Denise International Busine chap 5 PDF

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International Business: The Challenges of Globalization, 7e (Wild) Chapter 5 International Trade International trade is the purchase, sale, or exchange of goods and services across national borders. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Easy Cours...

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International Business: The Challenges of Globalization, 7e (Wild) Chapter 5 International Trade 1) International trade is the purchase, sale, or exchange of goods and services across national borders. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Easy Course LO: Define the fundamental concepts of international business 2) The value of trade passing through the borders of all countries exceeds the amount of goods and services they produce. Answer: FALSE AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Moderate Course LO: Define the fundamental concepts of international business 3) Most of the world's merchandise trade is composed of trade in agricultural products. Answer: FALSE AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Moderate Course LO: Define the fundamental concepts of international business 4) Trade in services tends to be relatively more important for the world's richest countries. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Easy Course LO: Define the fundamental concepts of international business 5) When a country's currency is weak relative to other nations, domestic products are more expensive than imports. Answer: FALSE AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Moderate Course LO: Define the fundamental concepts of international business

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6) Trade between most nations is presently characterized by a certain degree of isolationism. Answer: FALSE Skill: Concept Objective: 1 Difficulty: Easy Course LO: Define the fundamental concepts of international business 7) Mercantilism states that nations should only concern themselves with accumulating financial wealth. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 8) Mercantilist countries used to amass wealth by acquiring less-developed territories around the world. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 9) Trade deficit occurs when the value of a country's imports is greater than the value of its exports. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 10) Mercantilism views competition for the world's wealth as a positive-sum game. Answer: FALSE Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade

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11) According to Adam Smith, international trade should be restricted by tariffs and quotas in order to give a country an absolute advantage. Answer: FALSE AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Difficulty: Moderate Course LO: Compare and contrast theories of international trade 12) The theory of absolute advantage destroys the mercantilist idea that international trade is a zero-sum game. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade 13) The theory of absolute advantage measures a nation's wealth by the standard of living of its people. Answer: TRUE Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade 14) Economist David Ricardo developed the theory of comparative advantage. Answer: TRUE Skill: Concept Objective: 3 Difficulty: Easy Course LO: Define the fundamental concepts of international business 15) The ability of a nation to produce a good more efficiently than any other nation is called its comparative advantage. Answer: FALSE AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade

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16) The theories of comparative advantage and absolute advantage assume that countries are driven only by the maximization of production and consumption. Answer: TRUE Skill: Concept Objective: 3 Difficulty: Moderate Course LO: Compare and contrast theories of international trade 17) The theories of comparative and absolute advantage assume that specialization in the production of one particular good results in efficiency gains. Answer: FALSE Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade 18) Factor proportions theory states that factors in great supply relative to demand will be more costly than factors in short supply relative to demand. Answer: FALSE AACSB: Dynamics of the global economy Skill: Concept Objective: 4 Difficulty: Moderate Course LO: Compare and contrast theories of international trade 19) Factor proportions theory states that a country will produce and export those goods that require resources abundantly available within the country. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 4 Difficulty: Easy Course LO: Compare and contrast theories of international trade 20) The factor proportions theory of international trade was developed by Wassily Leontief. Answer: FALSE Skill: Concept Objective: 4 Difficulty: Easy Course LO: Compare and contrast theories of international trade

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21) In the maturing product stage of the international product life cycle theory, production facilities are introduced in countries with the highest demand. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 4 Difficulty: Easy Course LO: Compare and contrast theories of international trade 22) An absolute advantage is the economic and strategic advantage gained by being the first company to enter an industry. Answer: FALSE Skill: Concept Objective: 5 Difficulty: Easy Course LO: Compare and contrast theories of international trade 23) National competitive advantage theory states that a nation's competitiveness in an industry depends on the capacity of the industry to innovate and upgrade. Answer: TRUE AACSB: Dynamics of the global economy Skill: Concept Objective: 5 Difficulty: Easy Course LO: Compare and contrast theories of international trade 24) According to Michael Porter, advanced factors account for the sustained competitive advantage a country enjoys in a product. Answer: TRUE Skill: Concept Objective: 5 Difficulty: Easy Course LO: Compare and contrast theories of international trade 25) Companies that belong to a nation's internationally competitive industries exist in isolation from supporting industries. Answer: FALSE Skill: Concept Objective: 5 Difficulty: Easy Course LO: Compare and contrast theories of international trade

