Ch 23 Flashcards
What is the division of labour?
Different workers specializing in different productive activities.
Define exports.
Goods and services that a firm produces in its home market but sells in a foreign market.
What is foreign direct investment (FDI)?
Investing by setting up operations or buying assets in businesses in another country.
Define imports.
Goods and services that are brought into one country from another.
What is international trade?
Exporting and importing goods and services.
What is invisible trade?
Trade in services rather than physical products.
Define specialization.
A production strategy where a business or country focuses on a limited range of goods and services to produce at a lower cost per unit.
What are tariffs?
Taxes that are imposed on imports.
Define visible trade.
Trade in physical goods.
What are the benefits of international trade?
Creates opportunities for business growth, increases competition, and provides more consumer choices.
True or False: Exports are the easiest mode of entry into any international market.
True
What do most developed countries rely on for export earnings?
The sale of invisible items.
How do countries limit imports?
By using tariffs and non-tariff barriers such as quotas.
What is the concept of division of labour?
Workers specialize in an activity to increase output.
What does specialization by countries mean?
A country may have higher access to specific resources, making production cheaper and more efficient.
What advantage do businesses gain from specialization?
They can achieve lower costs per unit and reduce prices.
What is a potential benefit of FDI?
High potential for making profit if investing in new markets.
What is a joint venture?
Investing in a project with another firm.
Why do businesses prefer FDI over licensing?
To maintain control and protect intellectual property.
What is the difference between horizontal and vertical FDI?
Horizontal FDI involves investing in the same industry abroad, while vertical FDI involves investing in different stages of production.
What does a ‘greenfield’ investment refer to?
Building a new facility from the ground up in a foreign country.
