚

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Answer Key Test name: chapter 8 1) E 2) A 3) D 4) A 5) D 6) A 7) D 8) D 9) A 10) C 11) A 12) A 13) C 14) D 15) C 16) B 17) C 18) E 19) C 20) B 21) C 22) D 23) B 24) A 25) D 26) C Version 1

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27) C 28) A 29) B 30) A 31) B 32) D 33) E 34) B 35) B 36) A 37) D 38) E 39) A 40) A 41) C 42) D 43) C 44) A 45) C 46) B 47) B 48) A 49) D 50) D 51) B 52) B 53) C 54) A 55) B 56) B Version 1

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57) B 58) A 59) C 60) C 61) A 62) D 63) A 64) C 65) A 66) B 67) E 68) A 69) C 70) D 71) C 72) C 73) C 74) D 75) E 76) A 77) B 78) B 79) E 80) C 81) B 82) A 83) C 92) TRUE 93) FALSE 94) TRUE Version 1

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95) TRUE 96) FALSE 97) TRUE 98) TRUE 99) TRUE 100) FALSE 101) TRUE 102) FALSE 103) TRUE 104) TRUE 105) FALSE 106) FALSE 107) TRUE 108) TRUE 109) TRUE 110) TRUE 111) FALSE 112) TRUE 113) FALSE 114) TRUE 115) FALSE 116) TRUE 117) TRUE 118) FALSE 119) TRUE 120) FALSE 121) FALSE 122) TRUE 123) FALSE 124) FALSE Version 1

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Chapter 9 Student name: 1) The another.

is a market for converting the currency of one country into that of

A) foreign exchange market B) cross-cultural interchange C) financial barter market D) monetary replacement market E) international currency spot market

2)

The rate at which one currency is converted into another is called the

.

A) replacement percentage B) resale rate C) exchange rate D) interchange ratio E) valuation rate

3) Without the market, international trade and international investment on the scale that we see today would be impossible.

A) foreign exchange B) financial barter C) foreign resale D) monetary replacement E) capital market

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4) Although the cannot provide complete insurance.

offers some insurance against foreign exchange risk, it

A) foreign exchange market B) the Euro C) World Bank D) foreign currency exchange E) the CDC

5) The is the market that enables companies based in countries that use different currencies to trade with each other.

A) World Bank B) foreign currency exchange C) foreign exchange market D) foreign monetary mart E) foreign exchange mechanism

6)

The movement of foreign exchange rates

A) provide some insurance against foreign exchange risk.

B) has significantly deteriorated the overall volume of foreign trade.

C) sets interest rates charged to foreign investors.

D) introduces many risks into international trade and investment.

E) is a natural function of supply and demand among currency traders.

7)

When a tourist exchanges one currency into another, she is participating in the:

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A) foreign barter market B) foreign exchange market C) foreign replacement market D) foreign swap market E) international trade exchange

8) One function of the foreign exchange market is to provide some insurance against the risks that arise from changes in exchange rates, commonly referred to as:

A) foreign market hazard B) global jeopardy C) foreign exchange risk D) commerce uncertainty E) trade payment risk

9)

The foreign exchange market serves two main functions. These are what?

A) collect duties on imported products and convert the currency of one country into the currency of another.

B) insure companies against foreign exchange risk and set interest rates charged to foreign investors.

C) collect duties on imported products and set interest rates charged to foreign investors.

D) convert the currency of one country into the currency of another and provide some insurance against foreign exchange risk.

E) reduce the trade imbalances between countries and convert the currency of one country into another.

10) The foreign exchange market converts the currency of one country into the currency of another and:

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A) provides some insurance against foreign exchange risk B) collects duties on imported products C) sets interest rates charged to foreign investors D) arbitrates disputes between trade partners E) reduces trade imbalances between countries

11)

Tourists are minor participants in what?

A) the currency conversion exchange B) capital venturing C) foreign traveling D) FDI E) the foreign exchange market

12) Canadian businesses will normally use the transactions.

in international

A) German mark B) Euro C) U.S. dollar D) Japanese yen E) British pound

13) Small Canadian businesses will be than large Canadian businesses to be exposed to currency risk associated with the Canadian dollar.

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A) less likely B) unlikely C) likely D) probably likely E) more likely

14) Which of the following is not one of the four main uses that international businesses have for the foreign exchange market?

A) International businesses use foreign exchange markets to convert money they earn in foreign currencies to their home currencies B) International businesses use foreign exchange markets in determining domestic wage rates C) International businesses use foreign exchange markets when they have spare cash that they wish to invest for short terms in money markets D) Currency speculation E) Short term money market investments

15) typically involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates.

A) Capital venturing B) Currency speculation C) Monetary risk taking D) Investment contemplation E) Currency conversion

16) Barrick Gold used, until 2009, a(n) changes in the price of gold.

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A) Gold swap B) forward gold exchange C) insurance D) spot gold exchange E) gold hedging

17)

Currency speculation typically involves what?

A) the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates B) the permanent movement of funds from one currency to another in the hopes of profiting from long-term investment in a particular country C) the simultaneous purchase of currencies from several countries in hopes of profiting from increasing economic prosperity D) the liquidation of currency in favour of precious metals as a hedge against inflation E) Buying low and holding currency until it stabilizes, than selling

18) What do many Canadian businesspeople NOT buy into with respect to the value of the Canadian dollar?

A) A stronger dollar will result in more outbound tourism B) A weaker dollar is good for tourists coming to Canada C) A stronger dollar means that Canadian resources are more in demand D) A weaker dollar will make imports more expensive E) A stronger dollar will reduce demand for Canada's exports

19) When two parties agree to exchange currency and execute the deal immediately, the transaction is referred to as a .

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A) point-in-time exchange B) temporal exchange C) spot exchange D) forward exchange E) transaction

20) When a U.S. tourist in Japan goes to a bank to convert her dollars into Japanese yen, the exchange rate is the

A) forward exchange rate.

B) regulated exchange rate.

C) sanctioned exchange rate.

D) spot exchange rate.

E) Japanese central bank rate.

21) It is necessary to use a immediately.

exchange rate to execute a transaction

A) real time B) spot C) statutory D) sanctioned E) bank determined

22)

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A) Real time rates B) Spot exchange rates C) Sanctioned rates D) Statutory exchange rates E) Hedging costs

23)

The value of a currency is determined by

A) the interaction between the demand and supply of that currency relative to the demand and supply of other currencies.

B) a consortium of international currency traders.

C) the World Trade Organization.

D) negotiations between the central banks of the leading five industrial powers of the world.

E) currency speculators.

24) A exchange occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.

A) reverse B) spot C) hedge D) forward E) futures

25) exchange rates represent market participants' collective predictions of likely spot exchange rates at specified future dates.

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A) Reciprocal B) Hedge C) Reverse D) Forward E) Future

26) A(n) is purchase and sale of a given amount of foreign exchange for two different value dates, at the same time.

A) currency swap B) FDI C) economic fund D) short selling E) arbitrage group

27) as

Rates for currency exchange quoted for 30, 90, or 180 days into the future are referred to .

A) forward exchange rates B) foreign exchange quotes C) united trade rates D) generic exchange quotes E) future exchange rates

28) occurs when an investor purchases securities in one market for immediate resale in another.

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A) Hedge fund B) Foreign direct investment C) Foreign exchange risk D) Arbitrage E) Financial gain

29) Current estimates are that currencies worth approximately (U.S.) were traded every day.

trillion dollars

A) 1 B) 200 C) 13 D) 4.2 E) 1.5

30) When the dollar buys more yen on the spot market than the 30-day forward market, we say the dollars is selling at a . Conversely, when the dollars buys fewer yen on the spot market than the 30-day forward market, we say the dollar is selling at a .

A) premium; discount B) handicap; bonus C) discount; premium D) subsidy; handicap E) gain; loss

31)

The foreign exchange market:

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A) is not located in any one place B) is located in New York City C) has offices in the Capitols of the five most powerful industrialized nations in the world D) is located in London E) is managed by the UN

32)

The most important trading centers for the foreign exchange market are in

A) New York, Singapore, Tokyo.

B) Sao Paulo, New York, and Paris.

C) San Francisco, Tokyo, and Singapore.

D) New York, Hong Kong, and Paris.

E) London, New York, and Tokyo.

33)

One feature of the London exchange market is

A) Lower exchange fees.

B) Higher margins.

C) New investment products.

D) The ability to short the market.

E) Its geography between the Tokyo and New York Markets.

34)

Which of the following is a feature of the foreign exchange market?

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A) The market never sleeps B) The market has not yet created a global link C) There are not yet significant differences in the exchange rates D) High-speed computer linkages between trading centers have yet to be created E) Prices for various currencies are primarily set in New York and London

35)

The largest trading center in the foreign exchange market is

.

A) Hong Kong B) London C) San Paulo D) Paris E) New York

36)

The process of buying a currency low and selling it high at the same time is called

A) forward exchange.

B) skimming C) profiteering D) arbitrage E) hedging

37) If the prices differed in London and New York and a dealer spent $1 million to purchase × 125 million, then sold that × 125 immediately for $1.046666 million, the trader would earn a profit of $46,666 on the transaction. This is accomplished through

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A) arbitrage.

B) skimming.

C) FDI. D) pre exchange agreements.

E) buying low and selling high.

38) Although a foreign exchange transaction can involve any two currencies, most transactions involve

A) Japanese yen.

B) British pounds.

C) U.S. dollars.

D) French francs.

E) Euros.

39) At the most basic level, exchange rates are determined by the demand and supply of one currency relative to the

A) permanent value of another.

B) 30-day average of another.

C) 90-day average of another.

D) demand and supply of another.

E) market psychology.

40) Most economic theories suggest that three import factors have an important impact on future exchange rate movements in a country's currency. These factors are

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A) the country's price inflation, its interest rate, and its market philosophy.

B) the country's rate of GNP, its unemployment rate, and its economic policy.

C) the country's participation in the World Trade Organization, its monetary policy, and its market philosophy.

D) the country's rate of economic growth, its participation in the World Trade Organization, and its economy policy.

E) the country's economic policy, its trade balance, and its national deficits.

41) The three factors that have the most important impact on future exchange rate movement include the country's price inflation, its market philosophy, and its .

A) rate of economic growth B) unemployment rate C) interest rate D) participation in the World Trade Organization E) current account balance

42)

The law of one price and purchasing power parity are two components of

A) market psychology.

B) price and exchange rates.

C) interest rate.

D) prices inflation.

E) economic theory.

43) The states that in competitive markets free of transportation costs and barriers to trade, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency.

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A) law of one price B) principle of consistent pricing C) model of fair pricing D) principle of equitable pricing E) law of purchasing power equity

44) According to the , identical products sold in different countries must sell for the same price when their price is expressed in the same currency in competitive markets free of transportation costs and barriers to trade.

A) model of fair pricing B) law of purchasing power equity C) principle of equitable pricing D) principle of consistent pricing E) law of one price

45) The exchange rate between the British pound and the dollar is ≤1 = $1.50 and a jacket that retails for $75 in New York sells for ≤50 in London ($75/1.5 = ≤50). This reflects what?

A) model of fair pricing.

B) law of one price.

C) principle of equitable pricing.

D) principle of consistent pricing.

E) purchasing power equity

46) The text gives Bolivia as an example of the impact of rates.

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A) interest rates B) trade imbalances C) market psychology D) bad economic management E) money supply

47)

PPP theory stands for what?

A) productivity power premium theory B) process productivity predictor theory C) purchasing power parity theory D) personal power predictor theory E) production possibilities parameter theory

48)

A(n)

has no impediments to the free flow of goods and services.

A) classical market B) efficient market C) traditional market D) inefficient market E) free market

49) A less extreme version of the PPP theory state that given "basket of goods" should be roughly equivalent in each country.

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the price of a

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A) tolerant markets B) relatively efficient markets C) classical markets D) closed markets E) free markets

50) If the law of one price were true for all goods and services, the rate could be found from any individual set of prices.

exchange

A) stability power similarity (SPS) B) purchasing ability adeptness (PAA) C) buying prowess equality (BPE) D) purchasing power parity (PPP) E) spot

51) A(n) investment exist.

is a market in which few impediments to international trade and

A) relatively efficient market B) consistently inefficient market C) absolutely free market D) absolutely closed E) free market

52) The theory tells us that a country with a high inflation rate will see deprecation in its currency exchange rate.

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A) law of one price B) monetary system C) PPP D) price inflation E) currency determinism

53)

In essence, PPP theory predicts that

A) there is no relationship between changes in relative prices and changes in exchange rates.

B) changes in relative prices will result in stability in exchange rates.

C) stability in relative prices will result in a change in exchange rates.

D) changes in relative prices will result in a change in exchange rates.

E) changes in market barriers will result in changes in exchange rates

54) A less extreme version of the PPP theory states that given , that is, markets in which few impediments to international trade and investment exist-the price of a "basket of goods" should be roughly equivalent in each country.

A) relatively efficient markets B) statutory markets C) stable markets D) absolutely free markets E) mixed economies

55) In essence, the result in a change in exchange rates.

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A) buying power equality (BPE) B) purchasing power parity (PPP) C) stability power similarity (SPS) D) buying prowess equality (BPE) E) price stabilization potential

56) Theoretically, a country in which price inflation is running wild should expect to see its currency depreciate against that of countries in which inflation rates are lower refers to

A) buying purchase power.

B) purchasing power parity.

C) power similarities.

D) comparative advantage.

E) national competitive disadvantage.

57) The Canadian money supply is growing more rapidly than Canadian output. Dollars will be relatively more plentiful than the currencies of countries where monetary growth is closer to output growth. This is an example of

A) buying purchase power.

B) buying prowess equality.

C) stability power similarities.

D) purchasing power parity.

E) inflationary pressures.

58)

Inflation is a(n)

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A) legal B) political C) monetary D) social E) economic

59) According to our textbook, when the growth in a country's money supply is faster than the growth in its output, is(are) fuelled.

A) economic growth B) unemployment C) inflation D) per capita savings E) wage increases

60) Economic theory tells us that future inflation rates.

rates reflect expectations about likely

A) currency B) exchange C) interest D) unemployment E) forward

61) determines whether the rate of growth in a country's money supply is greater than the rate of growth in output.

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A) The international monetary authority B) Market mechanisms C) The private sector D) Government policy E) Demand for money

62)

The inevitable result of excessive growth in money supply is called

A) interest rate.

B) price inflation.

C) economic growth.

D) per capita savings.

E) wage increases

63) PPP theory predicts that changes in rates.

will result in a change in exchange

A) relative prices B) interest rates C) unemployment rates D) statutory prices E) wholesale prices

64) According to the textbook, PPP theory does not seem to be a particularly good predictor of exchange rate movements for time spans of

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A) one year or less.

B) three years or less.

C) five years or less.

D) ten years or less.

E) twenty years or less.

65) The is less useful for predicting exchange movements between the currencies of advanced industrialized nation that have relatively small differentials in inflation rates.

A) tolerant market B) efficiency theory C) PPP theory D) closed market E) supply and demand mechanism

66)

The PPP theory seems to best predict exchange rate changes for countries with what?

A) very low rates of inflation and developed capital markets.

B) very low rates of inflation and underdeveloped capital markets.

C) very high rates of inflation and underdeveloped capital markets.

D) very high rates of inflation and developed capital markets.

E) low rates of inflation and underdeveloped capital markets

67) The states that for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in the nominal interest rates between the two countries.

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A) Worldwide James Effect B) Universal Phillips Effect C) International Fisher Effect D) Global Miller Effect E) Law of One Price Effect

68) The International Fisher Effect states that for any two countries, the exchange rate should change in an equal amount but in the opposite direction to the difference in the nominal interest rates between the two countries.

A) reciprocal B) spot C) forward D) inward E) future

69) According to the International Fisher Effect, if the real rate of interest in a country is 5 percent and the annual inflation is expected to be 10 percent, the nominal interest rate will be

A) 5 percent.

B) 10 percent.

C) 12.5 percent.

D) 15 percent.

E) 20 percent.

70) Empirical evidence suggests that neither PPP theory nor the International Fisher Effect is particularly good at explaining

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A) long-term movements in exchange rates.

B) interest rates.

C) short-term movements in exchange rates.

D) unemployment rates.

E) short-term wage levels.

71)

Short run exchange rate movements may be explained by

.

A) the bandwagon effect B) investor expectations C) psychological factors D) nominal interest rates E) the bandwagon effect, investor expectations, and psychological factors

72) Relative monetary growth, relative inflation rates, and nominal interest rate differentials are all . predictors of long-run changes in exchange rates.

A) poor B) moderately good C) good D) very good E) excellent

73) The market school argues that forward exchange rates do the best possible job of forecasting future spot exchange rates, so investing in exchange rate forecasting services would be a waste of time.

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A) efficient B) closed C) inefficient D) free E) open

74) The market school argues that companies can improve the foreign exchange market's estimate of future exchange rates by investing in forecasting services.

A) inefficient B) free C) open D) closed E) efficient

75)

A(n)

market is one in which prices do not reflect all available information.

A) efficient B) inefficient C) free D) closed E) regulated

76) In an market, forward exchange rates will not be the best possible predictors of future spot exchange rates.

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A) closed B) inefficient C) efficient D) reciprocal E) regulated

77) draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.

A) Principal investigation B) Fundamental analysis C) Primary evaluation D) Technical analysis E) Economic analysis

78)

The variables in fundamental analysis models can include what?

A) price B) volume C) investor psychology D) the bandwagon effect E) money supply

79) uses price and volume data to determine past trends, which are expected to continue into the future.

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A) Principal investigation B) Primary evaluation C) Fundamental analysis D) Technical analysis E) Econometric analysis

80) The type of analysis that predicts exchange rate movements by using price and volume data to determine past trends is called

A) fundamental analysis.

B) primary evaluation.

C) technical analysis.

D) principal investigation.

E) econometric analysis.

81) is based on the premise that analyzable market trends and waves can be used to predict future trends and waves.

A) Technical analysis B) Fundamental analysis C) Basic analysis D) Central analysis E) Econometric analysis

82) Because there is no theoretical rationale for assumptions of predictability, many economists compare to fortune telling.

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A) technical analysis B) PPP C) exchange rate analysis D) inflation rates E) currency speculation

83) A country's currency is said to be when the country's government allows both residents and non-residents to purchase unlimited amounts of foreign currency with it.

A) technically convertible B) freely convertible C) externally convertible D) nonconvertible E) internally convertible

84) is most likely to occur when the value of the domestic currency is depreciating rapidly because of hyperinflation.

A) Counter trade B) Separate trade C) Reciprocal trade D) Capital flight E) Run on banks

85) A currency is said to be foreign currency without any limitations.

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A) externally convertible B) freely convertible C) technically convertible D) nonconvertible E) internally convertible

86) A currency is convert it into a foreign currency.

when neither residents nor non-residents are allowed to

A) freely convertible B) nonconvertible C) externally convertible D) technically convertible E) inconvertible

87)

A government restricts the convertibility of its currency to protect the country's and to halt any capital flight.

A) membership in the World Trade Organization B) foreign exchange reserves C) political stature D) national sovereignty E) economic stability

88) refers to a range of barter-like agreements by which goods and services can be traded for other goods and services.

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A) Separate trade B) Reciprocal trade C) Countertrade D) Alternative trade E) Cashless trade

89) If an Canadian grain company exported corn to Russia, and instead of receiving nonconvertible Russian currency in exchange for the corn received Russian crude oil, that would be an example of .

A) countertrade B) synergistic trade C) separate trade D) reciprocal trade E) barter trade

90) can

Currency exchange fluctuations are important for a business to understand because they .

A) affect profitability in an international transaction B) affect pricing in a country market C) affect the competitive advantage of a company D) increase costs for imported goods E) all of these answers are correct

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91) You are the manager of a company that operates internationally providing agricultural equipment that has been manufactured and assembled in Canada. You have sold your products in the United States for many years and are now looking to enter other markets.

For a firm like yours that deals in international markets, what does "foreign exchange risk" mean? How could foreign exchange risk affect the profitability of your firm exporting tractors to a German buyer?

92) You are the manager of a company that operates internationally providing agricultural equipment that has been manufactured and assembled in Canada. You have sold your products in the United States for many years and are now looking to enter other markets.

Your company has decided to enter the Argentinean market. You have decided to use two wholesalers, who will distribute to the retail market. The potential size of the market is $10,000,000 USD per year. However, both of your wholesalers will not assume the risk of invoices charging USD and they want at least 60 days before paying. They argue that they will have to give their retailers 60 days to pay and their retailers will only pay them in pesos.

Argentina has just come out of a currency crisis and your Canadian bank has warned you of possible severe currency fluctuations. What payment and currency strategy will you suggest to your senior management? Explain your answer.

93) What are the functions of the foreign exchange market? Would international commerce be possible without its existence?

94) Explain the difference between spot exchange rates and forward exchange rates. Briefly explain how the forward exchange market works.

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95) Where is the foreign exchange market located? What is the nature of the market? Is the market growing or shrinking on a global basis?

96) What is the International Fisher Effect? (note: you do not need to provide the mathematical formula provided in the book)

97) Explain how the psychology of investors and bandwagon effects can have an impact on the movement in exchange rates. Do you believe that bandwagon effects really happen? Explain your answer.

98) In the context of forecasting exchange rate movements, describe the difference between fundamental analysis and technical analysis. Which approach is preferred by economists? Why?

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99) Explain the concept of countertrade. When does countertrade make sense? How does countertrade help solve the no convertibility problem?

100)

Why do companies prefer not to use countertrade if it can be avoided?

101) What are the costs of the fall in the value of the peso against the yen for Japanese companies in 2015-2016, as discussed in the closing case?

102) A stronger Korean won means that Kia cars sold in Canada for dollars are recorded at a higher value when translated back into won in Korea. ⊚ ⊚

true false

103) The international reserve market is a market for converting the currency of one country into that of another country. ⊚ ⊚

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104) Without the foreign market exchange, international trade and international investment on the scale that we see today would be impossible. ⊚ ⊚

true false

105) In addition to altering the value of trade deals and foreign investments, currency movements can also open or close export opportunities and alter the attractiveness of imports. ⊚ ⊚

106)

true false

An exchange rate is simply the rate at which one currency is converted into another. ⊚ ⊚

true false

107) In international trade, the risk of not getting paid for a product that is exported from one country to another is referred to foreign exchange risk. ⊚ ⊚

true false

108) The market through which an individual or institution exchanges one currency into another is called the foreign exchange market. ⊚ ⊚

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109) When a tourist changes one currency into another, she is participating in currency speculation. ⊚ ⊚

110)

true false

Tourists play a major role in the foreign exchange market. ⊚ ⊚

true false

111) Currency speculation typically involves the short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates. ⊚ ⊚

true false

112) When a Canadian tourist in England goes to a bank to convert her dollars in pounds, the exchange rate is the forward exchange rate. ⊚ ⊚

true false

113) Spot exchange rates change daily as determined by the relative demand and supply for difference currencies. ⊚ ⊚

true false

114) A forward exchange occurs when two parties agree to exchange currency and execute the deal at some specific date in the future.

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⊚ ⊚

true false

115) A forward exchange is an investment fund that not only buys financial assets but also sells them short. ⊚ ⊚

true false

116) A currency swap is the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates. ⊚ ⊚

117)

true false

Arbitrage is the process of buying a currency high and selling it low. ⊚ ⊚

true false

118) At the basic level, exchange rates are determined by the demand and supply of one currency relative to the demand and supply for another. ⊚ ⊚

true false

119) The law of one price states that identical products sold in different countries must sell for the same price when their price is expressed in the same currency in competitive markets free of transportation costs and barriers to trade.

