Q&A Hero

Q: (p. 69) McHugh Corporation of Ireland and Enomoto Enterprises based in Japan have undertaken the production of a new electric car with rechargeable batteries that can be driven at high speeds for long distances. They have shared the investment, and each has contributed important technological expertise to the effort. These two firms have entered into a(n): A. joint venture. B. multinational cartel. C. industrial countertrade agreement. D. multinational limited partnership.

Q: (p. 66) 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.

Q: (p. 67) The Dabble Corporation is a medium-sized firm that has decided to begin exporting its products. The company needs advice about how to get started as well as trade-finance support. The federal government has established _____________ to help companies in Dabble's position. A. the World Trade Commission B. Export Assistance Centers C. export trading companies D. Federal Reserve Banks

Q: (p. 70) For a firm to be considered a multinational corporation, which of the following conditions must be true? A. It must have manufacturing facilities in different countries B. It must have marketing facilities based in the home country only. C. Stock ownership must be domestic. D. All transactions must be financed by the International Monetary Fund.

Q: (p. 70) Ralston-Purina is a firm that operates throughout the United States, even though it is wholly owned by a Swiss-based company, Nestl. Ralston-Purina an example of a: A. licensed venture. B. joint venture. C. export trading company. D. foreign subsidiary.

Q: (p. 69) Using contract manufacturing as a strategy to reach global markets offers firms the advantage of: A. significant start-up costs. B. reduced risks. C. increased volatility. D. currency stability.

Q: (p. 67) Firms such as McDonald's, Pizza Hut, and KFC, have entered the global market by offering investors the opportunity to set up: A. licensed trade offices. B. independent exporting houses. C. multinational subsidiaries. D. franchises.

Q: (p. 66-67) Which of the following is an advantage of a global licensing agreement? A. An organization can gain additional revenues from its home market. B. Foreign licensees must purchase start-up supplies, component materials, and consulting services from the licensing firm. C. Licensees spend little or no money to produce and market their products. D. A firm must grant licensing rights to its product for an extended period, maybe 20 years or longer.

Q: (p. 66) When entering a foreign market, Anheuser-Busch will contract with a local firm to brew and market the Anheuser-Busch product Budweiser. This is an example of: A. licensing. B. franchising. C. foreign direct investment. D. foreign subsidiaries.

Q: (p. 67) One of the purposes of Export Assistance Centers is to: A. help multinational corporations reach agreements with foreign governments. B. provide subsidies to domestic firms hurt by dumping by foreign firms. C. provide trade-finance support for small and medium-sized firms involved in direct exporting. D. encourage domestic firms to become more competitive by forming keiretsu-like organizations, much like those found in Japan.

Q: (p. 67) A specialized organization that assists businesses in creating relationships with foreign customers and suppliers is known as a(n): A. export trading company. B. international brokerage house. C. keiretsu. D. global trade bank.

Q: (p. 70) A key feature of a(n) __________ is that it has manufacturing capacity or some other physical presence in different nations. A. trade cartel B. import trading company C. export forwarding company D. multinational corporation

Q: (p. 70) A risk unique to firms with direct investment in a foreign county is the potential takeover of the firm's assets by the government of that country. This takeover is called a(n): A. hostile takeover. B. political bias. C. appropriation. D. expropriation

Q: (p. 70) When foreign firms build production facilities in the United States, they are engaging in: A. exporting. B. importing. C. foreign direct investment. D. countertrading.

Q: (p. 70) A business that is owned by a parent company located in a foreign country is referred to as a foreign: A. licensee. B. franchisee. C. subsidiary. D. host company.

Q: (p. 69) Which of the following terms describes a long-term partnership between two or more companies intended to help each firm build competitive market advantages? This arrangement does not call for the firms to share costs, risks, or management. A. export-trading affiliation B. joint venture C. strategic alliances D. foreign subsidiaries

Q: (p. 69) A __________ represents a long-term partnership between two or more companies established to help each firm build competitive market advantages. A. multinational cooperative B. shared venture C. global franchise D. strategic alliance

Q: (p. 69) A __________ is a partnership in which two or more companies (often from different countries) join to undertake a major project. A. multinational cooperative B. joint venture C. franchisee transfer D. recruit affiliation

Q: (p. 69) __________ involves the production of private-label goods by a foreign company to which a domestic company then attaches its own brand name or trademark. A. Franchising B. Contract manufacturing C. Import trading D. Export trading

