Business Essentials, 12e (Ebert/Griffin)
Chapter 4 Understanding the Global Context of Business
1) What are products that are created abroad and then transported and sold domestically?
A) Dumped goods
B) Exports
C) Imports
D) Buy backs
E) Domestic goods
2) What are products that are created domestically and transported for sale abroad?
A) Dumped goods
B) Exports
C) Imports
D) Buy backs
E) Domestic goods
3) Which country is the world’s largest marketplace and most stable economy?
A) The United States
B) Canada
C) Germany
D) Japan
E) China
4) Which country in the Pacific Asia region has one of the world’s largest economies?
A) South Korea
B) China
C) Indonesia
D) Japan
E) Taiwan
5) Which organization was developed to promote economic and cultural cooperation among
Asian countries?
A) ASEAN
B) UAS
C) EU
D) NAFTA
E) ECOWAS
6) Which organization created the classification of countries based on per capita income?
A) The World Bank
B) The World Trade Organization
C) The International Monetary Fund
D) The European Union
E) The North American Free Trade Agreement
7) Under which of the following treaties are Canada, the United States, and Mexico gradually
eliminating tariffs and all other trade barriers?
A) The EURO Agreement
B) The Pan-American Agreement
C) The North American Free Trade Agreement
D) The General Agreement on Tariffs and Trade
E) The G-3 Free Trade Agreement
8) What organization was founded in 1967 for economic, political, social, and cultural
cooperation in the Asia Pacific region?
A) SEATO
B) ASEAN
C) CENTO
D) OAS
E) WTO
9) Which of the following resulted from NAFTA?
A) Companies from other countries, such as Japan, have made fewer business investments in
North America.
B) U.S. exports to Mexico have decreased.
C) Mexican imports to the United States have increased.
D) More jobs have been created than what was originally predicted.
E) More U.S. jobs were eliminated than what was originally predicted.
10) Which of the following treaties sought to eliminate trade barriers such as tariffs and quotas
for most of the world’s countries?
A) United Nations Development Assistance Plan
B) North American Free Trade Agreement
C) General Agreement on Tariffs and Trade
D) General Agreement on Trade in Services
E) European Union Stability and Growth Pact
11) How does globalization of business benefit shareholders of an organization?
A) Through easier and faster international travel
B) Through the elimination of diseases in developing nations
C) Through increased and improved profitability
D) Through lower taxes between trade partners
E) Through more distinct cultural heritage
12) What caused manufacturing jobs to move from Mexico to China in the late 1990s?
A) Increases in Mexico’s cost of living and wages
B) Modernization of facilities in China
C) Improved international travel abilities
D) Increases in China’s cost of living and wages
E) Higher levels of education and professional jobs in Mexico
13) Where is the world’s largest free marketplace?
A) North America
B) South America
C) Southeast Asia
D) Europe
E) Middle East
14) An import is a product made or grown abroad but sold domestically.
15) The World Trade Organization (WTO) was created to encourage international trade.
16) Globalization refers to the process by which countries around the world are becoming more
self-sufficient.
17) NAFTA regulates trade between the United States, Europe, and Japan.
18) The purpose of the General Agreement on Tariffs and Trade is to reduce trade barriers.
19) The primary purpose of the World Trade Organization is to impose tariffs on imported
products.
20) Which of the following is the name for the economic value of all of the products that a
country exports minus the economic value of its imports?
A) Balance of foreign competition
B) Balance of domestic competition
C) Balance of trade
D) Balance of payments
E) Balance of supply and demand
21) Which of the following refers to the situation when a country’s imports exceed its exports?
A) Balance of payments
B) Balance of trade
C) Trade deficit
D) Trade surplus
E) Trade advantage
22) Which of the following is the name for the overall flow of money into or out of a country?
A) Exchange rate
B) Trade rate
C) Balance of exchange
D) Balance of payments
E) Balance of trade
23) With what type of exchange rate does the value of a country’s currency remain constant
relative to that of another country?
A) Floating
B) Indexed
C) Fixed
D) Adjusted
E) Deflated
24) When the value of one country’s currency relative to that of another varies with market
conditions, which of the following exists?
A) Floating exchange rate
B) Fixed exchange rate
C) Indexed exchange rate
D) Flat exchange rate
E) Balanced exchange rate
25) Which of the following BEST describes a positive trade balance?
A) The economic condition in which a country’s exports exceed its imports
B) The economic condition in which a country’s imports exceed its exports
C) The economic condition in which a country’s inflow of money exceeds its outflow
D) The economic condition in which a country’s outflow of money exceeds its inflow
E) The economic condition in which a country’s natural resources exceed its human resources
26) The value of the U.S. dollar relative to the value of the British pound fluctuates with market
conditions. What is this type of exchange rate?
A) Floating
B) Fixed
C) Indexed
D) Adjusted
E) Monitored
27) Which of the following exists when a country can produce something more cheaply and/or of
higher quality than any other country can?
A) Monopolistic advantage
B) National competitive advantage
C) Resource advantage
D) Absolute advantage
E) Comparative advantage
28) National competitive advantage derives from four conditions, one of which is factor
conditions. What do factor conditions include?
A) Customers, suppliers, and labor
B) Government quotas and subsidies
C) Product quality, productivity, and profits
D) Labor, capital, entrepreneurs, and physical resources
E) Strategies, structures, and rivalries
29) What typically happens to a country’s balance of trade as the value of its currency falls?
A) It improves.
B) It declines.
C) It remains the same.
D) It fluctuates drastically.
E) It fluctuates moderately.
30) What is the result when a country can produce goods more efficiently or better than other
nations?
A) Balance of trade deficit
B) Absolute advantage
C) Increased globalization
D) Comparative advantage
E) National competitive advantage
31) What condition is needed to gain a national competitive advantage that includes a large
domestic consumer base that promotes use of innovative products?
A) Factor conditions
B) Strategies and structures
C) Demand conditions
D) Rivalries
E) Related and supporting industries
32) What is the common currency for nations who are members of the European Union?
A) Deutsche Mark
B) Euro
C) Dollar
D) Lira
E) Franc
33) Why did the European Union develop the euro as its common currency?
A) To better compete with the U.S. dollar
B) To improve the integration of the economic system between member countries
C) To be able to outsource work to countries where wages are lower
D) To integrate a quality standard of production between member countries
E) To speed the issue of payment between member and nonmember countries
34) If the United States exports more to the Netherlands than it imports from the Netherlands, the
United States has a trade deficit with the Netherlands.
35) Today, fixed exchange rates are the norm for most major nations of the world.
36) A comparative advantage exists when a country can produce something more cost effectively
and/or of higher quality than any other country.
37) The single largest trading partner of the United States is China.
38) The United States has large trade deficits with Japan, China, and Mexico. This means that
the United States has imported more from them than what they have purchased from us.
39) Describe how balance of trade and balance of payments work and define both terms.
40) In assessing a country’s national competitive advantage, what is meant by factor conditions?
41) Explain a floating exchange rate.
42) Why should companies conducting international operations be concerned about exchange
rate fluctuations?
43) Explain why fluctuations in exchange rates have significant influence on the balance of
trade.
44) Discuss the differences between absolute advantage and comparative advantage.
45) What are the four components of national competitive advantage?
46) Which of the following organizations is a firm that makes products in one country and then
distributes and sells them in others?
A) Importer
B) Exporter
C) Multinational firm
D) International firm
E) Direct foreign investor
47) Which of the following buys products in foreign markets and then sells them for resale in its
home country?
A) Importer
B) Exporter
C) Multinational firm
D) International firm
E) Direct foreign investor
48) Which of the following will allow one firm to use another firm’s brand name, operating
procedures or technology?
A) A foreign direct investment
B) A licensing arrangement
C) A branch office setup
D) A strategic alliance
E) An import-export relationship
49) Which of the following helps to create a more visible public presence in foreign countries
and customers?
A) Developing a strategic alliance
B) Outsourcing
C) Licensing products
D) Investing directly in a foreign venture
E) Opening a local branch office
50) Which of the following denotes the international organization strategy of finding a partner in
the country in which a company would like to conduct business?
A) Opening a branch office
B) Developing a strategic alliance
C) Forming an independent agency
D) Outsourcing
E) Investing directly in a foreign venture
51) Ford, an American car company, purchased Volvo, which is based in Sweden. What is this
an example of?
A) A franchise
B) An independent agency
C) A licensing arrangement
D) A foreign direct investment
E) A strategic alliance
52) Which of the following types of firms design, produce, and manufacture products in many
nations?
A) Multinational firms
B) Importing firms
C) Domestic firms
D) International firms
E) Exporting firms
53) Which of the following is NOT considered an international organizational structure?
A) Independent agents
B) Licensing arrangements
C) Foreign direct investments
D) Branch office
E) Exporters