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ADMS 3960 (12)
Chapter 07

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Department
Administrative Studies
Course
ADMS 3960
Professor
Brian Zeiler- Kligman
Semester
Fall

Description
International Business: Environments and Operations, 14e (Daniels et al.) Chapter 7 Governmental Influence on Trade 1) Trade protectionism will most likely affect which aspect of a company's operations? A) selecting employees B) meeting union demands C) acquiring foreign supplies D) relocating personnel overseas Answer: C Diff: 2 Learning Outcome: Define the fundamental concepts of international business Skill: Concept Objective: 1 2) The term protectionism when applied to international trade refers to ________. A) governmental restrictions and competitive support actions to affect trade flows B) payments to dock workers to prevent pilferage of imported shipments C) border checks to prevent entry of counterfeit merchandise D) methods used to prevent intellectual property theft Answer: A Diff: 1 Learning Outcome: Define the fundamental concepts of international business Skill: Concept Objective: 1 3) Why should managers have an understanding of trade protectionism? A) Trade protectionism targets factor endowments, thus affecting the best country to locate production. B) Trade protectionism affects a company's ability to sell abroad and ability to compete at home. C) Trade protectionism affects the number of people permitted to practice a specific profession. D) Trade protectionism prevents companies' enactment of merger and acquisition agreements. Answer: B Diff: 2 Learning Outcome: Define the fundamental concepts of international business Skill: Concept Objective: 1 1 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 4) Managers should understand the effect of trade protectionism because ________. A) trade protectionism may limit the number of people permitted to practice a specific profession B) trade protectionism requires the payment of high insurance rates to transport goods internationally C) trade protectionism may prevent companies' enactment of merger and acquisition agreements D) trade protectionism may make it difficult for a company to buy what it needs from foreign suppliers Answer: D Diff: 2 Learning Outcome: Define the fundamental concepts of international business Skill: Concept Objective: 1 5) The government of Country X imposes import restrictions on all food products to help domestic grain farmers in depressed areas. What is the most likely result of such restrictions? A) damaging other industries in Country X B) devaluing the currency of Country X C) lowering food prices in Country X D) triggering boycotts in Country X Answer: A Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Application Objective: 1 6) A government that places restrictions on imports from a specific industry from a specific foreign country would most likely be concerned that which of the following would occur in response? A) the foreign producers raising the prices of their exports B) the foreign country restricting its own imports C) the foreign country restricting its exports in that industry D) the foreign producers seeking other markets Answer: B Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Application Objective: 1 AACSB: Analytic Skills 2 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 7) Assume a government is considering import restrictions on sugar because sugar imports are hurting the domestic industry. Which of the following groups is LEAST likely to speak out on the subject? A) politicians in areas that grow sugar B) employees of sugar companies C) sugar company owners D) sugar consumers Answer: D Diff: 2 Skill: Application Objective: 2 AACSB: Analytic Skills 8) What is the most likely reason that consumers rarely protest import restrictions that raise the prices they pay for goods? A) They reason that if the import restrictions are removed, the foreign producers will raise their prices to those of the domestic producers anyway. B) Many countries have prohibitions on the banding together of consumers to influence political actions. C) Typically, although the added costs to consumers for a given product are high in aggregate, they are fairly trivial for most individual consumers. D) They reason that if they do something to hurt domestic employment for one product, the displaced workers will then do something that will hurt their own employment. Answer: C Diff: 3 Skill: Concept Objective: 2 9) Unemployed workers are most apt to form a pressure group to support ________. A) export restrictions B) import restrictions C) price limitations D) import subsidies Answer: B Diff: 1 Skill: Concept Objective: 2 10) Successful trade retaliation is most likely achieved ________. A) on agricultural products B) on manufactured products C) by a large trading country D) by a small trading country Answer: C Diff: 2 Skill: Concept Objective: 2 3 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 11) Imports can stimulate exports by ________. A) redistributing the work force B) curtailing domestic competition C) generating more tax revenue D) increasing foreign income Answer: D Diff: 2 Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international business Skill: Concept Objective: 2 12) All of the following are generally true about trade-displaced workers EXCEPT which one? A) They move into industries with substantial import protection. B) They earn less in their new jobs than they earned in their old ones. C) They spend their