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⊚ ⊚

true false

120) According to the International Fisher Effect, for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in the nominal interest rates between the two countries. ⊚ ⊚

121)

true false

Investor psychology has an effect on long-run exchange rates. ⊚ ⊚

true false

122) Relative monetary growth, relative inflation rates, and nominal interest rate differentials are all moderately good predictors of long-run changes in exchange rates. ⊚ ⊚

true false

123) A firm's need to predict future exchange rate variations makes forecasting a valuable tool to aid decision making. ⊚ ⊚

124)

true false

An efficient market has significant impediments to the free flow of goods and services. ⊚ ⊚

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125)

An efficient market is one in which prices reflect all available public information. ⊚ ⊚

126)

true false

An inefficient market is one where prices do not reflect all available information. ⊚ ⊚

true false

127) Fundamental analysis uses price and volume data to determine past trends, which are expected to continue into the future. ⊚ ⊚

true false

128) Technical analysis draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements. ⊚ ⊚

true false

129) A currency is said to be externally convertible when only non-residents may convert it into foreign currency without limitations. ⊚ ⊚

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130) A country's currency is said to be freely convertible when neither residents nor nonresidents are allowed to convert it into a foreign currency. ⊚ ⊚

131)

true false

The majority of the countries in the world have currency that is freely convertible. ⊚ ⊚

true false

132) Few countries place some restrictions on their residents' ability to convert the domestic currency into a foreign currency (a policy of external convertibility). ⊚ ⊚

true false

133) Countertrade refers to a range of barter-like agreements by which goods and services can be traded for other goods and services. ⊚ ⊚

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Answer Key Test name: chapter 9 1) A 2) C 3) A 4) A 5) C 6) D 7) B 8) C 9) D 10) A 11) E 12) C 13) E 14) B 15) B 16) E 17) A 18) E 19) C 20) D 21) B 22) B 23) A 24) D 25) D 26) A Version 1

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27) A 28) D 29) E 30) C 31) A 32) E 33) E 34) A 35) B 36) D 37) A 38) C 39) D 40) A 41) C 42) B 43) A 44) E 45) B 46) E 47) C 48) B 49) B 50) D 51) A 52) C 53) D 54) A 55) B 56) B Version 1

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57) D 58) C 59) C 60) C 61) D 62) B 63) A 64) C 65) C 66) C 67) C 68) B 69) D 70) C 71) E 72) B 73) A 74) E 75) B 76) B 77) B 78) E 79) D 80) C 81) A 82) A 83) B 84) D 85) A 86) B Version 1

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87) B 88) C 89) A 90) E 102) FALSE 103) FALSE 104) TRUE 105) TRUE 106) TRUE 107) FALSE 108) TRUE 109) FALSE 110) FALSE 111) TRUE 112) FALSE 113) TRUE 114) TRUE 115) FALSE 116) TRUE 117) FALSE 118) TRUE 119) TRUE 120) TRUE 121) FALSE 122) TRUE 123) TRUE 124) FALSE 125) TRUE 126) TRUE 127) FALSE Version 1

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128) FALSE 129) TRUE 130) FALSE 131) FALSE 132) FALSE 133) TRUE Chapter 10 Student name: 1)

According to the opening case on Venezuela, one solution to its currency problems is

A) Invoking austerity measures B) dollarization C) restructuring the economy D) a change in regime E) none of these answers is correct

2) The world's four major trading currencies are all free to float against each other. They include all of these except

A) the British pound.

B) the Japanese yen.

C) the Spanish peso.

D) the U.S. dollar.

E) the European Euro.

3)

Institutional arrangements that countries adopt to govern exchange rates refers to what?

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A) floating interest rate B) international exchange rate C) fixed inflation rate D) dirty float E) international monetary system

4)

A currency value that is fixed relative to a reference currency is called what?

A) fixed exchange rate B) dirty-float system C) floating exchange rate D) banking exchange rate E) pegged exchange rate

5) The Bretton Woods conferences occurred in and established the basic framework for the post-World War II international monetary system.

A) 1944 B) 1959 C) 1968 D) 1988 E) 1999

6)

The Bretton Woods system called for

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exchange rates against the U.S. dollar.

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A) variable B) floating C) fixed D) fluctuating E) market

7) Under the exchange rate system established by the Bretton Woods agreement, the value of most currencies in terms of was fixed for long periods and was allowed to change only under a specific set of circumstances.

A) British pound B) Japanese yen C) U.S. dollars D) Chinese Renminbi E) European Euro

8) The Bretton Woods conference created two major international institutions. These are what?

A) the International Monetary Fund and the World Bank B) the World Trade Organization and the United Nations C) the World Currency Exchange and the World Bank D) the Bretton Woods Monetary Fund and the World Trade Organization E) the European Bank of Reconstruction and Development and the World Trade Organization

9)

The Bretton Woods system of fixed exchange rates

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.

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A) has continued to be in force since it was adopted B) collapsed in 1973 C) collapsed shortly after it was adopted D) collapsed shortly after it was adopted, but has been reinstated and is in effect today E) collapsed because of the Jamaica Agreement

10) As stipulated by the Bretton Woods conference, the goal of the International Monetary Fund was to:

A) maintain order in the international monetary system B) establish a world currency C) promote development D) set interest rates in members nations E) establish economic guidelines for countries

11)

The acronym IMF stands for:

A) International Monopoly Function B) Interval Monetary Fluctuations C) Interagency Monetary Function D) International Monetary Fund E) International Monetary Formation

12)

As stipulated by the Bretton Woods conference, the goal of the World Bank was to .

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A) maintain order in the international monetary system B) promote FDI in developing countries C) set interest rates in member states D) establish a world currency E) promote economic development

13) The Bretton Woods system of fixed exchange rates collapsed in 1973. Since then the many of the world's countries have operated with a

A) mixed system.

B) random monetary system.

C) regulated standard system.

D) monitored spot market.

E) managed-float system.

14)

The gold standard has it origin in what?

A) the use of the word "gold" to refer to items of value B) the use of gold coins as a medium of exchange C) the inherent value placed on gold stones as objects of beauty and value D) the use of gold bricks as a medium of exchange between countries E) the resistance of gold to depreciation in value

15)

Pegging currencies to gold and guaranteeing convertibility is known as what?

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A) gold standard B) federal reserve C) industrial revolution D) balance-of-trade equilibrium E) Bretton-Woods Agreement

16) By 1880, most of the world's major trading nations, including Great Britain, Germany, Japan, and the United States, had adopted the

A) diamond standard.

B) gold standard.

C) federal reserve standard.

D) platinum standard.

E) fixed exchange rate system.

17) The great strength claimed for the gold standard was that it contained a powerful mechanism for simultaneously achieving a(n) for all countries.

A) balance-of-trade equilibrium B) economic stability C) interest rate parity D) equal tariff levels E) currency convertibility

18)

The gold standard worked reasonably well until when?

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A) the 1870s B) the 1890s C) World War I D) World War II E) 1973

19)

The gold standard was temporarily abandoned by Canada in what year?

A) 1870 B) 1889 C) 1914 D) 1924 E) 1934

20)

The United States returned to the gold standard in what year?

A) 1870 B) 1919 C) 1925 D) 1932 E) 1934

21)

Most countries abandoned convertibility and the gold standard in 1931 because:

A) there was a sharp decline in the amount of gold mined B) the Bretton Woods Agreement was signed C) of the cycle of devaluations resulting from the Great Depression D) of the collapse of the Weimar Republic and the rise of Germany E) of the preference for a managed float system

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22)

In 1944, the dollar remained convertible into gold at

per ounce.

A) $22 B) $29 C) $35 D) $37 E) $40

23) that

One of the changes that was a result of Canada's return to the gold standard in 1926 was

A) chartered banks could no longer hold gold in their reserves.

B) the price of gold was allowed to fluctuate according to demand and supply.

C) gold mining was made a monopoly of the government.

D) the Canadian dollar was devalued to reflect the price of gold.

E) currency provided by the chartered banks lost its status as legal tender.

24) The gold standard broke down in the devaluations.

as countries engaged in competitive

A) 1910s B) 1920s C) 1930s D) 1950s E) 1970s

25)

The result of Canada's suspension of the gold standard was

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A) the end of the gold standard.

B) a trade surplus because of the lower value of the Canadian dollar.

C) the final end of mercantilism.

D) the raising of trade and convertibility restrictions.

E) a collapse in the confidence in the Canadian monetary system.

26)

In 1944, at the height of World War II, representatives from 44 countries met at to design a new international monetary system.

A) Richmond, Virginia B) San Francisco, California C) Bretton Woods, New Hampshire D) Morris Plains, New Jersey E) Yalta, USSR

27) The major problem with the was that no multinational institution could stop countries from engaging in competitive devaluations.

A) metal standard B) federal reserve standard C) premium standard D) gold standard E) global trade system

28)

The Bretton Woods agreement called for what?

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A) variable exchange rates B) fixed exchange rates C) freely floating exchange rates D) a set of "managed" floating exchange rates E) currency boards

29) The Bretton Woods system of fixed exchange rates was established in 1944. The central currency of this system was what?

A) French Franc B) Chinese Renminbi C) U.S. Dollar D) British Pound E) Swiss Franc

30) The Bretton Woods agreement called for a system of fixed exchange rates that would be policed by the .

A) World Bank B) United Nations C) League of Nations D) International Monetary Fund E) United States

31)

Under the Bretton Woods system, which currency served as the base currency?

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A) Japanese yen B) British pound C) French franc D) U.S. dollar E) Swiss Franc

32)

The IMF Articles of Agreement were heavily influenced by all of the following except

A) the worldwide financial boom.

B) competitive devaluations.

C) trade wars.

D) high unemployment.

E) hyperinflation.

33) A fixed exchange rate regime imposes discipline in two ways: (1) the need to maintain a fixed exchange rate puts a brake on competitive devaluations and brings stability to the world trade environment and (2) a fixed exchange rate regime imposes what?

A) social discipline on countries, thereby increasing the standard of living B) economic discipline on countries, thereby increasing gross national product C) political discipline on countries, thereby curtailing global opportunism D) monetary discipline on countries, thereby curtailing price inflation E) currency stability, thereby curtailing trade wars

34) Monetary discipline was a central objective of Bretton Woods, and a rigid policy of fixed exchange rates was .

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A) put into force B) seen as too inflexible C) tied to gold D) tied to inflation E) tied to monetary supply

35)

Fixed exchange rates are seen as a mechanism for achieving the following two objectives

A) controlling inflation and economic discipline.

B) controlling unemployment and political discipline.

C) controlling economic stability and increasing gross national product.

D) controlling political stability and economic discipline.

E) controlling currency speculation and trade imbalances.

36) The were/was heavily influenced by the world-wide financial collapse, competitive devaluations, trade wars, and high employment.

A) World Bank Development Program B) IMF export assistance C) fixed parities D) adjustable parities E) IMF Articles of Agreement

37) are seen as a mechanism for controlling inflation and imposing economic discipline on countries.

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A) Fixed exchange rates B) Floating exchange rates C) Global exchange rates D) Transnational exchange rates E) Managed float systems

38) Two major features of the International Monetary Fund (IMF) Articles of Agreement fostered flexibility within the monetary system. These features included IMF lending facilities and:

A) IMF export assistance B) fixed parities C) a return to the gold standard D) adjustable parities E) externally imposed monetary discipline

39) Although monetary discipline was a central objective of the Bretton Woods agreement, it was recognized that a of fixed exchange rates would be too inflexible.

A) relaxed policy B) rigid policy C) lending policy D) balanced policy E) managed policy

40) The International Bank for Reconstruction and Development (IBRD) is the official name for the:

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A) World Trade Organization B) World Bank C) International Monetary Fund D) Global-Regional Bank E) International Development Bank

41)

In the context of the global monetary system, the IBRD stands for the

.

A) International Bank for Rents and Deposits B) International Bureau for Restraining Devaluations C) International Bank for Reconstruction and Development D) International Bureau for Research and Development E) International Bank Depository for Reconciliation of Deposits

42)

The initial mission of the World Bank was to

.

A) help repay the allies war debt.

B) help small businesses establish export operations.

C) provide letters of credit on behalf of first-time exporters.

D) provide development loans for developing countries in Asia.

E) help finance the re-building of Europe's economy by providing low-interest loans.

43) Under the market.

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, money is raised through bond sales in the international capital

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A) International Monetary Fund B) World Bank C) World Trade Organization D) International Bank for Reconstruction and Development E) International Development Agency

44) Helping finance the building of Europe's economy after World War II by providing lowinterest loans was the initial mission of the .

A) World Trade Organization B) World Bank C) European National Bank D) International Monetary Fund E) United States Treasury

45) Which of the following statements accurately depicts what happened to the Bretton Woods system of fixed exchange rates?

A) The system never got off the ground, and collapsed in the late 1940s.

B) The system worked well for about a decade, then collapsed in the mid-1950s.

C) The system began to show signs of strain in the 1960s, and finally collapsed in 1973.

D) The system remained in place until the early 1990s when an international conference was convened in Finland to develop a managed float system.

E) The system was replaced by the Jamaica Agreement at the urging of the U.S.

46) The Bretton Woods system of fixed exchange rates collapsed in 1973, and since then most countries have practiced a .

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A) stepwise fixed rate exchange system B) more rigid and enforceable fixed exchange rate system C) float system D) combination of managed float systems and fixed exchange rate systems E) pegged exchange rate system

47) The exchange rate regime that followed the collapse of the fixed exchange rate system was formalized in January 1976 when IMF members met in Jamaica and agreed to the rules for the international system that are in place today.

A) floating B) quasi-fixed C) open D) closed E) managed

48)

The three main elements of the Jamaica Agreement were:

A) the International Monetary Fund was established; gold was abandoned as a reserve asset; and floating rates were declared unacceptable B) floating rates were declared acceptable; gold was abandoned as a reserve asset; and total annual IMF quotas were increased to $41 billion C) floating rates were declared unacceptable; the International Monetary Fund was abolished; and the World Bank was established D) fixed rates were declared acceptable, gold was accepted as a reserve asset; and the total annual IMF quotas were increased to $41 billion E) all of these answers are correct

49)

Which of the following was not one of the main elements of the Jamaica Agreement?

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A) The establishment of the International Monetary Fund B) Floating rates were declared acceptable C) Total annual IMF quotas were increased to $41 billion D) Gold was abandoned as a reserve asset E) Gold was returned to its members at current market rates

50) During the oil crisis in 1979, following the oil crisis of 1971 when the price of oil quadrupled, the Organization of Petroleum Exporting Countries increased the price of oil by .

A) 2 times B) 2.5 times C) 3 times D) 4 times E) 5 times

51)

The partial collapse of the European Monetary System occurred in

A) 1980.

B) 2001.

C) 1992.

D) 1998.

E) 1973.

52)

Under a floating exchange rate regime, market forces have produced what?

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A) a near fixed U.S. dollar exchange rate B) a predictable U.S. dollar exchange rate C) a stable U.S. dollar exchange rate D) a volatile U.S. dollar exchange rate E) a controlled dynamic U.S. dollar exchange rate

53)

The case for floating exchange rates has two main elements. These are:

A) monetary policy autonomy and automatic trade balance adjustments B) sporadic trade balance adjustments and monetary policy autonomy C) the impracticality of the gold standard and monetary policy control D) monetary policy control and sporadic trade balance adjustments E) monetary policy interdependence and autonomic trade balance adjustments

54)

Floating exchange rates are determined by what?

A) market forces B) the IMF C) the World Bank D) an international commission on exchange rate parity E) national banks

55) It is argued that a autonomy.

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exchange rate regime gives countries monetary policy

377

A) restricted B) forward C) fixed D) floating E) managed float

56) Under a exchange rate regime, a country's ability to expand or contract its money supply as it sees fit is limited by the need to maintain exchange rate parity.

A) forward B) fixed C) narrow D) floating E) managed float

57) also adds to the uncertainty surrounding future currency movements that characterizes floating exchange rate regimes.

A) The impracticality of the gold standard B) Monetary policy autonomy C) Trade balance Adjustments D) Speculation E) Market forces

58) The case for fixed exchange rates rests on arguments about monetary discipline, speculation, the lack of connection between the trade balance and exchange rates, and .

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A) automatic trade balance adjustments B) uncertainty C) the impracticality of the gold standard D) monetary policy autonomy E) the importance of the U.S. dollar

59)

"Free float" exchange rates are determined by

.

A) the IMF B) market forces C) governments D) the World Bank E) national banks

60)

Under a pegged exchange rate regime, a country will peg the value of its currency to .

A) an index of world currencies maintained by the World Bank B) that of a major currency C) an index of "peer nation" currencies D) an index of its historic currency rates E) the index of its major trading partners' currencies

61)

Pegged exchange rates are popular among many of the world's

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A) industrialized nations B) largest nations C) smaller nations D) communist nations E) developing nations

62)

There is some evidence that adopting a pegged exchange rate regime

.

A) reduces unemployment in a country B) moderates inflationary pressure in a country C) increases global GNP D) decreases global GNP E) increases GNI growth within the country

63) An IMF study concluded that countries with pegged exchange rate regimes had an average annual inflation rate of , compared with 14 percent for intermediate regimes and 16 percent for floating regimes.

A) 4 percent B) 18 percent C) 14 percent D) 8 percent E) 0.8 percent

64) A country that introduces a(n) commits itself to converting its domestic currency on demand into another currency at a fixed exchange rate.

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A) currency board B) monetary review commission C) exchange rate review commission D) certificate board E) IMF pegged rate regime

65) A(n) is a governing body that manages the value of a currency by holding foreign currency reserves equal to the amount of domestic currency issued at a fixed exchange rate.

A) exchange rate committee B) currency board C) certificate board D) monetary review commission E) national bank currency committee

66) One of the problems associated with currency boards is that if local inflation rates remain higher than the inflation rate in the country to which the currency is pegged than .

A) the country's currency can come under attack by speculators B) the country's interest rates can only be set with the agreement of the country to which the currency is pegged C) the country's monetary demand may increase faster than monetary supply D) the country's trade surplus may increase causing trading partners to apply tariffs and other trade barriers E) the country's currency may become over valued and reduce the country's international competitiveness

67)

Over the past 30 years, the activities of the IMF have

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381

A) expanded B) declined C) expanded in developed countries but declined in underdeveloped countries D) expanded in underdeveloped countries but declined in developed countries E) been increasingly criticized as being an instrument of the U.S. government

68) A occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserved and sharply increase interest rates to defend the prevailing exchange rate.

A) currency crisis B) monetary disruption C) banking crisis D) currency disruption E) liquidity crisis

69) A refers to a situation in which a loss of confidence in the banking system leads to a run on banks, as individuals and companies withdraw their deposits.

A) banking crisis B) currency crisis C) federal reserve crisis D) monetary crisis E) debt crisis

70)

A

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occurs when a country cannot service its foreign debt obligations.

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A) banking crisis B) currency crisis C) monetary crisis D) foreign debt crisis E) liquidity crisis

71) Which of the following is NOT among the main crises that have been of particular significance for the IMF?

A) loans to Latvia between 2008-2010 B) the U.S. mortgage crisis of 2008-2010 C) loans to Greece between 2008-1010 D) loans to Ireland between 2008-2010 E) the Asian crisis of 1997

72) The financial crisis that erupted across as the biggest challenge the IMF has had to deal with.

during the fall of 1997 has emerged

A) Eastern Europe B) Southeast Asia C) Central America D) South America E) the mid-east

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73) You are the Chief Financial Officer of a company that operates in almost two dozen countries around the world: in Europe, Central and South America, and Asia. You manufacture your product (which is used in the auto industry) in many countries, and also sell them in the same countries as well as others: all in the regions described above. You also import items from many countries, for use in your manufacturing process.

How do exchange rates affect individual international businesses? Do international businesses like stable rates or volatile rates? Explain your answer.

74) What is the difference between a floating exchange rate and a managed or dirty float system?

75) Describe what happened at the 1944 Bretton Woods conference. Are the monetary principles established by the Bretton Woods conference still in effect today?

76) Describe the role of the World Bank in the international community. How does the World Bank contribute to the overall stability of the global monetary system?

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77) Describe the difference between fixed and floating exchange rates. Which is better?

Explain your answer.

78) What is a pegged exchange rate? How does it work? What is the advantage of a pegged exchange rate regime?

79)

Explain what a moral hazard is, and how it is used as a criticism of IMF policies.

80) The closing case discusses the IMF's role in Egypt. What do you think are some of the consequences of the steps it has taken to improve its trade deficit and earn more foreign currency?

81) The international monetary system is the system of bank payments used around the world. ⊚ ⊚

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82) When the foreign exchange market determines the relative value of a currency, it is said that the country is adhering to a pegged exchange rate. ⊚ ⊚

83)

true false

The Bretton Woods system called for fixed exchange rates against the U.S. dollar. ⊚ ⊚

true false

84) The agreement reached at Bretton Woods established two multinational institutions: the World Trade Organization and the World Bank. ⊚ ⊚

true false

85) Since the Bretton Woods system of floating exchange rates collapsed in 1973, the world has operated with a fixed exchange rate system. ⊚ ⊚

true false

86) The gold standard is the practice of pegging currencies to gold and guaranteeing convertibility. ⊚ ⊚

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true false

386

87) Instead of gold and silver, the solution adopted was to arrange for payment in paper currency and for governments to agree to convert the paper currency into gold on demand at a fixed rate. ⊚ ⊚

true false

88) The great strength claimed for the gold standard was that it contained a powerful mechanism for simultaneously achieving balance-of-trade equilibrium by all countries. ⊚ ⊚

89)

true false

Great Britain abandoned the gold standard at the beginning of World War I ⊚ ⊚

true false

90) The Bretton Woods agreement resulted in a commitment not to use devaluation as a weapon of competitive trade policy. ⊚ ⊚

true false

91) Although monetary discipline was a central objective, the Bretton Woods agreement recognized that a rigid policy of fixed exchange rates would be too inflexible. ⊚ ⊚

true false

92) The task of the IMF was to maintain order in the international monetary system, as stipulated by the Bretton Woods agreement.

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⊚ ⊚

true false

93) Two features of the IMF helped build in limited flexibility: IMF lending facilities and adjustable parities. ⊚ ⊚

true false

94) The official name of the World Bank is the International Bank for Reconstruction and Development. ⊚ ⊚

true false

95) Most economists trace the break-up of the fixed exchange rate system to the U.S. macroeconomic policy package of 1965-1968. ⊚ ⊚

true false

96) Revising the IMF's Articles of Agreement to reflect the new reality of floating exchange rates was the purpose of the Jamaica meeting. ⊚ ⊚

true false

97) After Jamaica, the IMF continued its role of helping countries cope with macroeconomic and exchange rate problems, albeit within the context of a radically different exchange rate regime.

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⊚ ⊚

true false

98) Market forces have produced a volatile dollar exchange under a floating exchange rate regime. ⊚ ⊚

true false

99) The Oil crisis of 1979 is one reason for the volatility of exchange rates since March of 1973. ⊚ ⊚

true false

100) Monetary policy autonomy and automatic trade balance adjustments are the two main elements of the case for fixed exchange rates. ⊚ ⊚

true false

101) It is argued that a floating exchange rate regime gives countries monetary policy autonomy. ⊚ ⊚

true false

102) Removal of the obligation to maintain exchange rate parity restores monetary control to a government is the argument of advocates of a floating exchange rate regime.

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⊚ ⊚

true false

103) The case for fixed exchange rates rests on arguments about monetary discipline, speculation, uncertainty, and the lack of connection between the trade balance and exchange rates. ⊚ ⊚

true false

104) Critics of a floating exchange rate regime argue that speculation causes stability in exchange rates. ⊚ ⊚

105)

By 1880, most of the world's major trading nations had adopted the gold standard. ⊚ ⊚

106) rate.

true false

A currency value that is fixed relative to a reference currency is called a pegged exchange

⊚ ⊚

107)

true false

true false

The Bretton Woods agreement called for variable exchange rates ⊚ ⊚

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true false

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108) The IMF has kept its policies prescriptions and approaches consistent since it was formed. ⊚ ⊚

true false

109) A banking crisis occurs when there is a speculative attack on the exchange value of a currency. ⊚ ⊚

true false

110) Moral hazard occurs when people behave recklessly because they know they will be saved if things go wrong. ⊚ ⊚

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Answer Key Test name: chapter 10 1) B 2) C 3) E 4) E 5) A 6) C 7) C 8) A 9) B 10) A 11) D 12) E 13) E 14) B 15) A 16) B 17) A 18) C 19) C 20) E 21) C 22) C 23) E 24) C 25) E 26) C Version 1

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27) D 28) B 29) C 30) D 31) D 32) A 33) D 34) B 35) A 36) E 37) A 38) D 39) B 40) B 41) C 42) E 43) D 44) B 45) C 46) C 47) A 48) B 49) A 50) A 51) C 52) D 53) A 54) A 55) D 56) B Version 1

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57) D 58) B 59) B 60) B 61) C 62) B 63) D 64) A 65) B 66) E 67) A 68) A 69) A 70) D 71) B 72) B 81) FALSE 82) FALSE 83) TRUE 84) FALSE 85) FALSE 86) TRUE 87) TRUE 88) TRUE 89) TRUE 90) TRUE 91) TRUE 92) TRUE 93) TRUE 94) TRUE Version 1

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95) TRUE 96) TRUE 97) TRUE 98) TRUE 99) TRUE 100) FALSE 101) TRUE 102) TRUE 103) TRUE 104) FALSE 105) TRUE 106) TRUE 107) FALSE 108) FALSE 109) FALSE 110) TRUE Chapter 11 Student name: 1)

In the opening case, what is important to Red Bull's global success?

A) High prices B) Offering the same products throughout the world.

C) Using few suppliers D) marketing E) Using few manufacturers.

2)

Profit can be defined as:

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A) costs minus profits B) the difference between time and money C) quantity times profit D) sales plus costs E) the difference between TR and TC

3) A firm's of the firm.

can be defined as the actions that managers take to attain the goals

A) systems B) value chain C) operations D) strategy E) plans

4)

Anika creates

when she develops a way to maximize long-term profitability.

A) a strategy B) a mission C) competitors D) a design E) competitive advantage

5)

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is the difference between total revenues and total costs.

396

A) Strategy B) Profit C) Asset D) Economies of scale E) Gross margin

6)

A simple example of

is rate of return on sales.

