Chapter 11Service workers, who once thought globalization would not affect their jobs, are discovering that more and more service jobs are being outsourced to foreign countriesA)TrueB)False

2Most global markets are for consumer goods despite the national differences in tastes and preferences.A)TrueB)False

3Foreign direct investment occurs when a firm invests resources in business activities outside its home country.A)TrueB)False

4The two main components of globalization are:A)the globalization of markets and the globalization of production.B)the globalization of production and the globalization of finance.C)the standardization of technology and the globalization of markets.D)the globalization of finance and the globalization of accounting.

5______________________ is primarily responsible for policing the world trading system and making sure nation states adhere to the rules laid down in treaties the nation states have signed.A)InterpolB)The United Nations (UN)C)The World Trade Organization (WTO)D)The International Monetary Fund (IMF)

6Data about the volume of exports and world GDP suggest among other things that the economies of the world's nation-states _________________________________.A)are becoming more intertwined and dependent on each other for goods and servicesB)are becoming no wealthier as a whole, implying that the wealth is only shifting from country to countryC)firms are focusing on developing competencies at home and exporting goods and services from excess capacityD)markets have become globalized, but globalization of production has lagged

7Which of the following best describes the technological change that has been a driver of globalization?A)Communications has not kept pace with other areas.B)The microprocessor may be the single most important innovation.C)The Internet is important for gaming and social media within the domestic economy, but has yet to realize promise in globalization.D)Despite the widespread use of containerization, transportation costs continue to rise.

8Which of the following is NOT one of drivers that has made the globalization of production feasible?A)Decline of transportation costsB)Falling costs of information processingC)World-wide communications networksD)New applications for social media

9In the early 1960s, the United States was by far the world's dominant industrial power, and:A)even with the relative decline, it is still the largest industrial power.B)Germany, France and Italy have growth rates that suggest they may soon overtake the US.C)China's share of world GDP is still small given its large population.D)though some Asian countries have increased their share of world exports, the US will remain the world's leading exporter for some time to come.

10Medium-size and small multinationals (mini-multinationals):A)are not significant players in international business.B)have not grown significantly.C)have few of the same issues of complexity that large multinationals do.D)are becoming increasingly involved in international business.

11Latin America has become a more attractive market for exports and a site for foreign direct investment for all the following reasons EXCEPT:A)both democracy and free market reforms have taken place in much of Latin America.B)debt and inflation are down across most of Latin America.C)state involvement in the economies has almost completely disappeared throughout Latin America.D)foreign investment is now welcomed in much of Latin America.

12In Seattle, during December 1999, massive protests against globalization captured the attention of the world. Which of the following was not an issue the protesters raised?A)Domestic job lossesB)Downward pressure on wage rates of unskilled workersC)Environmental standards that were too strictD)Cultural imperialism of global media and multinational enterprises

13One of the most frequently voiced concerns raised by opponents of globalization is that ___________________________.A)globalization has led to increased global warmingB)falling barriers to international trade have destroyed manufacturing jobs in the wealthy advanced countries such as the United States and Western EuropeC)all ships rise with the tideD)prices for basic necessities of life have increased around the world

14One of the criticisms of the WTO is the concern that the organization will undermine the sovereignty of member nations. Which of the following is not a criticism in this area?A)Democratically elected governments must submit to unelected bureaucrats from other countries.B)Nations can no longer control their own destiny.C)There is a lack of transparency and accountability.D)The power of the organization rests largely on the ability to persuade member states to follow a certain action.

15Successful managers in international business:A)should pay little attention to governments and focus on the needs of the business.B)should focus on the values and systems of the home country instead of trying to figure out the nuances in other countries.C)insist that payments be made in U.S. dollars to avoid losses in currency transactions.D)face issues more complex than the issues managers face in strictly domestic business.

Chapter 21In the purest market economy, all productive activities are privately owned.A)TrueB)False

2Both U.S. law and OECD conventions condemn all forms of bribery with the exception of grease payments, which expedite the performance of routine government action.A)TrueB)False

3In the high-technology "knowledge" economy of the twenty-first century, intellectual property is becoming less important than creating open access to information.A)TrueB)False

4A country's political, economic, and legal system constitutes its:A)legal economy.B)political economy.C)economic economy.D)FDI economy.

