International Business
Exam Answer Key
Course Introduction
International Business explores the complexities and dynamics of conducting business across national borders, focusing on the economic, cultural, legal, and political environments that influence global commerce. Students will examine international trade theories, market entry strategies, cross-cultural communication, global supply chains, and the impact of multinational corporations. The course also addresses current issues such as global economic integration, ethical challenges, and the role of international institutions, providing a comprehensive understanding of how businesses operate and compete in a rapidly changing global landscape.
Recommended Textbook
International Logistics Management of International Trade Operations 3rd Edition by David
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Page 2
Chapter 1: Introduction
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Q1) The North American Free Trade Association (NAFTA)includes only the United States and Canada.
A)True
B)False
Answer: False
Q2) Most trade today is more likely to be explained by the Theory of Comparative Advantage than by the Theory of Absolute Advantage.
A)True
B)False
Answer: True
Q3) International trade is still mostly concentrated among the developed countries of the Northern Hemisphere.Which country is the largest exporter of the world?
A) United States
B) Germany
C) China
D) Japan
E) None of the above.
Answer: B
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Chapter 2: International Supply Chain Management
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Q1) Companies increasingly are designing products so that they can gain a competitive advantage through reverse logistics.Returned products are
A) refurbished for resale in secondary markets.
B) reused (packaging or containers).
C) remanufactured (restored to their original performance standards).
D) discarded.
E) All of the above
Answer: E
Q2) MRP,MRP II,and DRP are inventory management techniques that allow manufacturers to reduce their inventory levels.
A)True
B)False
Answer: True
Q3) Customer service became the primary focus of logistics in the 2000s.
A)True
B)False
Answer: True
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Page 4
Chapter 3: International Logistics Infrastructure
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Q1) The only water link between the Black Sea and the oceans is
A) the Corinth Canal.
B) the Danube River.
C) Lake Saint Clair.
D) the Bosporus Strait.
E) None of the above
Answer: D
Q2) In countries with poor traditional telephone services,communications infrastructure has rapidly been developed through A) fax machines.
B) satellite technology.
C) cellular telephones.
D) computers.
E) None of the above
Answer: C
Q3) The government of Poland estimates that ____________________ percent of its roads are in bad condition.
Answer: 80
Q4) The tunnel between France and Great Britain is called the ____________________.
Answer: Chunnel
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Chapter 4: Methods of Entry into Foreign Markets
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Q1) Usually,a distributor is located
A) near the exporter.
B) in the importing country.
C) near the capital city of the importing country.
D) in a neighboring country.
E) None of the above.
Q2) When they first go into international trading,most companies first do so after careful planning and thoughtful strategic planning.
A)True
B)False
Q3) When a distributor is involved in international trade,there are two sets of invoices: one set between the exporter and the distributor (who is also the importer),and a set of domestic invoices between the distributor and its customers.
A)True
B)False
Q4) A company has a foreign subsidiary (a wholly-owned foreign enterprise,WOFE)for which it builds a brand new facility.This facility is called a(n)____________________ operation.
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6
Chapter 5: International Contracts
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Q1) In most Middle Eastern countries,agents and distributors are not required to be nationals of the country.
A)True
B)False
Q2) Whenever a contract is established between two parties in the same country,the law governing the execution of this contract is determined by that country's legal system.
A)True
B)False
Q3) An agent can negotiate prices,delivery,or other sales terms with the buyer (importer)without direction from the exporter.
A)True
B)False
Q4) Under the Uniform Commercial Code (UCC),when a buyer agrees to an offer made by a seller,but indicates a desire for a different schedule of delivery or term of payment,such a response is considered to be a rejection of the offer.
A)True
B)False
Q5) An arbitration panel is usually made up of ____________________ arbitrators.
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Chapter 6: Terms of Trade or Incoterms
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Q1) Under the Delivered Duty Unpaid Incoterm,unloading costs are borne by the A) railroad.
B) ship line.
C) exporter.
D) harbor.
E) None of the above
Q2) Under the CIF Incoterm,the proof of delivery is an ocean bill of lading or a sea waybill.
