Course Introduction
International Trade Final
Exam Questions
International Trade explores the theories, policies, and practices that govern the exchange of goods and services across national borders. This course examines the benefits and challenges of global trade, the role of international institutions, comparative advantage, trade restrictions, and the impact of tariffs and quotas. Students will analyze how trade affects economic growth, employment, and income distribution, and assess contemporary issues such as globalization, trade agreements, and the effects of trade on developing economies. The course combines theoretical frameworks with real-world case studies to provide a comprehensive understanding of international economic relationships.
Recommended Textbook
Global Business Today 8th Edition by
Charles W. L. Hill
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17 Chapters
2491 Verified Questions
2491 Flashcards
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Page 2
Chapter 1: Globalization
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Sample Questions
Q1) The advanced industrial nations of the West committed themselves after World War II to removing barriers to the free flow of goods,services,and capital between nations.This goal was enshrined in the:
A) Inter-American Treaty of Reciprocal Assistance.
B) Comprehensive Economic Partnership Agreement.
C) General Agreement on Tariffs and Trade.
D) North American Free Trade Agreement.
E) United Nations charter.
Answer: C
Q2) How is managing an international business different from managing a purely domestic business?
Answer: Managing an international business is different from managing a purely domestic business for at least four reasons: (1)countries are different, (2)the range of problems confronted by a manager in an international business is wider and the problems themselves are more complex than those confronted by a manager in a domestic business, (3)an international business must find ways to work within the limits imposed by government intervention in the international trade and investment system,and (4)international transactions involve converting money into different currencies.
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Chapter 2: National Differences in Political Economy
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Q1) The term political economy is used to stress the fact that the political,economic,and legal systems of a country are independent of each other.
A)True
B)False
Answer: False
Q2) What are the various safeguards that are typically enshrined in constitutional law of an ideal representative democracy?
Answer: To guarantee that elected representatives can be held accountable for their actions by the electorate,an ideal representative democracy has a number of safeguards that are typically enshrined in constitutional law.These include (1)an individual's right to freedom of expression,opinion,and organization; (2)a free media; (3)regular elections in which all eligible citizens are allowed to vote; (4)universal adult suffrage; (5)limited terms for elected representatives; (6)a fair court system that is independent from the political system; (7)a nonpolitical state bureaucracy; (8)a nonpolitical police force and armed service; and (9)relatively free access to state information.
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Chapter 3: Political Economy and Economic Development
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Sample Questions
Q1) Economic advances in many countries have led to the:
A) decline of middle and working classes.
B) rise of totalitarian reforms.
C) decline of property rights.
D) emergence of closed and self-contained societies.
E) emergence of increasingly prosperous middle and working classes.
Answer: E
Q2) Which of the following creates an unfavorable environment for innovations and entrepreneurship?
A) Market economy
B) Economic freedom
C) State monopoly in production
D) Privatization
E) Strong legal protection of property rights
Answer: C
Q3) In Amartya Sen's view,development is solely an economic process,and not a political process.
A)True
B)False
Answer: False
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Chapter 4: National Differences in Culture
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Q1) Survival values typically stress the importance of:
A) diversity in the society.
B) economic and physical security.
C) self-expression.
D) participation in political processes.
E) capitalism.
Q2) What are norms? Briefly describe the two categories of norms.
Q3) A major distinction between a conventional bank and an Islamic bank is that:
A) Islamic banks are allowed to charge higher interest rates on loans.
B) Islamic banks cannot accept private deposits.
C) Islamic banks cannot pay or charge interest.
D) Islamic banks are not subject to any form of law.
E) Islamic banks are supposed to refrain from making a profit through any source.
Q4) Islam has roots in both Judaism and _____.
A) Buddhism
B) Hinduism
C) Christianity
D) Confucianism
E) Shinto
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Chapter 5: Ethics in International Business
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Q1) Which of the following practices should be avoided by a company to ensure ethical decision-making?
A) Auditing past decisions made in the company
B) Protecting the fundamental rights of stakeholders
C) Taking care of the interests of external stakeholders
D) Placing its economic interests before its moral principles
E) Adopting the moral principles specified in the code of ethics of the company
Q2) Due to certain strict environmental and employment standards in its home nation,Taurus Inc.has shifted its operations to developing nations.Hence,the firm has now been able to gain competitive advantage by avoiding costly pollution controls.This strategic move of Taurus Inc.will be considered as:
A) illegal.
B) ethical.
C) immoral.
D) uneconomical.
E) totalitarian.
Q3) Discuss the concept of ethical dilemma.
Q4) Describe how violation of the apartheid laws by Western businesses helped improve human rights in South Africa.
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Chapter 6: International Trade Theory
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Sample Questions
Q1) Discuss Paul Samuelson's critique of free trade.
