Chapter 2 Flashcards
Why should nations trade with other nations?
They can exchange resources, knowledge and products that they might need to better their population and economy
What is the theory of comparative advantage
Opportunity cost of performing a task < another’s
What is opportunity cost?
Decision to do something that gives up the opportunity to do something else
What is absolute advantage
Takes fewer hours to perform a task compared to another
What kind of products can be imported and exported?
Anything (that’s legal)
What terms are important in understanding world trade
- balance of trade
- balance of payments
- trade surplus
- trade deficit
What are some ways in which a company can get involved in global business?
- exporting
- franchising
- licensing
- contract manufacturing
- international joint ventures
- strategic alliances
- foreign direct investment
How do multinational corporations differ from other companies that participate in global business
Physical ties to other countries
What are some of the forces that can discourage participation in global business?
- Socio-culturel forces
- Economic forces
- Legal and regulatory forces
- Technological forces
What is trade protectionism
Use of government regulations to limit the import of goods and services in order to protect domestic producers
What are tariff and non tariff barriers
- taxes on a foreign product
- barrier to limit imports (embargo)
What are some examples of trade organizations that try to eliminate trade barriers and facilitate trade among nations?
- NAFTA
- EU
What is a common market? + examples
Regional group of countries that have a common external tariff, no internal tariffs (like the EU)
What is offshore outsourcing (pros/cons)
Pros
- stimulates the economy of the offshore country
- cheaper to produce things (country that is outsourcing)
Cons
- child/illegal labour
- takes away jobs in local country
