Ch. 2 Business in a Borderless World

Question 1

Absolute Advantage

Answer 1

a monopoly that exists when a country is the only source of an item, the only producer of an item, or the most efficient producer of an item

Question 2

Asia–Pacific Economic Cooperation (APEC)

Answer 2

community established in 1989 to promote international trade and facilitate business; as of 2013, has 21 member countries

Question 3

Association of Southeast Asian Nations (ASEAN)

Answer 3

trade alliance that promotes trade and economic integration among member nations in Southeast Asia

Question 3

Association of Southeast Asian Nations (ASEAN)

Answer 3

trade alliance that promotes trade and economic integration among member nations in Southeast Asia

Question 4

Balance of Payments

Answer 4

the difference between the flow of money into and out of a country

Question 5

Balance of Trade

Answer 5

the difference in value between a nation’s exports and its imports

Question 6

Cartel

Answer 6

a group of firms or nations that agree to act as a monopoly and not compete with each other in order to generate a competitive advantage in world markets

Question 7

Comparative Advantage

Answer 7

the basis of most international trade, when a country specializes in products that it can supply more efficiently or at a lower cost than it can produce other items

Question 8

Contract Manufacturing

Answer 8

the hiring of a foreign company to produce a specified volume of the initiating company’s product to specification; the final product carries the domestic firm’s name

Question 9

Counter Trade Agreements

Answer 9

foreign trade agreements that involve bartering products for other products instead of for currency

Question 10

Direct Investing

Answer 10

the ownership of overseas facilities

Question 11

Dumping

Answer 11

the act of a country or business selling products at less than what it costs to produce them

Question 12

Embargo

Answer 12

a prohibition on trade in a particular product

Question 13

Exchange Controls

Answer 13

regulations that restrict the amount of currency that can be bought or sold

Question 14

Franchising

Answer 14

a form of licensing in which a company—the franchisor—agrees to provide a franchisee a name, logo, methods of operation, advertising, products, and other elements associated with a franchiser’s business, in return for a financial commitment and the agreement to conduct business in accordance with the franchisor’s standard of operations

Question 15

General Agreement on Tariffs and Trade (GATT)

Answer 15

a trade agreement, originally signed by 23 nations in 1947, that provided a forum for tariff negotiations and a place where international trade problems could be discussed and resolved

Question 16

Global Strategy (globalization)

Answer 16

a strategy that involves standardizing products (and, as much as possible, their promotion and distribution) for the whole world, as if it were a single entity

Question 17

Tariff

Answer 17

a tax levied by a nation on imported or exported goods

Question 18

Infrastructure

Answer 18

the physical facilities that support a country’s economic activities, such as railroads, highways, ports, airfields, utilities and power plants, schools, hospitals, communication systems, and commercial distribution systems

Question 19

International Monetary Fund (IMF)

Answer 19

organization established in 1947 to promote trade among member nations by eliminating trade barriers and fostering financial cooperation

Question 20

Joint Venture

Answer 20

a partnership established for a specific project or for a limited time involving the sharing of the costs and operation of a business, often between a foreign company and a local partner

Question 21

Licensing

Answer 21

a trade agreement in which one company—the licensor—allows another company—the licensee—to use its company name, products, patents, brands, trademarks, raw materials, and/or production processes in exchange for a fee or royalty

Question 22

Multinational Corporation

Answer 22

a corporation that operates on a worldwide scale, without significant ties to any one nation or region

Question 23

Multinational Strategy

Answer 23

a plan, used by international companies, that involves customizing products, promotion, and distribution according to cultural, technological, regional, and national differences

Question 24

North American Free Trade Agreement (NAFTA)

Answer 24

agreement that eliminated most tariffs and trade restrictions on agricultural and manufactured products to encourage trade among Canada, the United States, and Mexico

Question 25

Offshoring

Answer 25

the relocation of business processes by a company or subsidiary to another country; it differs from outsourcing because the company retains control of the offshored processes

Question 26

Outsourcing

Answer 26

the transferring of manufacturing or other tasks—such as data processing—to countries where labour and supplies are less expensive

Question 27

Quota

Answer 27

a restriction on the number of units of a particular product that can be imported into a country

Question 28

Strategic Alliance

Answer 28

a partnership formed to create competitive advantage on a worldwide basis

Question 29

Trade Deficit

Answer 29

a nation’s negative balance of trade, which exists when that country imports more products than it exports

Question 30

Trade Surplus

Answer 30

a nation’s positive balance of trade, which exists when that country exports more products than it imports

Question 31

Trading Company

Answer 31

a firm that buys goods in one country and sells them to buyers in another country

Question 32

World Bank

Answer 32

an organization established by the industrialized nations in 1946 to loan money to underdeveloped and developing countries; formally known as the International Bank for Reconstruction and Development

Question 33

World Trade Organization (WTO)

Answer 33

international organization dealing with the rules of trade between nations