A)True
B)False
Q3) Under Incoterm DEQ,transfer of responsibility for cargo from importer to exporter is at the ship's rail as the cargo is loaded onto the ship
A)True
B)False
Q4) Conceptually,the CPT Incoterm is the same as the CFR Incoterm,except it applies to goods shipped by means other than ocean transport,or shipped by sea without being handed over the ship's rail (roll-on-roll-off cargo or intermodal containers).
A)True
B)False
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8
Chapter 7: Terms of Payment
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Q1) A letter of credit is more secure than cash in advance.
A)True
B)False
Q2) In a letter of credit,the creditworthiness of the exporter is substituted for the creditworthiness of the importer.
A)True
B)False
Q3) The responsibilities of the presenting bank in the importing country generally stop at notifying the importer that the documents have arrived and at requesting that the importer endorse the draft or at requesting payment before releasing the documents.This is called trade acceptance.
A)True
B)False
Q4) An aval
A) is a used only in open accounts.
B) means funds are available.
C) makes the presenting bank a co-signer of a draft.
D) All of the above
E) None of the above
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Chapter 8: Currency of Payment (Managing Transaction
Risks)
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Sample Questions
Q1) The International Bank for Reconstruction
A) is called the Bretton Woods.
B) was developed to manage Germany's World War I reparations.
C) is also known as the World Bank.
D) All of the above
E) None of the above
Q2) One strategy a company can follow to protect itself from currency fluctuations is use of
A) a letter of credit.
B) risk retention.
C) forward market hedges.
D) All of the above
E) None of the above
Q3) SDR,an artificial currency,is designed to ____________________ the U.S.dollar in its role as the international currency.
Q4) Importers generally prefer quotes that are written in the currency of the exporter's country.
A)True
B)False
Q5) The euro was first created as an artificial ____________________.
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Chapter 9: International Commercial Documents
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Q1) The sentence "This merchandise licensed by U.S.for ultimate destination [country].Diversion contrary to U.S.Law prohibited" is
A) a Commerce Control List.
B) the Fenwick Anti-Terrorist Amendment of the Export Administration Act.
C) the "List of Specially Designated Nationals."
D) the Denied Person's List.
E) None of the above
Q2) A specialized commercial invoice is considered a trade barrier.
A)True
B)False
Q3) The United States requires a(n)____________________ Export Declaration.
Q4) Export quotas can be used to control scarce resources or prices of products for which an exporting country faces heavy competition.
A)True
B)False
Q5) Export quotas can be used to control scarce resources or prices of products for which a country has a monopoly.
A)True
B)False
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Chapter 10: International Insurance
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Q1) A letter of credit usually requires
A) an open ocean cargo policy.
B) a special cargo policy.
C) a Certificate of Insurance.
D) All of the above
E) None of the above
Q2) Hull insurance rates are dependent upon the ____________________ of a ship,the way it is maintained,and the equipment it has on board.
Q3) Institute Marine Cargo Clauses Coverage C
A) is required by Incoterms CIF and CIP.
B) is appropriate for most goods.
C) is adequate for most containerized goods.
D) All of the above
E) None of the above
Q4) A major financial problem occurred for Lloyd's of London due to its coverage of A) oil tankers.
B) Carlos Santana's hands.
C) the Russian embassy in Washington.
D) asbestos.
E) None of the above
Page 12
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Chapter 11: International Ocean Transportation
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Q1) Countries with an open registry often provide
A) secondary registries.
B) flags of convenience.
C) more strict regulation of ships.
D) an opportunity for ship owners from developing countries to register their ships in the United States.
E) None of the above
Q2) Which of the following international liability conventions allow carriers to argue that their liability is limited by "17 defenses," such as navigational errors?
A) the Hamburg Rules
B) the Rotterdam Rules
C) the Hague-Visby Rules
D) the Felixstowe Rules
E) None of the above
Q3) The ____________________ tonnage is the total weight of the ship when fully loaded,measured by the weight of the volume of water it displaces.
Q4) ____________________ ships do not operate on a regular schedule but travel wherever the company using the vessel wants the cargo delivered.
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Chapter 12: International Air Transportation
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Q1) Aircraft designed so that freight is carried on the main deck as well as in the belly hold are called ____________________.
Q2) An "open-skies" agreement is a contract between two airlines,designed to facilitate cargo shipments.
