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Chapter 03 - Doing Business in Global Markets
3-120
Responding to pressure from political lobbyists representing the U.S. steel industry, the
U.S. government levies a tax on steel products imported from Europe. This is an example
of a(n):
A. protective tariff.
B. revenue tariff.
C. quota.
D. embargo.
Feedback: A protective tariff is designed to raise the retail price of imported products so that
domestic products will be more competitive.
333. Labor unions and businesses in the heavy equipment industry have asked the U.S.
Congress to place a tax on imported equipment in order to make it more expensive. They
hope that this will allow U.S. producers to be more competitive. The U.S. heavy
equipment industry appears to be seeking a(n):
A. injunction.
B. revenue tariff.
C. nontariff barrier.
D. protective tariff.
Feedback: Protective tariffs are designed to raise the retail price of imported products so that
domestic products will be more competitive.
334.
Chapter 03 - Doing Business in Global Markets
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Having recently found sources of oil on their own land, the infant nation of Lancerland
enacted a tariff on imported petroleum in order to raise money for their new government.
This trade restriction is an example of a(n) ________ tariff.
A. revenue
B. protective
C. percentage
D. fixed
Feedback: Revenue tariffs are designed to raise money for the domestic government.
335. Norvada is a small nation that has followed protectionist policies for many years.
Which of the following would be an example of a nontariff barrier established by
Norvada?
A. Establishment of a tax levied on imported goods so that foreign products are more
expensive than competing domestic goods.
B. Establishment of a tax levied on imported goods designed primarily to raise money for
the government.
C. Establishment of restrictive quality standards requiring foreign firms to make
expensive modifications to their products before they could be exported to Norvada.
D. Participation in the Uruguay Round of GATT negotiations.
Feedback: A common nontariff barrier is the establishment of special requirements that
foreign producers must meet before they can sell their products in a protectionist country.
336.
Chapter 03 - Doing Business in Global Markets
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A small Italian grocery store sells five varieties of feta cheese. It offers Bulgarian, French,
Danish, Greek, and one that is processed and sold from Tillamook, Oregon. The domestic
variety (from Oregon) sells for $1.99/pound, while all the others sell for more than
$2.99/pound, and the Greek variety is priced at $6.99/pound. The domestic variety is
much cheaper because:
A. Customers always perceive the domestic varieties to be of lower quality than the
imported varieties.
B. The value of the dollar never favors imported goods.
C. Imported cheese producers often pay protective tariffs on these goods, which ultimately
raises the price at the grocery store.
D. The distributors of these imports refuse to buy the cheese in large enough quantities to
enjoy economies of scale.
Feedback: Protective tariffs (import taxes) are assessed on imports to protect domestic and
grow domestic industries. The protective tariffs raise the price of imported products so
domestic goods are more competitively priced.
337. A major concern voiced by U.S. critics of the North American Free Trade Agreement
(NAFTA) is that it would result in:
A. higher prices for consumer goods.
B. loss of jobs in the U.S. economy.
C. national security problems.
D. increased illegal immigration from Mexico.
Feedback: Critics of NAFTA, warned that it would have serious economic consequences such
as the loss of U.S. jobs and loss of capital leaving the U.S.
338.
Chapter 03 - Doing Business in Global Markets
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One objective of NAFTA is:
A. increase trade barriers between the countries involved.
B. decrease investment opportunities in the countries involved.
C. promote conditions of fair competition for the three trading partners.
D. improve working conditions in Central America.
Feedback: NAFTA aims to promote conditions of fair competition in this free-trade area.
339. France, Italy, Denmark, and Luxembourg are all members of the EU. Which of the
following statements is an accurate description of trade between these nations?
A. France and Italy are permitted to engage in free trade due to their proximity to each
other, however, Luxembourg only has free trade with Belgium, and Denmark only has
free trade with Switzerland, Sweden, and Germany.
B. The EU has abolished customs duties at internal borders for these and other member
nations and put in place a uniform system for taxing imports. Internal border controls
subsequently disappeared.
C. Customs officers that collect tariffs are now found at the internal borders of all EU
member nations.
D. France, Italy, Denmark, and Luxembourg are four nations strongly considering
abandoning the EU common market. The global trading bloc has proved inefficient in
these nations attracting global business.