Q: (p. 67) __________ is an arrangement whereby someone with a good idea for a business sells the rights to use the business name and sell a product or service to others in a given territory in a specified manner. A. Franchising B. Contract manufacturing C. Import trading D. Export trading

Q: (p. 67) Which of the following helps exporters receive payment for their global market transactions? A. a joint venture B. a letter of credit C. an export license agreement D. an export-trading company

Q: (p. 67) _______________ are specialists that match buyers and sellers from different countries and provide services to ease the process of entering global markets. A. Export trading companies B. Licensees C. Strategic alliances D. Keiretsu

Q: (p. 67) The federal government created ___________ to help small and medium sized businesses get involved in exporting. A. the World Trade Organization B. Federal Export Loan Banks C. Export Assistance Centers D. the Federal Trade Promotion Commission

Q: (p. 66; figure 3.4) Which of the following strategies for reaching global markets involves the lowest risk and offers the lowest profit potential? A. a joint venture B. a foreign subsidiary C. contract manufacturing D. licensing

Q: (p. 66) The fee paid to a firm in a licensing agreement that gives another firm the right to manufacture their product or use its trademark is called: A. a joint venture. B. a royalty. C. a licensee. D. an outsource agreement.

Q: (p. 66) Granting a foreign company the right to manufacture your product or to use your firm's trademark in return for a fee is called: A. a joint venture. B. a foreign subsidiary. C. licensing. D. outsourcing.

Q: (p. 65) The president of the Nikkei Auto Parts testified before Congress defending the company against an accusation that it was dumping auto parts in the U.S. Her testimony included the following and Congress decided Nikkei was not practicing dumping. A. Nikkei includes 10% overhead costs and an 8 percent profit margin in the price of all the parts they export to the U.S. B. Japan runs a trade deficit with the U.S. in auto parts. C. Nikkei is a staunch supporter of free trade. D. Nikkei sells more auto parts in Europe than it does in the U.S.

Q: (p. 65) The president of the Auto Parts of America Corporation recently testified before 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 in their own countries. She believes these foreign producers are: A. dumping. B. exercising trade deficits. C. promoting free trade. D. exhibiting ethnocentricity.

Q: (p. 65) The amount of U.S. exports helps explain why: A. foreign direct investment in the United States has grown steadily. B. the United States enjoys a favorable balance of trade. C. the U.S. is one of the world's largest exporting nations. D. the U.S. is able to avoid becoming a debtor nation.

Q: A. McDonald's focus is on the U.S. market, and it currently has no plans to participate in global markets. B. McDonald's success in the global market has been achieved by offering the U.S. menu worldwide. C. McDonald's global market success reflects their willingness to adapt their menu to local tastes and culture. D. McDonald's has been successful in Europe, but has failed to achieve consumer acceptance in other regions of the world. This question is taken from the Beyond Our Borders boxed material for this chapter. The box indicates that McDonald's adapts and blends their values into the local culture. If you hope to get involved in global trade, it's critical to be aware of the cultural differences among nations.

Q: (p. 64) The nation of Redland reported that its imports for the previous year were $4 billion greater than its exports. During the same period, Redland reported a favorable balance of payments. This information suggests: A. Redland has made an error in their reporting. The nation must have had a balance of payments deficit since more money flowed out of Redland for imports than flowed into the country for its exports. B. Redland's gold reserves have increased in value. C. money inflows from tourism, foreign aid, foreign investment and other sources more than offset Redland's trade deficit. D. Redland devalued their currency to obtain a more favorable exchange rate.

Q: (p. 65) Reviewing the recent experience of the United States in global markets reveals that the U.S has: A. a merchandise trade surplus with the rest of the world. B. a large trade deficit with China. C. avoided becoming a debtor nation. D. attracted very little foreign direct investment.

Q: (p. 64) Last year, the nation of Kwansai reported that it had a favorable balance of trade even though it imported $11 billion worth of goods. This indicates that Kwansai: A. exported $11 billion worth of goods. B. exported more than $11 billion worth of goods. C. overpriced the value of its exports. D. exported less than $11 billion worth of goods.

Q: (p. 64) Last year, the nation of Tigerland imported goods totaling $500 million and exported products totaling $386 million. Tigerland experienced a(n): A. unfavorable balance of trade. B. favorable balance of trade. C. trade surplus. D. benefit from membership in a free trade zone.