unemployment benefits on living rather than retraining. D) They have difficulty finding new work because of educational deficiencies. Answer: A Diff: 2 Skill: Concept Objective: 2 13) The rationale for the infant-industry argument is that ________. A) incubated centers in which business, government, and academia cooperate will develop entrepreneurial companies B) a country should give one firm in an industry a monopoly status so that it will grow large enough to be competitive internationally C) it takes time for an industry to become competitive in world markets, so protection is needed to help this industry pass through the critical period D) lower restrictions should be placed on products coming from countries where a government has a large sphere of political influence Answer: C Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 1 4 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 14) Which of the following statements most likely undermines the infant-industry argument? A) Total unit costs decrease through economies of scale. B) High tariffs to prevent foreign competition increase government revenues. C) Domestic entrepreneurs need assistance to compete in industries with high entry barriers. D) Experience of operating over time triggers higher productivity and global competitiveness. Answer: B Diff: 3 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Critical Thinking Objective: 1 15) A problem that can arise in using trade protectionism to develop international competitiveness for a domestic industry is that ________. A) it is difficult to identify industries that have a high probability of reaching competitiveness B) assistance should be given only if entry barriers to new firms are very low C) the protecting countries lose too much revenue from import duties D) a short product life cycle makes the industry quickly noncompetitive Answer: A Diff: 3 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 16) Which of the following is a problem with the infant-industry argument for protection? A) Most developed countries increasingly have a larger portion of retirees than youth. B) Consumer groups become very active in protesting the higher prices that result during infancy. C) Other countries retaliate by limiting exports of technology needed by the infant industry producers. D) If the industry does not lower costs sufficiently to be competitive, it becomes a formidable pressure group for continued protection. Answer: D Diff: 3 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 5 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 17) The industrialization argument for developing countries is based on the assumption that ________. A) the protected industry will become competitive over time with economies of scale B) unemployment exists in rural areas, so little agricultural output is lost as people move into industrial jobs C) subsidizing production is a better means of protection than limiting imports D) it is better to depend on buying the agricultural surpluses from developed countries than to produce these agricultural goods Answer: B Diff: 2 Learning Outcome: Compare and contrast theories of international trade Skill: Concept Objective: 1 18) Unlike the infant-industry argument, the industrialization argument most likely ________. A) requires independence from other countries B) stresses labor-intensive production methods despite high costs C) emphasizes using locally available raw materials for manufacturing inputs D) presumes that economic growth will occur even if domestic prices are not globally competitive Answer: D Diff: 3 Learning Outcome: Compare and contrast theories of international trade Skill: Concept Objective: 1 19) Developing countries have sometimes adopted policies to shift people out of agriculture and into industry by protecting manufactured production. One of the problems they have encountered is that ________. A) people have been too reluctant to leave rural areas to go to the cities B) infrastructure costs have increased in rural areas because of worker shortages C) demand for social and political services has increased excessively in the cities D) developed countries have retaliated with protection of products from the developing countries Answer: C Diff: 3 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 6 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 20) Terms of trade refers to ________. A) the quantity of imports that a given quantity of a country's exports can buy B) specific requirements placed on imports and exports at the port of entry C) requirements agreed upon by two countries to regulate bilateral trade D) an account statement showing a country's annual imports and exports Answer: A Diff: 2 Learning Outcome: Define the fundamental concepts of international business Skill: Concept Objective: 3 21) Which term refers to an industrialization policy of restricting imports in order to boost local production for local consumption of goods that would otherwise be imported? A) import substitution B) terms-of-trade C) most-favored nation D) in-sourcing Answer: A Diff: 1 Learning Outcome: Compare and contrast theories of international trade Skill: Concept Objective: 3 22) Export-led development refers to ________. A) a country's efforts to promote its exports in order to reduce its trade deficits B) an industrialization policy promoting products that would otherwise be imported C) an industrialization program emphasizing industries that will have export capabilities D) decreases in infrastructure development due