Module 5 Flashcards
When the government does not use quotas, taxes, or other means to restrict what its citizens can buy from or sell to another country, it is called ___________
_ trade.
free
What are four main instruments of trade policy?
Multiple select question.
Unions
Import quotas
Local content requirements
Tariffs
Antidumping duties
Arbitration
Foreign direct investment
Import quotas
Local content requirements
Tariffs
Antidumping duties
A tax on goods coming into or leaving a country is called a(n) ______.
Multiple choice question.
subsidy
embargo
arbitrator
tariff
tariff
The nationwide company, Nightingale Health Systems, received a tax break from the government when it was faltering and ready to declare bankruptcy. This subsidy helped the company with production costs and allowed it to have a stronger presence in the competitive health industry. This tax break is a type of _____.
Multiple choice question.
embargo
subsidy
tariff
quota
subsidy
The United States has placed a limit on the amount of tuna in airtight containers that can be imported into this country. This is an example of a(n) _____.
Multiple choice question.
import quota
subsidy
voluntary export restraint
export tariff
import quota
______ trade is the economic policy of not discriminating against exports to or imports from foreign countries.
Multiple choice question.
Free
Restricted
Fair
Balanced
Free
What’s the main reason a country would use export tariffs?
Multiple choice question.
To achieve economies of scale
To ensure sufficient supply of a good within the country
To foster competition and ultimately lower costs to the consumer
To take advantage of lower production costs
To ensure sufficient supply of a good within the country
What is considered the simplest instrument of trade policy?
Multiple choice question.
Tariffs
Quotas
Subsidies
Antidumping duties
Tariffs
A(n) ______ states that some percentage of a good must be produced domestically.
Multiple choice question.
antidumping policy
local content requirement
voluntary export restraint
quota rent
local content requirement
Taxes placed on imports to protect domestic producers from foreign competition and to produce revenue for the government are called
Multiple choice question.
embargoes.
income.
quotas.
tariffs.
tariffs
A country might create safety standards for certain products that other nations can’t comply with. As a result, these nations can’t be involved with exporting parts for those goods and trade does not exist. These safety standards are a form of _____.
Multiple choice question.
antidumping policy
voluntary export restraint
quota rent
administrative trade policy
administrative trade policy
A(n) ______ is a payment by the government to a domestic producer to help lower production costs so they are better able to compete with foreign imports.
Multiple choice question.
tariff
voluntary export restraint
subsidy
import quota
subsidy
What occurs when a company practices dumping?
Multiple choice question.
The firm is asking the government for financial assistance to be more competitive.
The firm is moving all manufacturing processes to a foreign nation to lower costs.
The firm is unloading excess production in a foreign market.
The firm is placing a quota rent on goods but not services.
The firm is unloading excess production in a foreign market.
An import _____ is a type of trade restriction that sets a physical limit on the quantity of a product that can be imported into the country in a set period of time.
Multiple choice question.
quota
arbitration
subsidy
tariff
quota
By threatening ______ trade sanctions, one country can convince another country to open its markets.
Multiple choice question.
punitive
favorable
supportive
short-term
punitive
If a country places a 20 percent tax on dairy products exported to other nations in order to limit exports and have sufficient supplies of dairy products for the home country, it is using a(n) ______.
Multiple choice question.
import quota
subsidy
export tariff
embargo
export tariff
The oldest argument for government intervention in trade in which developing nations must protect their domestic industries until they are ready to compete globally is the ______ argument.
Multiple choice question.
infant industry
voluntary export restraint
local content
national security
infant industry
In order to win a contract in Mexico, QVB Auto Manufacturing must make 65 percent of the component parts of their vehicles in Mexico. This is an example of a(n)
Multiple choice question.
local supplier requirement.
local distribution requirement.
international content requirement.
local content requirement.
local content requirement.
Paul Krugman would agree that while strategic trade policy seems appealing in theory, in reality, strategic trade policy is _____.