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26) ________ refers to the purchase, sale, or exchange of goods and services across national borders. A) Domestic trade B) Foreign direct investment C) International trade D) Mercantilism Answer: C Skill: Concept Objective: 1 Difficulty: Easy Course LO: Define the fundamental concepts of international business 27) The importance of trade for a nation can be measured by ________. A) examining the amount of wealth acquired by the national government through restrictive trade policies B) the living standards of people involved in only trade activities C) the number of acquired territories the nation has that serves as sources of inexpensive raw materials D) examining the volume of its trade relative to its total output Answer: D AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Moderate Course LO: Define the fundamental concepts of international business 28) Most of the world merchandise trade is composed of trade in ________. A) minerals B) services C) manufactured goods D) agricultural products Answer: C AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Easy Course LO: Define the fundamental concepts of international business

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29) A majority of the total world merchandise trade occurs among ________. A) middle-income and low-income economies B) high-income economies C) newly industrialized countries D) emerging markets Answer: B AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Easy Course LO: Define the fundamental concepts of international business 30) The smallest portion of the total world trade comprises trade between ________. A) high-income and middle-income nations B) low-income and middle-income nations C) developed countries D) First World member countries Answer: B AACSB: Dynamics of the global economy Skill: Concept Objective: 1 Difficulty: Easy Course LO: Define the fundamental concepts of international business 31) The danger of trade dependency is that ________. A) it often leads to the exploitation of developed countries B) political turmoils in a country might affect all dependent countries C) the countries involved in trade often get into rivalry over trade tariff issues D) it is difficult to end trade activities with current trade partners and find new trade partners Answer: B Skill: Concept Objective: 1 Difficulty: Moderate Course LO: Compare and contrast theories of international trade 32) ________ says that nations should accumulate financial wealth, usually in the form of gold, by encouraging exports and discouraging imports. A) Absolute advantage theory B) Factor proportions theory C) Mercantilism D) Communism Answer: C AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 7 Copyright © 2014 Pearson Education, Inc.

33) The measures of a nation's well-being other than the financial wealth accumulated through exports are irrelevant according to ________. A) mercantilism B) absolute advantage theory C) factor proportions theory D) new trade theory Answer: A AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 34) Which of the following was a prominent mercantilist nation? A) U.S. B) China C) Britain D) Japan Answer: C Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 35) One of the major pillars upon which the practice of mercantilism rested was ________. A) economies of scale B) pricing mechanism C) excessive imports D) trade surpluses Answer: D Skill: Concept Objective: 2 Difficulty: Moderate Course LO: Compare and contrast theories of international trade 36) The condition that results when the value of a nation's exports is greater than the value of its imports is called ________. A) a trade deficit B) a trade surplus C) mercantilism D) dumping Answer: B AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 8 Copyright © 2014 Pearson Education, Inc.

37) The condition that results when the value of a country's imports is greater than the value of its exports is called ________. A) a trade deficit B) economies of scale C) a break-even point D) absolute advantage Answer: A AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 38) According to mercantilism, the accumulation of national wealth depended on the ________. A) increase in a nation's trade surplus B) increase in a nation's trade deficit C) expansion of a nation's total value of trade D) expansion of a nation's total volume of trade Answer: A AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Moderate Course LO: Compare and contrast theories of international trade 39) Which of the following statements is incorrect with regard to the importance of colonies for mercantilist nations? A) They served as sources of inexpensive raw materials. B) They served as markets for higher-priced finished goods. C) They served as a source of military protection. D) They served as a source of profits for mercantilist powers. Answer: C Skill: Concept Objective: 2 Difficulty: Moderate Course LO: Compare and contrast theories of international trade

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40) Nations following the theory of ________ believed that the world's wealth was limited and that a nation could increase its share of the pie only at the expense of its neighbors. A) absolute advantage B) comparative advantage C) mercantilism D) factor proportions Answer: C AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 41) Today, countries seen by others as trying to maintain a trade surplus and expand their national treasures at the expense of other nations are accused of practicing ________. A) totalitarianism B) anti-mercantilism C) social stratification D) economic nationalism Answer: D AACSB: Dynamics of the global economy Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade 42) Another term for neomercantilism is ________. A) new trade B) free trade C) economic nationalism D) political nationalism Answer: C Skill: Concept Objective: 2 Difficulty: Easy Course LO: Compare and contrast theories of international trade

