Chapter 3 (Global Markets)

Question 1

Importing

Answer 1

Buying products from another country

Question 2

Exporting

Answer 2

Selling products to another country

Question 3

Free trade

Answer 3

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

Question 4

Comparative advantage

Answer 4

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 5

Absolute advantage

Answer 5

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

Question 6

Balance of trade

Answer 6

Total value of a nation’s exports compared
to its imports over a particular period

Question 7

Trade surplus (favorable)

Answer 7

When the value of a country’s exports
exceeds that of its imports

Question 8

Trade deficit (unfavorable)

Answer 8

When the value of a country’s imports
exceeds that of its exports

Question 9

Balance of payments

Answer 9

The difference between money
coming into a country (from exports) and money leaving the
country (from imports) plus money flows from other factors
such as tourism, foreign aid, military expenditures, and foreign
investment

Question 10

Dumping

Answer 10

Selling products in a foreign country at lower
prices than those charged in the producing country

Question 11

Licensing

Answer 11

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

Question 12

Export Assistance Centers (EACs):

Answer 12

Help small- and medium-sized businesses with direct exporting by
providing exporting assistance and trade-finance support.

Question 13

Franchising

Answer 13

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 14

Contract Manufacturing

Answer 14

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

Question 15

Joint venture

Answer 15

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

Question 16

Strategic alliance

Answer 16

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

Question 17

Foreign direct investment (FDI)

Answer 17

The buying of
permanent property and businesses in foreign nations

Question 18

Foreign subsidiary

Answer 18

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

Question 19

Multinational corporation

Answer 19

An organization that
manufactures and markets products in many different
countries and has multinational stock ownership and
multinational management

Question 20

Sovereign wealth funds (SWFs)

Answer 20

Investment funds
controlled by governments holding large stakes in foreign
companies

Question 21

Exchange rate

Answer 21

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

Question 22

Devaluation

Answer 22

Lowering the value of a nation’s currency
relative to other currencies

Question 23

Counter-trading

Answer 23

A complex form of bartering in which
several countries may be involved, each trading goods for
goods or services for services

Question 24

Trade Protectionism

Answer 24

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

Question 25

Tariffs

Answer 25

A tax imposed
on imports

Question 26

Import Quota

Answer 26

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

Question 27

Embargo

Answer 27

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

Question 28

World Trade Organization (WTO)

Answer 28

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

Question 29

Common Markets

Answer 29

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 30

North American Free Trade Agreement (NAFTA)

Answer 30

Agreement that created a free-trade area among the
United States, Canada, and Mexico; it passed in 1993

Question 31

Central American Free-Trade Agreements (CAFTA)

Answer 31

created a
free-trade zone with:
* Costa Rica
* Dominican Republic
* El Salvador
* Guatemala
* Nicaragua
* Honduras

Question 32

Offshore outsourcing

Answer 32

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