Multiple choice question.
best for the service industry
only beneficial to the agricultural industry
unavoidable
unworkable
unworkable
A government would impose administrative trade policies in order to
Multiple choice question.
foster goodwill among trading nations.
make it difficult for imports to enter a country.
limit the amount of exports going out of a country.
ensure that there is sufficient supply of a good within a country.
make it difficult for imports to enter a country.
Country A subsidizes oil development and Country B is losing any competitive advantage because of it. Krugman would agree that Country B hopes to minimize subsidies to prevent a
Multiple choice question.
global response.
trade exchange.
trade war.
union action.
trade war.
When manufacturers export a product to another country at a price either below the price charged in its home market or below its cost of production, it is called ______.
Multiple choice question.
arbitration
dumping
embargo
phishing
dumping
The European Union’s support for the Common Agricultural Policy illustrates why strategic trade policy is problematic. In this instance, the government was influenced by ______ to the detriment of consumers.
Multiple choice question.
interest groups
election fraud
start-ups
foreign producers
interest groups
As noted in the text, the U.S. government used the threat of trade sanctions to try to convince the _____ government to enforce its intellectual property laws since massive copyright infringements in that country have cost U.S. companies millions of dollars in lost revenue.
Multiple choice question.
Mexican
Russian
British
Chinese
Chinese
Country A wants to lower trade barriers with its neighbor, Country B. While both countries support free trade, they are both reluctant to lower their barriers because they are not sure the other country will reciprocate. What obstacle is preventing the advancement of free trade between these countries?
Multiple choice question.
Fear of rising producer costs
Lack of resources
Lack of trust
Fear of rising consumer costs
Lack of trust
The ______ argument for trade intervention states that developing countries need to support new industries until they are strong enough to compete globally.
Multiple choice question.
infant industry
purchasing power parity
tragedy of the commons
balance sheet
infant industry
Which economist was a key figure in the early free trade movement in Great Britain?
Multiple choice question.
Ricardo
Samuelson
Keynes
Marx
Ricardo
The argument for strategic trade policy suggests a(n) ______ justification for government intervention in trade.
Multiple choice question.
economic
political
social
cultural
economic
______ is the acronym for the multilateral agreement established in 1947 aimed at the abolition of quotas, tariffs, and subsidies in order to liberalize trade.
Multiple choice question.
WTO
IMF
GATT
JIT
GATT
Krugman argues that if each country seeks to follow a strategic trade policy to protect its interests, this may lead to a ______.
Multiple choice question.
trade exchange
government subsidy
voluntary export restriction
trade war
trade war
During the 1980s and 1990s, the world trading system was strained by the persistent trade deficit in the world’s largest economy, which was:
Multiple choice question.
the United States.
China.
the United Kingdom.
Japan.
the United States.
Krugman advocates that it is logical to expect the U.S. government to ignore special-interest politics when forming policy.
True false question.
True
False
False
Unilateral lowering of trade barriers has not occurred mostly due to a lack of _____ among governments.
Multiple choice question.
ethnocentrism
trust
parity
production
trust
GATT rules initially only dealt with trade in manufactured goods and commodities. With the increase in trade in the ______ sector, the Uruguay Round sought to establish agreements to cover this area.
Multiple choice question.
technology
agriculture
communication
service
service
In the mid-1800s, ______ was the first nation to officially follow free trade.
Multiple choice question.
Sweden
the United States
Great Britain
France
Great Britain
Which function did the creators of the WTO hope it would perform?
Multiple choice question.
Prevent worldwide recessions
Facilitate future trade deals
Advocate for government subsidies
Eliminate trade surpluses or deficits
Facilitate future trade deals
GATT was put into place under the leadership of the U.S. government as a way to
Multiple choice question.
eliminate FDI.
foster free trade.
foster isolationism.
eliminate free trade.
foster free trade.
Today, many nations are _____ new trade policies associated with the WTO.
