International Trade Question Bank
Course Introduction
International Trade explores the fundamental theories and practical applications of trade between nations, examining why countries exchange goods and services and how these exchanges impact economies globally. The course covers classical and modern trade theories, the roles of comparative and absolute advantage, and the effects of trade policies such as tariffs, quotas, and trade agreements. Students will analyze the implications of globalization, regional integration, and the influence of institutions like the World Trade Organization. Through case studies and real-world examples, the course also delves into contemporary issues, including trade disputes, the impact of technology, and the challenges faced by developing economies in the international marketplace.
Recommended Textbook
International Business The New Realities 3rd Edition by S. Tamer Cavusgil
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20 Chapters
1910 Verified Questions
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Page 2
Chapter 1: Introduction: What Is International Business
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Sample Questions
Q1) In a short essay, explain the cross-cultural risk faced by internationalizing firms. What causes this type of risk? Why might it pose a problem for internationalizing firms?
Answer: Cross-cultural risk refers to a situation or event where a cultural miscommunication puts some human value at stake. Cross-cultural risk is posed by differences in language, lifestyles, mindsets, customs, and religion. Values unique to a culture tend to be long-lasting and transmitted from one generation to the next. These values influence the mindset and work style of employees and the shopping patterns of buyers. Foreign customer characteristics differ significantly from those of buyers in the home market.
Language is a critical dimension of culture. In addition to facilitating communication, language is a window on people's value systems and living conditions. When translating from one language to another, it is often difficult to find words that convey the same meanings. Such challenges impede effective communication and cause misunderstandings. Miscommunication due to cultural differences gives rise to inappropriate business strategies and ineffective relations with customers.
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Chapter 2: Globalization of Markets and the
Internationalization of the Firm
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Sample Questions
Q1) While a degree of cultural imperialism may be at work, it is offset by the countertrend of ________.
A) offshoring
B) McDonaldization
C) privatization
D) local nationalism
Answer: D
Q2) The third phase of globalization was triggered by ________.
A) the end of World War II
B) the invention of electricity
C) the end of World War I
D) the Great Depression
Answer: A
Q3) Falling trade barriers are facilitated by the WTO.
A)True
B)False
Answer: True
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Page 4
Chapter 3: Organizational Participants That Make
International Business Happen
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Sample Questions
Q1) Nanocell's management team is considering entering into other foreign markets using a strategy of foreign direct investment (FDI). Which of the following, if true, would most support the claim that expansion through FDI would benefit Nanocell?
A) Most small companies enter foreign markets by exporting, as Nanocell did two years ago.
B) SMEs prefer FDI as a foreign market entry strategy even though it is expensive.
C) Nanocell plans to cut advertising costs in the long run.
D) FDI is a common and successful foreign market entry strategy for multinational enterprises.
Answer: D
Q2) Distribution channel intermediaries perform all of the following functions for focal firms EXCEPT ________.
A) production
B) advertising
C) customer service
D) warehousing
Answer: A
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Chapter 4: The Cultural Environment of International Business
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Sample Questions
Q1) Polycentric orientation refers to ________.
A) a host-country mind-set in which the manager develops a strong affinity with the country in which she or he conducts business
B) the use of one's own culture as the standard for judging other cultures
C) a collectivist mind-set, which emphasizes conformity, duty, prescribed roles, and sacrifice for the greater good
D) the tendency to rely on elaborate verbal explanations, putting much emphasis on spoken words
Q2) As part of opening manufacturing units abroad, a U.S. apparel firm decided to send its apparel production coordinator Chris to Bangladesh. Chris is distressed that people don't come to meetings on time and finds it disrespectful when his team members stand too close to him. Chris may trigger a cross-cultural risk by a(n) ________.
A) ethnocentric orientation
B) anthropocentric orientation
C) polycentric orientation
D) geocentric orientation
Q3) In a short essay, describe three guidelines that managers should follow to achieve cross-cultural success.
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Chapter 5: Ethics and International Business
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Sample Questions
Q1) Which of the following is true with regard to corruption?
A) Countries with minimal corruption fail to attract direct investment.
B) In firms, corruption rarely occurs across the range of value chain activities.
C) Corruption harms the poorest in societies.