to the loss of revenue from export tariffs Answer: C Diff: 2 Learning Outcome: Compare and contrast theories of international trade Skill: Concept Objective: 3 23) Which of the following best explains why countries such as Taiwan and South Korea support export-led development policies? A) low inflation B) increased FDI C) industry diversity D) rapid economic growth Answer: D Diff: 2 Learning Outcome: Compare and contrast theories of international trade Skill: Concept Objective: 1 AACSB: Dynamics of the global economy 7 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 24) The relationship between import substitution policies and export-led development policies is best characterized by which of the following? A) Import-substitution policies are more likely to attract production of mature products, whereas export-led development policies attract more production of growth products. B) The two are hard to distinguish because production under import substitution may eventually be exported. C) Production under import substitution policies, as opposed to export-led development policies, is more likely to be located in urban areas. D) Production under import substitution policies, as opposed to export-led development policies, is likely to be more labor-intensive. Answer: B Diff: 3 Learning Outcome: Compare and contrast theories of international trade Skill: Concept Objective: 1 25) Advocates of the comparable access argument primarily assert that domestic industries ________. A) will deteriorate in countries that have lower import restrictions than their trading partners B) should be required to implement export-led development policies on foreign competitors C) are entitled to the same access to foreign markets as foreign industries have to their markets D) are hindered by foreign import restrictions and forced to lower prices for consumers Answer: C Diff: 2 Learning Outcome: Compare and contrast theories of international trade Skill: Concept Objective: 3 26) It is sometimes contended that by imposing import controls a country might be able to increase its exports. This contention is premised on ________. A) the country's simultaneous currency devaluation, which decreases the price of its exports B) using the import taxes to institute efficiency measures in potential export industries C) raising domestic prices in one industry so that the excess domestic profits in that industry can compensate for the cost of dumping products from another industry into foreign markets D) getting other countries to maintain or relax their current import restrictions instead of escalating restrictions in a trade war Answer: D Diff: 3 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 8 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 27) Country X wants to eliminate its balance of trade deficit while simultaneously keeping prices low for imported essentials. Which of the following methods would most likely achieve these dual objectives? A) devaluing the currency B) enacting selective import restrictions C) using tight monetary policies to deflate price levels D) spurring productivity increases through general tax breaks for industry Answer: B Diff: 3 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Application Objective: 3 AACSB: Reflective thinking skills 28) All of the following are reasons a country might institute import restrictions to improve its balance of trade position with other countries EXCEPT to ________. A) maintain essential industries B) reduce imports and encourage exports C) get comparable access for its companies D) bargain away restrictions by other countries Answer: A Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 29) Country X is withholding goods from international markets in an attempt to raise prices abroad. Such actions will be most effective for Country X if the nation ________. A) supports the development of substitutions B) provides domestic industries with tax breaks C) receives low-interest loans from foreign banks D) holds a monopoly on the product or resource Answer: D Diff: 2 Skill: Application Objective: 3 9 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 30) Countries most likely establish export restrictions to ________. A) retaliate against foreign import controls B) raise prices in foreign markets C) encourage substitute products D) reduce domestic production Answer: B Diff: 2 Skill: Concept Objective: 3 31) Export restrictions have a tendency to ________. A) favor domestic consumers B) protect employment in the export-restricted industries C) lower prices in foreign markets D) encourage the domestic development of substitutes Answer: A Diff: 2 Skill: Concept Objective: 3 32) All of the following are potential problems of using export controls EXCEPT which one? A) There is an incentive for other countries to develop production of their own. B) Domestic producers may have less incentive to increase output. C) Import prices may go down for the country imposing the controls. D) There is more incentive for smuggling. Answer: C Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 33) Exporting below cost or below the home country price is called ________. A) countertrade B) an export-led development policy C) a strategic trade policy D) dumping Answer: D Diff: 1 Learning Outcome: Define the fundamental concepts of international business Skill: Concept Objective: 3 10 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 34) There are several reasons for a company to sell products abroad at either below cost or below the price in the