A)True
B)False
Q3) The largest airfreight company in the world is ____________________.
Q4) Large amounts of _____ enter the United States through the Miami Airport.
A) cut flowers
B) DVD players
C) television sets
D) processed sugar
E) None of the above
Q5) Most airfreighters are the same types of aircraft used in passenger service,except they are equipped with ____________________ decks.
Q6) Products that do not fit in the cargo bay of a traditional cargo aircraft are often referred to as ____________________.
Q7) Most airfreight on passenger planes is not palletized but is ____________________.
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Chapter 13: International Land and Multi-Modal Transportation
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Q1) Aircraft containers are used to aggregate small individual packages rather than to form a whole shipment.
A)True
B)False
Q2) Overloaded trucks are common in ____________________ and some parts of Asia.
Q3) Although there are some standardization attempts,most air freight ____________________ are designed to fit a specific aircraft.
Q4) Switzerland prohibits trucking through the Alps,forcing trucks to "piggy-back" on trains.
A)True
B)False
Q5) The term "project cargo" refers to cargo
A) that is oversize and cannot fit in a container.
B) that is outside of the normal realm of what shipping companies handle in terms of weight, size, or destination.
C) that weighs more than 100 metric tonnes and/or measures more than 100 cubic meters.
D) that requires special handling, such as refrigeration or atmospheric control.
E) None of the above
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Chapter 14: Packaging for Export
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Q1) An intermodal container is designed to withstand the weight of up to how many similar containers placed on top of it?
A) two
B) three
C) four
D) five
E) None of the above
Q2) Characteristic(s)of fiber drums is/are
A) they are more resistant to pilferage than bags.
B) they can readily be rolled on their sides.
C) they are resistant to mechanical damage such as that caused by forklifts or sharp corners.
D) All of the above
E) None of the above
Q3) The standardized size of pallets in Europe is
A) 80 centimeters by 120 centimeters.
B) 31.5 inches by 47.25 inches.
C) different from the measurements of most pallets in the United States.
D) All of the above
E) None of the above
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Chapter 15: International Logistics Security
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Q1) The ____________________ was created in November 2001 by consolidating into one administration a large number of small private security firms' employees.
Q2) When a security detection process determines that a cargo is innocuous (safe),even though the goods are dangerous,what type of error is it?
A) Type I error
B) Type II error
C) Type III error
D) Sampling error
E) All of the above
Q3) The policy of a one-hundred-percent inspection is considered flawed because A) the costs are staggering.
B) the amount of room it requires is greater than what is normally available.
C) the personnel needed is very large.
D) it is ineffective.
E) All of the above
Q4) The events of September 11,2001 did not have a major impact on the way international business is conducted.
A)True
B)False
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Chapter 16: Customs Clearance
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Q1) Customs offices sometimes can use a "countervailing" duty to tax products that the exporting government is found to have subsidized.
A)True
B)False
Q2) The Brussels Definition of Value has been replaced by what is called "arbitrary" value.
A)True
B)False
Q3) A quota that places a yearly limit on the number of items entering a country under a specific HS number is called a(n)____________________ quota.
Q4) The country of origin of a product is the country in which it acquired its most substantial ____________________.
Q5) Duty is usually based upon
A) tariff, border traffic taxes, and non-tariff barriers.
B) value-added taxation, absolute quota, and patriotism campaigns.
C) pre-shipment inspections and Customs bonds.
D) product classification, valuation, and origin.
E) None of the above
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Chapter 17: Using International Logistics for Strategic Advantage
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Q1) In a transaction conducted in the exporter's currency,it is the importer that carries the currency exchange rate risk.
A)True
B)False
Q2) Which of the following Incoterms is the least customer-friendly?
A) Free On Board
B) Free Alongside Ship
C) Free Domicile
D) Cost, Insurance and Freight
E) None of the above
Q3) The technique developed by Edmond Weiss to communicate clearly and accurately with non-native English speakers is called ____________________.
Q4) One of the reasons English is "everybody's second language" is that it is the easiest language to learn.
A)True
B)False
Q5) The system of measurement used by just about every country in the world,and which is formally known as the International System of Units is commonly known as the ____________________ system.
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