Chapter three

Question 1

International business

Answer 1

All business activities that involve exchanges across national boundaries

Question 2

absolute advantage

Answer 2

The ability to produce a specific product more efficiently than any other nation

Question 3

Comparative advantage

Answer 3

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

Question 4

exporting

Answer 4

Selling and shipping raw materials or products to other nations

Question 5

importing

Answer 5

Purchasing raw materials or products in other nations and bringing them into one’s own country

Question 6

balance of trade

Answer 6

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

Question 7

trade deficit

Answer 7

A negative balance of trade

Question 8

balance of payments

Answer 8

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

Question 9

licensing

Answer 9

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

Question 10

contract manufacturing

Answer 10

An arrangement in which one firm contracts with another business, often in another country, to manufacture products or product
components to its specifications

Question 11

outsourcing

Answer 11

An arrangement in which one firm contracts manufacturing or other activities to a firm in another country that specializes in those activities and can offer them at a lower cost than domestic firms

Question 12

multinational corporation

Answer 12

A firm that operates on a worldwide scale without ties to any specific nation or region