Chapter 3

Question 1

Importing

Answer 1

Buying products from another country.

Question 2

Free trade

Answer 2

The movement of goods and services among nations without political or economic barriers.

Question 3

Trade Surplus

Answer 3

Occurs when the value of a country’s exports exceeds that of its imports.

Question 4

Balance of Payments

Answer 4

The difference between money coming into a country (from exports) and money leaving the country (from imports) plus money flows from other factors. (Tourism, foreign aid)

Question 5

Licensing

Answer 5

A global strategy in which a film (the licensor) allows a foreign company (the license) to produce its product in exchange for a fee (a royalty).

Question 6

Contract Manufacturing

Answer 6

A foreign company’s production of private-label goods to which a domestic company then attaches its brand name or trademark; is part of the broad category of outsourcing.

Question 7

Foreign Direct Investment

Answer 7

The buying of permanent property and businesses in foreign nations.

Question 8

Multinational Corporation

Answer 8

When a company has operational business in multiple nations and has multinational stock ownership management.

Question 9

Import Quota

Answer 9

A limit on the number of products in certain categories that a nation can import.

Question 10

World trade organization

Answer 10

An independent entity of 164 member nations whose purpose is to oversee cross-border trade issues and global business practices; headquartered in Geneva.

Question 11

Common market

Answer 11

A regional group of countries that have a common external tariff, no internal tariffs, and a coordination of laws to facilitate exchange; also called a trading bloc.

Question 12

Outsourcing

Answer 12

Process whereby one firm contracts with other companies to do some or all of its functions.

Question 13

Exporting

Answer 13

Selling products to another country.

Question 14

Balance of trade

Answer 14

The total value of a nation’s exports compared to its imports over a particular period.

Question 15

Trade deficit

Answer 15

Occurs when the value of a country’s imports exceeds that of its exports.

Question 16

Dumping

Answer 16

Selling your products in a foreign country at lower prices than those charged in your own producing country.

Question 17

Franchising

Answer 17

A contractual agreement whereby someone with a good idea for a business sells others the rights to use the name and sell a product or service in a given territory in a specified manner.

Question 18

Joint Venture

Answer 18

A partnership in which two or more companies (often from different countries) join to undertake a major project.

Question 19

Exchange Rate

Answer 19

The value of one nation’s currency relative to the currencies of other countries.

Question 20

Trade Protectionism

Answer 20

The use of government regulations to limit the import of goods and services.

Question 21

Embargo

Answer 21

A complete ban on the import or export of a certain product, or the stopping of all trade with a particular country.

Question 22

GATT

Answer 22

A 1948 agreement that established an internal forum for negotiating mutual reductions in trade restrictions.

Question 23

USMCA

Answer 23

An agreement that created a free-trade area among the United States, Mexico, and Canada was ratified in 2020.

Question 24

Comparative advantage

Answer 24

A country should sell to other countries those products that it produces most efficiently and buy from other countries those products that it cannot produce as effectively or efficiently.

Question 25

Absolute advantage

Answer 25

A country has a monopoly on producing a specific product or is able to produce it more efficiently than all other countries.

Question 26

Strategic Alliance

Answer 26

A long-term partnership between two or more companies is established to help each company build competitive market advantages.

Question 27

Foreign Subsidiary

Answer 27

A company owned in a foreign country by another company, called the parent company.

Question 28

Tariffs

Answer 28

A tax is imposed on imports coming into the USA on certain specified goods and from certain countries as well.

Question 29

CAFTA

Answer 29

Agreement that created a free-trade zone with Costa Rica, the Dominican Republic, El Salvador, Guatemala, Honduras, and Nicaragua; signed into law in 2005.