Chapter 9: Business in a Global Environment

Why do nations trade with each other?

• To reduce their production capabilities

• Because no national economy can produce all the goods and services its people need

• To increase the value of their currency

• To create monopolies in foreign markets

What is a trade deficit?

• When a country exports more than it imports

• When a country imports more than it exports

• When a country stops trading with another country

• When a country has a balanced trade policy

What does a country with a comparative advantage do?

• Produces all goods at a lower cost than other countries

• Specializes in the production of goods it can produce at a lower opportunity cost

• Imports all necessary goods to maximize efficiency

• Reduces exports to protect domestic industries

What is the difference between balance of trade and balance of payments?

• Balance of trade measures import and export transactions; balance of payments includes all financial transactions, including loans and investments

• Balance of trade includes only goods, while balance of payments includes services

• Balance of payments measures only exports, while balance of trade includes imports

• Balance of trade measures the value of currency, while balance of payments measures economic growth

What is an international licensing agreement?

• An agreement that allows a company to set up a foreign subsidiary

• An agreement allowing a foreign company to produce and sell a domestic company’s product

• A trade agreement between two countries

• A contract that gives exclusive rights to export a product

What is a foreign direct investment (FDI)?

• Buying goods from another country

• Establishing business operations in a foreign country, such as building factories

• Lending money to a foreign government

• Creating a joint venture with a foreign company

Which of the following is a challenge of doing business globally?

• Uniformity in global laws and regulations

• Differences in language, cultural norms, and legal systems

• Predictable currency exchange rates

• Easy access to international markets

What is the purpose of a strategic alliance?

• To compete directly with another company

• To pool resources with another company to achieve mutual business goals

• To merge two companies into one

• To outsource production to another country

What is a tariff?

• A tax imposed on imported goods

• A subsidy given to domestic producers

• A trade agreement between two countries

• A loan provided by the government to exporters

What is outsourcing?

• The practice of producing goods domestically to reduce costs

• The practice of contracting business processes or services to external providers, often in other countries

• The establishment of a company’s own foreign subsidiary

• The hiring of temporary workers to handle seasonal demand