A) strategy B) economies of scale C) profitability D) primary activity E) profit

7)

A basic condition that determines a firm's profits is:

A) the firm's costs of distribution.

B) taxes.

C) the amount of value customers place on the firm's goods.

D) government regulations.

E) variable costs

8)

Actions that managers take to attain the firm's goals are referred to as

.

A) value chain activities B) strategies C) systems D) operations E) tactics

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9) A company creates consumers place a value of V.

by converting inputs that cost C into a product on which

A) value B) wants C) profits D) demand E) profitability

10) According to the textbook, it is useful to think of the firm as a composed of a series of distinct activities, including production, marketing, materials management, R&D, human resources, information systems, and the firm infrastructure.

A) functional stream B) momentum machine C) inertia chain D) value chain E) business chain

11)

Value chain activities can be categorized as:

A) primary activities and secondary activities B) input activities and throughput activities C) profitable activities and unprofitable activities D) primary activities and support activities E) value creation and value delivery

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12) The activities of a firm have to do with creating the product, marketing and delivering the product to buyers, and providing support and after-sales service to the buyers of the product.

A) support B) subordinate C) ancillary D) primary E) distribution

13)

In the context of value chain analysis, the primary activities of a firm include:

A) manufacturing, materials management, marketing and sales, and service B) infrastructure (structure and leadership), human resources, and R&D C) R&D, sales, and materials management D) manufacturing, human resources, and materials management E) production, marketing & service, and sales

14) In the context of value chain analysis, which of the following is an example of a "primary" activity?

A) materials management B) research and development C) manufacturing D) human relations E) information systems

15)

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is concerned with the creation of goods or service.

399

A) Profitability B) Marketing C) Sales D) Production E) R&D

16)

In the context of value chain analysis, the support activities of a firm include:

A) human resources, management information systems, materials management, and accounting B) accounting, infrastructure, R&D, and materials management C) manufacturing, marketing and service, R&D, and management information systems D) human resources, materials management, infrastructure, and information systems E) infrastructure, R&D, human resources, and information systems

17) In the context of value chain analysis, activities of production and marketing to occur.

activities allow the primary

A) complementary B) secondary C) support D) subsidiary E) staff

18) do?

Which of the following is not something firms that operate internationally are able to

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A) Earn a greater return from the firm's distinctive skills or core competencies by leveraging those skills and applying them to new geographic markets.

B) Earn a greater return by leveraging any valuable skills developed in foreign operations and transferring them to other entities within the firm's global network of operations.

C) Realize location economies by dispersing individual creation activities to those locations around the globe where they can be performed most efficiently.

D) Realize greater cost economies from experience effects by serving an expanded global market from a central location, and increasing the costs of value creation.

E) None of these answers is correct

19) permitting, the firm will benefit by basing each value creation activity it performs at that location where economic, political, and cultural positions are most conducive to the performance of that activity.

A) Production regulations B) Resources and revenues C) Trade barriers and transportation costs D) Distribution and resource availability E) Exchange rates and transportation costs

20) is a way of further exploiting the value creation potential of a company's skills and product offerings by applying these skills and products in a larger market.

A) Retrenchment B) Marketing C) Global expansion D) Brand name E) Diversification

21)

The term

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refers to skills within a firm that competitors cannot easily match.

401

A) core competencies B) indigenous properties C) value chain D) discriminate attributes E) competitive advantages

22) According to our textbook, a firm's allow it to reduce the costs of value creation and/or to create value in such a way that premium pricing is possible.

A) special attributes B) discriminate attributes C) indigenous properties D) core competencies E) economies of scale

23)

Skills within the firm that competitors cannot easily match or imitate are referred to as

A) core competencies.

B) global competencies.

C) in-born skills.

D) competitive threats.

E) competitive competencies

24)

McDonald's core competencies are:

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A) materials management B) developing and marketing brand name products C) information systems and logistics D) developing and managing customer loyalty programs E) managing fast-food operations

25)

Core competencies are the foundation of a firm's competitive advantage because:

A) It has skills that cannot be matched or imitated by competitors B) It has profit margins that enable it to dominate C) It can increase the costs of value creation D) It does not include value creation activities like human resources E) None of these options

26) Economies that arise from performing a value creation activity in the optimal location for that activity are called .

A) site expediencies B) location economies C) site commerce D) location synergies E) offshore savings

27) Suppose General Motors decided to manufacture brakes in Ireland, because a detailed analysis of country specific advantages indicated that Ireland is the optimal place in the world to produce brakes. In this example, General Motors is capturing by manufacturing brakes in Ireland.

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A) location synergies B) site expediencies C) site commerce D) location economies E) offshore profits

28) Locating a value creation activity in the optimal location for that activity can have one or two effects. First, it can lower the costs of value creation and help the firm to achieve a low-cost position, and/or:

A) it can enable a firm to differentiate its product offering from that of competitors B) it can lower the cost of marketing and service C) it can expedite the research and development process D) it can create political good well E) all of these answers are correct

29) According to our textbook, a firm creates a(n) by dispersing the stages of its value chain to those locations around the globe where the value added is maximized or where the costs of value creation are minimized.

A) integrate circle B) disperse chain C) global web D) international mesh E) global conglomerate

30) In theory, a firm that realizes by dispersing each of its value creation activities to its optimal location should have a competitive advantage vis-à-vis a firm that bases all its value creation activities at a single location.

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A) multidomestic strategies B) site synergies C) site commerce D) geographical distinctiveness E) location economies

31) The refers to the systematic reductions in production costs that have been observed to occur over the life of a product.

A) experience curve B) forward advantage C) positive-sum result D) managed advantage E) economies of scale

32) If Goodyear Tire Corporation experienced systematic reductions in the production costs of a particular product over the life of the product, they would be realizing effects.

A) managed production B) forward advantage C) experience curve D) value chain E) economies of scale

33) A number of studies have observed that a product's characteristic each time accumulated output doubles.

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decline by some

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A) financing costs B) production costs C) marketing costs D) R&D costs E) distribution costs

34)

refer to cost savings that come from learning by doing.

A) Learning effects B) Exponential effects C) Ancillary effects D) Indirect effects E) R&D effects

35) Learning effects tend to be more significant when a because there is more than can be learned about the task.

task is repeated

A) repetitive manufacturing B) standardized manufacturing C) technologically complex D) standardized service E) multi-level

36) The term large volume of a product.

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refers to the reduction in unit cost achieved by producing a

406

A) volume synergies B) captured savings C) economies of scale D) rent effects E) cost efficiencies

37) If Honda noticed that the unit costs of Honda Accords went down as the number of Accord's produced went up, Honda would be realizing the benefits of .

A) captured savings B) volume synergies C) economies of scale D) rent effects E) learning effects

38) The ability to spread fixed costs over a large volume results in a cost-savings phenomenon referred to as:

A) volume synergies B) economies of scale C) captured savings D) size effects E) volume discounts

39)

Moving down the experience curve allows a firm to reduce its cost of:

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A) raw materials B) creating value C) distribution D) R&D E) production

40) the skills created within subsidiaries and applying them to other operations within the firm's global network creates value.

A) Eliminating B) Leveraging C) Reducing D) Cross-licensing E) Expanding

41) Firms that compete in the global marketplace typically face two types of competitive pressures. They face pressures for cost reductions and:

A) pressures for volume increases B) pressures to be locally responsive C) pressures to be politically savvy D) pressures for price reductions E) pressures to reduce costs

42) Pressures for cost reductions can be particularly intense in industries producing commodity products where meaningful differentiation on non-price factors is difficult and is the main competitive weapon.

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A) quality B) distribution efficiency C) sales and service D) price E) product attributes

43) Among global firms, which of the following is not a factor that is driving pressures for local responsiveness?

A) Differences in distribution channels B) Differences in infrastructure C) Similarities in consumer tastes and preferences D) Host government demands E) Differences in traditional practices

44) Which of the following is not a factor that is driving pressures for local responsiveness among global firms?

A) Similarities in distribution channels B) Host government demands C) Differences in infrastructure D) Differences in consumer tastes and preferences E) Differences traditional practices

45) Differences in consumer tastes and preferences, differences in infrastructure and traditional practices, differences in distribution channels, and host government demands are factors pressuring firms to in their international strategies.

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A) be locally responsive B) be globally standardized C) be cost sensitive D) integrate more "commodity" like features E) be politically neutral

46) Some have argued that consumer demands for local customization are worldwide.

A) declining B) levelling out C) increasing D) a myth E) diversifying

47) Pressures for emerge when there are differences in infrastructure and/or traditional practices between companies.

A) government support B) consumer support C) local responsiveness D) global cutbacks E) Internal Responsiveness

48)

Threats of protectionism, economic nationalism, and local content rules:

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A) try to keep foreign companies out B) dictate that international businesses manufacture locally C) put harsh regulations on distribution D) strictly regulate the raw materials that foreign companies use E) make foreign markets unattractive

49) Pressures for imply that it may not be possible for a firm to realize the full benefits from experience curve and location economies.

A) government approval B) consumer guidance C) national recognition D) local responsiveness E) local development

50)

Firms use four basic strategies to compete in the international environment. These are:

A) a cultural literacy, an ethnocentric strategy, a nationalistic strategy, a global strategy B) a cross-cultural strategy, a trade block strategy, a regional strategy, and a world strategy C) a domestic-based strategy, an international-focused strategy, a local/regional-based strategy, and a cultural-based strategy D) an international strategy, a regional strategy, a global strategy, and a world strategy E) an international strategy, a multidomestic strategy, a global strategy, and a transnational strategy

51) The appropriateness of the strategy that a firm uses in an international market varies with the extent of pressures for and .

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A) cost reductions; availability of financing B) price concessions; quality improvements C) availability of financing; product standardization D) cost reductions; local responsiveness E) market size; market characteristics

52) Firms that pursue a(n) strategy focus on increasing profitability by reaping the cost reductions that come from experience curve effects and location economies.

A) localization B) multinational C) international D) global E) transnational

53) The production, marketing, and R&D activities of firms pursuing a(n) strategy are concentrated in a few favourable locations.

A) international B) transnational C) global D) localization E) multinational

54) A(n) strategy makes sense when there are strong pressures for cost reductions and where demands for local responsiveness are minimal.

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A) global B) localization C) transnational D) international E) multinational

55) The distinguishing feature of firms is that they extensively customize both their product offerings and their marketing strategy to match national conditions.

A) localization B) global C) transnational D) international E) multinational

56) Firms pursuing a(n) maximum local responsiveness.

strategy orient themselves toward achieving

A) international B) domestic C) localization D) global E) multinational

57)

When cost pressures are low and the pressures for local responsiveness are high a(n) strategy is the most appropriate.

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A) localization B) global C) transnational D) international E) multinational

58) Firms pursuing a(n) maximum local responsiveness.

strategy orient themselves towards achieving

A) international B) global C) transnational D) localization E) multinational

59) A weakness of the strategy is that many of the firms that pursue this strategy have developed into decentralized federations in which each national subsidiary functions in a largely autonomous manner.

A) multinational B) global C) international D) transnational E) localization

60)

The work of Christopher Bartlett and Sumantra Ghoshal is associated with:

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A) global strategy B) strategy C) transnational strategy D) international strategy E) multinational strategy

61) According to the textbook, which of the following strategies is difficult to implement due to organizational problems?

A) Multinational B) International C) Global D) Multidomestic E) Transnational

62) According to Bartlett and Ghoshal, the strategy.

strategy is the only viable international

A) multidomestic B) international C) transnational D) global E) multinational

63) Firms that pursue a(n) strategy try to create value by transferring valuable skills and products to foreign markets where indigenous competitors lack those skills and products.

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A) multidomestic B) transnational C) global D) international E) multinational

64) A(n) strategy makes sense if a firm has a valuable core competence that indigenous competitors in foreign markets lack.

A) global B) international C) multidomestic D) transnational E) multinational

65)

When cost pressures are low and pressures for local responsiveness are low, a(n) strategy is the most appropriate.

A) multidomestic B) transnational C) global D) international E) multinational

66) A(n) strategy makes sense if a firm has valuable core competencies that indigenous competitors in foreign markets lack, and if the firm faces relatively weak pressures for local responsiveness and cost reductions.

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A) international B) global C) localization D) transnational E) multinational

67) Pursuing a(n) strategy involves a simultaneous focus on reducing costs, transferring skills and products, and being locally responsive.

A) global B) localization C) transnational D) international E) multinational

68) Which of the following two international strategies are disadvantaged by a lack of local responsiveness?

A) global and international B) multidomestic and transnational C) transnational and global D) multidomestic and international E) multidomestic and multinational

69) Which of the following two strategies suffer from a failure to exploit experience curve effects?

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A) international and transnational B) multidomestic and international C) transnational and global D) global and international E) multidomestic and multinational

70)

An international strategy is

viable in the long term.

A) Always B) Occasionally C) Never D) Rarely E) Often

71) The term competitors.

refers to cooperative agreements between potential or actual

A) tactical union B) strategic alliance C) political affiliation D) economic association E) global partnership

72)

Cooperative agreements between potential or actual competitors are called:

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A) economic associations B) tactical unions C) trade unions D) strategic alliances E) partnerships

73) contractual agreements.

run the range from formal joint ventures to short-term

A) Cooperative synergies B) Strategic alliances C) Franchise organizations D) Tactical partnerships E) Partnerships

74) Scholars have argued that between U.S. and Japanese firms are part of an implicit Japanese strategy to keep higher-paying, higher-value added jobs in Japan while gaining the project engineering and production process skills that underlie the competitive success of many U.S. companies.

A) licensing agreements B) strategic alliances C) turnkey projects D) franchise arrangements E) joint ventures

75) There are three major advantages that strategic alliances enjoy. These are (1) may facilitate trade into a foreign market, (2) allows firms to share the fixed costs and developing new products or processes, and (3):

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A) an alliance is a way to bring together the complementary skills and assets of the participants B) gives competitors a low cost route to new technology C) a firm never gives away more than it gains by participating in a strategic alliance D) give competitors a low cost route to new markets E) protects the proprietary technology of the partners

76)

Which of the following is not an advantage of a strategic alliance?

A) Alliances help facilitate entry into foreign markets B) Allows a firm to share the fixed costs of developing new products or services with another firm C) Provides a forum for firms to bring together complementary skills and assets that neither company could easily develop on its own D) Helps a firm guard its proprietary technology E) Helps establish technical standards in an industry

77)

One of the principle risks with strategic alliances is:

A) that they bring together the complementary skills of alliances partners B) alliances may facilitate entry into foreign markets C) a firm can give away more than it receives D) that they allow firms to share fixed costs E) can establish technological standards that are not compatible with one of the partners

78) One recent study of international strategic alliances found that serious managerial and financial troubles within two years of their formation.

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ran into

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A) 10 B) 12 C) 1/2 D) 2/3 E) 3/4

79) According to the textbook, the success of a strategic alliance is a function of three factors.

These are: partner selection, alliance structure, and .

A) similarity in size of the alliance partners B) geographic distance between the alliance partners C) the manner in which the alliance is managed D) government support E) the corporate culture of the partners

80)

Which of the following is not an attribute of a good strategic alliance partner?

A) Is unlikely to opportunistically exploit the alliances for its own ends B) Shares the firm's vision for the purpose of the alliance C) Must have capabilities identical to its partner D) Helps the firm achieve its strategic goals E) None of these answers is correct

81)

The four safeguards against opportunism by alliance partners include:

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A) retaining a CPA to audit the alliance's books, agreeing to share valuable skills and technologies, seeking credible commitments, and shared leadership in alliance activities B) walling off critical technology, establishing contractual safeguards, agreeing to swap valuable skills and technologies, and seeking credible commitments C) restricting the alliance to activities outside the partner's distinctive competencies, maintaining an atmosphere of secrecy, shared leadership in alliance activities, and seeking credible commitments D) establishing contractual safeguards, maintaining an atmosphere of secrecy, retaining a CPA to audit the alliance's books, and shared leadership in alliance activities E) ensuring partner selection is right, restricting technical knowledge to loyal employees, signing a comprehensive contract, and ensuring equal power sharing

82) The four safeguards against opportunism by alliance partners include: walling off critical technology, establishing contractual safeguards, agreeing to swap valuable skills and technologies, and .

A) seeking credible commitments B) maintaining an atmosphere of secrecy C) retaining a CPA to audit the alliance's books D) restricting the life span of the alliance to three years or less E) picking the right partner

83) Which of the following is not one of the four safeguards against opportunism by alliance partners mentioned in our textbook?

A) seeking credible commitments B) establishing contractual safeguards C) avoiding the practice of swapping valuable skills and technologies D) walling off critical technologies E) none of these answers is correct

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84) agreements are one way to achieve the goal of swapping skills and technologies that each company in a strategic alliance covets, and ensuring a chance for equitable gain.

A) Join venture B) Sharing C) Cross-licensing D) Learning E) Contractual

85) According to the textbook, there are three important factors that help to maximizing the benefits of strategic alliances. These are:

A) shared cultural values, contractual trust, and a learning environment B) joint planning, complete disclosure of proprietary technology, limiting the number of alliance partners C) restricting the alliance to issues dealing with the core competencies of the alliance partners, complete disclosure of proprietary technology, and learning from partners D) joint planning, building trust, and limiting the number of alliance partners E) make allowances for cultural differences, building trust, and learning from partners

86) Your Canadian company has successfully operated here for over two decades. As a new senior level manager, you have been tasked with expanding your operations globally. You have no experience operating in the international environment in any of your previous jobs. Your boss has asked you to prepare some documentation on "going global," and the only direction she has given you is that whatever method you choose, should "be very inexpensive."

Your company has decided to go global by entering into a strategic alliance. How do you choose a partner for strategic alliance? Is this important?

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87) Your Canadian company has successfully operated here for over two decades. As a new senior level manager, you have been tasked with expanding your operations globally. You have no experience operating in the international environment in any of your previous jobs. Your boss has asked you to prepare some documentation on "going global," and the only direction she has given you is that whatever method you choose, should "be very inexpensive."

Most companies have different business strategies from that of their competitors or partners.

Business strategy is the process of identifying and determining an organization's objectives, and then developing policies and plans to achieve these objectives, Business strategy sets the overall direction of the firm. How do firms with differences in business strategy manage and cooperate with respect to their alliance strategy?

88) Describe the concept of "core competence." What types of core competencies are the most valuable for penetrating foreign markets?

89) What is the experience curve? How can an involvement in overseas markets help a firm capture experience curve advantages more rapidly?

90)

What is the difference between learning effects and economies of scale?

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91) Firms that compete in global markets often face pressures for local responsiveness.

Describe what is meant by local responsiveness, and identify the underlying reasons that local responsiveness pressures exist.

92) For Callaway Golf, one of the largest American golf club equipment manufacturers, the world market is a very big part of its total market for clubs. The golf industry has a strong worldwide appeal. The game is extremely popular in countries around the world including Scotland (golf's birthplace), England, Sweden, Spain, South Africa, South America, Australia, New Zealand, and Japan, where golf enthusiasm rises to unheard of levels. Many countries and continents from around the world are represented both professionally and at the amateur level in worldwide competitions. Golf enthusiasts from around the world follow the sport through televised tournaments, daily newspaper coverage, golf magazines, weekly golf journals, sports reports, as well as Internet websites. Golf-related websites are among the largest categories of Internet sites. However the golf market is also highly competitive with many other firms making golf clubs and related equipment. Which Global strategic market choice should Callaway use?

Explain.

93) A Canadian company that manufactures sophisticated weather monitoring devices has seen demand for its product grow in SE Asia and South America. This growth is primarily the result of concerns about the impact of global warming on climate. This increase in demand has meant that the current production facility cannot produce any more. What Global strategy would you recommend they base their decision on?

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94)

Under what circumstances is entering into strategic alliances a risky undertaking?

95)

What are strategic alliances?

96) The actions that managers take to attain the goals of the firm are referred to as a firm's strategy. ⊚ ⊚

97)

Strategy is a ratio or rate of return concept. ⊚ ⊚

98)

true false

true false

Profit is the difference between total revenues and total costs. ⊚ ⊚

Version 1

true false

426

99)

Return on sales (ROS) is the same as profit. ⊚ ⊚

true false

100) There are two basic strategies for improving a firm's profitability-a differentiation strategy and a diversification strategy. ⊚ ⊚

true false

101) To contain costs, one must not think of the firm as a value chain composed of a series of distinct value creation activities. ⊚ ⊚

true false

102) A central tenet of Porter's basic strategy paradigm is that to maximize its profitability, a firm must do three key things. ⊚ ⊚

true false

103) Human resources, materials management, and manufacturing are included as the primary activities in a firm's value chain. ⊚ ⊚

Version 1

true false

427

104) In the context of the value chain analysis, support activities provide the inputs that allow the primary activities of production and marketing to occur. ⊚ ⊚

true false

105) The support activities of the value chain provide outputs that allow all activities to take place. ⊚ ⊚

true false

106) Strategy is often concerned with identifying and taking actions that will lower the costs of value creation and will differentiate the firm's product offering through superior design, quality, service, and functionality. ⊚ ⊚

true false

107) Locating a value creation activity in the optimal location for that activity can lower the costs of value creation and help the firm to achieve a low cost position, and/or enable a firm to differentiate its product offering from the offerings of competitors. ⊚ ⊚

true false

108) A firm that realizes location economies by dispersing each of its value creation activities to its optimal location should have a comparative advantage vis-à-vis a firm that bases all of its value creation activities at a single location. ⊚ ⊚

Version 1

true false

428

109) Firms that operate internationally are able to reduce the costs of value creation because they realize greater cost economies from experience effects by serving an expanded global market from a central location. ⊚ ⊚

true false

110) The system curve refers to systematic reductions in production costs that have been observed to occur over the life of a product. ⊚ ⊚

true false

111) Labour relations increase over time as individuals learn the most efficient ways to perform particular tasks. ⊚ ⊚

true false

112) To get down the experience curve rapidly, a firm may need to price and market aggressively so demand will expand rapidly. ⊚ ⊚

true false

113) Skills within the firm that competitors can easily match or imitate are called core competence. ⊚ ⊚

Version 1

true false

429

114) Firms that compete in the global markets typically face two types of competitive pressure: to be globally responsive and pressures for cost reductions. ⊚ ⊚

true false

115) According to Theodore Levitt, consumer demands for local customization are on the increase worldwide. ⊚ ⊚

true false

116) When there are differences in infrastructure and/or traditional practices between countries, pressures for local responsiveness emerge. ⊚ ⊚

true false

117) In the context of value chain analysis, the support activities of a firm include human resources, management information systems, materials management, and accounting. ⊚ ⊚

true false

118) A global strategy makes sense when there are strong pressures for cost reductions and where demands for local responsiveness are minimal. ⊚ ⊚

Version 1

true false

430

119) Firms pursuing a localization strategy orient themselves toward achieving maximum local responsiveness. ⊚ ⊚

true false

120) A localization strategy makes most sense when there are low pressures for local responsiveness and high pressures for cost reductions. ⊚ ⊚

true false

121) A business strategy that seeks experience-based economies and location economies, transfers distinctive competencies within the firm, and pays attention to pressures for local responsiveness is a transnational strategy. ⊚ ⊚

true false

122) A transnational strategy makes sense when a firm faces low pressures for cost reductions and low pressures for local responsiveness. ⊚ ⊚

123)

true false

Due to organizational problems, a transnational strategy is difficult to implement. ⊚ ⊚

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true false

431

124) When cost pressures are low and pressures for local responsiveness are low, an international strategy is the most appropriate. ⊚ ⊚

125)

An international strategy is always viable over the long term. ⊚ ⊚

126)

true false

true false

A multidomestic alliance is a cooperative agreement between competitors ⊚ ⊚

true false

127) Strategic alliances allow a firm to enter a new market, share fixed costs and risks, and bring together skills and assets. ⊚ ⊚

128)

true false

A firm can give away more than it receives through a strategic alliance. ⊚ ⊚

true false

129) In selecting a partner it is important to look for a partner who has capabilities that the firm lacks.