5___________ refers to a political system where the needs of society as a whole are seen as more important than individual freedoms.A)TotalitarianismB)Representative democracyC)CollectivismD)Individualism

6In the early 20th century, the socialist ideology split into two broad camps, communists and _________________.A)MaoistsB)SandinistasC)social democratsD)liberals

7The process by which state-owned enterprises are sold to private investors is known as ________________________.A)privatizationB)building a ex-command economyC)expropriationD)creating intellectual and economic property

8Which of the following is not one of the major forms of totalitarianism?A)Communist totalitarianismB)Theocratic totalitarianismC)Tribal totalitarianismD)Plutocratic totalitarianism

9The three general types of economic systems are:A)free, limited and fixed.B)industrial, service and social.C)international, domestic and multi-domestic.D)market, command and mixed.

10Consistent with the collectivist ideology, the objective of a __________________ economy is for the government to allocate resources for the good of society.A)marketB)commandC)mixedD)benevolent-dictator

11In mixed economies:A)the state operates transportation systems and utilities, but no other industries.B)the state may take over companies in danger of collapsing.C)the state takes an important advisory role in industries of national importance.D)the state owns companies, but private individuals take on advisory roles in companies focusing on consumer-oriented goods.

12Contracts drafted under a common law framework tend to be ______________.A)shorter and less specific because many of the issues are already in the codeB)very detailed with all contingencies spelled outC)less flexible than one drawn up in a civil law systemD)less expensive than one drawn up in a civil law system

13Property rights refer to the legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource. Property rights can be violated in two ways through private action and through ____________.A)unrestricted internet accessB)public actionC)international treatyD)black markets and counterfeits

14In addition to competitiveness, country differences in product safety and liability laws raise an important ____________ issue for firms doing business abroad if there significant differences in the toughness of product safety laws in the home country and the foreign company in which the firm is doing business.A)logisticsB)operationalC)legalD)ethical

15Other things being equal, a nation with ___________________________, democratic political institutions, and a strong legal system that protects property rights and limits corruption is a more attractive as a place in which to business than countries without these factors.A)strong political partiesB)a market-based economic systemC)a well-established stock marketD)membership in international organizations

Chapter 31Although democracy may not always be the cause of initial economic progress, it seems to be one consequence of that process.A)TrueB)False

2In the 1980s and 90s two trends characterized the world's nation-states a wave of democratic revolutions and a strong move away from planned economies.A)TrueB)False

3By identifying and investing early in country that will become an economic star in the future, an international firm may build brand loyalty and gain experience in that country's business practices. This is known as the pioneer advantages.A)TrueB)False

4The purchasing power parity adjustment (PPP):A)measures the difference between the value of the US dollar and the Euro.B)distorts historical economic data.C)makes it difficult to compare spending patterns between countries.D)is based on the cost of living in the United States.

5Official measurements of a country's economic development are essential elements international businesses need for assessment but these official figures:A)are often deliberately skewed by governments to present a more desirable investment picture.B)are so dynamic that is difficult to use them.C)do not include unrecorded cash transactions or barter, which could be substantial.D)are far less accurate and reliable than information available from private sources.

6Which of the following is not one of the three measures used to calculate the Human Development Index developed by the UN based on work of Amartya Sen?A)Life expectancy at birthB)Quality of air and waterC)Educational attainmentD)Whether average incomes are sufficient to meet the basic needs of life

7Without __________________________, businesses and individuals run the risk that profits they might earn from their innovative ideas might be appropriated by the state, other companies, or criminal elements.A)strong property rights protectionsB)relief from taxationC)access to low-cost capitalD)secure access to the Internet

8The collapse of totalitarian and communist states, new information and communications technologies, and economic advances in many countries have led to:A)the spread of democracy.B)the growing importance of the United Nations in world affairs.C)the domination of world trade by the United States and its Western Europe allies.D)the rise of economic terrorism.