Feedback: EU is the European common market (also known as a trading bloc). Member
nations (totaling 27 at this time) have a common external tariff, no internal tariffs, and
coordinated laws to facilitate exchange among members. Other common markets include
Mercosur, and the ASEAN. The EU has realized success in continued economic integration as
the major way to compete for global business.
340.
Chapter 03 - Doing Business in Global Markets
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The outlook for growth in global trade appears to be:
A. less optimistic than in the past.
B. more interesting yet more challenging every day.
C. unclear and lacking focus.
D. nonexistent.
341. Global trade with China is:
A. too risky and not worth the effort.
B. illegal based on World Trade Organization (WTO) rulings.
C. an emerging business opportunity for several companies.
D. dependent upon the success of multinational corporations.
342. 358. (p. 80) Many business experts contend that __________ will likely be the growth
market of the future.
A. Asia
B. Africa
C. South America
D. the Middle East
343.
Chapter 03 - Doing Business in Global Markets
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The "second wave" of offshore outsourcing refers to:
A. moving jobs to South America in addition to China.
B. moving skilled service jobs such as those in accounting offshore.
C. moving jobs to India in addition to China.
D. moving manufacturing jobs offshore.
344. When U.S. firms choose to hire skilled and unskilled workers in other countries to
produce goods and services, rather than producing them in the United States, we refer to
this as __________.
A. offshore procurement
B. domestic outsourcing
C. foreign distribution
D. offshore outsourcing
345. As students think about a career in the business world today, which of the following is
a good strategic suggestion?
A. Studying a foreign language.
B. Securing a job with a large multinational corporation.
C. Stay away from franchising due to the saturation of this form of business globally.
D. Avoid spending a lot of time studying fluctuations in currencies because a global
currency is eminent.
346.
Chapter 03 - Doing Business in Global Markets
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Which of the following nations has joined the U.S., Japan, and the EU as a key driver of
the world economy?
A. Thailand
B. Brazil
C. Russia
D. China
347. Trade experts' concerns about trading with China include:
A. its small population size compared to other nations, which puts doubt in business
people's minds about the worthiness of the investment.
B. its political system, counterfeiting activities, and human rights abuses.
C. its ties with organized labor unions.
D. its economic philosophy that has changed from free markets to command economies.
Feedback: Trade experts and other advocacy groups remain concerned about China's one-
party political system, documented human rights abuses in China, an increasing Chinese
urban population, and China's underground economy that promotes product piracy.
348.
Chapter 03 - Doing Business in Global Markets
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Although it has experienced persistent social unrest, multinationals have shown interest in
Russia due to:
A. its cultural compatibility to the West.
B. the consistent strength of its currency compared to U.S. and Japanese currencies.
C. the size of its natural resources.
D. its current abolishment of religious freedom.
Feedback: Despite the many political and social problems present, firms are clearly attracted
by Russia's huge oil reserves gas reserves, and gold.
349. Which of the following is an advantage of offshore outsourcing?
A. Companies can create efficiencies by hiring low-wage employees.
B. Wages increase in the home country.
C. Product quality improves permitting firms to charge more for their products.
D. Communication between the company and its customers improves.
Feedback: One advantage of offshore outsourcing is that outsourced work allows companies
to create efficiencies that in fact lets them hire more workers.
350.
Chapter 03 - Doing Business in Global Markets
Which of the following statements is a good prediction of future occurrences in global
markets?
A. Fortunately, safety issues will become less of a concern as developing nations begin to
participate in global trade at a faster pace.
B. It is doubtful that service and technical type jobs such as accounting, legal
representation, or financial management will become part of offshore outsourcing.
C. China will continue to be the only viable global trader in Asia for several years to
come.
D. With the strong growth in technical talent globally, offshore outsourcing should
continue to increase.
Feedback: As technical talent grows around the globe, offshore outsourcing will increase.
China and India currently graduate more engineers each year than U.S. colleges and
universities.
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351. As surgical procedures become extremely costly (upwards of $100,000 per surgery),
which of the following health benefits strategies is being considered, if not implemented,
by American companies? According to the Making Ethical Decisions box titled “See the
Sights, Meet the Doctors”:
A. U.S. companies are asking employees to seek out foreign medical students who are
trained in the U.S. and willing to perform surgeries at a discount price.
