40.
Countertrade is least attractive to large, diverse multinational enterprises.
FALSE
Countertrade is most attractive to large, diverse multinational enterprises
that can use their worldwide network of contacts to dispose of goods
acquired in countertrading.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-05 Describe how countertrade can be used to facilitate exporting.
Topic: Countertrade
Multiple Choice Questions
41.
Which of the following statements is true of exporting?
A.
It increases the trade deficit that nations have.
B.
Exporting leads to diseconomies of scope.
C.
It helps a firm achieve economies of scale
D.
The international market is normally so much larger than the firm’s
domestic market that exporting is nearly always a way to increase the
revenue and profit base of a company. By expanding the size of the market,
exporting can enable a firm to achieve economies of scale, thereby lowering
its unit costs.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-01 Explain the promises and risks associated with exporting.
Topic: The Promise and Pitfalls of Exporting
42.
The great promise of exporting is that _____.
A.
large revenue opportunities are often found in foreign markets
B.
it provides more opportunities to smaller firms than larger firms
C.
international trade is protected against exchange risks
D.
it reduces the need for insuring businesses against political risks
The great promise of exporting is that large revenue and profit opportunities
are to be found in foreign markets for most firms in most industries.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-01 Explain the promises and risks associated with exporting.
Topic: The Promise and Pitfalls of Exporting
43.
Which of the following statements is true of reactive firms?
A.
Reactive firms consider a variety of markets for selling their products and
services.
B.
They consider exporting only after their domestic market is saturated.
C.
They systematically scan foreign markets for profitable export
opportunities.
D.
They create excess productive capacity and actively hunt for
opportunities in foreign markets.
Many medium-sized and small firms are very reactive. Typically, such
reactive firms do not even consider exporting until their domestic market is
saturated and the emergence of excess productive capacity at home forces
them to look for growth opportunities in foreign markets.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-01 Explain the promises and risks associated with exporting.
Topic: The Promise and Pitfalls of Exporting
44.
Which of the following is a common difficulty that traders face when
exporting goods or services to other countries?
A.
Small firms tend to be more aggressive than larger firms in global trade.
B.
Governments do not provide much assistance to exporters.
C.
Growth opportunities are often limited in global markets.
D.
Exporters often face voluminous paperwork and complex formalities.
Exporters often face voluminous paperwork, complex formalities, and many
potential delays and errors. According to a UN report on trade and
development, a typical international trade transaction may involve 30
parties, 60 original documents, and 360 document copies, all of which have
to be checked, transmitted, reentered into various information systems,
processed, and filed.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-01 Explain the promises and risks associated with exporting.
Topic: The Promise and Pitfalls of Exporting
45.
Japan’s great trading houses are called _____.
A.
sogo shosha
B.
kaizen
C.
MITI
D.
Samurai
Japan’s great trading houses are known as sogo shosha. The sogo shosha
have offices all over the world, and they proactively, continuously seek
export opportunities for their affiliated companies large and small.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Improving Export Performance
46.
In the _____ program organized by the U.S. Department of Commerce,
department representatives accompany groups of U.S. businesspeople
abroad to meet with qualified agents, distributors, and customers.
A.
best prospects
B.
SCORE
C.
capital assistance
D.
matchmaker
The U.S. Department of Commerce offers a matchmaker program, in which
department representatives accompany groups of U.S. businesspeople
abroad to meet with qualified agents, distributors, and customers.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Improving Export Performance
47.
Which of the following statements is true about Small Business
Administration (SBA)?
A.
It is the most comprehensive source of export opportunities information.
B.
SBA is a private organization managed by leaders of large corporate.
C.
The SBA employs trade officers throughout the United States.
D.
SBA offers help exclusively to small businesses that sell products within
U.S.
The SBA employs 76 district international trade officers and 10 regional
international trade officers throughout the United States as well as a 10-
person international trade staff in Washington, D.C.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Improving Export Performance
48.
Which of the following is a nationwide group of international trade attorneys
who provide free initial consultations to miniature businesses on export-
related matters?
A.
ELAN
B.
EMC
C.
MITI
D.
SCORE
The SBA coordinates the Export Legal Assistance Network (ELAN), a
nationwide group of international trade attorneys who provide free initial
consultations to small businesses on export-related matters.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Improving Export Performance
49.
Through its _____ program, the SBA oversees about 850 volunteers with
international trade experience to provide one-on–one counseling to active
and new-to-export businesses.
A.
matchmaker
B.
SCORE
C.