9The economic transformation that has been spreading since the 1980s was, in general, a result of the fact that _______________________________ failed to deliver the sustained economic performance that was achieved by countries adopting ____________________.A)market-based economies; mixed economiesB)mixed and command economies; market-based economiesC)command economies; mixed economiesD)market-based and mixed economies; command economies

10____________ involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and the manner in which private enterprises operate.A)DeregulationB)A market-based economyC)A command economyD)The interplay of supply and demand

11A nation may _______ as a means of encouraging business owners to seek gains in economic efficiency.A)privatizeB)downsizeC)regulateD)divest

12After the collapse of Communism, many former Communist countries lacked the legal structure required to ___________________________.A)apply for membership in the World Trade OrganizationB)enter into treaties, especially those that dealt with commercial mattersC)open markets to laws of supply and demandD)protect property rights as all property had been held by the state

13Generally, the long-term monetary benefits of doing business in a country are a function of the size of the market, the present purchasing power of consumers in that market, and __________________.A)the likely future wealth of consumersB)the average age and demographic profile of its citizensC)the state of existing international competitionD)the availability of natural resources

14Political riskA)is the likelihood that economic mismanagement will cause drastic changes in a country's business environment that hurt the profit and goals of a particular business enterprise.B)is the likelihood that political forces will cause drastic changes in country's business environment that adversely affect the profit and goals of a business enterprise.C)is the likelihood that a trading partner will opportunistically break a contract or expropriate property rights.D)is the likelihood that commercial mismanagement will cause drastic changes in a country's business environment that will negatively affect the profit and goals of a particular business enterprise.

15The likelihood that economic mismanagement will cause drastic changes in a country's business environment that hurt the profit and other goals of a particular business enterprise is an example of:A)legal risk.B)political risk.C)economic risk.D)fiscal risk.

Chapter 41Folkways are norms that are seen as central to the functioning of a society and to its social life.A)TrueB)False

2Critics of the work of Geert Hofstede and his work on culture in the workplace have been proven correct, and the work is becoming irrelevant in the 21st century.A)TrueB)False

3Fundamentalist movements, separatist movements, and continuing ethnic strains are reactions against cultural convergence that affect international business.A)TrueB)False

4______________________ is an understanding of how cultural differences across and within nations can affect the way business is practiced.A)Cross-cultural literacyB)A code of ethicsC)Secular religionD)Social culture

5_____ can be defined as a system of values and norms that are shared among a group of people and that when taken together constitute a design for living.A)MoresB)SocietyC)CultureD)Folkways

6All of the following are determinants of culture except:A)geography.B)religion.C)language.D)education.

7One of the harmful effects of the emphasis on individual performance in many Western societies and the United States is:A)the expression of rugged individualism.B)the emphasis on entrepreneurship.C)the high degree of managerial mobility.D)the emphasis on effective teams and team building.

8All societies are stratified on a hierarchical basis into _________________, which are typically defined by characteristics such as family background, occupation, and income.A)culturesB)tribesC)hierarchies of needD)social strata

9Demonstrating the implications that religion can have on business, _____ made the connection between Protestant ethics and the spirit of capitalism.A)John DunningB)Adam SmithC)Michael PorterD)Max Weber

10Which of the following is not a response to the Islam prohibition against the payment or receipt of interest?A)U.S. banks are effectively closed out of Islamic markets.B)An alternative to charging interest is a kind of profit sharing scheme called mudarabah.C)An alternative is the murabaha contract, where a markup on the purchase price goes to the bank.D)Only a few nations actually enforce Islamic banking conventions.

11Education can be a determinant of national competitive advantage because:A)it has been demonstrated that higher GPAs and GMAT scores are related to a nation's competitiveness.B)a pool of skilled and educated workers often leads to economic success.C)most firms prefer to place their highly educated managers in places where their education will outperform those local employees with less education.D)higher levels of education mean that cultural differences are irrelevant.

12In the workplace, culture:A)is the attempt by management to improve productivity by getting workers to attend theater and opera.B)is a distraction since workers have little choice in the tasks they must perform.C)helps explain differences in how work is organized and how workers relate to management.D)is becoming increasingly irrelevant with the popularity of the Internet.

13With regard to globalization, it has been argued that advances in transportation and communication technologies, the dramatic increase in trade, and the rise of global corporations have resulted in a slow but steady blending of different cultures into some universally accepted values and norms. This is known as the ___________________.A)Internet effectB)homogenization of cultureC)globalization effect on cultureD)convergence hypothesis

14When a manager believes that his own ethnic group or culture is superior to those of others, the manager is demonstrating a(n) __________ attitude.A)polycentricB)ethnocentricC)geocentricD)transcentric

15Culture and national competitive advantage are closely related. An important implication for international business is that:A)value systems affect the costs of doing business.B)natural resources are generally more important for competitiveness than culture.C)governments can have little impact on national competitive advantages.D)American models of how business should be conducted are becoming the only means for success in international business.