Q: (p. 60) Monique's Unique Tile Boutique offers decorative tile from around the world. The owner regularly travels overseas to locate the best and most unusual tile that foreign producers have to offer. Monique practices: A. importing. B. licensing. C. dumping. D. exporting.

Q: A. the government still owns the land and people cannot sell the land to get funds. B. Chinese farmers use the commune system whereby they own only a share in the entire acreage. C. the cost of moving is extremely high. D. Actually, people don't want to move away from the farm. It is difficult to save money to move away from a farm in China because the government still owns the land and people cannot sell the land to get funds to start a business.

Q: (p. 49-50) Although it has been considered a capitalist economy in the past, for the past several years the economy of the nation of Suburbania has become more socialist in its characteristics. Which of the following trends is most likely to be associated with Suburbania's movement toward socialism? A. lower tax rates. B. more rapid economic growth. C. a more equal distribution of wealth. D. increasing reliance on markets to determine economic outcomes.

Q: (p. 43-44) Peter Principal is the prime minister of the nation of Urbania. Peter has called for Urbania's legislature to enact new legislation designed to shift his economy away from socialism toward a more capitalistic system. Peter has acknowledged that such a radical change will entail some hardships, and that some citizens will be unhappy with the changes in the economy. The most likely source of unhappiness associated with a move toward capitalism is: A. less wealth will be created. B. people will have less economic freedom. C. tax rates will have to increase. D. the distribution of wealth will become less equal.

Q: (p. 43-44) In an effort to promote rapid growth, the government of Goldinia has kept taxes low, done little to regulate business activities, and implemented only modest social programs. The government is now facing political pressure to do more to clean up the environment and to reduce the inequalities of income and wealth. Which of the following statements is most accurate? Goldinia's government is currently taking: A. a purely capitalist approach to achieve its economic goals, and is likely to continue doing so in the future. B. a purely socialist approach to achieve its economics goals, and is likely to continue doing so in the future. C. a predominately socialist approach to achieving economic goals, but the current pressures it faces suggest it is likely to adopt a more capitalist approach in the future. D. a predominately capitalist approach toward achieving economic goals, but the current pressures it faces suggest it is likely to adopt a more socialist approach in the future.

Q: (p. 43-44) The government of Ruritania has implemented many programs that promote equality, but has become concerned about the very slow rate of growth that has plagued the national economy for many years. In order to address this problem, the government is likely to: A. take control of more major industries. B. reduce taxes and cut back on some social programs. C. make sure to balance its budget. D. avoid the use of fiscal policies and reduce the supply of money in circulation.

Q: A. for the government to increase taxes on business. B. for the government to take control of more major industries. C. to explore markets in other countries. D. for the government to balance the budget annually. LG: 4

Q: (p. 45, figure 2.4) There are some restrictions on freedoms of assembly and speech under a ____________ system. A. capitalist B. socialist C. communist D. mixed economy

Q: (p. 45, figure 2.4) Under the __________ system the number of choices in the market is directly related to government involvement in markets. A. capitalist B. socialist C. communist D. mixed economy

Q: (p. 45, figure 2.4) Under the __________ system there is very little incentive to work hard or to produce quality goods or services. A. capitalist B. socialist C. communist D. mixed economy

Q: (p. 45, figure 2.4) The social and economic goals of __________ include private ownership of land and business. A. capitalism B. socialism C. communism D. a mixed economy

Q: (p. 43) A command system is characterized by: A. reliance on the forces of supply and demand to determine what is produced. B. reliance on the government to determine what is produced and who gets the output. C. an extremely rapid rate of economic growth. D. freedom of choice and freedom of competition.

Q: (p. 44) A major trend in the world today is that: A. free-market economies are moving more toward socialism and socialist economies are moving more toward capitalism. B. productivity in the service sector is increasing much more rapidly than productivity in agriculture and manufacturing. C. governments in socialist economies are increasing their use of social programs and relying on higher tax rates to finance these programs. D. governments in countries with capitalist economies are paying less attention to environmental concerns and issues involving social equality.

Q: (p. 43) Both socialism and communism are variations of: A. command economies. B. competitive economies. C. free-market economies. D. plutocratic systems.

Q: (p. 43) Today, the economic systems of most nations could most accurately be classified as: A. pure capitalism. B. pure socialism. C. command economies. D. mixed economies.