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⊚ ⊚

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true false

433

Answer Key Test name: chapter 11 1) D 2) E 3) D 4) A 5) B 6) C 7) C 8) B 9) A 10) D 11) D 12) D 13) E 14) B 15) D 16) D 17) C 18) D 19) C 20) C 21) A 22) D 23) A 24) E 25) A 26) B Version 1

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27) D 28) A 29) C 30) E 31) A 32) C 33) B 34) A 35) C 36) C 37) C 38) B 39) B 40) B 41) B 42) D 43) C 44) A 45) A 46) A 47) C 48) B 49) D 50) E 51) D 52) D 53) C 54) A 55) A 56) C Version 1

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57) A 58) D 59) E 60) C 61) E 62) C 63) D 64) B 65) D 66) A 67) C 68) A 69) B 70) E 71) B 72) D 73) B 74) B 75) A 76) D 77) C 78) D 79) C 80) C 81) B 82) A 83) C 84) C 85) E 96) TRUE Version 1

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97) FALSE 98) TRUE 99) FALSE 100) FALSE 101) FALSE 102) TRUE 103) FALSE 104) TRUE 105) FALSE 106) TRUE 107) TRUE 108) FALSE 109) TRUE 110) FALSE 111) FALSE 112) TRUE 113) FALSE 114) FALSE 115) FALSE 116) TRUE 117) FALSE 118) TRUE 119) TRUE 120) FALSE 121) TRUE 122) FALSE 123) TRUE 124) TRUE 125) FALSE 126) FALSE Version 1

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127) TRUE 128) TRUE 129) TRUE Chapter 12 Student name: 1) According to the opening case, Ikea introduced customers in model by creating its first experiential centre.

to its business

A) China B) Germany C) England D) India E) Japan

2)

The choice of what foreign market to enter should be driven by an assessment of:

A) relative long-run growth and profit potential B) geographic proximity and friendliness of host government C) climate and economic stability of host government D) friendliness of host government and profit potential E) relative long-run profit and the risk of losses

3)

Which of the following are not a basic decision for firms considering foreign expansion?

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A) Which markets to enter B) When to enter those markets C) At what scale to enter D) How to enter those markets E) Who should lead the expansion

4)

The most important consideration for a firm expanding into a foreign market is:

A) The country's long-run revenue potential B) Short-term returns C) The opportunity to cooperate D) How much the country can demonstrate it is welcoming E) Who is leading the initiative

5) as:

The advantages frequently associated with entering a market early are commonly known

A) inaugural advantages B) first-mover advantages C) initial-entrant premiums D) proactive-mover benefits E) primary entrant advantages

6)

Once attractive markets have been identified, it is important to consider the:

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A) timing of entry B) competition C) costs involved D) insurance needed in the event of failure E) All of these answers are correct

7)

Which of the following is not a first-mover advantage?

A) The ability to increase a firm's chances of survival by entering a foreign market before industrial rivals B) The ability to build sales volume in a country and ride down the experience curve ahead of rivals C) The ability to create switching costs that tie customers to a company's products or services D) The ability to pre-empt rivals E) The ability to capture demand by establishing a strong brand name

8)

What are the disadvantages associated with entering a market early commonly known as?

A) first-mover disadvantages B) inaugural disadvantages C) initial-entrant disadvantages D) proactive-mover losses E) primary entrant advantages

9) Which of the following are costs that an early entrant has to bear that a later entrant can avoid?

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A) experimental costs B) untried costs C) introductory costs D) pioneering costs E) early adoption costs

10) costs arise when the business system in a foreign country is so different from that in a firm's home market that the enterprise has to devote considerable effort, time, and expanse to learning the rules of the game.

A) Pioneering B) Early entry C) Introductory costs D) Inaugural costs E) Primary entrant

11)

All of the following are pioneering costs except the costs of:

A) business failure B) educating consumers C) promoting and establishing a product offering D) regulatory change E) learning costs from the mistakes of early entrants

12)

A decision that has a long-term impact and is difficult to reverse a(n):

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A) operational pledge B) functional assurance C) tactical covenant D) strategic commitment E) core investment

13) Sonic Jets, an international business, is considering entering a new market in Germany.

What does Sonic Jets need to consider?

A) Its scale of entry B) Its role as a social entity C) Its home-country employees D) Its top managements' desire to move to Germany E) Its product benefits

14) According to the text, tend to change the competitive playing field and unleash a number of changes, some desirable and some undesirable.

A) economies of scale B) loan commitments C) significant strategic commitments D) technological development E) pioneering costs

15) What type of entry allows a firm to learn about a foreign market while limiting the firm's exposure to that market?

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A) minimal-commitment B) small-scale C) reduced-commitment D) minimal-scale E) exporting

16) Entering a large market such as China before other similar industries will be associated with what?

A) exporting B) licensing C) franchising D) late mover advantages E) a high level of risk

17) The entrant is more likely than the entrant to be able to capture the first-mover advantages associated with demand pre-emption, scale economies, and switching costs.

A) small scale; large scale B) small scale; moderate scale C) large scale; moderate scale D) there is no relationship between scale of entrant and the ability to capture first-mover advantages E) large scale; small scale

18)

Which of the following is not a mode to enter foreign markets?

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A) turnkey projects B) establish joint ventures with another home country firm C) set up a new wholly owned subsidiary in the host country D) franchising E) licensing

19) The market entry mode which may help a firm achieve experience curve and location economics is what?

A) exporting B) importing C) joint ventures D) green field acquisition E) wholly owned subsidiaries

20)

Most manufacturing firms begin their global expansion through

.

A) establishing a joint venture with a host country firm B) licensing C) turnkey projects D) exporting E) franchising

21)

Which of the following are the two distinct advantages of exporting?

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A) Getting rid of excess inventory and reducing risk B) Access to local partner's knowledge; and politically acceptable C) Ability to earn returns from process technology skills in countries where FDI is restricted; and politically acceptable D) Access to a local partner's knowledge and it may help a firm achieve experience curve; and location economies E) It avoids the often-substantial cost of establishing manufacturing operations in the host country; and it may help a firm achieve experience curve and location economies

22)

All of the following are disadvantages of exporting except?

A) It may help a firm achieve experience curve economies B) High transportation costs can make exporting uneconomical C) Tariff barriers can make exporting uneconomical D) Exporting from a firm's home bases may not be appropriate if there are lower-cost locations for manufacturing the product abroad E) Marketing is the responsibility of local agents

23) Consider the following scenario: Ballard Manufacturing wants to sell its products overseas, but only if it can act on its own and manufacturer its product in a central location.

Based on these objectives, the appropriate foreign entry mode for Ballard is:

A) wholly owned subsidiary B) franchising C) exporting D) licensing E) turnkey project

24) The contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel in a(n) project.

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A) beginning to end B) A to Z C) front-to-back D) turnkey E) business completion

25)

Turnkey projects are a means of exporting

to other countries.

A) commodities B) the manufacturing of goods C) process technology D) the provision of services E) the production of automobiles

26) Suppose Exxon, a U.S. company, was contracted by a Saudi Arabian company to build an oil refinery in Saudi Arabia, and the contract specified that Mobil would handle every aspect of the construction of the refinery, including the training of the operating personnel. This type of project is referred to as a(n)

A) turnkey project B) beginning to end C) A to Z D) front to back E) petro project

27)

Turnkey projects are most common in the following industries:

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A) chemical, pharmaceutical, petroleum refining, and metal refining B) textiles, shoes, leather products, and linens C) cars, trucks, construction equipment, and farm implements D) lumber, furniture, paper, and pulp E) automobile, pulp and paper, metal mining, and oilfield production

28) of

Creating efficient competitors and lack of long-term market presence are disadvantages .

A) turnkey projects B) licensing C) franchising D) exporting E) joint ventures

29) Which foreign market entry strategy has the following disadvantages: lack of long-term market presence, may inadvertently create a competitor, risk of selling a firm's competitive advantage?

A) wholly owned subsidiary B) turnkey project C) exporting D) franchising E) joint venture

30) takes advantage of a firm's competency in the area of assembling and running technologically complex projects.

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A) Licensing B) Exporting C) Turnkey projects D) Franchising E) Greenfield investments

31) An arrangement whereby a firm grants the rights to intangible property to another entity for a specified time period in exchange for royalties is a(n) agreement.

A) franchising B) turnkey C) licensing D) exporting E) joint venture

32) Suppose Apple Computer granted a France company the rights to manufacture keyboards in France in exchange for a royalty fee. This type of arrangement is referred to as a:

A) franchising agreement B) turnkey project C) licensing agreement.

D) wholly owned subsidiary E) joint venture

33) Which of the following is not an argument in favour of licensing as a means of foreign market entry?

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A) The firm does not have to have capital to open markets overseas B) A firm wants to participate in a foreign market, but is prohibited from doing so by barriers to investment C) The firm possesses some intangible property that might have business applications and does not want to develop that technology or those applications itself D) The firm does not have to bear the development costs and risks associated with opening a foreign market E) The firm wants to maintain tight control over the marketing

34)

All of the following are disadvantages of licensing except:

A) high costs and risks B) lack of control over technology C) inability to realize location and experience curve economies D) inability to engage in global strategic coordination E) all of these answers are correct

35) Under a(n) agreement, a firm might license some valuable intangible property to a foreign partner, but in addition to a royalty payment, the firm might also request that the foreign partner license some of its valuable know-how to the firm.

A) inter-licensing B) reciprocal-licensing C) cross-licensing D) parity-licensing E) protected-licensing

36) What type of agreements enable firms to hold each other hostage, which reduces the probability that they will behave opportunistically toward each other?

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A) cross-licensing B) franchise C) joint venture D) exporting E) mergers

37) is basically a specialized form of licensing in which the franchiser not only sells intangible property to the franchisee, but also insists that the franchisee agree to abide by strict rules as to how it does business.

A) Franchising B) Chartering C) Exporting D) Leasing E) Cross-licensing

38) Other than licensing, the form of foreign market entry that results in a firm in the host country paying a royalty to the firm that has the rights to a product or service is called .

A) joint venture B) exporting C) franchising D) wholly owned subsidiary E) merger

39)

Distinct advantages of

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are low development costs and risks.

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A) wholly owned subsidiaries and exporting B) exporting and turnkey projects C) joint ventures and wholly owned subsidiaries D) franchising and licensing E) mergers and acquisitions

40) Lack of control over quality and the inability to engage in global strategic coordination are distinct disadvantages of .

A) franchising B) exporting C) wholly owned subsidiaries D) turnkey projects E) joint ventures

41) Whereas primarily pursue franchising.

firms pursue licensing, primarily

firms

A) manufacturing; service B) agricultural; manufacturing C) service; mining D) mining; service E) banking; manufacturing

42) The foundation of franchising arrangements is that the firm's message to consumers about the quality of the firm's product.

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conveys a

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A) market B) brand name C) employees D) competitors E) products

43) A entails establishment of a firm that is jointly owned by two or more otherwise independent firms.

A) licensing agreement B) wholly owned subsidiary C) franchise D) joint venture E) merger

44) If Pepsi and a Turkish firm established a jointly owned entity for the purpose of bottling soft drinks in Turkey, that would be an example of a:

A) turnkey project B) wholly owned subsidiary C) joint venture D) franchise E) merger

45) If two companies established a jointly owned entity for the purpose of building computers to export to Asia, that would be an example of a form of foreign market entry.

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A) wholly owned subsidiary B) joint venture C) turnkey project D) franchise E) merger

46) has the following advantages: firms benefit from a local partner's knowledge of the host country's competitive conditions, a firm shares development costs with a local partner, and in many countries political considerations necessitate this form of entry.

A) Wholly owned subsidiary B) Franchising C) Exporting D) Joint venture E) Acquisition

47)

The most typical joint venture is:

A) 80/20, in which there are two partners and one partner holds a substantial majority share.

B) 50/50, in which there are two partners and each partner holds an equal share.

C) 25/25/25/25, in which there are four partners and each partner hold an equal share.

D) 51/49, in which there are two partners and one partner holds a slight majority share.

E) 60/40, in which there are two partners and one holds a majority share

48)

Which of the following is a disadvantage of joint ventures?

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A) It gives a firm the tight control over subsidiaries that it might not need to realize experience curve or location economies.

B) A firm that enters a joint venture risks giving control of its technology to its competitors.

C) The shared ownership arrangement can lead to conflicts and battles for control between the investing firms if their goals and objectives change or if they take different views as to what the strategy should be.

D) When the development costs and/or risks of opening foreign markets are low, a firm might gain by sharing these costs and/or risks with a foreign partner.

E) A firm does not gain any local expertise

49)

In a

, the firm owns 100 percent of the stock.

A) joint venture B) turnkey operation C) wholly owned subsidiary D) strategic alliance E) acquisition

50) is the preferred mode of foreign market entry for a high-tech firms that wants to (1) minimize the risk of losing control over its technological competence; and (2) maintain tight control over its operations.

A) Licensing B) Franchising C) Wholly owned subsidiary D) Turnkey operation E) Acquisition

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51) Suppose Boeing decided to build an assembly plant in Iceland and, in an effort to maintain maximum control, decided to operate the plant completely on its own. This is an approach to foreign market entry referred to as:

A) joint venture B) turnkey operation C) exporting D) wholly owned subsidiary E) greenfield venture

52) Protection of technology, the ability to engage in global strategic coordination and the ability to realize location and experience economies are distinct advantages of .

A) franchising B) wholly owned subsidiary C) exporting D) licensing E) acquisitions

53)

Establishing a wholly owned subsidiary in a foreign country can be done:

A) through a turnkey operation or through a licensing agreement B) through a joint venture of through acquiring an established firm to promote its products C) through setting up a new operation in a foreign country or through acquiring an established firm to promote its products D) through licensing agreements or through setting up a new operation in the foreign country E) through master franchising agreements

54)

What is the most costly form of foreign market entry?

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A) exporting B) licensing C) franchising D) wholly owned subsidiary E) joint venture

55) If a firm's competitive advantage is based on control over proprietary technological know- how, which of the following foreign entry modes should be avoided?

A) exporting and joint ventures B) turnkey projects and franchising C) wholly owned subsidiaries and franchising D) joint ventures and licensing E) acquisitions

56) The most advantageous entry mode is , if a high-tech firm sets up operations in a foreign country to profit from a core competency in technological know-how.

A) exporting B) turnkey operation C) franchising D) licensing E) wholly owned subsidiary

57) Many service firms favour a combination of franchising and franchises within a particular country or regions.

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to control the

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A) strategic alliances B) subsidiaries C) turnkey project partners D) licensing agreements E) joint ventures

58) The greater the pressures for cost reductions are, the most likely a firm will want to pursue some combination of:

A) licensing and joint venture.

B) exporting and wholly owned subsidiaries.

C) franchising and exporting.

D) joint ventures and wholly owned subsidiaries.

E) exporting and licensing

59) agents.

is preferred to joint venture arrangements and to using foreign market

A) Franchising B) Exporting C) Wholly owned subsidiary D) Turnkey project E) Merger

60) Daimler-Benz used market.

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to establish a bigger presence in the North American

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A) licensing B) franchising C) a merger D) turnkey projects E) an acquisition

61) Why are wholly owned subsidiaries preferred by firms pursuing global or transnational strategies?

A) They are more challenging B) They are less costly than other modes C) They allow the use of profits generated in one market and improve the competitive position in another D) They allow for easier management and transitions E) they increase the value of the firm more

62)

An advantage of acquisitions is

.

A) low cost B) more risk than green field ventures C) the ability to pre-empt competitors D) faster to implement than exporting E) faster to implement than importing

63) The Mercer Study concluded that up eroded or substantially shareholder value.

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A) 90 B) 70 C) 50 D) 30 E) 25

64) Ravenscraft and Scherer concluded in their study that many good companies were acquired between January 1990 and July 1995, and on average, their profits and market shares following the acquisition.

A) declined B) skyrocketed C) doubled D) remained the same E) followed the market value

65)

Which of the following is not a reason why acquisitions fail?

A) The cultures of the acquiring and acquired firms clash B) Attempts to realize synergies by integrating the operations of the acquiring firm and host-country government often run into roadblocks and take longer than forecasted C) Inadequate preacquisition screening D) Overpayment for assets of the acquired firm E) Underpayment for assets of the acquired firm

66) XYZ, Inc, a Canadian company, has chosen to establish a wholly owned subsidiary in Mexico. It has the choice of acquiring an established company in Mexico or

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A) create a joint venture.

B) buy a franchise.

C) license the manufacturing techniques to a Mexican corporation.

D) build a greenfield venture.

E) a merger.

67) The big advantage of establishing a(n) in a foreign country is that it gives the firm a much greater ability to build the kind of subsidiary company that it wants.

A) franchise B) joint venture C) turnkey project D) greenfield venture E) takeover strategy

68)

Which of the following statements is true?

A) Greenfield ventures are risky.

B) Greenfield venture are more risky than acquisitions.

C) There is a possibility of a greenfield venture being pre-empted by more aggressive global competitors.

D) Greenfield ventures are slow to establish.

E) Greenfield ventures are more profitable.

69)

Which of the following is not an advantage of acquisitions?

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A) They pre-empt the competition B) They are quick to execute C) They allow a firm to rapidly build its presence in a new market D) They are less risky than greenfield ventures E) They are the least expensive form of expansion

70)

The need for pre-emption is particularly great in markets that are what?

A) rapidly globalizing B) dynamic C) stable D) deregulated E) fast growing

71) If a firm is entering a market where there is already well-established incumbent enterprises, and where global competitors are also interested in establishing a presence, it may pay the firm to enter via a(n):

A) acquisition B) government subsidy C) greenfield venture D) franchise E) joint venture

72) Suzi's Sleds, Inc. is considering entering Japan, where there are no other incumbent competitors to acquire. Suzi's would do best in Japan with a(n):

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A) franchise B) turnkey project C) joint venture D) greenfield venture E) acquisition

73) of

Many Canadian companies are leery of forming equity joint ventures with China because

A) changing regulations.

B) issues around currency convertibility.

C) lack of skilled labour.

D) poor quality raw materials.

E) all of these answers are correct.

74) You manage a small Canadian company that makes sportswear shirts with a special fabric that wicks away perspiration, and yet lasts through repeated washings. It also produces a related line of home fitness equipment (barbells, small equipment, and large all-in-one home gyms retailing for several thousand dollars). Your company wants to "go global" but has little extra money to do so. About five years ago your company tried local marketing agents, but was unimpressed with the results, as the agents seemed to spend more time marketing the complete product lines from other firms, that they had represented for decades. You don't want to go down this route again. Your company's founder wants to enter a market in Central America, in the country he is from. Unfortunately, this country has very high trade barriers against apparel made in Canada. Your company is very risk averse, yet wants to go global.

From the perspective of a domestic firm, what are the advantages of licensing the rights to the company's production process and trademark to a firm in a foreign country?

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75) You manage a small Canadian company that makes sportswear shirts with a special fabric that wicks away perspiration, and yet lasts through repeated washings. It also produces a related line of home fitness equipment (barbells, small equipment, and large all-in-one home gyms retailing for several thousand dollars). Your company wants to "go global" but has little extra money to do so. About five years ago your company tried local marketing agents, but was unimpressed with the results, as the agents seemed to spend more time marketing the complete product lines from other firms, that they had represented for decades. You don't want to go down this route again. Your company's founder wants to enter a market in Central America, in the country he is from. Unfortunately, this country has very high trade barriers against apparel made in Canada. Your company is very risk averse, yet wants to go global.

What are the disadvantages of licensing the rights to the company's production process and trademark to a firm in a foreign country?

76) You manage a small Canadian company that makes sportswear shirts with a special fabric that wicks away perspiration, and yet lasts through repeated washings. It also produces a related line of home fitness equipment (barbells, small equipment, and large all-in-one home gyms retailing for several thousand dollars). Your company wants to "go global" but has little extra money to do so. About five years ago your company tried local marketing agents, but was unimpressed with the results, as the agents seemed to spend more time marketing the complete product lines from other firms, that they had represented for decades. You don't want to go down this route again. Your company's founder wants to enter a market in Central America, in the country he is from. Unfortunately, this country has very high trade barriers against apparel made in Canada. Your company is very risk averse, yet wants to go global.

What are some of the ways that a firm can reduce the risk of losing its proprietary know-how to foreign companies through licensing agreements?

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77) You manage a small Canadian company that makes sportswear shirts with a special fabric that wicks away perspiration, and yet lasts through repeated washings. It also produces a related line of home fitness equipment (barbells, small equipment, and large all-in-one home gyms retailing for several thousand dollars). Your company wants to "go global" but has little extra money to do so. About five years ago your company tried local marketing agents, but was unimpressed with the results, as the agents seemed to spend more time marketing the complete product lines from other firms, that they had represented for decades. You don't want to go down this route again. Your company's founder wants to enter a market in Central America, in the country he is from. Unfortunately, this country has very high trade barriers against apparel made in Canada. Your company is very risk averse, yet wants to go global.

Given what you know about the company, would you choose licensing over exporting?

78) What is meant by the term, "first-mover advantage?" Describe several first-mover advantages.

79)

What are pioneering costs? When do these costs arise?

80) What are the six different ways for a firm to enter a foreign market? Provide a brief description of each of these foreign market entry strategies.

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81) You have been recently hired by the Canadian manufacturer of a branded line of fashion accessories. They are designed and manufactured in Canada and sold in the US and parts of the EU. This firm is known for being consistently ahead of the curve in the fashion market that appeals to women between the ages of 21 to 29. They have recently been approached by an Indonesian manufacturer and distributor of fashion accessories. Indonesia is not a priority for the company and they are not prepared to invest the resources to establish a marketing office in Indonesia. The Indonesian company has suggested licensing their line for manufacturing and sale in Indonesia. As a consultant you have been asked to evaluate this proposal and suggest steps the company could take to minimize risks associated with licensing.

82) Harvey's, the Canadian hamburger chain, is looking to expand internationally. They feel that China is a huge untapped market with lots of potential for their products. McDonalds and KFC have a large presence in China already. What would be the best approach for Harvey's to take if they were to enter China. a. Describe in detail what would be your recommendation for how they should enter the Chinese market. b. Explain the reasons why you chose this entry strategy and the advantages and disadvantages compared to other possible methods a business might enter a country.

83) What is meant by the term "wholly owned subsidiary?" Under what circumstances is the establishment of a wholly owned subsidiary an appropriate foreign entry strategy?

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84) Thunder Rock is a small microbrewery on the outskirts of Toronto. Sales have grown rapidly in the last two years mainly through word of mouth. Thunder Rock has a small brewery that is producing at full capacity at the moment. Thunder Rock has been written up in many business publications as an example of a well-run small business. As a result of the publicity they have received a lot of attention from venture capitalists and companies that want to buy them out. Thunder Rock wants to grow their business but is unsure which direction they want to take. They could expand in the Canadian market, but it is saturated with many microbreweries already. China is a huge untapped market that does not have a lot of foreign beers yet. There are a couple of large Chinese breweries like Tsingtao, that dominate the market but there are many foreigners now living in China that have a different taste for beer than Tsingtao. a. Describe in detail what would be your recommendation for how they should enter the Chinese market. b.

Explain the reasons why you chose this entry strategy and the advantages and disadvantages compared to other possible methods a business might enter a country.

85) Cycle Inc., is small motorcycle company that builds small sleek looking motorcycles that are geared to urban life. These motorcycles are much smaller than traditional motorcycles, they only fit one person, there is no room for a passenger like on traditional motorcycles. They are ideal for navigating traffic and small streets. The owners of Cycle Inc., think that their motorcycles would be perfect for the crowded streets of Chinese cities. a. Describe in detail what would be your recommendation for how they should enter the Chinese market. b. Explain the reasons why you chose this entry strategy and the advantages and disadvantages compared to other possible methods a business might enter a country.

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86) As more people in China acquire wealth they are choosing to have cosmetic surgery. One of the most popular is to have laser eye surgery to correct their vision. Lasik 20/20 is a Canadian company that has been doing very well in Canada with high-profile athletes and celebrities having their vision corrected with Lasik 20/20. They are looking to enter the Chinese market but do not know the best way to go about it. a. Describe in detail what would be your recommendation for how they should enter the Chinese market. b. Explain the reasons why you chose this entry strategy and the advantages and disadvantages compared to other possible methods a business might enter a country.

87)

In what situation would you choose exporting over wholly owned subsidiary?

88) The best way to enter a foreign market is the same for all businesses that have headquarters in Canada. ⊚ ⊚

true false

89) The choice of what foreign markets to enter should be driven by an assessment of relative long-run growth and profit potential. ⊚ ⊚

90)

true false

A basic decision for firms considering foreign expansion is what scale to enter at.