Chapter 51What is considered normal practice in one nation is usually considered ethical in another.A)TrueB)False

2When the Foreign Corrupt Practices Act was first passed, some U.S. businesses immediately objected that the Act would put them at a competitive disadvantage, though that has not proved true.A)TrueB)False

3The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, environmental pollution, and the use of power are not always clear-cut.A)TrueB)False

4When a resource, held in common by all but owned by no one, is overused by individuals, resulting in its degradation, it is a phenomenon known as:A)Hardin's obloquy.B)environmental tragedy.C)the tragedy of the commons.D)environmental degradation.

5Paying bribes:A)is generally unsavory but is not a criminal offense in developed countries.B)may actually stimulate the economy in some developing countries according to some economists.C)cannot be distinguished from facilitating payments.D)is essential for most international businesses in developing countries.

6When a firm faces a situation in which none of the available alternatives seems ethically acceptable, the firm is facing:A)an ethical question.B)the Sullivan principle.C)an ethical dilemma.D)moral uncertainty.

7Unethical behavior is determined by:A)personal ethics, organization culture, realistic performance goals, leadership, and decision-making processes.B)unrealistic performance goals, personal ethics, organization culture, leadership, and decision-making processes.C)decision-making processes, national culture, unrealistic performance goals, personal ethics, and leadership.D)national culture, realistic performance goals, leadership, decision-making processes, and personal ethics.

8Several studies of unethical behavior in business have concluded that businesspeople do not realize they are acting unethically, primarily because _________________________.A)their personal ethics are not as demanding as business ethicsB)profit is a more important business goal than ethical behaviorC)they learned their decision-making skills before it became a standard practice to incorporate an ethical dimensionD)they apply a business calculus to what they perceive to be a business decision forgetting that the decision may also have an important ethical dimension

9Using Hostede's dimensions of social culture, a recent study found that cultures where individualism and ________________________ were high were more likely to emphasize the importance of behaving ethically than firms headquartered in cultures that emphasized other attributes.A)uncertainty avoidanceB)masculinityC)power distanceD)Confucian dynamism

10The Friedman doctrine, cultural relativism, the righteous moralist, and the nave immoralist are approaches that have some value but are unsatisfactory in important ways. Companies do adopt these approaches, but they are generally known as __________________.A)philosophical exercisesB)corporate practical necessitiesC)straw menD)neoclassical ethics

11___________________ approaches to ethics hold that the moral worth of actions or practices is determined by their consequences.A)Nave moralistB)Rights theoriesC)KantianD)Utilitarian

12According to _______, employing people in sweatshops, making them work long hours for low pay in poor work conditions, is a violation of ethics.A)Kantian ethicsB)utilitarianismC)the Friedman doctrineD)cultural relativism

13Which of the following is NOT one of the five things international businesses and managers can do to make sure ethical issues are considered in business decisions?A)Hiring and promoting people with a well-grounded sense of personal ethicsB)Ethical environmental scanningC)Building an organizational culture that places a high value on ethical behaviorD)Putting decision-making processes in place that require people to consider the ethical dimension of business decisions

14One of the ways a business can build an organizational culture that values ethical behavior is to articulate explicitly the values that emphasize ethical behavior. Many companies do this by drafting _____________________.A)strong employment contracts in each of the languages in which it does businessB)a comprehensive mission statementC)detailed recruitment and employment policiesD)a code of ethics

15Which of the following is NOT true about moral courage?A)Moral courage enables managers to make a decision that may unfavorable affect the profits of the firm if it is ethical.B)Moral courage may be required of employees to defy managers.C)Moral courage may be needed in delicate international business decisions.D)Moral courage means having the strength to live with a decision you may not like rather than discussing in the media or on the internet.

Chapter 61The Samuelson Critique suggests that when a rich country enters into a free trade agreement with a poor country, the lower prices that the richer country's citizens pay may not be enough to produce a net gain for that economy if the agreement ends up lowering wages in the richer country.A)TrueB)False

2Research has shown that countries that adopt an open economy and embrace free trade will enjoy higher economic growth rates.A)TrueB)False

3The most contentious implication of the new trade theory is that it shows that government intervention and strategic trade policy work against economic growth and the general well-being of the country.A)TrueB)False

4When a government does not attempt to influence through trade barriers what its citizens can buy from another country, or what they can sell to another country, the government is promoting:A)free trade.B)capitalism.C)mercantilism.D)ethnocentrism.