Q: (p. 42) Which of the following statements provides the most accurate comparison of socialism and communism? A. Under socialism the government owns most businesses, while under communism the church owns most businesses. B. Both socialism and communism want to achieve a more equal distribution of income and wealth, but under communism the government takes more control over people's lives. C. Socialism strives for an equal distribution of income but communism wants income to go primarily to those who own and operate private businesses. D. Communism believes that the government should always strive to balance its budget, while socialism accepts deficit spending as the price of achieving true equality.

Q: (p. 42) One of the most significant problems faced by communist economies is: A. a great inequality in the distribution of wealth and income. B. severe inflationary pressures due to rapid economic growth. C. too little government regulation of economic activity. D. persistent shortages of basic goods such as food and clothing.

Q: (p. 42) Which of the following people would tend to favor a communist economy? A. John wants to live in a country with low marginal tax rates. B. Robin wants to live in a country that encourages rapid economic growth. C. Liz wants to live in a country where the government makes almost all of the economic decisions. D. Fred prefers to live in a country that promotes social equality.

Q: (p. 41) Which of the following people would tend to favor a socialist economy? A. John wants to live in a country with low marginal tax rates. B. Robin wants to live in a country that encourages rapid economic growth. C. Liz wants to live in a country with limited government regulation. D. Fred prefers to live in a country that promotes social equality.

Q: (p. 41) Jorge Martinez is a hard working entrepreneur who operated a successful business in his home country of Margintina for many years. Recently, however, he immigrated to the United States and applied for U.S. citizenship. "In Margintina, tax rates were very high," Jorge complained. "The government used the taxes I paid to finance all sorts of social programs to help the less fortunate. While this is a noble goal, it has really undermined the profit incentive of individuals such as me. I really feel that these high taxes have stifled economic growth." Jorge's comments illustrate the reason many socialist countries are experiencing a(n): A. antitrust problem. B. depression. C. brain drain. D. budget surplus.

Q: (p. 41) In the nation of Equalia, many businesses are privately owned, but the government owns some of the basic businesses and has developed many social programs designed to promote social equality. The economy of Equalia would be considered an example of: A. pure capitalism. B. socialism. C. mercantilism. D. communism.

Q: (p. 42) The economic and political system in which the government owns almost all the major factors of production is called: A. communism. B. capitalism. C. ethnocentrism. D. socialism.

Q: (p. 42) In recent years, countries with communist economic systems have: A. enjoyed a period of great prosperity. B. experienced severe economic depression. C. have placed even more emphasis on government ownership of business. D. grown very slowly, but have avoided the severe problems that have plagued some capitalist economies in Asia and Europe.

Q: (p. 42) __________ intrudes the most into people's lives. A. Capitalism B. Socialism C. A free-market economy D. Communism

Q: (p. 42) Communism is an economic system in which: A. the government and private citizens own equal shares of the economic resources. B. all or most of the productive resources are owned by private businesses. C. the government makes almost all of the major economic decisions. D. individual consumers make all economic decisions.

Q: (p. 41) The reason why many socialist countries have experienced brain drain is that: A. socialism encourages a very unequal distribution of income. B. the government does little to protect the natural environment. C. workers tend to have to work longer hours and receive fewer benefits under socialism. D. tax rates on talented individuals tend to be very high.

Q: (p. 41) A key assumption of socialism is that: A. government ownership of some basic businesses is desirable because it helps achieve a more equal distribution of profits among the people. B. the most important economic function of government is to promote rapid economic growth. C. economic growth requires strict government control over population growth. D. tax rates should be kept as low as possible in order to give consumers the maximum possible purchasing power.

Q: (p. 41) A major benefit of socialism is assumed to be its: A. ability to stimulate rapid economic growth. B. emphasis on low tax rates. C. emphasis on social equality. D. ability to create strong incentives to work hard.

Q: (p. 41) Under socialism: A. the basic goal is to make sure that those that create wealth are allowed to keep that wealth. B. a major goal of the government is to reduce the inequality in the distribution of wealth. C. a major goal of the government is to create incentives to encourage entrepreneurs to create jobs and economic growth. D. the most important goal of the government is to keep tax rates extremely low.

Q: (p. 40) Which of the following statements most accurately identifies a serious limitation of the free-market economic system? A. Free-market economies offer little opportunity for the poor to work their way out of poverty. B. Free-market economies have been unable to create wealth as rapidly as other types of economic systems. C. Free-market economies often are plagued by shortages of needed consumer goods. D. Free-market economies result in a very unequal distribution of wealth.