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⊚ ⊚

true false

91) The most important consideration for a firm expanding into a foreign market is the country's long-run revenue potential ⊚ ⊚

true false

92) Pre-emptive advantages are the advantages frequently associated with entering a market early. ⊚ ⊚

93)

true false

Pioneering costs are costs that an early entrant has to bear that a later entrant can avoid. ⊚ ⊚

true false

94) A decision that is short-term in nature and is fairly easy to reverse is referred to as a strategic commitment. ⊚ ⊚

95)

true false

Strategic commitments tend to change the competitive playing field. ⊚ ⊚

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true false

468

96) The early large-scale entrant into a major developing nation may be able to capture significant first-mover advantages. ⊚ ⊚

97)

true false

There are five key modes of entry for a firm to enter a foreign market. ⊚ ⊚

true false

98) One advantage to exporting is that it avoids the costs of establishing manufacturing operations in the host country. ⊚ ⊚

true false

99) A contractor agrees to handle every detail of the project for a foreign client, including the training of operating personnel in a turnkey project. ⊚ ⊚

true false

100) Licensing gives a firm tight control over the manufacturing, marketing, and strategy that is required for realizing experience curve and location economies. ⊚ ⊚

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true false

469

101) Franchising is employed primarily by service firms, whereas licensing is pursued primarily by manufacturing firms. ⊚ ⊚

102)

A primary advantage of franchising is low development costs and risks. ⊚ ⊚

103)

true false

true false

Quality control is one of the most significant disadvantages of franchising. ⊚ ⊚

true false

104) A joint venture entails establishment of a firm that is jointly owned by two or more otherwise independent companies. ⊚ ⊚

105)

true false

The sharing of development costs and risks is a primary advantage of joint ventures. ⊚ ⊚

true false

106) Research suggests that joint ventures with local partners face a high risk of being subject to nationalization or other forms of government interference. ⊚ ⊚

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true false

470

107) One of the primary advantages of a wholly owned subsidiary is that it gives the firm tight control over operations in different countries that are necessary for engaging in global strategic coordination. ⊚ ⊚

true false

108) Generally, the most inexpensive method of serving a foreign market is establishing a wholly owned subsidiary. ⊚ ⊚

109)

true false

An advantage of licensing and franchising are the low development costs and risks. ⊚ ⊚

true false

110) If a firm's competitive advantage is based on control over proprietary technological know-how, licensing and joint venture arrangements are preferred methods of foreign market entry. ⊚ ⊚

true false

111) By licensing its technology to competitors, the firm may deter them from developing their own, possibly superior technology. ⊚ ⊚

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true false

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112) Management know-how is what most industrial firms base their competitive advantage upon. ⊚ ⊚

true false

113) The greater the pressures for cost reductions are, the most likely a firm will want to pursue some combination of licensing and joint venture. ⊚ ⊚

true false

114) Wholly owned subsidiaries are preferred for joint venture arrangements and to using foreign market agents. ⊚ ⊚

115)

Firms pursuing global or transnational strategies tend to prefer establishing joint ventures. ⊚ ⊚

116)

true false

Acquisitions are quick to execute. ⊚ ⊚

117)

true false

true false

Acquisitions often produce disappointing results, despite the argument for making them.

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⊚ ⊚

118)

true false

Overpayment for assets of an acquired firm is one reason acquisitions fail. ⊚ ⊚

true false

119) The managerial hypothesis suggests that top managers typically overestimate their ability to create value from an acquisition, primarily because rising to the top of a corporation has given them an exaggerated sense of the own capabilities. ⊚ ⊚

120)

Greenfield ventures are slower to establish than acquisition, but they are less risky. ⊚ ⊚

121)

true false

true false

The need for pre-emption is particularly great in markets that are rapidly globalizing ⊚ ⊚

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473

Answer Key Test name: chapter 12 1) D 2) A 3) E 4) A 5) B 6) A 7) A 8) A 9) D 10) A 11) E 12) D 13) A 14) C 15) B 16) E 17) E 18) B 19) A 20) D 21) E 22) A 23) C 24) D 25) C 26) A Version 1

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27) A 28) A 29) B 30) C 31) C 32) C 33) E 34) A 35) C 36) A 37) A 38) C 39) D 40) A 41) A 42) B 43) D 44) C 45) B 46) D 47) B 48) C 49) C 50) C 51) D 52) B 53) C 54) D 55) D 56) E Version 1

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57) B 58) B 59) C 60) E 61) C 62) C 63) C 64) A 65) E 66) D 67) D 68) B 69) E 70) A 71) A 72) D 73) E 88) FALSE 89) TRUE 90) TRUE 91) TRUE 92) FALSE 93) TRUE 94) FALSE 95) TRUE 96) TRUE 97) FALSE 98) TRUE 99) TRUE 100) FALSE Version 1

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101) TRUE 102) TRUE 103) TRUE 104) TRUE 105) TRUE 106) FALSE 107) TRUE 108) FALSE 109) TRUE 110) FALSE 111) TRUE 112) FALSE 113) FALSE 114) TRUE 115) FALSE 116) TRUE 117) TRUE 118) TRUE 119) FALSE 120) FALSE 121) TRUE Chapter 13 Student name: 1)

According to the opening case, exporting services are what?

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A) a way to lower costs B) a political decision C) only available to large firms D) an expensive way to enter foreign markets E) an increasing trend

2)

According to the text, why is exporting becoming easier?

A) declining trade barriers under GATT B) declining trade barriers under the WTO C) regional economic agreements such as the EU D) regional economic agreements such as NAFTA E) all of these answers are correct

3) Exporting remains a challenge for firms, especially for process intimidating.

firms that can find the

A) Canadian B) U.S. C) small D) large E) multinational

4)

What is the attraction to firms of exporting?

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A) larger revenue B) larger profits C) the ability to gain cultural awareness D) all of these answers are correct E) both larger revenue and larger profits

5) Large firms generally tend to be about seeking opportunities for profitable exporting, whereas medium-sized and small firms are .

A) passive; aggressive B) reactive; proactive C) discouraged; encouraged D) proactive; reactive E) aggressive; discouraged

6) Toddler Toyshas 45 employees and about $10 million in sales and would be considered to be a small or medium sized firm. According to studies, Toddler Toys would be seeking opportunities for profitable exporting.

A) proactive about B) prohibited from C) reactive about D) government-driven for E) discouraged from

7)

One reason more firms are not proactive about seeking export opportunities is that:

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A) they are very familiar with foreign market opportunities B) they are intimidated by complexities and mechanics of exporting C) there are too many opportunities available domestically D) they have concluded foreign markets are not profitable E) they do not have enough time to serve both the domestic and export markets

8)

Exporters are typically faced with what problems?

A) lots of paperwork B) complex formalities C) many potential delays D) potential errors E) all of these answers are correct

9) According to the United Nations report on trade and development, document and paperwork preparation often amounts to what percentage of the final value of the goods exported?

A) Approximately 10 percent B) Over 33 percent C) Less than 2 percent D) Between 40 and 50 percent E) Between 22 and 23 percent

10)

Common pitfalls of exporting include all of these except:

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A) poor understanding of competitive conditions B) problems securing financing C) poor market analysis D) intimidating the foreign customers E) failure to customize the product

11) ABC International's market research identified that Canadian consumers prefer relatively less sugar in their soft drinks whereas Asian consumers prefer more. ABC exported their best selling soft drink in Canada, Tasty, without modification to the Asian market. ABC committed which of the common mistake of exporting?

A) A failure to customize the product B) A failure to undertake the research to understand their foreign market C) A poorly executed promotional campaign D) A poor understanding of competitive conditions E) A poor choice of retailers

12)

Great trading houses in Japan are called:

A) kaizen B) sogo shosha C) MITI D) guanxi E) keiretsu

13)

Unlike their German and Japanese competitors, Canadian firms are still somewhat when they seek export opportunities.

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A) information disadvantaged B) money strapped C) regulation-bound D) much better prepared E) overly cautious

14) What federal agency supports the development of trade by providing services to exporters, developing policy, and attracting investment to Canada?

A) The UN B) Global Affairs Canada C) CITP D) FITT E) EMC

15)

The way to overcome ignorance about export opportunities is

.

A) to start importing B) to DFAIT C) to collect information D) to use barter transactions E) to use countertrade

16) For Canadian firms, the most comprehensive sources of export opportunities information is/are the:

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A) trade commissioners B) United Nations C) Team Canada D) foreign embassies E) Global Affairs Canada

17)

ITCs refer to what?

A) International Trade Committees B) International Transit Committees C) International Trade Centres D) Inter-provincial Trade Centres E) Inter-governmental Trade Committees

18)

International Trade Centres Are located where?

A) the United Nations B) In developed nations C) In developing nations D) In the United States E) Across Canada

19) The set of international trading rules that set out the rights and obligations of buyers and sellers in international trade is known as what?

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A) DFAIT B) FITT C) Incoterms D) The Paris declaration E) EMCs

20) are export specialist who act as the export marketing department or international department for their client firms.

A) Trade Commissioners B) The foreign country embassies C) The WTO and the World Bank D) EMCs E) Team Canada members

21)

A good EMC will have all of these except:

A) a network of contacts in potential markets.

B) a good knowledge of different business mores.

C) multilingual employees.

D) the financing available for client firms.

E) an understanding of the ins and outs of the exporting process.

22)

3M has built its export success on all of these principles except:

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A) adding additional product lines once export operation is successful.

B) cultivating personal relationships with customers.

C) hiring local to promote the firm's products.

D) entering on a small scale to reduce risks.

E) using a first mover strategy.

23) A firm can increase the probability of exporting successfully by taking which of these steps?

A) avoid hiring EMCs to contain costs B) hire home country personnel to build commitment C) enter on a small scale D) wait for the export opportunities to come to you E) make extensive investments in building regional contacts

24) Global Trading, Inc. is considering export operations for the first time. It can increase the probability of success by taking all of these steps except:

A) be proactive about seeking export opportunities.

B) hire an EMC. C) focus on one market.

D) hire the home country personnel to build commitment.

E) enter on a small scale.

25) Mechanisms for financing exports and imports have evolved over the centuries in response to a problem that can be particularly acute in international trade: .

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A) the letter of credit B) the lack of trust C) government regulations D) undeveloped international political system E) currency exchange rate differences

26) Which of the following financing and venture capital services does the BDC not provide?

A) start-up financing B) interest-free loans C) working capital D) new equipment financing E) financing for commercial real estate

27)

When was the BDC conceived?

A) at the end of World War II B) in the 1950s C) in the 1960s D) in the 1970s E) in the 1980s

28)

Which of these stands at the centre of international commercial transactions?

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A) bill of lading B) time draft C) way bill D) sight draft E) letter of credit

29) What is the document, issued by a bank, that indicates that the bank will make payments under specific circumstances known as?

A) bill of lading B) time draft C) way bill D) sight draft E) letter of credit

30) Access International, a British based greeting card company, is interested in importing paper from Canada. Which of these should Access arrange first for the Canadian company to ship the merchandise?

A) letter of credit B) bill of Lading C) time draft D) sight draft E) way bill

31)

The letter of credit is issued by a bank at the request of a(n):

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A) exporter B) government C) importer D) shipping company E) exporter's bank

32) Issued by a bank at the request of an importer, the states that the bank will pay a specified sum of money to the beneficiary on presentation of particular, specified documents.

A) bill of lading B) letter of credit C) time draft D) sight draft E) draft

33)

For the service of providing letter of credit, the bank's service charge ranges between of the value of L/C.

A) 5 to 7 percent B) 10 to 15 percent C) 3 to 4 percent D) 0.5 to 2 percent E) 1 to 3 percent

34) Which of the following correctly states the role of banks in import/export transactions involving a letter of credit (L/C)?

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A) the importer's bank is the advising and/or confirming bank; the exporter's bank is the issuing bank B) the exporter's bank is the advising and/or confirming bank; the importer's bank is the issuing bank C) the exporter's bank is the advising, confirming, and issuing bank D) the importer's bank is the advising, confirming, and issuing bank E) the exporter's bank is the drawee; the importer's bank is the payee

35)

A draft is sometimes referred to as a:

A) bill of exchange B) letter of credit C) bill of lading D) counter purchase E) payment order

36) A is simply an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.

A) bill of lading B) draft C) letter of credit D) barter E) bank order

37) In an international transaction between an Asian exporter and a German importer, the German company will request a whereas the Asian company will issue a .

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A) draft; letter of credit B) bill of lading; letter of credit C) letter of credit; draft D) bill of exchange; bill of lading E) bill of lading; banker's order

38)

The person or business initiating the draft is known as the

.

A) drawee B) importer C) importer's agent D) maker E) banker

39)

Which of these is payable on presentation to the drawee?

A) bill of lading B) sight draft C) L/C D) time draft E) banker's draft

40)

Which of these allows for a delay in payment?

A) sight draft B) time draft C) bill of lading D) barter E) post-dated draft

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41)

When a time draft is drawn on and accepted by a business firm, it is called a(n):

A) trade acceptance B) in-transit C) banker's acceptance D) bill of lading E) commercial acceptance

42)

Time drafts:

A) have no value given the deferred nature of document B) are generally not preferable in international transaction C) are negotiable instruments D) are also called bill of ladings E) are replaced by sight drafts after all conditions are met

43)

A bill of lading is a:

A) receipt B) contract C) document of title D) transportation agreement E) all of these answers are correct

44) As a receipt, the indicates that the carrier has received the merchandise described on the face of the document.

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A) letter of credit B) time draft C) sight draft D) bill of lading E) trade acceptance

45) As a , a bill of lading specifies that the carrier is obligated to provide a transportation service in return for a certain charge.

A) contract B) receipt C) document of title D) letter of credit E) cargo document

46) A typical international trade transaction involves being .

steps, with the first step

A) 12; an importer placing an order with an exporter asking if the importer would be willing to ship under a letter of credit B) 12; an importer placing an order with an exporter asking if the exporter would be willing to ship under a letter of credit C) 14; an exporter placing an order with an importer asking if the exporter would be willing to ship under a letter of credit D) 14; an exporter placing an order with an importer asking if the importer would be willing to ship under a letter of credit E) 14; an importer placing an order with an exporter asking if the exporter would be willing to ship under a letter of credit

47)

The typical export-import transaction has how many steps?

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A) 4 B) 6 C) 12 D) 14 E) 16

48)

There are how many forms of government-backed assistance for U.S. exporters

A) 2 B) 4 C) 3 D) 7 E) 6

49)

The U.S. Export-Import Bank was established in

.

A) 1934 B) 1945 C) 1918 D) 1965 E) 1984

50)

Export credit insurance is provided in the U.S. by:

A) The Foreign Credit Insurance Association B) The Export-Import Bank C) The WTO D) The IMF E) State-level companies

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51) A money.

's principle is to trade goods and services when they cannot be traded for

A) letter of credit B) draft C) bill of exchange D) countertrade E) switch trading

52) When a firm agrees to purchase a certain amount of materials back from a country to which a sale is made, it is called:

A) barter B) counter-purchase C) offset D) switch trading E) buybacks

53) When a specialized third-party trading house is used in a countertrade arrangement, it is called:

A) counter-purchase B) offset C) managed barter D) buyback E) switch trading

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54) When a firm builds a plant in a country—or supplies technology, equipment, training, or other services to the country—and agrees to take a certain percentage of the plant's output as partial payment for the contract, it is called:

A) counter-purchase B) offset C) switch trading D) buyback E) industrial barter

55)

The most restrictive countertrade arrangement is:

A) counter-purchase B) offset C) buybacks D) switch trading E) barter

56)

A reciprocal buying arrangement is known as what?

A) a commercial invoice B) counter purchase C) offset D) packing list E) switch trading

57)

Countertrade is most attractive to:

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A) medium-sized exporters B) large multinational enterprises C) trading houses D) commodities brokers E) crown corporations

58)

What is the main attraction of countertrade?

A) it is cheap B) it is easy to structure C) it gives a firm a way to finance and export deal when there are no other means D) it is the most popular way of doing an export deal E) none of these answers is correct

59)

Which of the following is not a drawback of countertrade?

A) firms would normally prefer cash B) firms may be stuck with unusable goods C) firms may be stuck with poor-quality goods D) firms may be able to use buybacks to make a quick profit E) firms may not be able to dispose of goods at a profit

60)

Who are considered to be the masters of countertrade?

A) the sogo shosha B) small firms C) DFAIT D) the Canadian Commercial Corporation E) the World Bank

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61) You want to understand the mechanisms for financing exports and imports as they relate to your business, which has never before exported or imported any goods (you have operated completely within your own province). Your company is small, at fewer than 25 employees, but you hope that it will grow substantially in the future.

Describe the most important mechanism, the letter of credit.

62) You want to understand the mechanisms for financing exports and imports as they relate to your business, which has never before exported or imported any goods (you have operated completely within your own province). Your company is small, at fewer than 25 employees, but you hope that it will grow substantially in the future.

Describe the financing mechanism known as the draft (or bill of exchange).

63) You want to understand the mechanisms for financing exports and imports as they relate to your business, which has never before exported or imported any goods (you have operated completely within your own province). Your company is small, at fewer than 25 employees, but you hope that it will grow substantially in the future.

Describe the financing mechanism known as the bill of lading.

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64) You want to understand the mechanisms for financing exports and imports as they relate to your business, which has never before exported or imported any goods (you have operated completely within your own province). Your company is small, at fewer than 25 employees, but you hope that it will grow substantially in the future.

Do you believe that the complexity of export financing deters small firms such as yours from becoming involved in exporting? Is there a role for government? Explain with reference to the BDC.

65) Why do many neophyte exporters have problems when first trying to do business abroad?

What are the common pitfalls of neophyte exporters?

66) How can Canadian firms increase their awareness of export opportunities? What agencies can be used? What do they provide?

67) The probability of exporting successfully can be increased dramatically by taking some strategic steps. What are these steps?

68)

What is the BDC? What is its mission? How does it pursue its mission?

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69)

What is the difference between a sight draft and a time draft?

70)

What is countertrade? Give an example of when it can be used.

71) Describe the pros and cons of countertrade. Who is most likely to engage in countertrade?

72) The volume of export activity in the world economy is declining as exporting has become more difficult and regulated. ⊚ ⊚

true false

73) Unlike large firms, small and medium-sized firms tend to go out into the world to seek opportunities.

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⊚ ⊚

true false

74) Neophyte exporters tend to underestimate the time and expertise needed to cultivate business in foreign countries. ⊚ ⊚

true false

75) According to the UN, the time involved in preparing documentation and costs of common errors in paper work often amounts to 25 percent of the final value of goods exported. ⊚ ⊚

true false

76) Most exporters understand the amount of management resources that must be dedicated to exporting. ⊚ ⊚

77)

The way to overcome ignorance in exporting is to collect information. ⊚ ⊚

78)

true false

true false

A large vertically integrated Japanese trading house is known as a sogoshosha. ⊚ ⊚

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true false

500

79)

Germany is one of the world's most successful exporting nations. ⊚ ⊚

true false

80) Given the financial and other risks, today, governments at all levels in Canada are not willing to assist small firms in starting export operations. ⊚ ⊚

true false

81) The set of international trading rules that determine the rights and obligations of buyers and sellers are known as incoterms ⊚ ⊚

true false

82) For novice exporters, it is recommended that they hire an EMC to help identify opportunities and navigate through the web of paperwork and regulations. ⊚ ⊚

true false

83) The Business Development Bank of Canada focuses on Canadian exporting businesses and provides financial assistance mainly for export specific purposes as a way to facilitate the exchange of goods between Canada and other countries. ⊚ ⊚

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501

84) Financial devices can address the issue of a lack of trust among players in international trade. ⊚ ⊚

true false

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

true false

86) When it comes to bank's service charge for providing a letter of credit, the larger the transaction, the higher the percentage. ⊚ ⊚

87)

A letter of credit is issued by an importer ⊚ ⊚

88)

true false

A draft is the instrument normally used in international commerce to effect payment. ⊚ ⊚

89)

true false

true false

A sight draft allows for a delay in payment.

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⊚ ⊚

90)

true false

Time drafts are negotiable instruments. ⊚ ⊚

true false

91) The bill of lading can function as collateral against which funds may be advanced to the exporter by its local bank before final payments by the importer. ⊚ ⊚

92)

true false

A typical international trade transaction involves 12 steps. ⊚ ⊚

true false

93) There are 2 main forms of government-backed assistance for U.S. exporters to finance their export initiatives. ⊚ ⊚

94)

true false

The Export-Import Bank is a wholly owned U.S. government corporation. ⊚ ⊚

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503

95) Export credit insurance protects exporters who have to forego a letter of credit to remain competitive. ⊚ ⊚

96)

Countertrade is an alternative means of structuring an international sale. ⊚ ⊚

97)

true false

true false

There is more than one type of countertrade. ⊚ ⊚

true false

98) Switch trading involves the direct exchange of goods and/or services between two parties without a cash transaction. ⊚ ⊚

99)

After a switch trade, a firm can end up with counter purchase credits. ⊚ ⊚

100)

true false

true false

Barter is primarily used with trading partners who are not creditworthy or trustworthy.

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⊚ ⊚

true false

101) If a firm builds a plant in a country and agrees to take a certain percentage of the plant's output as partial payment for the contract, this is known as an offset. ⊚ ⊚

true false

102) From an exporter's perspective, an offset agreement is more attractive than a straight counter-purchase agreement because it gives the exporter greater flexibility to choose the goods that it wishes to purchase. ⊚ ⊚

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505

Answer Key Test name: chapter 13 1) E 2) E 3) C 4) E 5) D 6) C 7) B 8) E 9) A 10) D 11) B 12) B 13) A 14) B 15) C 16) E 17) C 18) E 19) C 20) D 21) D 22) B 23) C 24) D 25) B 26) B Version 1

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27) A 28) E 29) E 30) A 31) C 32) B 33) D 34) B 35) A 36) B 37) C 38) D 39) B 40) B 41) A 42) C 43) D 44) D 45) A 46) E 47) D 48) A 49) A 50) A 51) D 52) B 53) E 54) D 55) E 56) B Version 1

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57) B 58) C 59) D 60) A 72) FALSE 73) FALSE 74) TRUE 75) FALSE 76) FALSE 77) TRUE 78) TRUE 79) TRUE 80) FALSE 81) TRUE 82) TRUE 83) TRUE 84) TRUE 85) TRUE 86) FALSE 87) FALSE 88) TRUE 89) FALSE 90) TRUE 91) TRUE 92) FALSE 93) TRUE 94) TRUE 95) TRUE 96) TRUE 97) TRUE Version 1

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98) FALSE 99) TRUE 100) TRUE 101) FALSE 102) TRUE Chapter 14 Student name: 1) for.

The opening case shows the challenge created by fake news and alternative facts create

A) Ability to acquire partners B) Power of lowering prices C) Usefulness of buying licensing rights back D) countertrade effects E) global branding

2) A(n) marketing strategy that views the world's consumers as similar in their tastes and preferences is consistent with the mass production of a standardized output.

A) domestic B) multinational C) indigenous D) national E) global

3) A critical aspect of the function is identifying gaps in the market so that new products can be developed to fill those gaps.

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A) materials management B) finance C) operations D) marketing E) R&D

4) Only customized products.

can tell R&D whether to produce globally standardized or locally

A) finance B) materials management C) marketing D) operations E) segmentation analysis

5) Research has long maintained that a major factor of success for new products is the closeness of the relationship between:

A) finance and marketing B) marketing and R&D C) finance and materials management D) operations and R&D E) sales and R&D

6)

The

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is the set of choices the firm offers to its targeted market.

510

A) production mix B) marketing mix C) products and services mix D) materials mix E) promotional mix

7)

The four elements that constitute a firm's marketing mix include

A) product attributes, distribution strategy, communication strategy, and pricing strategy.

B) transportation strategy, warehousing strategy, availability of financing, and pricing strategy.

C) promotions strategy, pricing strategy, availability of financing, and distribution strategy.

D) product attributes, promotions strategy, communication strategy, and transportation strategy.

E) logistics mix, product and packaging mix, promotional mix, and sales and pricing mix.

8) commonalty.

is a powerful force that drives the world toward a converging

A) Technology B) Production C) Culture D) Distribution E) Globalization

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9) Levitt has argued that, due to the advent of modern communications and transport technology, consumer tastes and preferences are becoming , which is creating global markets for standardized consumer products.

A) individualistic B) localized C) cross-regional D) global E) uniform

10) In his Harvard Business Review article, Theodore Levitt argued that due to the advent of modern communications and transport technology, consumer tastes and preferences are becoming more global, which is creating global markets for standardized consumer products. In regard to these arguments, the current consensus among academics seems to be that Levitt:

A) was exactly right B) understated his case C) was way off D) overstated his case E) has become outdated since the introduction of the Internet

11) The continuing persistence of differences between nations acts as a major brake on any trend toward global consumer tastes and preferences.

A) technological and communication B) product standard C) cultural and economic D) production and distribution E) language and historical

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12) by:

When markets are divided up by sex, age, income, race, or education, they are segmented

A) geography B) economic factors C) psychological factors D) demography E) socioeconomic

13)

If Sara decided the best way to divide her market is by lifestyle choices, she is using segmentation.

A) demographic B) psychological C) social-cultural D) geographic E) behavioural

14)

Automobile companies tend to use

segmentation.

A) socioeconomic B) geographic C) personality D) educational E) demographic

15) refers to the process of identifying distinct groups of consumers whose purchasing behaviour differs from others in important ways.

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A) Target marketing B) Consumer differentiation C) Demographic profiling D) Customer analysis E) Market segmentation

16) When managers in an international business consider market segmentation in foreign countries, they need to be aware of two main issues. These are:

A) the differences between countries in the structure of marketing segments, and the existence of segments that transcend national borders B) the differences between countries in terms of tariff rates, and the differences between the countries in terms of exchange rates C) the differences between countries in terms of barriers to entry, and the differences between countries in terms of economic stability D) the differences between countries in terms of culture, and the differences between countries in terms of exchange rates E) the difference between countries in terms of product standards, and the difference between countries in terms of consumer preferences

17) Segments that transcend national borders exist in certain rare in markets.

markets, but are

A) consumer; industrial B) industrial; consumer C) service; industrial D) consumer; service E) youth; adult

18)

A product can be viewed as a bundle of what?