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43) Which of the following refers to the ability of a nation to produce a good more efficiently than any other nation? A) mercantilism B) comparative advantage C) absolute advantage D) neomercantilism Answer: C AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade 44) Who proposed the theory of absolute advantage? A) David Ricardo B) Adam Smith C) Bertil Ohlin D) Raymond Vernon Answer: B Skill: Concept Objective: 3 Difficulty: Easy Course LO: Define the fundamental concepts of international business 45) Adam Smith believed that ________. A) governments should determine trade flows B) market forces should determine trade flows C) international trade should be restricted by tariffs and quotas D) countries should produce most goods themselves and trade as little as possible Answer: B Skill: Concept Objective: 3 Difficulty: Moderate Course LO: Compare and contrast theories of international trade 46) The theory of absolute advantage measures a nation's wealth by determining the ________. A) amount of gold it has on reserve B) quantity of minerals it has on reserve C) total trade volume in the country D) living standards of its people Answer: D AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade 11 Copyright © 2014 Pearson Education, Inc.

47) The theory of absolute advantage destroys the mercantilist idea that international trade is a ________. A) positive-sum game B) zero-sum game C) negative-sum game D) win-win game Answer: B AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade 48) Which of the following is true about the theory of absolute advantage? A) The theory accepts the mercantilist idea that international trade is a zero-sum game. B) The theory approves the objective of national governments to acquire wealth through restrictive trade policies. C) The theory emphasizes that nations should open their doors to trade so that people can obtain more goods at cheaper rates. D) The theory measures a nation's wealth by how much gold and silver it has on reserve. Answer: C AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Difficulty: Moderate Course LO: Compare and contrast theories of international trade 49) When there are gains to be had by both countries that are party to an exchange, international trade is considered a(n) ________. A) positive-sum game B) equal-sum game C) negative-sum game D) zero-sum game Answer: A AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade

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50) When a country is not able to produce a good more efficiently than other nations, but produces the good more efficiently than it does any other good, it is said to have a(n) ________. A) absolute advantage B) resource advantage C) first-mover advantage D) comparative advantage Answer: D Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade 51) The theory of comparative advantage was proposed by ________. A) David Ricardo B) Adam Smith C) Bertil Ohlin D) Raymond Vernon Answer: A AACSB: Analytic skills Skill: Concept Objective: 3 Difficulty: Easy Course LO: Define the fundamental concepts of international business 52) To complete his business bookkeeping work each month, a business owner spends about 20 hours and in the process, has to give up $900 in income. If he hired a bookkeeper to do the work, the job would be completed in 15 hours and would cost him $600. Should the owner hire the bookkeeper or continue to do the work himself? A) He should hire the bookkeeper because the bookkeeper has an absolute advantage in completing the books. B) He should do the bookkeeping himself because he has an absolute advantage in completing the books. C) He should hire the bookkeeper only if the bookkeeper agrees to give him a discount on the service price. D) He should hire the bookkeeper only if the bookkeeper is willing to complete the work in 12 hours. Answer: A AACSB: Analytic skills Skill: Application Objective: 3 Difficulty: Hard Course LO: Compare and contrast theories of international trade

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53) Country A produces a ton of coffee using one unit of resources. Country B produces two tons of coffee using one unit of resources. Which of the following is true regarding Country A and Country B? A) Country A has an absolute advantage in producing coffee. B) Country B has an absolute advantage in producing coffee. C) Neither Country A nor Country B has an absolute advantage in producing coffee. D) Both Country A and Country B have an absolute advantage in producing coffee. Answer: B AACSB: Analytic skills Skill: Application Objective: 3 Difficulty: Moderate Course LO: Compare and contrast theories of international trade 54) According to the theory of ________, trade is beneficial even if one country is less efficient in the production of two goods, as long as it is less inefficient in the production of one of the goods. A) absolute advantage B) mercantilism C) comparative advantage D) factor proportions Answer: C AACSB: Dynamics of the global economy Skill: Concept Objective: 3 Difficulty: Easy Course LO: Compare and contrast theories of international trade 55) Which of the following statements is true regarding the assumptions of the absolute and comparative advantage theories? A) The theories assume that there are many number of countries engaged in the production and consumption of just two goods. B) The theories assume that there are additional costs for transporting traded goods from one country to another. C) The theories assume labor to be the only resource used in the production process. D) The theories assume that specialization in the production of one particular good results in gains in efficiency. Answer: C Skill: Concept Objective: 3 Difficulty: Moderate Course LO: Compare and contrast theories of international trade

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56) Which of the following is an assumption made by the comparative advantage theory? A) maximization of production and consumption B) government interference and control in trade activities C) creation of trade deficits D) creation of trade...