5Although import controls may benefit _____________, the theories of Smith, Ricardo and Hecksher-Ohlin suggest that the economy as a whole is hurt by such actions.A)exportersB)importersC)producers or manufacturersD)consumers

6The flaw with mercantilism is that it viewed trade as ____________________________.A)a zero-sum gameB)an instrument of foreign policyC)incompatible with democratic governmentsD)more important than considerations of political sovereignty

7In Adam Smith's theory of absolute advantage, he argues that __________________.A)a country should never produce goods at home that it can buy at a lower cost from other countriesB)import controls should be used to maintain an absolute advantage in domestic productionC)the first mover advantage is the most important and therefore absoluteD)a government should discourage imports and encourage exports

8The theory of comparative advantage:A)holds that it may make sense to purchase goods from another country even if your country can efficiently produce it.B)repudiated Adam Smith's theory of absolute advantage.C)holds that in some cases it is better to restrict trade to gain a comparative advantage.D)is no longer relevant in today's world because of the impact of the Internet.

9Unlike Ricardo's theory, which argues that patterns in international trade are due to differences in productivity, the Heckscher-Ohlin theory argues that the patterns are due to differences in _____________________.A)protection of intellectual property rightsB)attractive foreign exchange ratesC)effectiveness of government interventionD)factor endowments

10Economists prefer the ___________ on theoretical grounds although it is a poor predictor of real-world international trade patterns, and while the _______________ is regarded as too limited, it predicts trade patterns with greater accuracy.A)theory of absolute advantage; theory of comparative advantageB)Smith's theory of absolute advantage; the Leontief ParadoxC)mercantilism; Hecksher-Ohlin theoryD)Hecksher-Ohlin theory; Ricardo's theory of competitive advantage

11The _________ suggests that trade is mutually beneficial because it allows for the specialization of production, the realization of scale economies, the production of a greater variety of products, and lower prices.A)product life cycle theoryB)new trade theoryC)theory of competitive advantageD)theory of comparative advantage

12The new trade theory suggests that a country may have a dominant position in the export of a good because ________________________________________.A)it was lucky enough to have one or more firms among the first to produce that goodB)the businesses in that country are more productiveC)the country has more attractive factor endowmentsD)competition in that country has made the companies better global competitors

13Michael Porter argues that:A)the diamond is a mutually reinforcing system.B)government should not play a role in a nation's competitiveness.C)chance has little bearing on the success of a firm.D)factor endowments should be treated as a constant.

14Which of the following is NOT an important implication for international business of international trade theory?A)It makes sense for a firm to disperse its productive activities to countries where they can be performed most efficiently.B)It makes sense for the individual firm to invest substantial resources to build a first mover or early mover advantage.C)Businesses can exert a strong influence on government trade policy so it is important to understand the theories of international trade.D)Because of the many debates on international trade theory, it is generally wiser for a company to ignore international trade theory and focus on its own strategies and tactics.

15A firm can preempt available demand, gain cost advantages related to volume, build an enduring brand ahead of competitors and establish a long-term, sustainable competitive advantage by establishing a(n)_____________________.A)absolute advantageB)comparative advantageC)first mover advantageD)factor endowment advantage

Chapter 71Both governments and consumers realize significant gains from tariffs, while domestic producers typically see a negative effect.A)TrueB)False

2Economists who have studied the issue have found little evidence that firm move production in response to changes in pollution regulations.A)TrueB)False

3A strategic trade policy that aims to establish domestic firms in a global industry might attract retaliation and a trade war.A)TrueB)False

4Which of the following is NOT one of the seven main instruments of trade policy?A)SubsidiesB)Import quotasC)Local content requirementsD)Quota rents

5By lowering production costs, ________________ help domestic producers in two ways, competing against foreign firms and gaining export markets.A)subsidiesB)tariffsC)administrative policiesD)boycotts

6Preserving jobs, protecting industries important to national security, retaliating against unfair foreign competition, and advancing human rights of individuals in exporting countries are examples of __________________.A)political arguments for government interventionB)implementation of the new trade policyC)practical elements of absolute advantageD)political party platforms meant mainly to appeal to voters

7Many economists criticize ______ for trade intervention arguing that it leads to prolonged inefficiency.A)the retaliation policyB)strategic trade policyC)the infant industry argumentD)human rights protection