D) Under the Sherman Antitrust Act, firms charged for corruption may be fined $2 million and managers can be imprisoned for up to five years.
Q2) Trademarks, copyrights, and patents are examples of ________.
A) intellectual property rights
B) fundamental rights
C) tangible property rights
D) ethical rights
Q3) Which of the following approaches to ethical standards for corporate governance reflects the view that the best ethical action is the one that provides the most good or the least harm?
A) common good approach
B) utilitarian approach
C) virtue approach
D) fairness approach
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Chapter 6: Theories of International Trade and Investment
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Sample Questions
Q1) ________ argues that increasing returns to scale, especially economies of scale, are important for superior international performance in industries that succeed best as their production volume increases.
A) Comparative theory
B) Competitive theory
C) Cost-advantage theory
D) New trade theory
Q2) Distinguish between comparative and competitive advantages. Provide examples.
Q3) Earth-Rite executives are considering internalizing operations in Brazil. Which of the following, if true, best supports this plan?
A) The management of Earth-Rite wants to maximize dissemination of proprietary knowledge.
B) Intermediaries and collaborators ensure greater control over domestic operations.
C) By internalizing operations, Earth-Rite will retain control of product quality.
D) Internalizing value-chain activities increases employee turnover.
Q4) In a short essay, explain the absolute advantage principle. Provide an example of the principle at work.
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Chapter 7: Political and Legal Systems in National
Environments
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Sample Questions
Q1) Which of the following characterizes country risk?
A) The political and legal systems of adjacent nations greatly impact the country risk of nations that host foreign firms.
B) Country risk will change only after the creation of laws and regulations that affect foreign firms.
C) A nation's country risk level remains fairly constant until the election and installation of a new political leader.
D) Country risk is always present, but its intensity fluctuates over time and from country to country.
Q2) Which of the following statements is true about managing country risk?
A) Scanning allows a firm to assess the potential country risk.
B) Firms can reduce country risk by entering markets in collaboration with a foreign partner.
C) Country risk can seldom be anticipated by advance research.
D) Home-country employees are the best source for anticipating country risk in host-countries.
Q3) Market forces and free trade are encouraged in democracies.
A)True
B)False
Page 9
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Chapter 8: Government Intervention in International Business
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Sample Questions
Q1) Which of the following entry strategies do most firms use in the absence of high tariffs?
A) FDI
B) licensing
C) joint ventures
D) exporting
Q2) Which of the following may allow a manufacturer to practice dumping?
A) countervailing duties
B) subsidies
C) currency control
D) import license
Q3) The purpose of protectionism is to protect ________.
A) domestic industries from foreign competitors
B) foreign firms from domestic competition
C) domestic exports from high production costs
D) foreign and domestic firms from labor unions
Q4) Anti-dumping duty reduces or eliminates the competitive advantage of imported products priced at abnormally low levels.
A)True
B)False
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Chapter 9: Regional Economic Integration
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Sample Questions
Q1) The intraregion exports of the EU are greater than its extraregion exports.
A)True
B)False
Q2) Which of the following blocs' success was most dependent on a shared language and culture?
A) NAFTA
B) MERCOSUR
C) EU
D) EFTA
Q3) Under NAFTA, Canadian companies enjoy more trade and investment relationships with U. S. firms than with Mexican firms because of language similarities between Canada and the U.S.
A)True
B)False
Q4) Member countries that belong to the higher levels of regional integration must sacrifice control of their own economic affairs by submitting to the laws of the economic bloc's central authority.
A)True
B)False
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Chapter 10: Understanding Emerging Markets
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Sample Questions
Q1) Which of the following best summarizes the argument in favor of microfinance?
A) Microfinance ultimately leads to greater tax revenues for national governments.
B) Recently, mainstream banks have begun to view microfinance as the prime driver of advanced economies.
C) Microfinance allows the underprivileged to create businesses and improve their lives.
D) Microfinance alleviates the pressure on MNEs to support developing economies.
Q2) Which of the following is a benefit to a foreign firm collaborating with a family conglomerate in an emerging market?
A) reduced capital requirements
B) complete exemption from paying taxes
C) complete protection from intellectual property rights violations
D) low dependence on technology
Q3) In a short essay, explain why family conglomerates dominate emerging markets. What are the benefits to foreign firms who collaborate with FCs in order to do business in emerging markets?