Q2) A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.
A)True
B)False
Q3) According to Vernon,which of the following factors obviates the need for pioneering U.S.firms to look for low-cost production sites in other countries?
A) The uncertainties and risks inherent in introducing new products are very low.
B) The demand for most new products tends to be based mainly on price.
C) U.S. labor costs are relatively low compared to global standards.
D) Firms can charge relatively high prices for new products.
E) The production of innovative products in other advanced countries, limits the potential for exports from the United States.
Q4) Porter argues that an absence of domestic rivalry is vital to the creation and persistence of international competitive advantage in an industry.
A)True
B)False
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Chapter 7: The Political Economy of International Trade
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Q1) According to Krugman,the ideal way for a country to respond,when the foreign competitors of its companies are already being supported by government subsidies,is probably not to engage in retaliatory action,but to:
A) help establish rules that minimize the use of trade-distorting subsidies.
B) adopt the strategic trade policy as a way to establish domestic firms in a dominant position in the global industry.
C) provide subsidy to a new industry where the foreign competitors have not had the benefit of such strategic trade policies.
D) use a combination of home-market protection and export-promoting subsidies.
E) provide high level of subsidies to the oldest industry in the country.
Q2) _____ are bureaucratic rules designed to make it difficult for imports to enter a country.
A) Voluntary export restraints
B) Consumer regulations
C) Subsidies
D) Administrative trade policies
E) Public sector regulations
Q3) Explain the organizational structure and the key functions of the WTO.
Q4) What are the issues that are at the forefront of the current agenda of the WTO?
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Chapter 8: Foreign Direct Investment
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Q1) The pragmatic nationalist view is that :
A) FDI benefits only the host country.
B) FDI does not make any positive contribution to the host economy.
C) every country should adopt the free market view.
D) FDI should not be allowed by any country as it is an instrument of economic domination rather than economic development.
E) FDI has both benefits and costs.
Q2) The _____ of foreign direct investment refers to the amount of FDI undertaken over a given period (normally a year).
A) portfolio
B) flow
C) status
D) stock
E) fragment
Q3) By the early 1990s,the radical position toward FDI was in retreat due to the rise of communism in eastern Europe.
A)True
B)False
Q4) What are the benefits of FDI to the home (source)country?
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Chapter 9: Regional Economic Integration
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Q1) Which of the following entails a closer economic integration and cooperation than a common market?
A) Command economy
B) Customs union
C) Efficient market
D) Free trade area
E) Economic union
Q2) Which of the following treaties committed European Community members to adopt a common currency by January 1,1999?
A) The Maastricht Treaty
B) The Treaty of Rome
C) The Treaty of Lisbon
D) The Montreal Treaty
E) The Treaty of Paris
Q3) Briefly describe the benefits of the euro.
Q4) Mercosur originated in 1988 as a free trade pact between Chile and Argentina.
A)True
B)False
Q5) Describe the drawbacks of the euro.
Q6) Describe the contents of the North American Free Trade Agreement (NAFTA).
Page 11
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Chapter 10: The Foreign Exchange Market
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Q1) The foreign exchange market is a market for converting the currency of one country into that of another country.
A)True
B)False
Q2) Which of the following is true of the determination of exchange rates?
A) Differences in relative demand and supply do not explain the determination of exchange rates.
B) Differences in relative demand and supply explain the factors underlying the phenomenon behind the demand for and supply of a currency.
C) The differences in relative demand and supply alone provide a high level understanding of behind determination of exchange rates.
D) While the differences in relative demand and supply they provide an accurate explanation for appreciation of currencies, they fail to explain depreciation.
E) The differences in relative demand and supply cannot explain or predict the conditions under which a particular currency will be in demand or not.
Q3) Briefly describe the schools of thought regarding exchange rate forecasting.
Q4) How does an increase in money supply in an economy lead to inflation?
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Page 12
Chapter 11: The International Monetary System
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Q1) Without currency devaluation,a country in "fundamental disequilibrium" would experience:
A) a persistent trade surplus.
B) a balance-of-payments equilibrium.
C) an increase in exports.
D) high unemployment.
E) deflation.
Q2) Since March 1973,currency exchange rates have become less volatile and more predictable than they were between 1945 and 1973.
A)True
B)False
Q3) When the Bretton Woods participants established the World Bank,the need to lend money to third world nations was foremost in their minds.
A)True
B)False
Q4) Describe the Jamaica agreement of 1976.What were the main elements of this agreement?
Q5) What was the drawback of the Bretton Woods system?
Q6) Describe gold standard and a balance-of-trade equilibrium.
Page 13
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Chapter 12: The Strategy of International Business
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Sample Questions
Q1) Typically,the price a firm charges for a good or service is:
A) less than the value placed on that good or service by the customer.