home country. Which of the following is one of these reasons? A) encouraging foreign consumers to try new products B) improving the exporting country's terms of trade C) gaining imports that are sold below cost D) following import substitution objectives Answer: A Diff: 2 Learning Outcome: Define the fundamental concepts of international business Skill: Concept Objective: 3 35) Countries sometimes fear that foreign producers are pricing their exports artificially low. This fear is most likely based on the assumption that ________. A) foreign companies will lack the earnings to repay their foreign debt B) insufficient earnings will be available to improve product technology C) foreign producers will charge exorbitant prices after putting competitors out of business D) developing countries will be unable to maintain critical industries needed in times of war Answer: C Diff: 3 Skill: Concept Objective: 3 AACSB: Analytic Skills 36) According to the optimum tariff theory, a foreign producer will most likely ________. A) ship highly taxed goods internationally on a per-unit basis B) lower its export prices if the importing country imposes a tax on its products C) assess a tax on goods shipped internationally based on a percentage of the goods' value D) increase its tax revenue by imposing tariffs on goods shipped from developed countries Answer: B Diff: 2 Learning Outcome: Compare and contrast theories of international trade Skill: Concept Objective: 3 37) An argument against limiting exports to unfriendly countries is that ________. A) the costs of the sanctions are borne by innocent people rather than by leaders B) markets cannot be regained after the countries become friendly C) one country's essential product is superfluous to another D) the nation's cultural identity is harmed Answer: A Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 AACSB: Ethical understanding and reasoning abilities 11 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 38) A possible drawback to the essential industry argument for import protectionism is ________. A) that such protection hurts the balance of payments B) in times of military emergency, almost any product could be considered essential C) other countries find supplies elsewhere D) governments can easily terminate protection granted under such a policy Answer: B Diff: 2 Skill: Concept Objective: 3 39) Defense arguments are sometimes used to prevent exports to unfriendly countries. This runs the risk of the targeted country ________. A) becoming politically destabilized B) removing import restrictions C) finding alternative sources of supply D) banding with other countries to form a cartel Answer: C Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 3 40) What is the main motive for countries' protection of their film/cinema industries? A) to keep prices low for their citizens B) to improve their balance of payments C) to diversify their economies D) to maintain their cultural sovereignty Answer: D Diff: 2 Skill: Concept Objective: 3 41) The most common type of tariff is the ________ tariff. A) export B) import C) transit D) ad valorem Answer: B Diff: 1 Skill: Concept Objective: 4 12 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 42) An import tariff may be protective ________. A) only if it is on imports the country produces domestically B) if it serves primarily to restrict entry of hazardous materials C) if it does not generate significant tax revenue for essential industries D) even though the importing country does not produce the product Answer: D Diff: 2 Skill: Concept Objective: 4 43) In addition to protection, tariffs serve to ________. A) generate revenue B) subsidize exports C) subsidize imports D) influence policies Answer: A Diff: 2 Skill: Concept Objective: 4 44) Which term refers to a tariff or duty assessed as a percentage of an item's value? A) specific duty B) effective tariff C) ad valorem duty D) compound tariff Answer: C Diff: 1 Skill: Concept Objective: 4 45) What is the primary difficulty associated with dismantling developed countries' agricultural subsidies? A) Rural areas in the United States, the European Union, and Japan are disproportionately represented in their governments. B) Developing countries put pressure on developed countries to maintain the subsidies so that they receive food products at a lower price. C) The subsidies are used to counter the commodity agreements set up mainly by developing countries. D) The subsidies are at the consumer, rather than producer, level, and everyone benefits from the lower prices. Answer: A Diff: 3 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 4 13 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 46) In most cases, which type of government subsidy is most controversial? A) business development services B) foreign business contacts C) trade expositions D) tariffs Answer: D Diff: 2 Learning Outcome: Discuss arguments for and against government intervention in international business Skill: Concept Objective: 4 47) Tied aid requires a recipient to ________. A) donate a portion of the funds to the donor country's infrastructure needs B) use the capital in any way as long as donor country approval is granted C) employ local workers in management positions D) spend the funds in the donor country Answer: D Diff: 2 Learning Outcome: Define the fundamental concepts of international business Skill: Concept Objective: 4 48) Most countries have agreed on how to assess values when their customs agents levy tariffs. Which of the following best expresses this