Q: (p. 39) In its advertisements, PaPa John's Pizza tells potential customers that its pizzas are made with fresher and better ingredients than competitors' pizzas. The goal of this strategy is to achieve: A. product differentiation. B. an equilibrium price. C. a monopsony. D. a perfectly competitive market.

Q: (p. 39) Bigbux is a major producer of whatsits, but it faces competition in the whatsit market from three other major producers. Together, Bigbux and its three large rivals control almost the entire supply of whatsits. The type of market Bigbux is in is called: A. oligopoly. B. duopoly. C. monopolistic competition. D. quasi-monopoly.

Q: (p. 38) The market price of apples is currently rising. In a free-market economy, the most likely explanation of this price change is that: A. the government has decided to set a higher price so that the firms in the market make an adequate profit. B. there is a shortage in the market for apples. C. the supply of money has decreased. D. the equilibrium price is lower than the market price.

Q: A. As the team starts losing after a winning streak owners begin losing money at the concession stand. B. As demand for tickets to see the winning team increases the team owners can increase the price of tickets. C. The informal market for tickets for the winning team forces prices down. D. The team owners can charge less for tickets when the team begins losing. LG: 2

Q: (p. 35-36) business and building. Patrick is able to maintain ownership of these items under the right to: A. eminent domain. B. freedom of choice. C. private property. D. freedom of competition.

Q: (p. 40) One of the greatest concerns associated with capitalism is that: A. it is not very successful at creating wealth. B. some businesspeople may let greed guide their behavior. C. the amount of economic freedom enjoyed by consumers is very limited. D. producers are unlikely to supply the goods and services that consumers value the most.

Q: (p. 40) One of the benefits of the free market is that: A. businesses must provide customers with quality products at fair prices. B. businesses all make the same amount of profit. C. businesses do better with more government regulation. D. the government dictates the number of competitors there are in each industry.

Q: (p. 40) The presence of competition in free markets: A. is undesirable because it results in unnecessary duplication of efforts. B. typically results in better quality and lower prices. C. is rare, since most markets eventually evolve into monopolies. D. is undesirable, because one big firm can usually produce goods more efficiently than a large number of small firms.

Q: (p. 39) In most large cities there are a large number of bakeries. These bakeries produce similar, but not identical, products. Some bakeries claim to have the best cheesecakes in town, while others brag about their cookies or specialty breads. The bakery market in a large city is an example of: A. monopolistic competition. B. perfect competition. C. an oligopoly. D. a monopoly.

Q: (p. 39) The markets for laundry detergents, soft drinks, and automobiles all are dominated by just a few sellers. Economists would classify these markets as examples of: A. monopolistic competition. B. perfect competition. C. an oligopoly. D. a monopoly.

Q: (p. 38) When the market price of a good is above its equilibrium value: A. a shortage will exist in the market. B. the quantity demanded will exceed the quantity supplied. C. both the supply curve and the demand curve will shift to the right. D. a surplus will exist in the market.

Q: (p. 38) When the market price of a good is below the equilibrium price: A. the quantity demanded will exceed the quantity supplied. B. the supply curve will be to the right of the demand curve C. a surplus will exist in the market. D. the government will regulate the price of the good to ensure equilibrium is attained.

Q: (p. 36) One benefit of the rights and freedoms of capitalism is that: A. people feel safe and don't take any risks in business. B. people are willing to take more risks than they would otherwise. C. people don't have to choose where they will work. D. the prices of needed products are always very low.

Q: (p. 34) Which of the following statements about capitalism is the most accurate? A. In capitalist economies, most resources are owned by the government. B. One strength of capitalism is its ability to deal with environmental problems. C. Captialism is characterized by significant inequality in the distribution of wealth and income. D. A drawback of capitalism is that people have little freedom to pursue their own goals.

Q: (p. 39) An oligopoly is a market that is characterized by: A. one firm that totally dominates the supply of the product. B. a large number of small firms all producing very similar products. C. a few large sellers who dominate the market supply. D. several small firms that compete primarily by differentiating their products.

Q: (p. 40) __________ exists when the entire supply of a good is controlled by a single seller. A. Perfect competition B. Oligopoly C. Pure Capitalism D. A monopoly