B) more than what customers assume it would be.
C) more than the market price for similar goods or services.
D) the same as the value placed on that good or service by the customer.
E) less than the lowest priced similar good or service in the market.
Q2) Successful global expansion requires the transfer of core competencies to foreign markets where indigenous competitors lack them.
A)True
B)False
Q3) Which of the following is true of a firm that pursues a global standardization strategy?
A) It ensures that it pursues a high-cost strategy on a global scale.
B) It has its production, marketing, and R & D activities in only one optimum location.
C) It tries to customize its products to local conditions.
D) It has shorter production runs.
E) It reaps maximum benefits from economies of scale and learning effects.
Q4) What is an experience curve? What is its strategic significance?
Q5) What are the disadvantages of strategic alliances?
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Chapter 13: Entering Foreign Markets
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Q1) In international business,an advantage of being a late entrant in a foreign market is the ability to:
A) create switching costs that tie customers into products or services.
B) capture demand by establishing a strong brand name.
C) build sales volume and ride down the experience curve before early entrants.
D) ride on an early entrant's investments in learning and customer education.
E) create a cost advantage over first-movers.
Q2) Establishing a _____ gives international firms a 100 percent share in the profits generated in a foreign market.
A) franchising agreement
B) licensing deal
C) joint venture
D) wholly owned subsidiary
E) turnkey project
Q3) First-mover advantages refer to the advantages frequently associated with entering a market early.
A)True
B)False
Q4) Describe the advantages of turnkey projects as a mode of entry into a foreign market.
15
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Chapter 14: Exporting, Importing, and Countertrade
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Q1) Which of the following is true of countertrade?
A) The governments of developing nations sometimes insist on a certain amount of countertrade.
B) Countertrade is a means of structuring an international sale when conventional means of payment are cost-effective.
C) Nonconvertibility is an advantage for exporters.
D) Nonconvertibility implies that the exporter will only be paid in his or her home currency.
E) Most exporters desire payment in a currency that is not convertible.
Q2) TruWorth Petroleum negotiated a deal with a foreign country in which TruWorth would build several ammonia plants in the foreign country and receive ammonia as partial payment over a 20-year period.This is an example of _____.
A) switch trading
B) a buyback
C) a counterpurchase
D) an offset
E) barter
Q3) What is an Ex-Im Bank? What is its mission and how does it pursue it?
Q4) Describe the pros and cons of countertrade.
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Chapter 15: Global Production, Outsourcing, and Logistics
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Q1) When should a firm concentrate its production facilities in a centralized location?
A) When the production technology has a low minimum efficient scale
B) When the production technology has low fixed costs
C) When important exchange rates are expected to remain relatively stable
D) When flexible manufacturing technologies are not available
E) When the product's value-to-weight ratio is low
Q2) Six Sigma refers to a statistically based philosophy that aims to:
A) increase defects.
B) lower productivity.
C) increase the costs of value creation.
D) eliminate waste.
E) increase cost per unit.
Q3) A major aspect of a transnational strategy is a belief that valuable knowledge resides in a firm's domestic operations instead of its foreign subsidiaries.
A)True
B)False
Q4) How do country-specific factors affect a country's attractiveness as a manufacturing base?
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17
Chapter 16: Global Marketing and R-D
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Q1) Which of the following is true of barriers to international communication?
A) Noise tends to increase the probability of effective communication.
B) Source effects can be beneficial for an international business when potential consumers in a target country have a bias against foreign firms.
C) Many international businesses try to promote positive source effects by deemphasizing their foreign origins.
D) Fewer firms vie for the attention of prospective customers in developing countries, thus the noise level is lower.
E) Research suggests that a consumer may use country of origin as a cue when evaluating a product, particularly if he or she has detailed knowledge of the product.
Q2) The fact that tastes and preferences of consumers are not universal disproves Theodore Levitt's views on the globalization of markets.
A)True
B)False
Q3) A technological innovation can make established products obsolete overnight.
A)True
B)False
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Chapter 17: Global Human Resource Management
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Q1) In the context of international labor relations,which of the following is true of organized labor?
A) It supports the pursuit of a transnational standardization strategy.
B) It supports the pursuit of a global standardization strategy.
C) It increases unintentional bias in evaluating the performance of expatriate managers.
D) It limits a firm's ability to integrate and consolidate its global operations.
E) It reduces a firm's ability to understand host-country cultural differences that require different approaches to marketing.
Q2) In the context of international labor relations,what are the concerns of organized labor?
Q3) _____ refers to a subset of expatriates who are citizens of a foreign country working in the home country of their multinational employer.
A) Virtual expatriates
B) Inpatriates
C) Third-country nationals
D) Host-country nationals
E) Parent-country nationals
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