agreement? A) They should use the value of similar goods arriving at about the same time. B) They should use the declared invoice price unless they doubt its authenticity. C) They should assess a value based on local costs to produce a similar product. D) They should assess a value based on the expected final consumer sales price. Answer: B Diff: 2 Skill: Concept Objective: 4 49) What is a quota? A) a prohibition on trade established by emerging countries B) a quantitative limit on the amount of a product that can be imported or exported C) a countertrade arrangement that establishes the value of imports and exports D) a bilateral agreement calling for mutual access to markets Answer: B Diff: 1 Skill: Concept Objective: 4 14 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 50) A voluntary export restriction (VER) refers to ________. A) an agreement between two countries to reciprocally restrict exports to one another B) requests by governments for companies to limit exports of militarily useful technology C) limits a government places on exports to a country with which it has a temporary trade surplus D) limits placed on exports by a government of an exporting country at the request of the government of an importing country Answer: D Diff: 1 Skill: Concept Objective: 4 51) An import license is ________. A) an agreement whereby one country gives another country permission to use a patent that a company has registered there B) a requirement that exporters take merchandise in lieu of money as payment for their sales C) a requirement that permission be secured from governmental authorities before importation can be undertaken D) a government prohibition of imports from a specific country Answer: C Diff: 1 Skill: Concept Objective: 4 52) Why are offsets considered protectionist measures? A) Exporters must often find markets for goods outside their lines of expertise. B) Exports must be sold at a certain percentage price below the price of domestic producers. C) Companies must submit samples to government authorities before receiving export permission. D) Trading companies must incur additional inventory carrying charges and pay significantly higher tariffs. Answer: A Diff: 3 Skill: Concept Objective: 4 53) Which of the following hypothetical examples would be a restriction on the import of services? A) The U.S. restricts foreign companies from carrying cargo between two U.S. cities. B) Japan restricts North Koreans from visiting Tokyo Disneyland. C) China does not allow the importation of rice from Thailand. D) Canada does not allow Air Canada to buy Brazilian aircraft. Answer: A Diff: 2 Skill: Application Objective: 4 AACSB: Reflective thinking skills 15 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 54) The fact that there are few reciprocal agreements among countries on the licensing of professionals most likely means that ________. A) there has been a contraction of universities' study abroad programs so that students can obtain dual degrees and licenses from more than one country B) more service functions are being handled as not-for-profit C) people immigrate to those countries with the highest standards so as to more easily become licensed anywhere else D) there is an effective limitation on trade in services Answer: D Diff: 2 Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international business Skill: Application Objective: 4 AACSB: Dynamics of the global economy 55) A physician, who is a citizen of Country A, meets the professional licensing requirements of Country B. The physician will most likely ________. A) have to pass a language proficiency exam before being allowed to work in Country B B) not be allowed to work in the not-for-profit sector in Country A or Country B for a set period C) not be allowed to work in Country B because immigration authorities will deny a work permit D) have to work in the not-for-profit sector in Country B for a period of time before being permitted to work for a profit-seeking organization Answer: C Diff: 3 Skill: Application Objective: 4 56) The U.S. automobile industry has attempted to counter import competition in all the following ways EXCEPT ________. A) concentrating on market niches that initially had less import competition B) lobbying for customs deposits so that importers' costs would be raised C) moving production to lower-cost countries and exporting to the United States D) effecting internal adjustments, such as cost efficiencies and improved quality Answer: B Diff: 2 Learning Outcome: Discuss the roles of exporting, importing, and countertrade in international business Skill: Concept Objective: 5 AACSB: Dynamics of the global economy 16 Copyright © 2013 Pearson Education, Inc. Publishing as Prentice Hall 57) Companies with which of the following characteristics would most likely oppose global protectionist measures? A) internationally integrated supply chains B) domestically focused supply chains C) multidomestic production facilities D) product differentiation Answer: A Diff: 2 Skill: Concept Objective: 5 58) In nearly half the cases in which U.S. firms have requested protection from imports, one or more companies in the industry opposed the protection. What was the reason for opposing protection? A) They did not want consumers to have to pay higher prices that would result from protection. B) These were foreign-owned companies that saw the opportunity to serve the U.S. market. C) They feared that they would lose foreign export markets because of r
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