Q4) Write a short essay on emerging markets as target markets for international business.
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Chapter 11: The International Monetary and Financial Environment
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Sample Questions
Q1) A devaluation is an action taken by the international monetary fund.
A)True
B)False
Q2) Which of the following should an international manager keep in mind about the constantly fluctuating exchange rates?
A) The prices the firm charges should be quoted in the firm's currency exclusively.
B) The firm and its customers should use the exchange rate as it stands on the date of each transaction, there is no scope for an agreement between them to use any other specific exchange rate.
C) If goods are bought from a supplier whose currency is appreciating against the buyer's currency, the buyer will have to pay a lesser amount of their currency to complete the purchase.
D) The time taken between placement and delivery of an order can at times go up to a few months, fluctuations in the exchange rate during that time can cost or earn the firm money.
Q3) Describe the two main types of foreign exchange management used today. Provide examples of nations which use each type of system. What are the benefits of each system?
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Chapter 12: Strategy and Organization in the International Firm
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Q1) Which of the following best supports the decision by the Ace board of directors to hire Tanya as the CEO?
A) Tanya's recognition of the homogeneity across communities
B) Tanya's innovative ideas and ability to spot future retail trends
C) Tanya's subjective moral and ethical standards
D) Tanya's competitive personality and dogmatic determination
Q2) Armaz Inc., a manufacturing company, has its headquarters located in Texas, U.S., and subsidiaries in India, China, and Vietnam. Which of the following decisions will be the most centralized?
A) decision about building factories in Cambodia
B) decision about hiring a marketing manager for its India operations
C) decision to open a retail store in Vietnam
D) decision about marketing newly developed products for the Chinese market
Q3) Which of the following activities would be considered last by a manager while developing strategies?
A) analyzing the particular challenges that confront the firm
B) deciding how best to contend with competitors
C) examining the firm's specific strengths and weaknesses
D) analyzing the particular opportunities for the firm
Page 14
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Chapter 13: Global Market Opportunity Assessment
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Sample Questions
Q1) According to the Emerging Market Potential Indicators index, ________ is an indicator of market intensity.
A) average annual growth rate of primary energy use
B) percentage share of middle class in income/consumption
C) private consumption as a percentage of GDP
D) per-capita imports from the United States
Q2) One of the goals that firms most likely want to attain from internationalizing is ________.
A) decrease trade barriers in the foreign markets
B) establish their presence in saturated markets
C) increase their sales and profits
D) minimize country risk
Q3) Explain why it is especially critical for a firm to select the most appropriate market for its product or service during the primary stage of internationalization. What are the negative consequences of making a poor market selection for firms planning to globalize through FDI?
Q4) Describe the four factors that contribute to the likelihood of success for a product or service in an international market.
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Chapter 14: Exporting and Countertrade
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Sample Questions
Q1) Which of the following is the first stage of internationalization?
A) experimental involvement
B) domestic market focus
C) pre-internationalization
D) active involvement
Q2) Prox Inc. is a U.S.-based manufacturer of consumer electronics. It decides to export to Mexico and wants to protect its goods against damage, loss, and pilferage. Which of the following documents is applicable here?
A) insurance certificate
B) bill of lading
C) pro forma invoice
D) license
Q3) Incoterms are universally accepted terms of sale that specify how the buyer and the seller share the cost of freight and insurance in an international transaction and at which point the buyer takes title to the goods.
A)True
B)False
Q4) Describe the four-step process many managers use to achieve successful exporting.
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Chapter 15: Foreign Direct Investment and Collaborative Ventures
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Sample Questions
Q1) Cross-licensing agreements are a type of project-based, nonequity venture in which the partners agree to allow access to licensed intellectual property developed by the other on preferential terms.
A)True
B)False
Q2) Which of the following is a characteristic of successful international retailers?
A) conservative managers and salespeople and a centralized organizational system
B) an entrepreneurial approach to foreign markets and an understanding of the target market
C) significant financial borrowings and high foreign and domestic operational costs
D) extreme competition and support from home-country governments exclusively
Q3) Which of the following industries considers proximity to customers especially important in the decision to enter a foreign market?