B. U.S. companies are asking employees to choose between taking a trip abroad or
proceeding with expensive surgical procedures. The company is willing to pay for a trip,
which may cost about $10,000, rather than a surgery, which may cost $100,000.
C. Patients who elect to have surgeries performed abroad are finding the quality of these
surgeries to be sub-standard compared to the quality and care they receive in the U.S. The
lesson is to think twice about a company whose benefits prescribe that you have your
surgeries abroad.
D. U.S. companies are willing to pay for surgical procedures performed in nations such as
India, South Korea, and Thailand, as opposed to the same procedure in the U.S. The
difference in cost is significant, and the expertise and accommodations are similar if not
better.
Feedback: The quality of medical care and the quality of medical facilities abroad are
impressive. Expert physicians are performing major surgical procedures for patients. The
cost is significantly less than similar procedures in the U.S. The ethical question becomes: If
an employee requires an expensive medical procedure, should the company benefits only pay
if the patient is willing to leave his/her family and travel abroad to receive the necessary
medical procedure?
352.
Chapter 03 - Doing Business in Global Markets
Jill works as a flight attendant for an international airline. While in China, it is convenient
for Jill to find look-alikes in famous brands of watches, purses, clothing, and golf clubs. In
fact, she does her Christmas shopping there and even buys good quality items for
auctioning at her son's pre-school events back in the U.S. Jill's actions:
A. Demonstrate a continual problem with product piracy in China.
B. Demonstrate how expensive it is to trade with China. Persons who travel there are
really the only ones who can benefit from China trade.
C. Demonstrate the low level of economic development in China, and the fact that only
tourists can afford to purchase name brand goods in that nation.
D. Demonstrate the World Trade Organization's encouragement of China to increase its
production of counterfeit goods because there is a high demand for these globally.
Feedback: Concerns remain about China's significant product piracy and counterfeiting
activities.
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353. Explain and provide examples of the difference between comparative and absolute
advantage in global markets.
354.
Chapter 03 - Doing Business in Global Markets
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Describe and provide examples of four different strategies for reaching global markets.
355.
Chapter 03 - Doing Business in Global Markets
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Explain and provide at least one example of how socio-cultural differences can create
trade difficulties in world markets.
356. Explain and provide at least one example of how legal and regulatory forces impede
global trade.
357.
Chapter 03 - Doing Business in Global Markets
Define offshore outsourcing and explain its pros and cons.
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358. Initially, Rhett believed he should maintain his production facilities within the United
States and simply export his designer eyeglass frames to foreign sellers. However, he
lacked expertise in exporting. Rhett decided to see if the federal government could
provide any help by contacting a(n):
A. World Trade Center.
B. Export Assistance Center.
C. Federal Reserve Bank.
D. U.S. Export Savings Bank.
Feedback: Export Assistance Centers were established by the federal government to provide
hands-on exporting assistance and trade finance support to small and medium-sized
businesses.
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361. Rhett spoke with a Korean company that said it might be interested in producing his
products in their market. They would pay him a royalty for what they sold and would bear
all the start-up expenses of this effort. This Korean company is proposing a:
A. subsidiary agreement.
B. joint venture.
C. export trading company.
D. licensing agreement.
Feedback: Licensing is an agreement in which a producer allows a foreign company to
produce its products in exchange for royalties.
362. The company was informed by the Japanese Ministry of Trade that they could only
export 1.5 million pairs of eyeglasses to the Japanese market during a given year. The
Japanese have imposed a(n):
A. revenue tariff.
B. embargo.
C. import quota.
D. limit order.
Feedback: The term that describes the limiting of the number of products in certain categories
that can be imported is an import quota.
363.
Chapter 03 - Doing Business in Global Markets
Next year, in order to cut both time and cost in getting new styles to global markets, Rhett
plans to _________________ a few lines. Rhett will send his designs to manufacturers in
Saipan, Bangladesh, and Turkey who will produce the eyeglasses in facilities in their
respective countries. This will not only reduce the cost of labor, it will help Rhett reach
regional markets in a timely manner.
A. license
B. contract manufacture
C. franchise
D. subsidize
Feedback: Contract manufacturing is when a foreign manufacturer produces and private-
labels goods for a domestic company. Contract manufacturing enables a company to
experiment in a new market without heavy start-up costs. It also can significantly reduce the
cost of labor.