Multiple choice question.
in agreement with
advocating for
opposed to
opposed to
What are three reasons that caused the global trading system erected under GATT to be strained during the 1980s and early 1990s?
Multiple select question.
Countries found ways to get around GATT regulations
The economic success of Japan
A wave of economic recession throughout Europe
The persistent trade deficit in the United States
The economic distress of many African countries
Countries found ways to get around GATT regulations
The economic success of Japan
The persistent trade deficit in the United States
Reciprocal trade agreements between two or more partners are called _____ trade agreements.
Multiple choice question.
mutual
mass
monopolistic
multilateral trade
multilateral
The European Union’s support for the Common Agricultural Policy illustrates why strategic trade policy is problematic. In this instance, the government was influenced by ______ to the detriment of consumers.
Multiple choice question.
foreign producers
election fraud
interest groups
start-ups
interest groups
Following Brexit, Great Britain withdrew from the European Union in 2016.
True false question.
True
False
True
Select all that apply
GATT negotiations continue to deal with additional issues such as (Check the three that apply.)
Multiple select question.
intellectual property.
income inequality.
exchange rates.
services.
agricultural subsidies.
intellectual property.
services.
agricultural subsidies.
Select all that apply
What are two ways trade barriers hamper a firm’s productive activities?
Multiple select question.
Quotas limit the ability to serve a country from outside locales.
They increase the ability to operate at full capacity.
They raise the cost of exporting products.
They allow access to the imports a firm may need.
Quotas limit the ability to serve a country from outside locales.
They raise the cost of exporting products.
The WTO is more successful than GATT because the WTO has ______ that make it more effective.
Multiple choice question.
consumer confidence
monetary discretion
enforcement mechanisms
corporate lobbying
enforcement mechanisms
What are the four issues currently at the forefront of the WTO agenda?
Multiple select question.
Antidumping policies
High tariffs on nonagricultural goods and services
Protectionism in agriculture
Lack of intellectual property protection
Local content requirements
Entrepreneurial activities
Antidumping policies
High tariffs on nonagricultural goods and services
Protectionism in agriculture
Lack of intellectual property protection
The stalled Doha Round has caused many nations to use _____ to foster trade.
Multiple choice question.
strict quota rents
voluntary export restraints
multilateral trade agreements
local content requirements
multilateral trade agreements
In _____ Britain withdrew from the European Union following _____.
Multiple choice question.
2018, TWO
2016, Brexit
2018, TPP
2016, NAFTA
2016, Brexit
When considering the three basic decisions a firm must make when it decides to enter a foreign market, it must determine the market to enter, the timing of entrance, and
Multiple choice question.
facility location.
finance options.
the scale.
the partner.
the scale.
Lyttleton Enterprises, based in the United States, is considering opening an operation in London, England. The costs and risks associated with doing business in London would be considered _______________
_ because the country is economically advanced and politically stable. (select low or high)
low
What is the term used for when one company enters markets before its competitors?
Multiple choice question.
Concurrent entry
Late entry
Complacent entry
Early entry
Early entry
A firm enters a market on a(n) ______ scale when it commits significant resources to this effort.
Multiple choice question.
small
narrow
even
large
large
Which is an example of a major strategic commitment by a company?
Multiple choice question.
Choosing a local manager
Assessing the potential tax consequences of a price change
Changing the local board of advisers from 5 to 7 members
Entering a foreign market on a significant scale
Entering a foreign market on a significant scale
Select all that apply
What three basic decisions must firms evaluate when considering foreign expansion?
Multiple select question.
When to enter markets
What accounting procedures to use
The availability of personnel
On what scale to enter markets
Which markets to enter
When to enter markets
On what scale to enter markets
Which markets to enter
Foreign market entry decisions are based on the varying levels of risk and reward.
True false question.
True
False
True
Companies that want to have the least amount of risk when pursuing business in a foreign country should consider countries that are _____.
Multiple choice question.
politically stable
struggling economically
less developed
financially unstable
politically stable
Quick Auto Parts does not want to establish a manufacturing facility in Mexico but does want to get component parts to the 75 dealers it has in that country. Which form of entry should it use?
Multiple choice question.
Licensing
Acquisition
Turnkey project
Exporting
Exporting
Conrad’s U.S. based company entered the European market long after its competitors had established themselves. This is known as ________ entry.
Multiple choice question.
delayed
noncompetitive
late
cautious
late
Lisette works for Southwest Petroleum Corp. Her company is responsible for every aspect of setting up a refinery location for its clients. Southwest Petroleum builds the site, trains personnel, and notifies the client when the refinery is ready for operation. What foreign entry mode does this represent?
Multiple choice question.
Greenfield investment
Acquisition
Exporting
Turnkey project
Turnkey project
Select all that apply
What are two reasons a firm would choose NOT to enter a new market on a large scale?
Multiple select question.
May not have the resources available to commit to a large scale
Already has brand recognition in neighboring countries
Does not need the competitive advantage
Prefer to enter slowly so that it can become more familiar with the market
May not have the resources available to commit to a large scale
Prefer to enter slowly so that it can become more familiar with the market
What are two types of intangible property that can be associated with a licensing agreement?
Multiple select question.
Accounting
Trademark
Patent
Marketing
Trademark
Patent
A commitment that is strategic has a short-term impact and is easy to reverse.
True false question.
True
False
False
______ involves one firm selling intangible property to another firm and insisting that the receiver of the intangible property abides by strict rules on how it does business.
Multiple choice question.
Franchising
An acquisition
Licensing
Exporting
Franchising
Multiple Select Question
Select all that apply
What are two advantages of exporting?
Multiple select question.
Not having to establish manufacturing operations in host country
Having complete control over the distribution channels
Selling directly to the final consumer
Helps a firm achieve experience curve and location economies
Not having to establish manufacturing operations in host country
Helps a firm achieve experience curve and location economies
What are two ways a company can set up a wholly owned subsidiary in a foreign country?
Multiple select question.
A greenfield venture
Franchising agreement
Acquire an established firm
Master licensing arrangement
A greenfield venture
Acquire an established firm
A type of entry mode that is common in the chemical, pharmaceutical, and petroleum-refining industries in which a contractor agrees to handle every detail of a project for a foreign client is called ______.
Multiple choice question.
franchising
exporting
a turnkey project
an acquisition
a turnkey project
If a firm is highly concerned about choosing a politically acceptable entry mode, the firm should choose
Multiple choice question.
exporting.
licensing.
a wholly owned subsidiary.
a joint venture.
a joint venture.
In a licensing deal, the licensor receives payment in the form of ____ from the licensee.
Multiple choice question.
royalties
stock
dividends
imports
royalties
If a firm is determining which foreign entry strategy to use but is concerned with maintaining control over its proprietary technology, which two entry modes should it AVOID?
Multiple select question.
Licensing
Joint ventures
Franchising
Exporting
Licensing
Joint ventures
Which three statements are TRUE about franchising?
Multiple select question.
It is similar to a license but with a longer time commitment.
The franchiser does not sell intangible property as part of the franchise.
The franchiser typically receives a royalty payment.
Once the franchisee has a commitment, it is able to make all decisions about how to run the business.
The franchisee commits to abiding by strict rules on how it does business.
It is similar to a license but with a longer time commitment.
The franchiser typically receives a royalty payment.
The franchisee commits to abiding by strict rules on how it does business.
As the pressure to reduce costs increases, a firm will focus on location and experience curve economies. These firms would MOST LIKELY consider franchising and joint ventures entry modes.
True false question.
True
False
False
The most typical joint venture involves a ____ stake in ownership between two companies.
Multiple choice question.
50–50
33 1/3–66 2/3
80–20
40–60
50–50
A(n) ______ is a form of foreign direct investment where a parent company builds its operations in a foreign country from the ground up. In addition to the construction of new production facilities, these projects can also include the building of new distribution hubs, offices, and living quarters.
Multiple choice question.
joint venture
wholly owned subsidiary
merger
greenfield strategy
greenfield strategy
In which entry mode, does a firm own 100 percent of the stock?
Multiple choice question.
Wholly-owned subsidiary
Joint venture
Exporting
Licensing or franchising
Wholly-owned subsidiary
Select all that apply
What are three advantages of acquisitions?
Multiple select question.
Preempt the competition
Guaranteed first-mover advantage
Less risky than greenfield ventures
Lower cost than exporting
Quick to execute
Preempt the competition
Less risky than greenfield ventures
Quick to execute
At Jackson Electric, the company’s core competence is based in the proprietary technology it has developed for kitchen appliances. Which foreign entry mode should Jackson Electric avoid in order to protect this technology?
Multiple choice question.
Wholly owned subsidiary
Exporting
Franchising
Joint venture
Joint venture
Which entry mode’s major advantage is that a firm has more control over the kind of subsidiary it wants in a foreign market?
Multiple choice question.
Joint venture
Greenfield venture
Franchise
Exporting
Greenfield venture
If a firm’s core competency is based on technological know-how, a firm generally should NOT use which two entry modes?
Multiple select question.
Wholly owned subsidiary
Greenfield investment
Licensing
Joint venture
Licensing
Joint venture
Bob’s Bicycle Company is planning to enter into foreign markets where there are already well-established incumbent enterprises and in which global competitors are also interested in establishing a presence. Based on these circumstances, Bob’s Bicycle Company should enter the foreign markets via ______.
Multiple choice question.
acquisition
greenfield venture
acquisition
Which of the following are the two most appropriate foreign market entry modes as pressures for cost reductions increase?
Multiple select question.
Franchising
Exporting
Wholly owned subsidiary
Joint ventures
Exporting
Wholly owned subsidiary
A company that gains entry into a foreign market through ______ has total control over the products or services manufactured or sold.
Multiple choice question.
direct exports
franchising
a greenfield venture
joint venture
a greenfield venture
Developing countries with a comparative advantage in manufacturing should temporarily support new industries until they have grown strong enough to meet international competition.
Political or economic argument
Economic
Part of strategic trade policy suggesting that a government can help raise national income if it can ensure that the firm or firms with a first-mover advantage will be domestic.
Political or economic argument
Economic
A vocal and active segment of the population feels that domestic companies may shift factories to foreign locations.
Political or economic argument
Political
Part of strategic trade policy that suggests it is a good idea to help domestic firms overcome barriers to entry created by foreign firms that have reaped first-mover advantages.
Political or economic argument
Economic
Certain key industries should be supported so that in case of national emergency or war the country will have access to key supplies and materials.
Political or economic argument
Political
Certain foreign products seem attractive to consumers, but there are also significant concerns about the safety of the products over the long run.
Political or economic argument
Political
Poor-quality products may be sold, which lowers profits for firms that originally developed the product.
Political or economic argument
Economic
As societies get richer, citizens lobby for greater environmental protections.
Political or economic argument
Political
While the present wealth of customers in a national market is an important factor, the firm must also consider living standards and _______________________.
economic growth
The benefit–cost–risk trade-off is likely to be least favorable in developing nations that operate with a mixed or command economy or where _____________________________.
speculative financial bubbles have led to excess borrowing
One ___________________________ is the ability to preempt rivals and capture demand by establishing a strong brand name.
first-mover advantage
Strategic commitments, like ___________________, can have an important influence on the nature of competition.
rapid-large scale market entry
By buying out its joint venture partners in China and Japan and establishing wholly owned subsidiaries, Starbucks
limits its profit potential.
avoids long-term commitment in the host country.
increases its costs and risk.
capitalizes on the potential for nationalization.
decreases its ability to take profits out of the country.
increases its costs and risk.