A) fashion
B) automotive
C) biotechnology
D) mining
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Chapter 16: Licensing, Franchising, and Other Contractual Strategies
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Sample Questions
Q1) The government of Azoo might select Contractor B in order to ________.
A) prevent the builder from operating in the country for even a short period of time
B) avoid rental fee, user fee, and tolls during the operational stage of the bridge and subway system
C) build the projects cost-effectively
D) increase the number of visitors to Azoo
Q2) Which of the following is provided by the licensor in a licensing agreement?
A) a monetary down-payment plus royalties for all products sold locally
B) a combination of intellectual property and technical information and assistance
C) a storefront or facility and the necessary materials to make the product
D) a combination of a lump-sum payment and the intellectual know-how
Q3) In a system franchising agreement, the franchisor provides ________.
A) down-payment plus royalty
B) production and marketing methods
C) lump-sum payment
D) sale of related products
Q4) Describe three advantages of licensing agreements from the perspective of the licensor.
Page 18
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Chapter 17: Global Sourcing
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Sample Questions
Q1) The likelihood of a firm internalizing marketing and branding instead of outsourcing it is high.
A)True
B)False
Q2) In a short essay, explain how global sourcing can affect home-country employees.
Q3) Contract manufacturing can best be defined as ________.
A) the outsourcing to independent suppliers of business service functions such as accounting, payroll, human resource functions, travel services, IT services, customer service, or technical support
B) the relocation of a business process or entire manufacturing facility to a foreign country
C) sourcing from the firm's own production facilities
D) an arrangement in which the focal firm contracts with an independent supplier to manufacture products according to well-defined specifications
Q4) Discuss the major risks associated with global sourcing.
Q5) In a short essay, describe three key drivers responsible for the recent growth of global sourcing.
Q6) How can managers best resolve tension among employees on account of global sourcing?
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Chapter 18: Marketing in the Global Firm
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Sample Questions
Q1) International advertising expenditures vary depending on the size and extent of a firm's foreign operations.
A)True
B)False
Q2) Buyer receptiveness differs as a function of ________.
A) culture and language
B) lobbying
C) media expenses
D) product quality
Q3) Gray marketers are ________.
A) typically large business conglomerates
B) unauthorized intermediaries
C) authorized distributors
D) a firm's most effective promotional channels
Q4) Explain the importance of a global market strategy. How does a global market strategy affect the choice of adaption versus standardization for an international marketing program?
Q5) In a short essay, discuss the three common pricing strategies. How do firms employ each strategy? What are the main advantages and disadvantages of using such strategies?
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Chapter 19: Human Resource Management in the Global Firm
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Q1) Critical incident analysis examines ________.
A) a situation under which an MNE is forced to relocate operations abroad
B) an episode in which tension arises between employee and foreign counterpart due to a cross-cultural misunderstanding
C) an episode in which tension arises between an employee and a manager with regard to performance evaluation
D) a critical situation in which the internal stakeholders of a firm fail to reach a consensus with regard to a common issue
Q2) Which of the following measures would a progressive firm most likely take to ensure female equality in international business?
A) encourage senior executives to learn multiple foreign languages
B) limit the number of female executives for international executive posts
C) deny leadership roles in foreign assignments to men
D) have female executives serve as mentors and role models for aspiring women
Q3) Which of the following employees is most likely a host-country national?
A) Shelly Eaton
B) Raj Patel
C) Keiko Tran
D) Marcus Field
Page 21
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Chapter 20: Financial Management and Accounting in the Global Firm
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Q1) What are four advantages to large firms lending funds to their foreign subsidiaries?
Q2) The global capital market has grown rapidly due to widespread ________ of financial instruments, which results in the conversion of illiquid financial instruments, such as bank loans, into tradable securities, such as bonds.
A) debt consolidation
B) factoring
C) securitization
D) multilateral netting
Q3) Economic exposure results from exchange-rate fluctuations that affect ________.
A) marketing strategies
B) tariffs and duties
C) brand personality
D) product pricing
Q4) Multilateral netting is the means by which subsidiaries and affiliates charge each other as they exchange goods and services.
A)True
B)False
Q5) How has technology affected foreign exchange trading?
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