8The strategic trade policy argument has two main components. First, appropriate government actions can help raise national incomes if the governments can ensure domestic firms gain first mover advantages. Second, ______________________.A)it may help domestic firms overcome barriers to entry created by foreign firms who had a first mover advantageB)it is necessary to help firms compete against other nations' state-owned companiesC)it provides revenue for the government that helps keep other tax revenues downD)proprietary knowledge is protected

9Governments do not always act in the national interest as they intervene in the economy, when, for example, ____________________.A)corruption is driven out of sight but still existsB)politically important interest groups influence themC)the political system favors business interests over those of consumersD)the country has few natural resources or other factor endowments

10Protectionism:A)increased in the 1980s and 1990s after a period of relative decline.B)was endorsed by the theories of both Adam Smith and David Ricardo.C)helps consumers by keeping prices low.D)preserves jobs in both the short-term and long-term.

11The WTO's role as a global policeman for trade has so far been:A)successful.B)moderately unsuccessful.C)quite ineffective.D)completely disorganized.

12Intellectual property rights have become thorny areas of international trade, especially in relation to software, pharmaceuticals, music and entertainment, and:A)in response uniform patent and copyright laws have been adopted and enforced by all WTO members.B)both the developed and developing world are standing together on protect the rights of companies.C)innovation remains a principal driver for economic growth.D)this was one area of agreement in the Doha round and meetings leading up to it.

13All of the following were part of the agenda of the Doha round of talks except:A)cutting tariffs on industrial goods and services.B)phasing out subsidies to agricultural producers.C)increasing the use of antidumping laws to bring discipline to the trading system.D)reducing barriers to cross-border investments.

14A firm will need to consider ________________ as it develops and executes its strategy, disperse activities around the globe and recognizes its cost structures.A)trade barriersB)the culture of its "C level" leadershipC)language barriersD)theories of mercantilism

15Business firms are major players on the international trade scene, and as such:A)they should ignore the minor complaints and extreme demands of protestors.B)they should pay less attention to national laws and focus more on their own strategies.C)they may ignore world events and international trade theory at the operational level and let experts with specialized policy backgrounds make the decisions to prevent costly errors.D)be aware of the problems both protectionism and free trade can bring.

Chapter 81Foreign direct investment has grown more rapidly than world trade and world output for many reasons, including the fear of international businesses of protectionist pressures.A)TrueB)False

2Since 2002, the number of regulations that have been unfavorable to FDI have increased, particularly in Latin America.A)TrueB)False

3Only a few countries choose pragmatic nationalism preferring instead either the free market or radical view.A)TrueB)False

4If a company wants a quick entry into a foreign market, ______ are appropriate.A)mergers and acquisitionsB)greenfield investmentsC)portfolio investmentsD)monopoly investments

5FDI is more profitable than licensing when the firm has valuable know-how that cannot be protected by a licensing contract and when ______________________.A)the firm sells services not physical goodsB)the firm needs tight control over a foreign entity to maximize its market share and earnings in that countryC)the market in that country is an oligopolyD)foreign exchange rates are extremely volatile

6________________ arise(s) when two or more enterprises encounter each other in different regional markets, national markets, or industries.A)ExternalitiesB)Multipoint competitionC)Location-specific advantagesD)FDI

7Knowledge spillovers such as those arising from the concentration of intellectual talent in Silicon Valley are referred to as ________.A)knowledge poolsB)knowledge basesC)knowledge epicentersD)externalities

8______________ is the political ideology most hostile to FDI, and ______________ is the most supportive of FDI.A)The radical view; pragmatic nationalismB)Pragmatic nationalism; the free market viewC)The radical view; the free market viewD)The free market view; pragmatic nationalism

9Which of the following is not one of the four main benefits of FDI for a host country?A)the resource transfer effectB)the employment effectC)the balance-of-payments effectD)the exchange rate effect

10If a country is running a current account deficit:A)governments are generally pleased for both the short and long term.B)the country is exporting more goods and services than it is importing.C)the deficit must be financed by the sales of assets of the country.D)FDI is an important consideration, but it cannot help a country address the deficit.