ELAN
D.
trade fair
Through its Service Corps of Retired Executives (SCORE) program, the SBA
oversees some 850 volunteers with international trade experience to
provide one-on-one counseling to active and new-to–export businesses.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Improving Export Performance
50.
Which of the following statements is true of EMCs?
A.
An EMC is a transportation company that engages in international
business.
B.
EMCs are export-import banks that manage foreign exchanges.
C.
EMCs are export specialists that act on behalf of their client firms.
D.
An EMC is an intermediary that facilitates talks between two nations.
One way for first-time exporters to identify the opportunities associated
with exporting and to avoid many of the associated pitfalls is to hire an
export management company (EMC). EMCs are export specialists that act
as the export marketing department or international department for their
client firms.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-02 Identify the steps managers can take to improve their firm’s export performance.
Topic: Improving Export Performance
51.
In theory, the advantage of EMCs is that they are _____.
A.
managed by governments that provide export subsidies
B.
not-for-profit organizations that provide free service
C.
subsidized by the Department of Commerce
D.
experienced specialists who can help the neophyte exporter.
In theory, the advantage of EMCs is that they are experienced specialists
that can help the neophyte exporter identify opportunities and avoid
common pitfalls.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Identify the steps managers can take to improve their firm’s export performance.
Topic: Improving Export Performance
52.
In a letter of credit transaction, the importer secures the letter of credit
_____.
A.
before product shipment
B.
after product shipment
C.
from the exporter’s bank
D.
after receiving the product
An importer has to give a letter of credit to the exporter before shipping the
items. Letter of credit is a bank’s promise to pay on the importer’s behalf.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
53.
Which of the following is a document used to give the title of the products
to a bank?
A.
bill of lading
B.
letter of credit
C.
draft
D.
promissory note
Having seen the letter of credit, an exporter can ship the products to
another country. Title to the products is given to the bank in the form of a
document called a bill of lading.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
54.
A _____ states that the bank will pay a specified sum of money to a
beneficiary, normally the exporter, on presentation of particular, specified
documents.
A.
bill of exchange
B.
bill of lading
C.
letter of credit
D.
bank statement
A letter of credit, abbreviated as L/C, stands at the center of international
commercial transactions. Issued by a bank at the request of an importer,
the letter of credit states that the bank will pay a specified sum of money to
a beneficiary, normally the exporter, on presentation of particular, specified
documents.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
55.
Bank charges on letter of credit will depend on the _____.
A.
exporter’s creditworthiness
B.
size of the transaction
C.
exporter’s means of finance
D.
time taken to approve sale
Banks will charge importers a fee for issuing a letter of credit. Typically this
amounts to between 0.5 percent and 2 percent of the value of the letter of
credit, depending on the importer’s creditworthiness and the size of the
transaction.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
56.
A draft used in international transactions _____.
A.
is a document requesting payment
B.
explains the conditions of a contract
C.
is the same as a letter of credit
D.
gives bank guarantee to an exporter
A draft is the instrument normally used in international commerce to effect
payment.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
57.
In an international transaction involving bank as a third party, the exporter
ships the product after _____.
A.
the bank receives materials from the importer
B.
receiving cleared payment through bank
C.
the importer has paid the bank
D.
the bank promises to pay on the importer’s behalf
When trading with bank as a third-party, the importer obtains bank’s
promise to pay on importer’s behalf at first. Then, the bank promises
exporter to pay on behalf of importer. The exporter ships the items after
this.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
58.
Which of the following is a major advantage of using a letter of credit?
A.
It gives the importer time to resell the merchandise before payment.
B.
It guarantees the exporter pre-export financing.
C.
It helps international traders engage in trade with trust.
D.
It guarantees the importer extra funds for other purposes.
The great advantage of using a letter of credit system is that both the
French importer and the U.S. exporter are likely to trust reputable banks,
even if they do not trust each other. Once the U.S. exporter has seen a
letter of credit, he knows that he is guaranteed payment and will ship the
merchandise.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
59.
Which of the following is a disadvantage of using a letter of credit (L/C)?
A.
A letter of credit does not give protection to the importer.
B.
A letter of credit does not give protection to the exporter.
C.
The exporter cannot avail pre-export financing when using a L/C.
D.
The importer must pay a bank fee for the letter of credit.
The main drawback for the importer is that she must pay the issuing bank
for the letter of credit. In addition, since the letter of credit is a financial
liability against her, it may reduce her ability to borrow funds for other
purposes.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing