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| 1 | |
Which of the following statements best describes the theory of comparative advantage? |
| | A) | The best way for a nation to ensure full employment is to be totally self-sufficient rather than relying on other nations to obtain goods and services. |
| | B) | Each nation should produce those goods that it can produce more efficiently and effectively than other nations, and buy the goods it cannot produce efficiently from other nations. |
| | C) | The nation that has the largest reserves of gold and other natural resources will enjoy a position of comparative advantage in trade relationships. |
| | D) | A nation should produce those goods for which domestic demand is comparatively strong, and should import those goods for which domestic demand is comparatively weak. |
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| 2 | |
The concept of free trade means: |
| | A) | Buyers and sellers contract with each other and offer some goods at no cost. |
| | B) | There is no exchange of currency. Trading partners determine the value of the product and perform a bartering process to exchange goods. |
| | C) | Currencies are equalized before any goods are exchanged. |
| | D) | Goods and services can be traded freely across borders without political and/or economic barriers. |
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| 3 | |
The president of the American Auto Parts Corporation recently testified before members of Congress, urging them to limit the flow of imported automobile parts into the United States. She contended that these imports were priced lower than the foreign producers were charging for the same parts in their own countries. She believes these foreign producers are guilty of: |
| | A) | Dumping. |
| | B) | Reverse exporting. |
| | C) | Free trade. |
| | D) | Bilateral trade surplus. |
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| 4 | |
When foreign companies build facilities and produce goods in the U.S., they are participating in ________________. In May, 2008, the U.S. Secretary of Commerce announced "Invest in America" week, which involved a series of activities in 18 states that highlighted the importance of this strategy to the U.S. economy. |
| | A) | Exporting |
| | B) | Importing |
| | C) | Foreign direct investment |
| | D) | Countertrading |
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| 5 | |
Pepsi Cola has entered into a long-term contract with a South African beverage business. The contract calls for the South African firm to produce and market Pepsi Cola in South Africa. Pepsi will receive a royalty on each case of soda sold. This is an example of: |
| | A) | Licensing. |
| | B) | A joint venture. |
| | C) | A foreign subsidiary. |
| | D) | Foreign direct investment. |
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| 6 | |
Mo's Hardware, a U.S. retailer, buys much of its inventory from Asian countries. Mo's Hardware would benefit if the value of the dollar ________ relative to the currencies of the countries from which Mo's imports. |
| | A) | rose |
| | B) | fell |
| | C) | remained constant |
| | D) | floated unpredictably |
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| 7 | |
Tyler is typical of many U.S. businesspersons. Tyler feels the U.S. culture should represent the model for the rest of the world, and that the "American Way" of doing things is almost always the best. Tyler is guilty of: |
| | A) | Xenoculturalism. |
| | B) | Ethnocentricity. |
| | C) | Culture shock. |
| | D) | Counter valuation. |
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| 8 | |
Under a system of floating exchange rates, changes in the value of the U.S. dollar relative to other currencies usually result from: |
| | A) | Negotiated rate adjustments between the U.S. government and the World Trade Organization. |
| | B) | Decisions by the Federal Reserve Board of Governors to declare a new value for the exchange rate. |
| | C) | Fluctuations in the world price of gold. |
| | D) | Changes in the supply of and/or demand for dollars in the market for the U.S. currency. |
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| 9 | |
Many countries use ________________ to protect their domestic industries against dumping and unfair foreign competition. |
| | A) | Export limitations |
| | B) | Global marketing |
| | C) | Trade protectionism |
| | D) | Import enhancements |
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| 10 | |
A disruption to the U.S. job market is ____________, where companies have shifted the manufacturing, design, and architecture processes to other nations in order to reduce labor costs. |
| | A) | franchising |
| | B) | offshore outsourcing |
| | C) | expatriation |
| | D) | expropriation |
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