11Home countries can faces costs as well as benefits from FDI, including ______________.A)a decrease in the quality of the goods being soldB)less control over environmental qualityC)a loss of sovereignty in terms of the firms' actions and behaviorsD)employment effects when FDI is seen as a substitute for domestic production

12Among the policies countries can take to encourage outward foreign direct investment are foreign risk insurance, capital assistance, tax incentives, and ___________________.A)political pressureB)pressure on organized labor to allow the FDIC)encouraging subsidies from the host-country governmentsD)transportation subsidies

13It was not until the 1990s that there was consistent involvement of a multinational institution in governing FDI. This changed with the formation of _____________.A)the OECDB)GATTC)the WTOD)the United Nations Advisory Council on FDI

14Licensing is a potentially good option for which of the following industries or industry groups?A)High-technology industriesB)Global oligopoliesC)The fast food industryD)Industries with intense cost pressure which demand tight control

15When a MNE considering FDI is negotiating with a country about a potential investment which of the following is the least important factor?A)The value each side places on what the other has to offerB)The strength of the military and police forces of the countryC)The number of comparable alternative available to each sideD)Each party's time horizon

Chapter 91The desire by Europe to hold their own on the world's economic and political stage prompted the formation of the EU.A)TrueB)False

2NAFTA's initial impact on jobs was very small.A)TrueB)False

3Despite its importance in international trade, China is not a member of any major free trade agreement.A)TrueB)False

4By 2010, nearly all of the members of the WTO have notified the organization of their participation in free trade agreements, and the number of these agreements is around ________.A)30B)100C)200D)400

5Several levels of economic integration are possible. Three such levels from the least integrated to the most integrated are:A)free trade area, customs union, common market.B)customs union, political union, economic union.C)free trade area, political union, common market.D)common market, customs union, political union.

6Regional economic integration can be seen as an attempt to achieve gains from ________________ beyond those attainable under international agreements such as the WTO.A)common currenciesB)region-specific tariffsC)the free flow of trade and investmentD)gains from common access to intellectual property

7One of the main impediments to regional economic integration is the cost that individuals must bear even while the country as a whole might gain. The second major impediment is the ______________.A)increased concern about monetary policyB)loss of national sovereigntyC)loosening of control over fiscal issuesD)the increased costs of defending and monitoring borders

8If, prior to NAFTA, the U.S. produced its own textiles at a higher cost than Mexico, but after NAFTA imports them from Mexico:A)trade has been diverted.B)trade has been created.C)Mexico is worse off.D)the U.S. is worse off.

9Which institution is responsible for proposing EU legislation, implementing it, and monitoring compliance?A)The European CouncilB)The European ParliamentC)The Court of JusticeD)The European Commission

10In a(n) ________________________, similarities in the underlying structure of economic activity make it feasible to adopt a single currency and use a single exchange rate as an instrument of macroeconomic policy.A)optimal currency zoneB)free trade areaC)customs unionD)common market

11Turkey's application to join the European Union has presented the EU with difficult issues. Which of the following is not one of those issues?A)Less than a quarter of Turkey's international trade is with the EU.B)The EU has concerns about human rights violations, especially with the Kurdish population.C)There are suspicions that the EU is concerned because Turkey is primarily a Muslim nation.D)There are concerns because Turkey straddles both Europe and Asia.

12Progress toward a Free Trade Agreement of the Americas has been slow:A)because of debates over intellectual property rights and agricultural subsidies.B)because Brazil is firmly against the idea, yet is the largest economy in South America.C)because the U.S. wants Brazil and Argentina to remove their subsidies on agricultural products.D)because Latin American debt must be paid off in order for this type of agreement to be successful.

13African countries have been experimenting with regional trade blocks with the following result:A)The key to effectiveness had been the enthusiastic support of the free trade movement.B)There are nine trade blocks, often with countries members of more than one block.C)The initiatives have been successful because of reduced traditional rivalries and suspicions.D)Most countries are committed to reducing trade barriers to gain the benefits of freer trade.

14Regional economic integration, for example, the EU, offers significant opportunities to US businesses including:A)non-EU companies no longer need to set up subsidiaries in EU countries.B)companies can realize significant cost economies by centralizing operations where factor costs and skills are optimal.C)it makes no difference where in the EU one locates an operation since the costs are the same throughout.D)cultural differences and national consumer preferences are now irrelevant.

15Regional economic integration presents potentially significant threats to business outside the area, including:A)long-term improvements in the competitive positions of firms inside the areas.B)the end of a "fortress" mentality means other firms outside the area will be able to enter the areas more easily to compete with existing area firms.C)the end to efforts to rationalize production and reduce costs.D)the imposition of US standards, recognized as a pioneer in regional economic integration, which means US firms will not be able to get around the legal barriers.