International Trade Exam Solutions - 2491 Verified Questions

International Trade Exam Solutions

Course Introduction

International Trade explores the economic, political, and institutional factors that govern the exchange of goods and services across national borders. The course examines foundational theories such as comparative advantage and the gains from trade, while also addressing practical policy issues like tariffs, trade agreements, and the role of international organizations like the WTO. Students will analyze the impact of globalization on economies and societies, study the effects of trade on income distribution and development, and discuss current challenges including trade disputes and protectionism. Through case studies and empirical examples, the course provides a comprehensive understanding of how international trade shapes today's global economy.

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Global Business Today 8th Edition by

Charles W. L. Hill

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Page 2

Chapter 1: Globalization

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Q1) One concern of globalization opponents is that it undermines the influence of supranational organizations and promotes the sovereignty of individual nation-states.

A)True

B)False

Answer: False

Q2) Ryan is the executive general manager of a U.S.multinational and Jacob is a manager in a similar position,but works for another U.S.company that operates only in its home country.In this context,which of the following business functions will be most typically exclusive to Ryan?

A) Marketing a product or service

B) Maintaining healthy relations with the U.S. government

C) Planning on a business strategy

D) Adhering to the labor and environmental standards

E) Choosing an appropriate mode for entering a particular foreign country

Answer: E

Q3) The IMF is less controversial than its sister institution,the World Bank.

A)True

B)False

Answer: False

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Page 3

Chapter 2: National Differences in Political Economy

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Q1) The governments of China,Vietnam,and Laos are communist in name only because those nations have adopted wide-ranging market-based economic reforms.

A)True

B)False

Answer: True

Q2) In the context of common law,which of the following terms refers to the ways in which laws are applied in specific situations?

A) Tradition

B) Precedent

C) Custom

D) Interpretation

E) Culture

Answer: C

Q3) Command economies provide a more favorable environment for innovation and entrepreneurs than market economies.

A)True

B)False

Answer: False

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4

Chapter 3: Political Economy and Economic Development

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Q1) The purchasing power parity for different countries is adjusted (up or down)depending upon whether the cost of living is lower or higher than in the United States.

A)True

B)False

Answer: True

Q2) Which of the following is most likely to be implemented by a country as a part of deregulation?

A) Prohibition of private enterprises from operating in certain sectors

B) Commitment toward communism

C) Removal of price controls

D) Centrally planned economic system

E) Increased restrictions on foreign direct investment

Answer: C

Q3) In general,command and mixed economies failed to deliver the kind of sustained economic performance that was achieved by countries adopting market-based systems.

A)True

B)False Answer: True

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Chapter 4: National Differences in Culture

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Q1) What is class-consciousness? What is its impact on businesses?

Q2) _____ 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.

A) Social mobility

B) Class consciousness

C) Cross-culture literacy

D) Social awareness

E) Class representativeness

Q3) The least rigid system of social stratification is a caste system.

A)True

B)False

Q4) _____ is a non-religious,ethical system principally followed in China,Korea,and Japan.

A) Shinto

B) Buddhism

C) Judaism

D) Confucianism

E) Hinduism

Q5) Compare and contrast the principles of Hinduism and Buddhism.

Page 6

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Chapter 5: Ethics in International Business

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Q1) The _____ outlawed the paying of bribes to foreign government officials to gain business.

A) Monopoly trade practices Act

B) Foreign Corrupt Practices Act

C) Sullivan principles

D) Smith-Connally Act

E) Taft-Hartley Act

Q2) Who are a firm's stake holders? What are the two types of stakeholders?

Q3) Unipeg Corporation has uniform high sales targets for its employees all across the globe,regardless of the environmental constraints in each market.Employees are penalized for any shortfall.This has caused many employees to falsify the values of their sales.In this context,the roots of unethical behavior can be traced to:

A) unrealistic performance expectations.

B) cultural differences of countries.

C) strong personal ethics among employees.

D) varying ethical standards in different nations.

E) national differences in factors of production.

Q4) Discuss John Rawls principles of justice.

Q5) Discuss the utilitarian approach to business ethics and examine its weaknesses.

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Chapter 6: International Trade Theory

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Q1) Vernon predicts that as the demand for a new product starts to grow in other advanced countries,in the long run,:

A) the cost of labor in these advanced countries begins to increase.

B) it becomes profitable for foreign firms to invest in production facilities in the United States.

C) the firms in the United States begin to gain an absolute advantage.

D) it begins to limit the potential for exports from the United States.

E) the same product will begin command a higher price.

