Chapter 3

Question 1

Absolute advantage

Answer 1

the ability to produce a specific product

more efficiently than any other nation

Question 2

Comparative Advantage

Answer 2

the
ability to produce a specific
product more efficiently than any other product

Question 3

Balance of Trade

Answer 3

the total value
of a nation’s exports minus the total value of its imports over
some period of time

Question 4

Trade Deficit

Answer 4

a negative balance

of trade

Question 5

Balance of Payments

Answer 5

the total
flow of money into a country minus
the total flow of money out of that
country over some period of time

Question 6

Import Duty (tariff)

Answer 6

a tax levied
on a particular foreign product
entering a country

Question 7

Dumping

Answer 7

exportation of large
quantities of a product at a price
lower than that of the same
product in the home market

Question 8

Nontariff Barrier

Answer 8

a nontax measure imposed by a government
to favor domestic over foreign
suppliers:

iMPORT qQUOTA:
- limit on the
amount of a particular good that may be imported into a country
during a give
n period of time

EMBARGO:
- An embargo is a complete halt to trading with a particular
nation or of a particular product. The

FOREIGN EXCHANGE CONTROL:
- A foreign-exchange control is a restriction on the
amount of a particular foreign currency that can be
purchased or sold.

Question 9

Economic Model of Social Responsibility

Answer 9

Society will benefit most when business is left alone.

Question 10

Socioeconomic Model

Answer 10

Places emphasis not only on profits but also on the impact of business decisions on society

Question 11

Affirmative Action Program

Answer 11

Plan designed to increase the number of minority employees at all levels within an organization

Question 12

Economic community

Answer 12

an organization of nations formed
to promote the free movement of resources and products among its
members and to create common
economic policies

Question 13

Licensing

Answer 13

A contractual
agreement in which one firm
permits another to produce and
market its product and use its
brand name in return for a royalty
or other compensation

Question 14

Letter of Credit

Answer 14

issued by a bank
on request of an importer stating
that the bank will pay an amount
of money to a stated beneficiary

Question 15

Bill of lading

Answer 15

document
issued by a transport carrier
to an exporter to prove that
merchandise has been shipped

Question 16

Draft

Answer 16

issued by the exporter’s
bank, ordering the importer’s
bank to pay for the merchandise,
thus guaranteeing payment once
accepted by the importer’s bank

Question 17

Countertrade

Answer 17

Countertrade is essentially an international barter

transaction in which goods and services are exchanged for different goods and services.