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A) attributes B) wants C) needs D) profits E) benefits

19) According to the textbook, the most important aspect of a country's cultural differences is the impact of

A) language.

B) tradition.

C) geographic location.

D) the availability of natural resources.

E) religion.

20)

Across the world, consumer tastes and preferences are becoming more:

A) ethnocentric B) parochial C) indigenous D) cosmopolitan E) egalitarian

21) may be a more important attribute in less developed nations for major purchases such as a car.

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A) Product reliability B) Extra features C) Style D) Customization E) Price

22)

Consumer needs vary between countries due to cultural differences and

A) geographic location.

B) level of technological development.

C) demography.

D) level of economic development.

E) religious differences.

23)

Mass production and marketing of a standardized product can be ruled out by differing product standards.

A) government-mandated B) consumer-mandated C) market and D) distribution of E) consumer driven

24) Even with the forces that are creating some convergence of consumer tastes among industrialized nations, Levitt's vision of global markets can be a long way off due to what?

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A) the segmentation of markets B) highly localized markets C) the continued development of markets D) the changing nature of consumer demands E) national differences in product and technological standards

25)

What can the differences in technical standards constrain?

A) The segmentation of markets B) The localization of markets C) The development of markets D) The globalization of standards E) The globalization of markets

26) A critical element of a firm's marketing mix is its means it chooses for delivering the product to the consumer.

strategy, which is the

A) materials management B) communications C) logistics D) distribution E) retail

27) In terms of their distribution strategies, countries differ along three main dimensions.

These are

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A) end-user identification, channel integration, and transportation strategy.

B) customer concentration, channel breadth, and warehousing strategy.

C) wholesale concentration, channel depth, and transportation strategy.

D) retail concentration, channel length, and channel exclusivity.

E) retail levels, channel organization, and channel quality.

28)

In a(n)

retail system, a few retailers supply most of the market.

A) fragmented B) dispersed C) focused D) concentrated E) selective

29) A retail system is one in which there are many retailers, no one of which has a major share of the market.

A) concentrated B) consolidated C) focused D) fragmented E) diverse

30)

Most of the differences in the retail concentrations of different countries are rooted in

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A) current events and trade status.

B) economic stature and religious beliefs.

C) history and tradition.

D) geographic location and language.

E) urban and rural divisions.

31) In terms of retail concentration, developed countries tend to have a higher degree of concentration than developing countries for all of the following reasons except:

A) increases in car ownership B) a tradition of established local neighbourhoods in which people walk to stores C) number of households with refrigerators D) number of two-income households E) number of households with freezers

32)

In the last decade the global retail industry has become more

.

A) fragmented because of diverse consumer tastes B) multi-level because of the growth of the Internet C) similar because of the influence of western cultural programming D) diverse because of moves towards cultural autonomy E) concentrated because of the growth of retailers like Wal-Mart

33) The number of intermediaries between the product (or manufacturer) and the consumer is referred to as

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A) channel length.

B) channel distance.

C) channel exclusivity.

D) channel reach.

E) channel levels.

34) If the producer sells directly to the consumer, the channel is producer sells through an import agent, a wholesaler, and a retailer, a exists.

. If the channel

A) short; intermediate B) long; very short C) intermediate; long D) short; long E) direct; multi-level

35) The degree to which a retail system is determinant of channel length.

is the most important

A) concentrated B) fragmented C) decentralized D) globalized E) developed

36) Which of the following countries is characterized by fragmented retail systems with long channels of distribution?

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A) Japan B) Germany C) United States D) France E) Britain

37)

A(n)

distribution channel is one that is difficult for outsiders to access.

A) long B) exclusive C) short D) inclusive E) selective

38) Derik, a grocery store owner, has been dealing with Cheryl's Cheesecake Distributors for 20 years. Michael wants to create a contract with Derik so Derik will carry his cheesecakes.

Michael will find this a difficult task because of the distribution channel Derik has with Cheryl's Cheesecakes.

A) fragmented B) concentrated C) short D) exclusive E) managed

39) A choice of reach potential consumers.

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A) logistics B) transportation C) communications D) operations E) distribution

40)

Direct selling, sales promotion, direct marketing, and advertising are all channels.

A) communications B) distribution C) product D) operations E) mass media

41)

The best way for a firm to overcome cultural barriers is to do what?

A) increase the advertising budget B) adjust the product mix C) build a communications strategy D) adjust prices E) develop cross-cultural literacy

42) communications occur whenever a firm uses a marketing message to sell its products in another country.

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A) Diversified B) International C) Multi-domestic D) Functional E) Cross-cultural

43) The effectiveness of a firm's international communication can be jeopardized by three potentially critical variables. These are

A) technological barriers, geographic barriers, and political barriers.

B) economic factors, political-legal barriers, and noise levels.

C) technological factors, source effects, and noise levels.

D) cultural barriers, source effects, and noise levels.

E) language barriers, noise levels, and religious beliefs.

44)

Country of origin effects are:

A) always negative B) the same as source effects C) a subset of source effects D) affected by predatory pricing E) affected by channel length

45) If a firm chooses to use direct selling, instead of advertising to communicate its message, it should develop a(n) sales force whenever possible.

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A) global B) international C) national D) local E) multicultural

46) occur when the receiver of the message (i.e. the potential customer) evaluates the message based on the status or image of the sender.

A) Synergistic effects B) Temporal effects C) Source effects D) Direct effects E) Noise effects

47) product evaluations.

refer to the extent to which the place of manufacturing influences

A) Home country effects B) Country of origin effects C) Social effects D) Host country effects E) Export country effects

48) In the context to barriers to international communication, number of other messages competing for a potential consumer's attention.

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refer(s) to the

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A) alternative signals B) source effects C) noise D) channels effects E) ad effects

49) In highly developed countries like Canada, noise from firms competing for the attention of target consumers is

A) extremely high.

B) extremely low.

C) moderate.

D) not a factor in communication.

E) reasonable.

50)

The main decision with regard to communications strategy is the choice between a(n)

A) external strategy and an internal strategy.

B) aggressive strategy and a conservative strategy.

C) noisy strategy and a quiet strategy.

D) push strategy and a pull strategy.

E) direct strategy or indirect strategy.

51) In regard to communication strategy, a strategy emphasizes personal selling rather than mass media advertising in the promotional mix.

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A) reverse B) push C) forward D) pull E) direct

52) Which of the following communications strategies relies primarily on mass media advertising rather than personal selling?

A) forward B) pull C) push D) reverse E) indirect

53) The three main factors that determine the relative attractiveness of push and pull strategies include:

A) advertising cost, product type relative to consumer sophistication, and channel exclusivity B) geographic dispersion of buyers, channel length, and channel exclusivity C) product type relative to consumer sophistication, channel length, and media availability D) channel exclusivity, advertising cost, and cultural diversity of buyers E) industrial or consumer products, concentrated or fragmented retail systems, noise levels

54)

A pull strategy is generally favoured by

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A) firms in durable goods industries that are trying to sell to a small segment of the markets.

B) firms in consumer goods industries that are typing to sell to a large segment of the market.

C) firms in commodities industries that are trying to sell to foreign governments.

D) firms in service industries that are typing to sell to a large segment of the market.

E) firms using E-commerce to sell to niche markets.

55)

A push strategy is favoured by firms that sell:

A) services B) commodities C) consumer products or other standardized products D) industrial products or other complex products E) through distributors

56)

In the context of communications strategy, push strategies tend to be emphasized:

A) for industrial products and/or complex new products, when distribution channels are short, and when few print or electronic media are available B) for commodities, when distribution channels are short, and when international markets are attractive for the product C) for consumer goods, when distribution channels are long, and when sufficient print and electronic media are available to carry the marketing message D) for services, when distribution channels are long, and when international markets are attractive for the product E) for consumer products, when distribution channels are exclusive and there is a high level of literacy

57)

In the context of communications strategy, pull strategies tend to be emphasized:

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A) for commodities, when distribution channels are short, and when international markets are available for the product.

B) for consumer goods, when distribution channels are long, and when sufficient print and electronic media are available to carry the marketing message.

C) for services, when distribution channels are long, and when international markets are available for the product.

D) for industrial products and/or complex new products, when distribution channels are short, and when few print or electronic media are available.

E) for industrial services, when distribution channels are direct and when there is a low degree of literacy.

58) Push strategies tend to be emphasized for industrial products and/or complex new products, when distribution channels are short, and when .

A) few print or electronic media are available B) international markets are available for the product C) sufficient print and electronic media are available D) distribution channels are difficult to access E) cultural differences and source effects diminish the effectiveness of advertising

59)

Pull strategies tend to be emphasized for

.

A) commodities B) consumer goods C) industrial goods D) services E) cultural goods

60) According to the text, one of the most successful standardized campaigns in history was the promotion of

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A) Joy dish detergent.

B) Marlboro cigarettes.

C) Levi Jeans.

D) Coca-Cola.

E) Toyota.

61)

Which of the following is not a justification for global advertising?

A) It has significant economic advantages B) Because creative talent is scarce, one large effort to develop a campaign will produce better results than 40 or 50 smaller efforts C) Many brands are global D) Cultural differences among nations are such that a message that works in one nation can fail in another E) None of these answers is correct

62)

There are two main arguments against global advertising. These are:

A) many brands are global; country differences in advertising regulations may block implementation of global messages B) because creative talent is scarce, one large effort to develop a campaign will produce better results than 40 or 50 smaller efforts; it has significant economic advantages C) cultural differences among nations are such that a message that works in one nation can fail in another; country differences in advertising regulations may block implementation of global messages D) many brands are global E) it has significant economic advantages

63)

Which of the following is not an aspect of international pricing strategy?

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A) competitive advertising B) price discrimination C) strategic pricing D) regulatory factors E) antidumping regulations

64) In an international context, exists whenever consumers in different countries are charged different prices for the same product.

A) price discrimination B) global pricing C) predatory pricing D) standardized pricing E) country specific pricing

65) If a consumer in Italy paid $45,000 for a BMW and a consumer in Great Britain paid $60,000 for the identical vehicle that would be an example of what?

A) standardized pricing B) price discrimination C) global pricing D) predatory pricing E) country specific pricing

66)

Two conditions are necessary for profitable price discrimination. These are

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A) the firm must sell a standardized product; and the firm must be able to keep its national markets separate.

B) the firm must be able to keep its national markets separate; and the existence of different price elasticities of demand in different countries must exist.

C) the firm must rely upon substantial economies of scale; and the firm cannot be a member of a major trade block.

D) the firm must sell highly differentiated products; and the existence of different prices elasticities of demand in different countries must exist.

E) there must be no tariff differences between the countries and there must be a fragmented retail system.

67) Demand is said to be change in demand, while it is said to be only a small change in demand.

when a small change in price produces a large when a large change in price produces

A) inelastic; elastic B) small; large C) large; small D) elastic; inelastic E) changeable; resistant

68) According to the textbook, the elasticity of demand for a product in a given country is determined at least in part by the following two important factors:

A) geographic location and economic stability B) currency rates and interest rates C) income level and competitive conditions D) tax rates and standard of living E) perception of what is a luxury and what is a necessity

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69)

Many competitors cause

elasticity of demand.

A) low B) neutral C) mid D) high E) controlled

70)

To maximize profits, the firm must produce at the output where:

A) D j = MR. B) MR = MC. C) D j = MC. D) D u = MR. E) D u = MC

71)

Which of the following is not an aspect of strategic pricing?

A) experience curve pricing B) predatory pricing C) skim pricing D) multipoint pricing E) none of these answers is correct

72) The use of price as a competitive weapon to drive weaker competitors out of a national market is called:

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A) pillage pricing B) predatory pricing C) forward pricing D) competitive pricing E) war pricing

73) The fact a firm's pricing strategy in one market may have an impact on its rivals' pricing strategy in another market refers to:

A) dumping B) predatory pricing C) experience pricing D) multipoint pricing E) transfer pricing

74) When Kleenex cuts its prices in Germany, it caused Puffs to lose profits there. In return, Puffs cut prices in Canada, causing Kleenex to lose profits. This is an example of what?

A) dumping B) multipoint pricing C) predatory pricing D) competitive pricing E) war pricing

75)

As a firm builds, it increases production volume over time, unit costs fall due to what?

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A) experience effects B) decrease in demand C) lower price of raw materials D) predatory pricing E) learning effects

76) In the context of strategic pricing, occurs whenever a firm sells a product for a price that is less than the cost of producing it.

A) insourcing B) dumping C) price reengineering D) outsourcing E) predatory pricing

77) A country is allowed to bring antidumping actions against an importer under Article 6 of GATT as long as two criteria are met. These are

A) sales are made at less than fair market value; and when material injury is done to a domestic industry.

B) the importer is not participant in the GATT Agreement; and when no advance notice of the dumping action was provided.

C) when material injury is done to a domestic industry; and the alleged dumping has taken place for more then six months.

D) sales are made at less than fair market value; and the importer is a participant in the GATT Agreement.

E) sales are made at less than fair market value; and when the two countries are members of a regional economic agreement.

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78) Carol wants to decide what she should customize and what she should standardize. What should she carefully examine to make this decision?

A) The features and benefits of her products B) The cost and benefits of each element in the marketing mix C) The supply and demand of the products D) The government regulations on advertising and economic conditions of the country E) The consumer preferences and the cultural differences

79)

Technological innovation has

product life cycles.

A) created difficulty in B) created less costly C) lengthened D) shortened E) multiple

80) Which of the following is a characteristic of countries where new-product development is strong?

A) competition is weak B) demand is strong C) consumers are having little to say D) little money is spent on basic and applied research and development E) markets are regulated

81) Countries where new-product development is strong have all of the following characteristics except what?

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A) competition is intense B) more money is spent on basic and applied research and development than in countries where new-product development is weak C) consumers are affluent D) demand is strong E) trade barriers are moderate

82) One study cited in the textbook of product development in 16 companies in the chemical, drug, petroleum, and electronics industries suggested that only about of R&D projects ultimately result in commercially successful products or processes.

A) 10 percent B) 20 percent C) 25 percent D) 30 percent E) 35 percent

83) Which of the following is not an objective of tight cross-functional integration between R&D, production, and marketing?

A) product development projects are driven by customer needs B) new products are designed for ease of manufacturer C) development costs are kept in check D) time to market in minimized E) none of these answers is correct

84) Close integration by R&D and is required to ensure that product development projects are driven by the needs of customers.

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A) marketing B) human resources management C) production D) materials management E) market research

85)

Members of a cross-functional team should have:

A) low standing within their function B) an ability to put functional and national advocacy first C) an ability to contribute functional expertise D) a willingness to give management responsibility for team results E) close physical proximity

86) Which of the following is not an attribute that is important for a product development team to function effectively and meet all its development milestones?

A) it should be led by a "heavyweight" project manager B) it should have competitors' plans and goals C) it should have preset processes for communication and conflict resolution that are developed by top management.

D) it should have at least one member from each key function included E) it should be physically co-located to create a sense of camaraderie

87) You are a senior manager at Gildan Canada, which manufactures t-shirts, active wear, and socks and underwear and distributes these products in North America, Asia-Pacific, and Latin America. You are in charge of continuing to grow the international component of your firm.

Ideally, is it better for a firm to sell the same product worldwide or would a firm rather customize its products for each individual market?

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88) You are a senior manager at Gildan Canada, which manufactures t-shirts, active wear, and socks and underwear and distributes these products in North America, Asia-Pacific, and Latin America. You are in charge of continuing to grow the international component of your firm.

Explain what is meant by distribution strategy. What are the main differences among countries' distribution systems?

89) You are a senior manager at Gildan Canada, which manufactures t-shirts, active wear, and socks and underwear and distributes these products in North America, Asia-Pacific, and Latin America. You are in charge of continuing to grow the international component of your firm.

Ultimately, how does a firm determine its distribution strategy in individual foreign markets?

90) Describe what is meant by the term "marketing mix." What factors cause a firm to vary its marketing mix across markets?

91) How do economic differences between countries affect the importance of different product attributes?

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92)

Describe the concept of channel length? How does a firm determine its channel length?

93) Is channel length a choice that a company can control or is it an external environmental condition that is outside the control of the company? What influences the ideal channel length for a consumer goods company that sells laundry detergent in a developing economy such as Kenya?

94) In the context of international communication, describe the concept of "noise." Is the noise level higher in developed or developing countries? Why?

95) In regard to communication strategy, what is the difference between a push versus a pull strategy? Provide an example of an appropriate application of a push strategy and an example of an appropriate application of a pull strategy.

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96) Discuss the concept of predatory pricing. Is predatory pricing ethical? What, if anything, should governments do to limit the influence predatory pricing by importers on domestic industries? Explain your answer.

97) Pricing in a foreign market is determined by many different environmental factors, including competition, internal company objectives, and legal restrictions. Your company has just developed a new production method, for window air conditioning units that are 35% cheaper than your closest competitors. The owners of your company want to recover the investment made in developing this new production process and they also want to increase their market share. The company has the opportunity to enter the Italian, French and Spanish markets. What pricing strategy would you use in these markets and why?

98)

The opening case discusses the challenge of global branding in the era of fake news. ⊚ ⊚

true false

99) A global marketing strategy, which views the world's consumers as similar in their tastes and preferences, is inconsistent with the mass production of a standardized output. ⊚ ⊚

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100) Academic research has long maintained that a major factor of success for new-product introductions is the closeness of the relationship between finance and R&D. ⊚ ⊚

true false

101) The four elements of a firm's marketing mix include product attributes, distribution strategy, communication strategy, and legal strategy. ⊚ ⊚

102)

true false

Marketing is the force that drives the world toward a converging commonalty. ⊚ ⊚

true false

103) The current consensus among academics, in regard to Theodore Levitt's arguments on the globalization of markets, is that Levitt overstates his case. ⊚ ⊚

true false

104) Research finds that different marketing segments usually have the same purchasing behaviour; therefore, firms keep the same marketing mix for all segments. ⊚ ⊚

true false

105) Segments that transcend national borders are more common in consumer markets than industrial markets.

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⊚ ⊚

true false

106) Business analytics can be defined as the knowledge, skills, and technology that allow for the exploration. ⊚ ⊚

107)

true false

Products sell well when their attributes match consumer needs ⊚ ⊚

true false

108) For historical and idiosyncratic reasons, a range of cultural differences exists between countries. ⊚ ⊚

109)

true false

Developed countries tend to have less retail concentration than developing countries. ⊚ ⊚

true false

110) A country that is characterized by a high percentage of car ownership, a high percentage of households with refrigerators and freezers, and a high percentage of two-income households, will most likely have a low level of retail concentration. ⊚ ⊚

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111) Differing government-mandated product standards can often result in companies ruling out mass production and marketing of a fully global and standardized product. ⊚ ⊚

true false

112) The most important determinant of channel length is the degree to which the retail system is fragmented. ⊚ ⊚

113)

true false

Countries with fragmented retail systems also tend to have short channels of distribution. ⊚ ⊚

true false

114) Since each intermediary in a channel adds its own markup to the products, there is generally a critical link between channel length and the firm's profit margin. ⊚ ⊚

true false

115) International communication occurs whenever a firm uses a marketing message to sell its product in another country. ⊚ ⊚

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116) The effectiveness of a firm's international communication can be jeopardized by cultural barriers, source effects, and noise levels. ⊚ ⊚

true false

117) A pull strategy emphasized personal selling rather than mass media advertising in the promotional mix. ⊚ ⊚

true false

118) A push strategy is generally favoured by firms in consumer goods industries that are trying to sell to a large segment of the market. ⊚ ⊚

true false

119) Pull strategies tend to be emphasized for industrial products and/or complex new products. ⊚ ⊚

120)

true false

Cultural diversity is one of the main arguments against standardized global advertising. ⊚ ⊚

true false

121) In an international context, predatory pricing exists whenever consumers in different countries are charged different prices for the same product.

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⊚ ⊚

true false

122) 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 perhaps the two most important. ⊚ ⊚

123)

true false

Predatory pricing, if successful, drives some of a company's competitors out of business. ⊚ ⊚

true false

124) Strategic pricing has three aspects: predatory pricing, multipoint pricing, and segment curve pricing. ⊚ ⊚

true false

125) Dumping occurs whenever a firm sells a product for a price that is less than the cost of producing it. ⊚ ⊚

true false

126) There are few opportunities for standardization along one or more elements of the marketing mix ⊚ ⊚

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127) Other things being equal, the rate of new-product development seems to be greater in countries where demand is strong, consumers are affluent, and competition is weak. ⊚ ⊚

true false

128) Because leading-edge research is now carried out in many locations, the argument for centralizing R&D activity in Canada is now much weaker. ⊚ ⊚

129)

true false

New-product development has a low failure rate. ⊚ ⊚

true false

130) A cross-functional team should be able to take a product development project from the initial concept development to market introduction. ⊚ ⊚

true false

131) To adequately commercialize new technologies, a firm must build close links between its R&D centres and its various country operations. ⊚ ⊚

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Answer Key Test name: chapter 14 1) E 2) E 3) D 4) C 5) B 6) B 7) A 8) A 9) D 10) D 11) C 12) D 13) C 14) A 15) E 16) A 17) B 18) A 19) B 20) D 21) A 22) D 23) A 24) E 25) E 26) D Version 1

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27) D 28) D 29) D 30) C 31) B 32) E 33) A 34) D 35) B 36) A 37) B 38) D 39) E 40) A 41) E 42) B 43) D 44) C 45) D 46) C 47) B 48) C 49) A 50) D 51) B 52) B 53) C 54) B 55) D 56) A Version 1

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57) B 58) A 59) B 60) B 61) D 62) C 63) A 64) A 65) B 66) B 67) D 68) C 69) D 70) B 71) C 72) B 73) D 74) B 75) A 76) B 77) A 78) B 79) D 80) B 81) E 82) B 83) E 84) A 85) C 86) C Version 1

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98) TRUE 99) FALSE 100) FALSE 101) FALSE 102) FALSE 103) TRUE 104) FALSE 105) FALSE 106) TRUE 107) TRUE 108) TRUE 109) FALSE 110) FALSE 111) TRUE 112) TRUE 113) FALSE 114) TRUE 115) TRUE 116) TRUE 117) FALSE 118) FALSE 119) FALSE 120) TRUE 121) FALSE 122) TRUE 123) TRUE 124) FALSE 125) TRUE 126) FALSE 127) FALSE Version 1

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128) TRUE 129) FALSE 130) TRUE 131) TRUE Chapter 15 Student name: 1)

In the opening case, the example of P&G demonstrates how:

A) how long-term relationships work with new international retailers B) the disadvantages of a tightly managed and coordinated global manufacturing and logistics system C) the use of Cad/Cam systems throughout an organization D) the change in global tracking systems E) the consumer packaged goods is one of the most competitive industries

2)

Global firms need to consider:

A) Locating production in a single country B) How to manage a globally dispersed supply chain C) The long term strategic role of foreign production sites D) Whether or not to own their foreign production activities E) All of these options

3)

What is the process of creating a product called?

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A) bureaucracy B) materials management C) production D) administration E) R&D

4) is the activity that controls the transportation of physical materials through the value chain, from procurement through production and into distribution.

A) operations B) production C) materials management D) bureaucracy E) logistics

5) Which of these in relation to materials management refers to the procurement and physical transmission of material through the supply chain, from suppliers to consumers?

A) interchange B) logistics C) reciprocation D) conveyance E) operations

6) Two important objectives shared by both manufacturing and materials management are to simultaneously:

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A) increase quality and increase revenues B) increase product awareness and lower costs C) lower costs and increase quality D) increase revenues and decrease customer complaints E) increase quality and reduce inventories

7)

Which of the following is not a result of improved quality control?

A) greater product quality means lower warranty costs B) increased product quality means lower scrap costs C) increased quality leads to lower unit costs D) productivity increases because time is not wasted manufacturing poor-quality products that cannot be sold E) increased product quality means higher rework

8) The main management technique that companies are utilizing to boost their product quality is:

A) total quality management B) materials management C) reengineering D) logistics E) Deming quality management system

9) Saving time by not producing poor quality products that cannot be sold, lowering rework costs, lowering scrap costs, and lowering warranty costs are the intended results of:

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A) total feature management B) reengineering C) logistics D) total quality management E) materials management

10)

The TQM concept was developed by a number of American consultants such as:

A) Martin Wolf, R.B. Weber, and Raymond Vernon B) W. Edwards Deming, Joseph Juran, and A.V. Feigenbaum C) J.H. Dunning, M. McQueen, and Michael Porter.

D) Paul Krugman, Raymond Vernon, and Michael Porter E) David Ricardo, Raymond Vernon, and Michael Porter

11) argued that management should embrace the philosophy that mistakes, defects, and poor-quality materials are not acceptable and should be eliminated.

A) Deming B) Juran C) Vernon D) Krugman E) Porter

12)

Which of the following is not a suggestion from Deming?

