Module 2

Question 1

An _______ or _________, is a system of production, resource allocation and distribution of goods and services within a society or a given geographic area.

It includes the combination of the various institutions, agencies entities, decision-making processes and patterns of consumption that comprise the economic structure of a given community.

Answer 1

Economic system or Economic order

Question 2

Three broad types of economic systems:

Answer 2

(1) Market economy
(2) Command economy
(3) Mixed economy

Question 3

An economy in which the greater part of the production, distribution, and exchange is controlled by individuals and privately owned corporations rather than by the government, and in which government interference in the market is minimal.

Answer 3

Market economy

Question 4

Is a system where the government, rather than the free market determines what goods should be produced, how much should be produced, and the price at which the goods are offered for sale. It also determines investments and incomes.

Answer 4

Command Economy

Question 5

means that a part of the economy is left to the free market, and part of it is managed by the government. This type of economy start from the basis of allowing private enterprise to run most businesses.

Answer 5

Mixed Economy

Question 6

Items of International Trade

Answer 6

(1) Visible
(2) Invisible
(3) Import
(4) Export

Question 7

The items of international trade consist of goods and services, the former being referred to at times as _______ items, whereas the later are invariably described as _______ items.

Answer 7

visible; invisible

Question 8

Based upon their movement and destination, such items (visible and invisible) are classified as _______ and _______ .

Answer 8

imports and exports

Question 9

Imports, from the Latin in which means “in” and “porto” meaning ______, are items that enter into a port coming from foreign one.

Answer 9

“carry”

Question 10

What are the Advantages of International Trade?

Answer 10

(1) Increased revenues
(2) Decreased competition
(3) Longer product lifespan
(4) Easier cash-flow management
(5) Better risk management
(6) Benefiting from currency exchange
(7) Access to export financing
(8) Disposal of surplus goods
(9) Enhanced reputation
(10) Opportunity to specialize

Question 11

What are some Disadvantages of International trade?

Answer 11

(1) Shipping Customs and Duties
(2) Language Barriers
(3) Cultural Differences
(4) Servicing Customers
(5) Returning Products
(6) Intellectual Property Theft

Question 12

One of the top advantages of international trade is that you may be able to increase your number of potential clients. Each country you add to your list can open up a new pathway to business growth and increased revenues.

Answer 12

Increased revenues

Question 13

Your product and services may have to compete in a crowded market in the U.S, but you may find that you have less competition in other countries.

Answer 13

Decreased competition

Question 13

Getting paid upfront may be one of the hidden advantages of international trade. When trading internationally, it may be a general practice to ask for payment upfront. Expanding your business overseas could help you manage cash flow better.

Answer 13

Easier cash-flow management

Question 13

Focusing only on the domestic market may expose you to increased risk from downturns in the economy, political factors, environmental events and other risk factors.

Selling a product to an overseas market can extend the life of an existing product as emerging markets seek to buy American products.

Answer 13

Longer product lifespan

Question 14

One of the significant advantages of international trade is market diversification. Focusing only on the domestic market may expose you to increased risk from downturns in the economy, political factors, environmental events and other risk factors.

Answer 14

Better risk management

Question 15

Those who add international trade to their portfolio may also benefit from currency fluctuations. For example, when the U.S dollar is down, you may be able to export more as foreign customers benefit from the favorable currency exchange rate.

Answer 15

Benefiting from currency exchange

Question 16

Another one of the advantages of international trade is that you may be able to leverage export financing.

Answer 16

Access to export financing

Question 17

One of the advantages of international trade is that you have an outlet to dispose of surplus goods that you’re unable to sell in your home market.

Answer 17

Disposal of surplus goods

Question 18

Doing business in other countries can boost your company’s reputation. It can help increase your company’s credibility, both abroad and at home.

Answer 18

Enhanced reputation

Question 19

International markets open up avenues for a new line of service or products. It can also give you an opportunity to specialize in different area to serve that market.

Answer 19

Opportunity to specialize

Question 20

International shipping companies like FedEx, UPS and DHL make it easy to ship packages almost anywhere in the world. However, one of the disadvantages of international trade is that most of these destination countries’ customs agencies charge extra fees on items shipped to them.

Answer 20

Shipping customs and duties

Question 21

In addition to the cost of their product, a company needs to understand what the end customer will be charged by the international shipping company. This is sometimes referred to as the ________ .

Answer 21

“landed cost”

Question 22

Despite the availability of online translators, language is still one of the major disadvantages of international trade.

Answer 22

Language barriers

Question 23

The marketplace is filled with examples of ______________ with names that got misconstrued in another language.

Answer 23

poorly translated products

Question 24

What makes this one of the major disadvantages of international trade is that _________ , many times, are never documented. They are the unwritten rules of commerce in that country that are hard to uncover and can be even more difficult to solve.

Answer 24

cultural differences

Question 25

After international customers make a purchase, how will they be serviced when they are so far away? Again, language and cultural differences need to be considered to overcome one of the major disadvantages od international trade.

Answer 25

Servicing customers

Question 26

Since not all international customers will be satisfied with a company’s products, a process must be in place to return them and process a refund.

Answer 26

Returning products

Question 27

The wider a product is distributed, the more likely that it may be illegally copied by a competitor. This can be in the form of proprietary information or market branding.

Answer 27

Intellectual Property Theft