Q2) _____ predicts that countries will export those goods that make intensive use of factors that are locally abundant,while importing goods that make intensive use of factors that are locally scarce.

A) Mercantilism

B) The theory of absolute advantage

C) The Heckscher-Ohlin theory

D) The theory of comparative advantage

E) Samuelson's critique

Q3) From a profit perspective based on the various international theories,how would a business go about choosing locations for its various productive activities?

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Chapter 7: The Political Economy of International Trade

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Q1) Antidumping duties are often called _____ duties.

A) tariff rent

B) counterveiling

C) subsidy

D) quota rent

E) export restraint

Q2) Tariffs are the most complex instrument of trade policy.

A)True

B)False

Q3) Which of the following historical events signifies the first official embracing of free trade as a government policy by a country?

A) The Union of the Crowns in 1603

B) The repeal of the Corn Laws by the British Parliament in 1846

C) The Treaty of American Independence in 1783

D) The Industrial Revolution of the 18^th and 19^th centuries

E) The Glorious Revolution of 1688

Q4) Briefly describe the implications of the strategic trade policy as applied to international trade.

Q5) Are tariffs levied only on imports?

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Chapter 8: Foreign Direct Investment

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Q1) According to the extreme version of radical view,no country should ever permit foreign corporations to undertake FDI,because they can never be instruments of economic development,only of economic domination.

A)True

B)False

Q2) A firm will favor FDI over exporting as an entry strategy when:

A) the costs of establishing production facilities are high.

B) the transportation costs or trade barriers are high.

C) there are problems associated with doing business in a different culture.

D) the products involved have a high value-to-weight ratio.

E) the firm wants to occupy a position that falls inside the efficiency frontier.

Q3) Describe the role of WTO in the liberalization of FDI.

Q4) When a country is importing more goods and services than it is exporting,it is incurring a(n):

A) trade surplus.

B) current account deficit.

C) positive balance of payment.

D) economic recession.

E) net capital inflow.

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Chapter 9: Regional Economic Integration

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Q1) Which of the following is true of the political case for regional economic integration?

A) Linking neighboring economies increases the potential for violent conflict.

B) Free trade stimulates economic growth, which creates dynamic gains from trade.

C) Making neighboring economies increasingly dependent on each other fails to create incentives for political cooperation.

D) Countries can enhance their political weight in the world by grouping their economies.

E) Those who have sought a united Europe have always had a desire to make another war in Europe imminent.

Q2) Briefly describe the Association of Southeast Asian Nations.

Q3) Which of the following refers to an association of English-speaking Caribbean states that are attempting to establish a customs union?

A) CARICOM

B) Central American Free Trade Agreement

C) Central American Common Market

D) Free Trade Area of the Americas

E) Caribbean Single Market and Economy

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Chapter 10: The Foreign Exchange Market

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Q1) The phenomenon of _____ occurs when residents and nonresidents of a country rush to convert their holdings of domestic currency into a foreign currency.

A) deflation

B) arbitrage

C) liquidity rush

D) capital flight

E) currency swap

Q2) _____,a category of foreign exchange risk,is concerned with the effect of exchange rate changes on individual transactions,most of which are short-term affairs that will be executed within a few weeks or months.

A) Purchasing power parity

B) Transaction exposure

C) Economic exposure

D) Translation exposure

E) Currency speculation

Q3) When companies wish to convert currencies,they typically enter the foreign exchange market directly.

A)True

B)False

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Page 12

Chapter 11: The International Monetary System

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Q1) During the 1997 Asian currency crisis,the currency board of _____ maintained the value of its currency against the U.S.dollar.

A) Japan

B) Taiwan

C) Hong Kong

D) Indonesia

E) China

Q2) Which of the following is a main element of the Jamaica agreement of 1976?

A) The establishment of the International Monetary Fund

B) The adoption of fixed exchange rates

C) The increase in the total annual IMF quotas to $41 billion

D) The declaration of gold as the reserve asset

E) The decrease in the total membership of the International Monetary Fund

Q3) Which of the following statements is true about the changes in the world monetary system since March 1973?

A) The value of the U.S. dollar has never seen a fall ever since.

B) Exchange rates have become much more volatile.

C) Exchange rates have become more predictable.

D) The fixed rate system was adopted to calculate exchange rates.

E) The European monetary system as an institution has gained more prominence.

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Chapter 12: The Strategy of International Business

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Q1) In theory,which of the following advantages can be realized by a firm by implementing a global web of operations?

A) It will be able to raise the perceived value of its goods and services.

B) It will be able to decrease consumers' reservation price for its products.

C) It will be able to decrease consumer surplus.