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A) management should create an environment in which employees will not fear reporting problems or recommending improvements B) work standards should be defined as number or quotas C) quality of supervision should be improved by allowing more time for supervisors to work with employees and by providing them with the tools they need to do the job D) achieving better quality requires the commitment of everyone in the company E) work standards should be defined to include some standard of quality

13) Before the firm is allowed access to the European marketplace, the European Union requires that the quality of a firm's manufacturing processes and products be certified under a quality standard known as .

A) total quality management B) reengineering C) BT 12000 D) ISO 9000 E) QM 15000

14) The key decision factors that pertain to where an international firm locates its manufacturing facilities can be grouped under three broad headings. These are:

A) political factors, economic factors, and legal factors B) country factors, technological factors, and product factors C) product factors, service factors, and labour factors D) language factors, cultural factors, and transportation factors E) market factors, production factors, and logistics factors

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15) Demands for local responsiveness creates pressures to the major national or regional markets in which the firm does business or to implement flexible manufacturing processes that enable the firm to customize the product coming out of a factory according to the market in which it is to be sold.

A) receive supplies from B) market to C) centralize logistic processes to D) decentralize manufacturing activities to E) increase customization for

16) A firm should locate its various manufacturing activities where the economic, political, and cultural conditions are to the performance of those activities.

A) beneficial B) challenging C) indifferent D) government-protected E) extraneous

17) (1) The level of its fixed costs, (2) its minimum efficient scale, and (3) are three characteristics of a manufacturing technology that are particularly interesting to international firms when making manufacturing location decisions.

A) its flexibility B) its variable costs C) the technological sophistication of the manufacturing process D) the cost of moving manufacturing executives overseas E) its factors of production

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18) In some cases the costs of setting up a manufacturing plant are so high that a firm must serve the world market from a single location or from a very few locations.

A) changeable B) reoccurring C) fixed D) variable E) destination

19) The concept of economies of scale tells us that as plant output expands unit costs do what?

A) increase B) decrease C) remain the same D) expand exponentially E) decrease exponentially

20) The declines with output until a certain output level is reached; at which point further increases in output realize little reduction in unit costs.

A) component expense curve B) unit expense line C) unit cost curve D) component cost slope E) marginal cost curve

21) The larger the minimum efficient scale of a plant, the greater the argument for centralizing production in a single location or a limited number of locations is the implication of the concept.

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A) consumer input B) economies of scale C) production D) materials management E) TQM

22) What are manufacturing technologies that are designed to reduce setup times, increase use of individual machines through better scheduling, and improve quality control at all stages of manufacturing called?

A) multifaceted production B) lean production C) lateral production D) temporal production E) six sigma

23) According to the textbook, manufacturing technologies provide a company the ability to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output.

A) multifaceted B) lateral C) side by side D) flexible E) mass customization

24) Which of the following is not one of the objectives of flexible manufacturing technology, or lean production?

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A) reduce setup times for complex equipment B) bring a factory into compliance with ISO 9000 C) improve quality control at all stages of the manufacturing process D) increase utilization of individual machines through scheduling E) none of these answers is correct

25) What refers to the ability to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output?

A) assembly-line like customization B) standardized customization C) mass customization D) economies of customization E) product customization

26) customization implies that a firm may be able to customize its product range to suit the needs of different customer groups without bearing a cost penalty.

A) Assembly-like B) Standardized C) Economic D) Mass E) Manufacturing

27) One of Toyota's engineers, Ohno Taiichi, found many problems with the company's mass production system. Which of the following is not one of these problems?

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A) the system was unable to accommodate consumer preferences for product diversity B) long production runs created massive inventories that had to be stored in large warehouses which was expensive C) the system ran too quickly for the employees to keep up which created a high turnover due to frustration and low evaluations D) if the initial machine settings were wrong, long production runs resulted in the production of a large number of defects E) small production runs were uneconomical

28)

All of the following are advantages of flexible manufacturing except:

A) improved efficiency B) flexible manufacturing technologies allow companies to customize products to suite the unique demands of small consumer groups C) increase customer responsiveness D) flexible manufacturing technologies help firms standardize products for different national markets E) small production runs are economical

29) In terms of making a location decision, when fixed costs are substantial, the minimum efficient scale of production is high, and flexible manufacturing technologies are available, it makes sense to:

A) manufacture the product in every country in which it is sold B) concentrate production at a few choice locations C) spread production over as many locations as possible D) outsource production to a third party E) disperse distribution centres and maintain higher minimum inventories

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30) Many electronic components and pharmaceuticals have ratios, whereas refined sugar, paint, and petroleum products have ratios.

value-to-weight value-to-weight

A) high; low B) low; high C) low; no D) no; high E) insignificant; significant

31)

Two product factors impact location decisions. These are:

A) the product's value-to-weight ratio and whether the product serves universal needs B) the product's shape and the product's weight C) the product's content and the product's point-of-origin D) the product's technological sophistication and the product's shape E) product's packaging and durability

32) Two product factors impact location decisions. These are (1) whether the product serves universal needs and (2) .

A) the product's shape B) the product's point-of-origin C) the product's weight D) the product's value-to-weight ratio E) the product's volume

33)

Needs that are the same all over the world are referred to as

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A) specific B) domestic C) universal D) individualistic E) global

34) The following two factors that correctly depict the manufacturing attributes of a product that has universal needs are:

A) since there are few national differences in consumer taste and preferences for such products, the need for local responsiveness is reduced, manufacturing should be concentrated at an optimal location B) since there are many national differences in consumer taste and preferences for such products, the need for local responsiveness is reduced, manufacturing should be concentrated at an optimal location C) since there are few national differences in consumer taste and preferences for such products, the need for local responsiveness is increased, manufacturing should take place in each major market in which the firm is active D) since there are many national differences in consumer taste and preferences for such products, the need for local responsiveness is increased, manufacturing should take place in each major market in which the firm is active E) since there are some national differences in consumer behaviour, but not in needs and perceived benefits, there is only moderate demand for local responsiveness and manufacturing needs only to be moderately dispersed

35)

There are two basic strategies for locating manufacturing facilities. These are:

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A) concentrating them in the optimal location and serve the world market from there and, concentrate them in markets that are parts of major trade blocks B) locate at least one manufacturing facility in each continent in which the firm is active and, concentrate manufacturing at an optimal location C) decentralize them in major trading blocks, but not in smaller markets D) concentrate them in markets that are part of major trade blocks and, centralizing them at a single location E) concentrate them in the optimal location and serve the world market from there and, decentralizing them in various regional or national locations that are close to major markets

36)

Concentration of manufacturing makes sense when:

A) trade barriers are high B) the product's value-to-weight ratio is high C) the product's value-to-weight ratio is low D) the product does not serve universal needs E) the product's value-to-volume ratio is high

37) Placing manufacturing facilities in one concentrated location makes sense for all of the following reasons except:

A) trade barriers are high B) the product serves universal needs C) important exchange rates are expected to remain relatively stable D) the production technology has high fixed costs or a high minimum efficient scale or a flexible manufacturing technology exists E) product's value-to-weight ratio is high

38) Decentralization of the location of a firm's manufacturing locations makes sense for all of the following reasons except:

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A) trade barriers are low B) volatility in important exchange rates is expected C) the production technology has low fixed costs, low minimum efficient scale or a flexible manufacturing technology exists D) the product does not serve universal needs E) the product's value-to-weight ratio is low

39)

Initially, many foreign factories are established where:

A) labour costs are high B) labour costs are low C) labour costs are on par with the manufacturer's typical costs D) labour intensive manufacturing is the exception rather than the norm E) labour is more productive

40)

The strategic role of foreign factories is typically to:

A) produce labour-intensive products at as low a cost as possible B) appease foreign governments by producing jobs in their countries C) increase product quality D) provide domestic managers with foreign experience E) increase market penetration by reducing source effects

41)

The two sources of improvement in the capabilities of a foreign factory are:

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A) the increasing abundance of advanced factors of production in the nation in which the factory is located and pressure from the centre to improve a factory's cost structure and/or customize a product to the demands of consumers in a particular nation can start a chain of events that ultimately leads to development of additional capabilities at that factory B) the increasing abundance of advanced factors of production in the nation in which the factory is located and the large amount of skilled workers in the area of which the factory is located C) pressure from the centre to improve a factory's cost structure and/or customize a product to the demands of consumers in a particular nation can start a chain of events that ultimately leads to development of additional capabilities at that factory and increasing government regulations that benefit the factory D) the large amount of skilled workers in the area of which the factory is located and increasing government regulations that benefit the factory E) productivity improvements leads to excess manufacturing capacity that can be used elsewhere and increasing expertise of workers due to learning effects

42) A major aspect of a transnational strategy is a belief in valuable knowledge does not reside just in a firm's domestic operations.

--the idea that

A) information sharing B) knowledge effects C) global learning D) transnational sharing E) intellectual equality

43) What are the type of decisions about whether a firm should make or buy the component parts that go into the final product known as?

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A) end-user B) synergistic C) sourcing D) quality E) cost

44) For international businesses that source worldwide, scheduling problems can be worsened by the between the firm and its suppliers.

A) time and distance B) differences in regulations C) cultural differences D) political conflicts E) geographic distance and trade restrictions

45) The arguments that support making component parts in-house (i.e. vertical integration) are fourfold:

A) lower costs, facilitates investments in highly specialized assets, protects proprietary product technology and, facilitates the scheduling of adjacent processes B) greater flexibility, helps a firm capture orders from international customers, facilitates investments in highly standardized assets and, facilitates the scheduling of adjacent processes C) helps a firm capture orders from international customers, lower costs, facilitates investments in highly standardized assets and, facilitates the scheduling of adjacent processes D) lower costs, greater flexibility, facilitates the scheduling of adjacent customers and, facilitates investments in highly specialized assets E) greater efficiencies, better quality control, protects against technology theft, and more responsive to customers

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46) In general, when substantial investments in specialized assets are required to manufacture a component, a firm will:

A) re-engineer the component to reduce costs B) find a alternative method of manufacturing the component C) contract out the production of the component rather than make it internally D) discontinue making the product that the component goes into E) prefer to make the component internally rather than contract it out to a supplier

47) According to the textbook, the benefits of manufacturing components in-house seem to be greatest when all of the following factors are involved except:

A) when highly specialized assets are involved B) when the firm is simply more efficient than external suppliers at performing a particular activity C) when maximum flexibility is necessary D) when vertical integration is necessary for protecting proprietary technology E) when trade barriers are low

48)

The greatest advantage of buying component parts from independent suppliers is:

A) lower costs B) offsets C) supports TQM D) strategic flexibility E) increased market penetration

49) The advantages of buying component parts from independent suppliers are that it gives the firm the following advantages:

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A) it may help the firm to capture orders from international customers, facilitates the scheduling of adjacent processes and, greater flexibility B) greater flexibility, facilitates the scheduling of adjacent processes and, protects proprietary production technology C) facilitates investments in highly specialized assets, protects proprietary product technology and, facilitates the scheduling of adjacent processes D) greater flexibility, it can help drive down the firm's cost structure and, it may help the firm to capture orders from international customers E) provides offsets, improved costs and new technologies

50) An example of a(n) Canon.

relationships is Kodak's cooperative relationships with

A) operating arrangement B) firm-to-firm cooperative arrangement C) integral form of integration D) strategic alliance E) supplier alliance

51)

Strategic alliances

between the firm and its suppliers.

A) help in hiring B) always work C) expand slowly D) increase revenue E) build trust

52) In general, the trends toward just-in-time systems (JIT), computer-aided design (CAD), and computer-aided manufacturing (CAM) seem to have increased pressures for firms to establish relationships with their suppliers.

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A) strictly arms-length B) intermediate term C) long-term D) short-term E) closer

53)

What is the potential for reducing costs through more efficient materials management?

A) enormous B) moderate C) minor D) insignificant E) unknown

54) allows for a holistic overview of the supply chain with a single point of control for all inventory management

A) Electronic data interchange B) Vendor management of inventory C) Materials requirements planning D) Collaborative forecasting E) Enterprise resource planning

55)

Across a global supply chain, responsiveness refers to

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A) The ability to meet customer needs in a timely way B) The integration of a control system to eliminate disruptions C) Programs that combine small shipments D) Integration of reverse logistics and after-market service E) Controlling assets and the speed of distribution

56) According to the textbook, for the typical manufacturing firm, material costs account for between percent of revenues depending on the industry.

A) 15-25 B) 30-40 C) 50-70 D) 70-80 E) 80-90

57) What can a firm end up limiting by the commitments it makes to its alliance partners when it enters long-term alliances?

A) choice of suppliers B) trade availability C) decision freedom D) strategic flexibility E) financial risk

58) Pioneered by firms during the 1950s and 1960s, just-in-time inventory systems now play a major role in most manufacturing firms.

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A) German B) American C) Japanese D) British E) Canadian

59) The basic philosophy behind is to economize on inventory holding costs by having materials arrive at a manufacturing plant when needed to enter the production process?

A) management by objectives B) reengineering C) just-in-time D) total quality management E) CAD/CAM

60)

In the context of materials management, the acronym JIT stands for:

A) Jobber-In-Training B) Job-In-Transit C) Joint-In-Transpiration D) Just-In-Time E) Join-Integrate-Transfer

61) Under a not warehoused.

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system, parts enter the manufacturing process immediately; they are

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A) just-in-time B) reengineering C) soft manufacturing D) maximum fluency E) flexible manufacturing

62)

Unlike in a traditional system,

are spotted right away under a JIT system.

A) defective inputs B) increasing costs C) illegal operations D) machinery problems E) wastage

63)

What system has a drawback that leaves a firm without a buffer stock of inventory?

A) total-quality management B) just-in-time C) management by objectives D) reengineering system E) CAD/CAM

64)

What are computer-aided design and computer-aided manufacturing systems known as?

A) total-quality management B) just-in-time C) management by objectives D) reengineering system E) CAD/CAM

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65)

In the context of materials management, the acronym EDI stands for:

A) Electronic Data Intelligence B) Eliminate Distribution Intermediaries C) Eastern Distribution Interchange D) Effective Data Interchange E) Electronic Data Interchange

66) According to the textbook, what systems require Internet-based computer links between a firm, its suppliers, and its shippers?

A) electronic data interchange B) electronic data intelligence C) elastic data interchange D) elastic demographic interchange E) effective data interchange

67) enable a firm to optimize its production scheduling according to when components are expected to arrive by tracking component parts as they are shipped to an assembly plant.

A) Management systems B) Information systems C) Suppliers D) Distributors E) Collaborative intranets

68)

Suppliers typically use a(n)

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link to send invoices to purchasers.

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A) elastic demographic interchange B) elastic data interchange C) electronic data intelligence D) electronic data interchange E) internet

69)

Which of the following is a consequence of an EDI system?

A) production costs are increased B) most paperwork between suppliers, shippers, and the purchasing firm is eliminated C) it is difficult for suppliers, shippers, and the purchasing firm to communicate due to the complexity and slowness of the system D) flexibility and responsiveness of the supply system is decreased E) the potential for industrial espionage increases

70)

Global supply chain coordination refers to

A) timing of delivery of key components B) shared decision-making opportunities and operational collaboration key activities.

C) joint decision-making only D) operational collaboration only E) shared decision-making only

71)

The key to interorganizational relationships is:

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A) Trust B) Commitment C) Motivation D) Trust and commitment E) Transactional focus

72) How does an international firm decide where to locate its manufacturing activities?

Consider the key factors involved in making location decisions, which entail the dual considerations of minimizing costs and increasing quality. A consideration and weighing of all of the issues involved will result in the best overall decision.

What are the country factors that an international firm uses to decide where to locate its manufacturing facilities?

73) How does an international firm decide where to locate its manufacturing activities?

Consider the key factors involved in making location decisions, which entail the dual considerations of minimizing costs and increasing quality. A consideration and weighing of all of the issues involved will result in the best overall decision.

What are the technological factors that an international firm uses to decide where to locate its manufacturing facilities?

74) How does an international firm decide where to locate its manufacturing activities?

Consider the key factors involved in making location decisions, which entail the dual considerations of minimizing costs and increasing quality. A consideration and weighing of all of the issues involved will result in the best overall decision.

What are the product factors that an international firm uses to decide where to locate its manufacturing facilities?

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75) How does an international firm decide where to locate its manufacturing activities?

Consider the key factors involved in making location decisions, which entail the dual considerations of minimizing costs and increasing quality. A consideration and weighing of all of the issues involved will result in the best overall decision.

What are the hidden costs of foreign locations that your company should also consider?

76) Define the term "materials management." Discuss the relationship between materials management and logistics.

77) Discuss the overall objectives of international firms in terms of manufacturing and materials management.

78) Define the term "total quality management (TQM)." What is the relationship between TQM and manufacturing?

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79)

Describe the terms flexible manufacturing and mass customization.

80) What are make-or-buy decisions? What are the advantages of make versus buy and vice-versa? Are these decisions harder for international opposed to strictly domestic firms? Explain your answer.

81) Describe the concept of "Just-In-Time" manufacturing. What are the advantages and disadvantages of the Just-In-Time system?

82) A Daimler Chrysler plant in Greenville, North Carolina was flooded as a result of a recent hurricane. This in turn resulted in a shortage of suspension parts for the minivan plant in Windsor, Ontario. Strikes and other labour actions can also have an extreme impact on plants using JIT systems. This illustrates a problem with JIT, when companies are located relatively close to one another. Can JIT be used when plants are scattered all over the world.

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83)

P&G is an example of a company with an agile world leading global supply chain. ⊚ ⊚

true false

84) Materials management is the activity that controls the transmission of physical materials through the value chain, from procurement through production and into distribution. ⊚ ⊚

true false

85) Two important objectives shared by manufacturing and materials management are to lower costs and to simultaneously increase product quality. ⊚ ⊚

true false

86) Reengineering is the main management technique that companies are using to boost their product quality. ⊚ ⊚

true false

87) A standard designed to assure the quality of products and processes is referred to as ISO 9000. ⊚ ⊚

88)

true false

ISO 9000 is an Asian quality certification process.

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⊚ ⊚

true false

89) Political economy, culture, and relative factors costs are similar across the countries of the world. ⊚ ⊚

true false

90) The presence of global concentrations of activities at certain locations is a major influence for some firms in deciding where to locate. ⊚ ⊚

true false

91) The concept of economies of scale tells us that as plant output expands, unit costs increase. ⊚ ⊚

true false

92) Flexible manufacturing technologies allow a company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output. ⊚ ⊚

true false

93) Unique in their ability to help companies produce highly standardized products for a global clientele are flexible manufacturing technologies.

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⊚ ⊚

94)

true false

A product with a high value-to-weight ratio is expensive and does not weigh very much. ⊚ ⊚

true false

95) When the product's value-to-weight ratio is high decentralizing a firm's manufacturing facilities in various regional or national markets that are close to major markets makes sense. ⊚ ⊚

true false

96) The arguments for concentrating production at a few choice locations are strong when fixed costs are substantial, the minimum efficient scale of production is high, and flexible manufacturing technologies are not available. ⊚ ⊚

true false

97) Concentrating a firm's manufacturing facilities in an optimal location and serving the world market from that single location makes sense when trade barriers are low. ⊚ ⊚

true false

98) Pressures from the centre to improve a factory's cost structure and/or customize a product to the demands of consumers in a particular nation can start a chain of events that ultimately leads to development of additional capabilities at that factory.

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⊚ ⊚

true false

99) A source of improvement in the capabilities of a foreign factory can be the increasing abundance of advanced factors of production in the nation where the factory is located. ⊚ ⊚

true false

100) The decision about whether a firm should make or buy the component parts that go into the final product is referred to as a sourcing decision. ⊚ ⊚

true false

101) Global inventory management is a decision-making process about the raw materials, component parts and finished goods inventory for a global firm ⊚ ⊚

true false

102) There are five strategic levels that can be undertaken by a global firm, from domestic, to international, to global. ⊚ ⊚

103)

true false

Make-or-buy decisions are even more problematic for international businesses. ⊚ ⊚

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true false

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104)

Technology unique to a firm is proprietary product technology. ⊚ ⊚

true false

105) Scheduling problems, for international businesses that source worldwide, are nonexistent, even though there is time and distance between the firm and its suppliers. ⊚ ⊚

true false

106) The benefits of manufacturing components in-house seem to be greatest when highly specialized assets are involved, when vertical integration is necessary for protecting proprietary technology, or when the firm is simply more efficient than external suppliers at performing a particular activity. ⊚ ⊚

true false

107) The greatest advantage of buying component parts from independent suppliers is that the firm can maintain its flexibility. ⊚ ⊚

108)

true false

There are risks, or trade-offs in the make vs. buy decision. ⊚ ⊚

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true false

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109) The four main areas of concern for managing a global supply chain are the role of just-intime inventory, information technology, coordination, and interorganizational relationship. ⊚ ⊚

true false

110) Increased utilization of JIT inventory systems, CAD, and CAM over the past decades seems to have decreased pressures for firms to establish long-term relationships with suppliers, but increased the pressure to establish short-term ones. ⊚ ⊚

true false

111) Some businesses have been able to achieve the gains of vertical integration without encountering its problems by entering into strategic alliances with suppliers. ⊚ ⊚

true false

112) To economize on inventory holding costs by having materials arrive at a manufacturing plant just in time to enter the production process and not before is the basic philosophy of CAD. ⊚ ⊚

true false

113) Good EDI systems can help a firm decentralize materials management decisions to the plant level by giving corporate-level managers the information they need for coordinating and controlling decentralized materials management groups. ⊚ ⊚ Version 1

true false 583

114) Global supply chain coordination refers to shared decision-making opportunities and operational collaboration of key activities. ⊚ ⊚

true false

115) The most important factors for successful interorganizational relationships are trust and commitment. ⊚ ⊚

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true false

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Answer Key Test name: chapter 15 1) E 2) E 3) C 4) C 5) B 6) C 7) E 8) A 9) D 10) B 11) A 12) B 13) D 14) B 15) D 16) A 17) A 18) C 19) B 20) C 21) B 22) B 23) D 24) B 25) C 26) D Version 1

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27) C 28) D 29) B 30) A 31) A 32) D 33) C 34) A 35) E 36) B 37) A 38) A 39) B 40) A 41) A 42) C 43) C 44) A 45) A 46) E 47) C 48) D 49) D 50) D 51) E 52) C 53) A 54) B 55) A 56) C Version 1

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57) D 58) C 59) C 60) D 61) A 62) A 63) B 64) E 65) E 66) A 67) B 68) D 69) B 70) B 71) D 83) TRUE 84) TRUE 85) TRUE 86) FALSE 87) TRUE 88) FALSE 89) FALSE 90) TRUE 91) FALSE 92) TRUE 93) FALSE 94) TRUE 95) FALSE 96) FALSE 97) TRUE Version 1

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98) TRUE 99) TRUE 100) TRUE 101) TRUE 102) TRUE 103) TRUE 104) TRUE 105) FALSE 106) TRUE 107) TRUE 108) TRUE 109) TRUE 110) FALSE 111) TRUE 112) FALSE 113) TRUE 114) TRUE 115) TRUE Chapter 16 Student name: 1)

One of the lessons from the opening case on Royal Dutch Shell is what?

A) Human resources involves only the hiring and firing of people.

B) Firms in Canada have closed the gender pay gap.

C) Moving employees to new global locations requires many considerations.

D) Gender equality hurts a firm's profitability.

E) All of these options are correct.

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2)

HRM refers to what?

A) Human Resources Management B) Human Ratio Management C) Hard Resources Management D) Human Resources Manager E) Human Resource Management

3) The activities an organization carries out to utilize its referred to as human resource management.

effectively is

A) customers B) external stakeholders C) employees D) suppliers E) management

4) Compensation practices may vary from country to country, labour laws prohibiting union organization, and the strong pursuit of equal employment legislation are all complexities in:

A) customers orientation B) external stakeholders C) human resources D) supplier confidence E) firm structure

5) Philip Thomas is a manager for XYZ International Inc. Philip's job requires him to deal with the differences in equal employment legislations between each country. Philip could be considered to be a(n)

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A) external manager.

B) account manager.

C) human resource manager.

D) expatriate manager.

E) labour lawyer.

6) The activities which include determining the firm's human resource strategy, staffing, performance evaluation, management development, compensation, and labour relations are referred to as what?

A) personnel psychology management B) stakeholder management C) human resource management D) positive-sum management E) employee relations management

7) A(n) manager is a citizen of one country who is working abroad in one of his or her firm's subsidiaries.

A) expatriate B) cross-divisional C) cross-cultural D) ethnocentric E) inpatriate

8)

How is total compensation calculated?

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A) salary B) salary + bonus C) salary + fringe benefits D) salary + bonus - fringe benefits E) salary + bonus + benefits

9) Adam Cowgill works for Dell Computer (a U.S. based firm) but is assigned to Dell's sales office in Germany. Under these circumstances, Mr. Cowgill would be called a(n) manager.

A) ethnocentric B) cross-cultural C) expatriate D) cross-divisional E) foreign

10)

One role that HRM does not involve is:

A) Staffing B) Training C) Workflow D) Compensation E) Performance appraisal

11)

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is concerned with the selection of employees for particular jobs.

