Self Test: Multiple Choice

You can find the answers on the last page of this text.

  1. 4-1 The globalization of markets refers to moving away from thinking

    1. the market for your product is local.

    2. that other countries are interested in trade.

    3. that every component of a product must be ­produced in this country.

    4. investment in foreign countries is a good idea.

  2. 4-2 The globalization of markets and the globalization of production means that

    1. people are no longer in control of their own lives.

    2. we are all connected by the Web.

    3. companies can take one product to international markets without having to adapt it.

    4. companies design products for global markets and can produce them offshore.

  3. 4-3 The theory that states that specialization and trade are mutually beneficial to all economies ­involved in trade is called the

    1. theory of comparative advantage.

    2. theory of beneficial trade.

    3. theory of absolute advantage.

    4. theory of relative trade.

  4. 4-4 Ethnocentrism is a belief that

    1. ethics are central to doing well in business.

    2. the value of commerce changes in different societies.

    3. all cultures should be respected equally.

    4. can lead to conflict when conducting business globally.

  5. 4-5 The theory of comparative advantage indicates that

    1. a country should sell to other countries the products it produces most efficiently and buy from other countries the products that it cannot produce as efficiently.

    2. international trade will force domestic businesses to lose market share to foreign competitors.

    3. countries that participate in international trade will have a higher standard of living.

    4. a limit is placed on the amount of goods and ­services that can be traded.

  6. 4-6 Which of the following are examples of regional free-trade agreements?

    1. European Union, NAFTA, and APEC

    2. The Euro, the IMF, and GATT

    3. WTO and GMO

    4. SWF, EU and KFC

  7. 4-7 A mini-multinational is a company that

    1. is small but still does international sales.

    2. is a large international firm.

    3. is a small local business.

    4. is now illegal because of trade barriers.

  8. 4-8 Exchange rates affect international businesses ­because the exchange rate

    1. impacts the relative costs of imports and exports.

    2. can impact the trade deficits and trade surpluses of a country.

    3. can be manipulated by governments and can cause price changes outside the control of businesses.

    4. all of the above.

  9. 4-9 Which method of entering foreign markets has the advantage of allowing for test-marketing a product in a foreign market at the lowest cost?

    1. Joint ventures

    2. Wholly owned subsidiaries

    3. Exporting

    4. Contract manufacturing

  10. 4-10 A local content requirement is one kind of ­government rule meant to

    1. reduce foreign exports.

    2. limit imports.

    3. tax foreign goods.

    4. subsidize domestic producers.

True/False

You can find the answers on the last page of this text.

  1. 4-11 A free-floating exchange rate system uses global supply and demand to set exchange rates.

    1. □ True or □ False

  2. 4-12 Dumping refers to selling a product below what it cost to make.

    1. □ True or □ False

  3. 4-13 Increasing U.S. dominance of foreign direct ­investments has helped accelerate globalization.

    1. □ True or □ False

  4. 4-14 Entering a foreign market through a joint venture means you will eventually be operating independently in that market.

    1. □ True or □ False

  5. 4-15 A transnational business strategy is used when a product is sold in many regions of a country at the same time.

    1. □ True or □ False

Critical Thinking Questions

  1. An image shows a star blue icon. 4-16 Governments invest in education and infrastructure for their citizens, in part to gain a competitive advantage in world markets. Could a government invest too much in education? Could a government invest too heavily in technology? What are the key technologies or services that would give a country more of a competitive ­advantage in today’s markets?

  2. 4-17 Review the three basic strategies of international business. Discuss the type of companies that would most likely pursue a global strategy, a multidomestic strategy, and a transnational strategy.

  3. An image shows a star blue icon. 4-18 Organizations to promote free trade, like the EU, have had difficulty creating a common currency. Why do you think not all EU countries use the euro? Why do some countries that are not part of the EU choose to use the euro?

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