D) It will be able to increase the cost of value creation.

E) It will be able to sell its products at a price which is below its cost price in its home country.

Q2) The ability to spread fixed costs over a large volume is one of the sources of economies of scale.

A)True

B)False

Q3) Which of the following terms best represents the requirements that are the same all over the world,such as steel,bulk chemicals,and industrial electronics?

A) Universal needs

B) Efficiency frontier

C) Global web

D) Lateral requirements

E) Supreme needs

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Page 14

Chapter 13: Entering Foreign Markets

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Q1) Which of the following is true of the value that an international business can create in a foreign market?

A) If the international business offers the same type of product that indigenous competitors are offering, then the value of that product is likely to be greater.

B) If the international business can offer a product that satisfies an unmet need, the value of that product to consumers is likely to be lower.

C) Greater value of an international business translates into an inability to charge higher prices and/or to build sales volume more rapidly.

D) The value that an international business can create in a foreign market depends on the suitability of its product offering to that market and the nature of indigenous competition.

E) An international firm should not rank countries in terms of their attractiveness and long-run profit potential because these factors are always changing.

Q2) What are the consequences of an international firm entering a foreign market on a significant scale?

Q3) In terms of international business,briefly describe pioneering costs.

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Chapter 14: Exporting, Importing, and Countertrade

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Q1) A firm sells some products to a foreign country.The foreign country pays the firm in dollars,but in exchange,the firm agrees to spend some of the proceeds from the sale on textiles produced by the foreign country.In which of the following types of countertrade arrangement are the two parties engaged?

A) Switch trading

B) Buyback

C) Counterpurchase

D) Barter

E) Compensation

Q2) Lack of trust in international trade is exacerbated by the distance between the two parties in space,language,and culture.

A)True

B)False

Q3) Firms that do not export often:

A) face problems of currency conversion.

B) lose out on significant opportunities for cost reduction.

C) are able to reduce their unit costs.

D) are not intimidated by the business practices of foreign countries.

E) explore foreign markets to see where they can leverage their technology.

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Page 16

Chapter 15: Global Production, Outsourcing, and Logistics

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Q1) In terms of minimum efficient scale of output,the "unit cost curve" rises with output until a certain output level is reached,at which point further increases in output realize little reduction in unit costs.

A)True

B)False

Q2) Which of the following is a consequence of using flexible machine cells?

A) It fails to adapt to the production of different products.

B) It generally results in stockpiles of partly finished products.

C) It improves capacity utilization and reduces wastes.

D) It increases setup time for complex equipment.

E) It adds to the cost structure of a firm.

Q3) Two product factors impact location decisions.They are the product's value-to-weight ratio and:

A) whether the product serves universal needs.

B) the product's life cycle.

C) the product's packaging.

D) the availability of flexible manufacturing technology.

E) whether the product is produced using environmental friendly methods.

Q4) Discuss the advantages and the disadvantages of just-in-time (JIT)inventory systems.

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Chapter 16: Global Marketing and R-D

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Q1) When the retail sector is very concentrated:

A) it is more expensive for the firm to make contact with each individual retailer.

B) it makes sense for a firm to deal with wholesalers instead of retailers.

C) a relatively large sales force is required to deal with the retail sector.

D) there are long channels of distribution.

E) the orders generated from each sales call can be large.

Q2) Which of the following has resulted in a dramatic shortening of product life cycles?

A) Acceleration of the pace of technological change

B) Intensity of domestic competition

C) Affluence of customers

D) Increase in the number of educated consumers

E) Removal of trade barriers

Q3) With regard to communication strategies,what is the difference between a push and a pull strategy?

Q4) Discuss the arguments for and against standardized advertising.

Q5) Describe the differences in distribution systems between countries in terms of retail concentration.

Q6) Briefly describe predatory pricing and multipoint pricing strategy.

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Chapter 17: Global Human Resource Management

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Q1) Unless a host country has a reciprocal tax treaty with the expatriate's home country,an expatriate must pay income tax to both the home- and host-country governments.

A)True

B)False

Q2) A firm that adopts a polycentric staffing policy is less likely to:

A) isolate foreign subsidiaries from corporate headquarters.

B) implement an expensive staffing policy.

C) be controlled by corporate headquarters.

D) suffer from cultural myopia.

E) provide growth opportunities.

Q3) An expatriate manager is a citizen of one country who is working abroad in one of the firm's subsidiaries.

A)True

B)False

Q4) Describe any two components of a typical expatriate compensation package.

Q5) For international firms,an ethnocentric staffing approach is compatible with a localization strategy.

A)True

B)False

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