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A) Compensation policy B) Staffing policy C) Performance appraisal policy D) Training policy E) Hiring policy

12)

The term corporate culture refers to an organization's

.

A) compensation systems B) norms and value systems C) standing among its peer firms D) policies, rules, and regulations E) behaviour and attitudes

13) Beth's behavioural style, beliefs, and value system are consistent with that of the company that she works for and is said to be compatible with her company's what?

A) corporate culture B) corporate structure C) corporate resources D) corporate bureaucracy E) corporate standards

14) General Electric is not just concerned with hiring people who have the skills required for performing particular jobs; it wants individuals whose behavioural styles, beliefs, and value systems are consistent with those of GE. This would be an example of what?

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A) ethnocentrism B) corporate culture C) polycentric policy D) network approach E) behavioural approach

15) Research has identified three types of staffing policies in international businesses: (1) the ethnocentric approach, (2) the polycentric approach, and (3) the .

A) network centric approach B) intercentric approach C) global centric approach D) geocentric approach E) multicentric approach

16) In the Dutch firm Philips, all important positions in most foreign subsidiaries were at one time held by Dutch nationals who were referred to by their non-Dutch colleagues as the Dutch Mafia. This example illustrates a(n) .

A) ethnocentric staffing policy B) global centric staffing policy C) polycentric staffing policy D) domestic centric staffing policy E) national centric staffing policy

17) A(n) staffing policy is one in which all key management positions are filled by parent company nationals.

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A) ethnocentric B) intercentric C) polycentric D) geocentric E) nationalistic

18) Many Japanese firms prefer their foreign operations to be headed by expatriate Japanese managers because these managers will have socialized into the firm's culture while employed in Japan. This is an example of .

A) polycentricity B) intercentricity C) ethnocentricity D) egocentricity E) nationalistic

19)

A reason not to pursue an ethnocentric staffing policy is what?

A) if a firm is trying to create value by transferring core competencies to a foreign operation, it may believe that the best way to do this is to transfer parent country nationals who have knowledge of that competency to the foreign operation B) the firm may believe there is a lack of qualified individuals in its own parent company to fill senior management positions C) the firm may see an ethnocentric staffing policy as the best way to maintain a unified corporate culture D) the firm may believe there is a lack of qualified individuals in the host country to fill senior management positions E) the firm may believe that parent company managers are superior to host country managers

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20) There are two reasons that the ethnocentric staffing policy is on the wane in most international businesses. These are:

A) an ethnocentric staffing policy limits advancement opportunities for host country nationals and an ethnocentric policy can lead to "cultural myopia" B) an ethnocentric staffing policy is the most expensive of the alternatives and an ethnocentric policy limits advancement opportunities for parent country personnel C) an ethnocentric staffing policy limits the cultural awareness of parent company personnel and an ethnocentric policy can lead to "cultural myopia" D) an ethnocentric staffing policy is the most expensive of the alternatives and an ethnocentric policy limits the cultural awareness of parent company personnel E) an ethnocentric staffing policy prevents a company from realizing compensation savings from hiring local staff and can lead to the dilution of corporate culture

21) A(n) staffing policy requires host country nationals to be recruited to manage subsidiaries, while parent company nationals occupy key positions at corporate headquarters.

A) polycentric B) geocentric C) ethnocentric D) intercentric E) multicentric

22)

A(n)

is a response to the shortcomings of an ethnocentric approach.

A) ethnocentric staffing policy B) geocentric staffing policy C) polycentric staffing policy D) intercentric staffing policy E) multicentric staffing policy

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23)

"Cultural Myopia" refers to the firm's failure to:

A) understand host-country cultural differences that require different approaches to marketing and management B) create the proper environment for fostering creativity C) adapt to certain ethnocentric cultures through the expatriate D) distinguish between forward thinking and empowerment among cultures E) be far sighted in considering cultural trends and developments in host countries

24) According to the textbook, what staffing policy has the advantage of having firms that are less likely to suffer from cultural myopia?

A) geocentric B) intercentric C) polycentric D) ethnocentric E) multicentric

25) A(n) organization.

staffing policy seeks the best people for key jobs throughout the

A) intercentric B) ethnocentric C) geocentric D) polycentric E) multicentric

26) Which of the following is not an advantage of a geocentric approach to staffing for international businesses?

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A) uses human resources efficiently B) helps build a strong culture C) inexpensive to implement D) helps build a strong informal management network E) helps build a group of managers who are comfortable working in many different cultures

27)

The strategy that is most compatible with an ethnocentric staffing policy is what?

A) transnational strategy B) global strategy C) multidomestic strategy D) international strategy E) pan-national strategy

28)

Which of the following strategies is most compatible with a polycentric staffing policy?

A) international strategy B) global strategy C) multidomestic strategy D) transnational strategy E) pan-national

29) Which of the following two strategies are most compatible with a geocentric staffing policy?

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A) global and transnational B) multidomestic and transnational C) international and multidomestic D) global and multidomestic E) global and international

30) What two of the three common international staffing policies rely on extensive use of expatriate managers?

A) ethnocentric, geocentric B) polycentric, intercentric C) ethnocentric, intercentric D) polycentric, geocentric E) ethnocentric, multicentric

31) A(n) approach to staffing has the following advantages: (1) overcomes lack of qualified managers in host nation, (2) unified culture, and (3) helps transfer core competencies.

A) polycentric B) geocentric C) ethnocentric D) intercentric E) multicentric

32) A(n) approach to staffing has the following advantages: (1) alleviates cultural myopia, (2) inexpensive to implement.

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A) polycentric B) intercentric C) geocentric D) ethnocentric E) multicentric

33) What approach to staffing has the following advantages: (1) uses human resources effectively, (2) helps build strong culture and informal management network?

A) ethnocentric B) geocentric C) intercentric D) polycentric E) multicentric

34) A(n) approach to staffing has the following disadvantages: (1) produces resentment in host country, (2) can lead to cultural myopia.

A) polycentric B) intercentric C) ethnocentric D) geocentric E) multicentric

35) A(n) approach to staffing has the following disadvantages: (1) limits career mobility, (2) isolates headquarters from foreign subsidiaries.

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A) polycentric B) intercentric C) geocentric D) ethnocentric E) multicentric

36) country.

is the premature return of an expatriate manager to his of her home

A) Expatriate relief B) Expatriate failure C) Expatriate rotation D) Expatriate timing E) Repatriation

37) is a subset of expatriates who are citizens of a foreign country working in the home country of their multinational employer.

A) Immigrant B) Inpatriates C) Third-country nationals D) Hyperpatriate E) Repatriates

38) One estimate of the costs of expatriate failure is that the average cost per failure to the parent company can be as high as time the expatriate's annual domestic salary plus the cost of relocation.

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A) 1.5 B) 3 C) 5 D) 7 E) 2

39) _______________percent of U.S. multinationals experience expatriate failure rates of 10 percent or more, according to a study conducted by R.L. Tung.

A) 91 B) 76 C) 44 D) 17 E) 28

40) Which of the following was not identified by R.L. Tung as a reason for expatriate failure among U.S. expatriate managers?

A) poor pay B) difficulties with new environment C) inability of spouse to adjust D) personal or emotional problems E) family discord

41) All of the following were identified by R.L. Tung as a reason for expatriate failure among U.S. expatriate managers except .

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A) manager's personal or emotional maturity B) inability to cope with larger overseas responsibility C) inability of spouse to adjust D) poor working conditions overseas E) other family problems

42) According to the results of a study by R.L. Tung, what indicated that the most consistent reason cited by European expatriates for expatriate failure among their group?

A) personal or emotional problems B) inability to cope with larger overseas responsibilities C) poor pay D) the inability of the manager's spouse to adjust to a new environment E) ethnocentric attitudes

43) In a recent survey, almost return home early.

of employees sent to developing nations

A) 25 percent B) 33 percent C) 50 percent D) 60 percent E) 70 percent

44) According to the results of a study of R.L. Tung, the number one reason that Japanese expatriate managers fail is:

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A) inability of spouse to adjust B) lack of technical competence C) personal or emotional problems D) inability to cope with larger overseas responsibilities E) ethnocentric attitudes

45) fail?

Which of the following describes the most important reason why American expatriates

A) other family problems B) manager's personal or emotional maturity C) inability of spouse to adjust D) lack of technical competence E) inability to cope with larger overseas responsibilities

46) Recent research suggests that a main reason managers now turn down international assignments is concern over what?

A) the impact of such an assignment might have on their spouse's career B) how well the expatriate can develop in a new atmosphere C) the technical expertise of the individual D) whether or not there will be a job lined up with the same company after the return E) security concerns

47)

What trend has contributed to spousal discontent in foreign postings?

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A) the increased security threats B) lack of cross cultural sensitivity C) host country nationalism D) increased restrictions on spousal work permits E) the rise in two career families

48) What four dimensions seem to predict success in expatriate selection were identified by Mendenhall and Oddou?

A) self-orientation, others-orientation, perceptual ability, and cultural toughness B) cognitive ability, subjective ability, positive effect, and cultural awareness C) self-orientation, cognitive ability, subjective ability, and cultural toughness D) subjective ability, others-orientation, perceptual ability, and cultural awareness E) multicultural exposure, self-confidence, self-reflection, and social personality type

49) A person who is an expatriate with good mental well-being, high self-esteem, and high self-confidence is successful in what dimension?

A) cultural toughness B) others-orientation C) perceptual ability D) self-orientation E) reflection

50) The ability of a female western manager to adapt to a culture that is extremely male dominated is an example of what?

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A) cultural toughness B) others-orientation C) perceptual ability D) self-orientation E) religious tolerance

51) If you were transferred abroad and didn't like interacting those in the host country and didn't know the local language, this might mean that you lacked attributes of Mendenhall and Oddou's dimension.

A) self-orientation B) others-orientation C) perceptual ability D) cultural toughness E) cross-cultural literacy

52) According to Mendenhall and Oddou, the attribute of expatriate's self-esteem, self-confidence, and mental well-being.

strengthens an

A) cultural toughness B) perceptual ability C) others-orientation D) self-orientation E) self confidence

53) According to Mendenhall and Oddou, the attribute of expatriate's ability to interact effectively with host country nationals.

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A) others-orientation B) self-orientation C) cultural toughness D) perceptual ability E) multiculturalism

54) Relationship development and willingness to communicate are the two factors that are particularly important in developing a health degree of what?

A) cultural toughness B) perceptual ability C) others-orientation D) self-orientation E) socialization

55) According to Mendenhall and Oddou, expatriate managers who lack tend to treat foreign nationals as if they were home country nationals.

A) cultural toughness B) self-orientation C) others-orientation D) perceptual ability E) empathic ability

56) According to Mendenhall and Oddou, the attribute of provides an expatriate the ability to understand why people of other countries behave the way they do, that is, the ability to empathize with them.

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A) cultural toughness B) perceptual ability C) self orientation D) others-orientation E) cultural sensitivity

57) According to Mendenhall and Oddou, what refers to the fact of how well an expatriate adjusts to a particular posting as it relates to the country of assignment?

A) cultural toughness B) expatriate stamina C) country-specific durability D) expatriate persistence E) adaptive ability

58) The type of training that seeks to foster an appreciation for the host country's culture is called what?

A) cultural training B) technical training C) language training D) practical training E) cultural literacy

59) The type of training that is aimed at helping an expatriate manager and his or her family ease themselves into day-to-day life in the host country is called .

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A) cognitive training B) practical training C) technical training D) cultural training E) life training

60) According to one study, what percent of repatriated employees didn't know what their position would be when they returned home?

A) 10-15 B) 25-35 C) 45-50 D) 50-60 E) 60-70

61) A(n) a firm.

program is intended to develop a manager's skills over his or her career with

A) organizational development B) personnel development C) management development D) technical development E) career development

62)

An important goal in management development programs is to:

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A) build an informal network of contacts B) encourage the cross-transfer of skills and knowledge C) encourage cross-cultural literacy D) enhance the employability of participants E) build a unifying culture

63)

In most cases, which two groups evaluate the performance of expatriate managers?

A) host-nation employment standards committees and home country superiors B) host nation managers and host nation customers C) home country managers and host nation customers D) home country managers and host country employees E) home country managers and host country managers

64) Some of the reasons that may bias the home country managers' appraisals of expatriate managers are:

A) distance and lack of experience working abroad B) unfamiliarity with the language and culture C) personal relationships and subjectivity D) their compensation is tied to the evaluation of the host country manager E) none of these answers is correct

65) When evaluating the performance of an expatriate manager, home-country managers tend to rely on what?

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A) the appraisals of host-country managers B) pay grades C) overall compensation D) soft variables E) hard data

66)

What is the most common approach to expatriate pay?

A) merit approach B) correspondence approach C) balance sheet approach D) parity approach E) country equity approach

67) In regard to expatriate pay, the equalizes purchasing power across countries so employees can enjoy the same living standard in their foreign posting that they enjoyed at home.

A) balance sheet approach B) standard of living approach C) merit approach D) correspondence approach E) country equity approach

68) In regard to expatriate pay, the balance sheet approach accomplishes two objectives.

These are

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A) compensates for higher taxes in the host country and reduces expatriate failure rates.

B) relieves an employee of the burden of paying taxes on income earned overseas, and provides an employee a standard 25 percent increase in pay for taking an overseas assignment.

C) equalizes purchasing power across countries so employees can enjoy the same living standard in their foreign posting that they enjoyed at home, and relieves an employee of the burden of paying taxes on income earned overseas.

D) provides financial incentives to offset qualitative differences between assignment locations, and provides an employee a standard 25 percent increase in pay for taking an overseas assignment.

E) equalizes purchasing power across countries so employees can enjoy the same living standard in their foreign posting that they enjoyed at home, and provides financial incentives to offset qualitative differences between assignment locations.

69) Which compensation approach attempts to provide expatriates with the same standard of living in their host countries as they enjoy at home plus a financial inducement for accepting an overseas assignment?

A) merit approach B) correspondence approach C) parity approach D) balance sheet approach E) country equity approach

70) A(n) country of origin.

is extra pay the expatriate receives for working outside his or her

A) parity adjustment B) expatriate special circumstance C) foreign service premium D) allowance E) foreign service allowance

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71) What are the four types of allowances that are often included in an expatriate's compensation package?

A) travel allowances, emergency allowances, training allowances, and relocation allowances B) hardship allowances, housing allowances, cost-of-living allowances, and education allowances C) emergency allowances, hardship allowances, training allowances, and cost-of-living allowances D) housing allowances, travel allowances, cost-of-living allowances, and relocation allowances E) living allowance, education allowance, travel allowance, and spousal allowance

72) One task of the function is to foster harmony and minimize conflict between the firm and organized labour.

A) marketing B) exporting C) human resource management D) production E) host country management

73) The function of an international business is typically responsible for international labour relations.

A) international business B) human resource management C) finance and accounting D) legal E) management

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74)

From a strategic perspective, the key issue in international labour relations is .

A) the degree to which organized labour can limit the choices of an international business B) the degree to which organized labour increases the costs of conducting international business C) the degree to which organized labour discourages participation in international business D) the degree to which organized labour resists the transfer of domestic employees to overseas operations E) the degree to which organized labour can restrict job flexibility

75) Unions generally try to get better pay, greater job security, and better working conditions for their members through with management.

A) binding arbitration B) negotiation C) wildcat strikes D) voluntary consensus E) collective bargaining

76) A principle concern of domestic unions about multinational firms it that the multinational can counter their bargaining power with .

A) work schedules tied to global rather than domestic standards B) wage rates tied to global rather than domestic standards C) the power to import labour from abroad D) the power to move production to another country E) the power to close plants

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77) Organized labour has responded to the increased bargaining power of multinational corporations by taking three actions:

A) trying to impose regulations on multinationals through organizations such as GATT, trying to establish international labour organizations, applying pressure on the governments of major industrial nations to impose stricter regulations on multinationals B) trying to establish regional labour organizations, trying to establish international organizations to act as advocates for the employees of multinationals, and lobbying for national legislation to restrict multinationals C) trying to establish international labour organizations, lobbying for national legislation to restrict multinationals, and trying to create controlled regional labour boards D) trying to impose regulations on multinationals through organizations such as the International Monetary Fund, applying pressure on the governments of major industrial nations to impose stricter regulations on multinationals, trying to establish regional labour organizations E) requiring the ILO (International labour Organization) to register all multinational contracts, organizing in the host countries so as to create one bargaining unit, and lobbying domestic governments to restrict multinationals

78) Organized labour has responded to the increased bargaining power of multinational corporations by taking which of the following actions?

A) trying to impose regulations on multinationals through organizations such as GATT B) trying to achieve international regulations on multinationals through such organizations as the United Nations C) trying to establish regional boards D) trying to lobby multinational corporations to restrict their global reach to three or fewer foreign countries E) creating global bargaining units

79) What is the main difference between international businesses in terms of their approaches to international labour relations?

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A) the degree to which labour relations activities are centralized or decentralized B) the degree to which labour relations are formal or informal C) the degree to which labour relations are given a high priority or a low priority D) the degree to which labour relations are internally or externally managed E) the degree to which labour relations are restricted or allowed

80) In the case of Interface, all employees are trained in the principles of the firm toward a commitment to sustainability.

to reorient

A) systems thinking B) fair compensation C) international labour relations D) performance appraisal E) cross-cultural communication

81) Your firm wants to operate in the international environment. At home in Canada, your company has been considered to be a leader in the human resources field. You want to select the appropriate staffing policy for your firm, and recognize that it is important to integrate staffing policy with your overall corporate operations.

Discuss the ethnocentric approach to staffing policy for your international firm. What is the rationale for this approach?

82) Your firm wants to operate in the international environment. At home in Canada, your company has been considered to be a leader in the human resources field. You want to select the appropriate staffing policy for your firm, and recognize that it is important to integrate staffing policy with your overall corporate operations.

Discuss the polycentric approach to staffing policy for your international firm. What is the rationale for this approach?

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83) Your firm wants to operate in the international environment. At home in Canada, your company has been considered to be a leader in the human resources field. You want to select the appropriate staffing policy for your firm, and recognize that it is important to integrate staffing policy with your overall corporate operations.

Discuss the geocentric approach to staffing policy for your international firm. What is the rationale for this approach?

84) Your firm wants to operate in the international environment. At home in Canada, your company has been considered to be a leader in the human resources field. You want to select the appropriate staffing policy for your firm, and recognize that it is important to integrate staffing policy with your overall corporate operations.

How does a firm's staffing policy relate to the strategy that it is pursuing in a foreign country?

85) Describe the concept of human resources management. What extra challenges confront an international business in this area?

86) What is an expatriate manager? What are some of the steps that an international business can take to enhance the success of their expatriate manager program?

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87) What are management development programs? How can international businesses use management development programs as a strategic tool?

88) What is the purpose of cultural training for an expatriate? How can "culture shock" be avoided?

89) Discuss the issue of expatriate compensation. Suppose you worked for a firm that transferred you from the United States to a developing country in Asia or South America. How do you think you should be compensated relative to your peers in similar jobs at home?

90) Define and describe the balance sheet approach used by many MNCs to calculate the compensation they wish to offer to their expatriates.

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91) What is the principle role of labour unions? What concerns do organized labour have about multinational firms?

92) Explain the differences between centralized and decentralized approaches to international labour relations.

93) The opening case describes several examples where companies have successfully thought of the human resource implications for their firm in the future, when it may merge or change locations. ⊚ ⊚

true false

94) Human resource management refers to the activities an organization carries out to utilize its human resources effectively. ⊚ ⊚

95) firm.

true false

The role of HRM has a similar level of complexity for a domestic and an international

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⊚ ⊚

true false

96) A citizen of one country who is working abroad in one of the firm's subsidiaries is an expatriate manager. ⊚ ⊚

true false

97) The four strategies pursued by international businesses are the multi domestic, the international, the global, and the transnational. ⊚ ⊚

98)

Compensation policy is concerned with the selection of employees for particular jobs. ⊚ ⊚

99)

true false

true false

Staffing policy can be a tool for developing and promoting corporate culture. ⊚ ⊚

true false

100) The ethnocentric approach, the polycentric approach, and the geocentric approach are three types of staffing policies in international businesses research has identified. ⊚ ⊚

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101) A polycentric staffing policy is one in which parent-country nationals fill all key management positions. ⊚ ⊚

102)

A polycentric staffing policy can lead to "cultural myopia." ⊚ ⊚

103)

true false

true false

A polycentric staffing policy is appropriate for a firm following a multidomestic strategy. ⊚ ⊚

true false

104) The ethnocentric and geocentric approaches to staffing policy rely on extensive use of expatriate managers. ⊚ ⊚

true false

105) European-based multinationals experience a much higher expatriate failure rate than either Japanese or United States multinationals, according to a study conducted by R.L. Tung. ⊚ ⊚

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106) According to a study by R.L. Tung, the number one reason for expatriate failure among U.S. multinationals is the inability of the expatriate manager's spouse to adjust. ⊚ ⊚

true false

107) J.C. Baker's study of executives of U.S. multinationals found that most believed that knowledge of foreign languages was necessary for conducting business abroad. ⊚ ⊚

true false

108) Mendenhall and Oddou identified four dimensions that seem to predict success in foreign postings: self-orientation, others-orientation, perceptual ability, and cultural toughness. ⊚ ⊚

true false

109) One of the main reasons why managers turn down international assignments is concern over the impact of the assignment on their spouse's career. ⊚ ⊚

true false

110) Historically, most international businesses have been more concerned with management development than with training. ⊚ ⊚

111)

true false

Cultural training seeks to foster an appreciation for the host country's culture.

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⊚ ⊚

true false

112) According to the textbook, almost all expatriates believe that a position in a foreign country is beneficial to the careers of almost all expatriates, because their knowledge is highly valued by their company when they get home. ⊚ ⊚

113)

true false

There is unintentional bias in the performance evaluation of expatriate managers. ⊚ ⊚

true false

114) Repatriation should be seen as the final link in an integrated, circular process that connects good selection and cross-cultural training of expatriate managers with completion of their term abroad and reintegration into their national organization. ⊚ ⊚

true false

115) Management development programs don't do very much to build a unifying corporate culture by socializing new managers into the norms and value systems of the firm. ⊚ ⊚

true false

116) An enterprise with a homogenous employee base is underutilizing the talent to be found among women and minorities.

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⊚ ⊚

117)

A firm's performance appraisal systems are an important element of its control systems. ⊚ ⊚

118)

true false

Relying on hard data is enough to assess a manager's performance. ⊚ ⊚

119)

true false

true false

It's impossible to reduce bias in performance appraisal processes. ⊚ ⊚

true false

120) Key issues that are raised in regard to compensation practices in an global firm are how compensation should be adjusted to reflect national differences in economic circumstances, common compensation practices, and how expatriate managers should be paid. ⊚ ⊚

121)

true false

Base pay in most global firms is set with regard to local market conditions. ⊚ ⊚

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122) The balance sheet approach equalizes purchasing power across countries so employees keep their standard of living wherever they are located. ⊚ ⊚

true false

123) One task of the HRM function is to minimize conflict between the firm and organized labour. ⊚ ⊚

true false

124) A concern of organized labour is that an international business will keep highly skilled tasks in its home country and farm out only low-skilled tasks to foreign plants. ⊚ ⊚

true false

125) One very successful labour strategy has been to achieve international regulations on multinationals. ⊚ ⊚

126)

true false

Today, many global firms are not seeking to centralize control over labour relations. ⊚ ⊚

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127) Employees generally understand their company's commitment to sustainability the first time they hear about it. ⊚ ⊚

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Answer Key Test name: chapter 16 1) C 2) E 3) C 4) C 5) C 6) C 7) A 8) E 9) C 10) C 11) B 12) B 13) A 14) B 15) D 16) A 17) A 18) C 19) B 20) A 21) A 22) C 23) A 24) C 25) C 26) C Version 1

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27) D 28) C 29) A 30) A 31) C 32) A 33) B 34) C 35) A 36) B 37) B 38) B 39) B 40) A 41) D 42) D 43) E 44) D 45) C 46) A 47) E 48) A 49) D 50) A 51) B 52) D 53) A 54) C 55) D 56) B Version 1

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57) A 58) A 59) B 60) E 61) C 62) E 63) E 64) A 65) E 66) C 67) A 68) E 69) D 70) C 71) B 72) C 73) B 74) A 75) E 76) D 77) C 78) B 79) A 80) A 93) FALSE 94) TRUE 95) FALSE 96) TRUE 97) TRUE 98) FALSE Version 1

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99) TRUE 100) TRUE 101) FALSE 102) TRUE 103) TRUE 104) TRUE 105) FALSE 106) TRUE 107) FALSE 108) TRUE 109) TRUE 110) FALSE 111) TRUE 112) FALSE 113) TRUE 114) TRUE 115) FALSE 116) TRUE 117) TRUE 118) FALSE 119) FALSE 120) TRUE 121) TRUE 122) TRUE 123) TRUE 124) TRUE 125) FALSE 126) FALSE 127) FALSE

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