Unit 2: Global Business Review

One reason countries trade with other countries is that even technologically advanced nations cannot produce all the products their people want and need.

• True

• False

The World Trade Organization (WTO) was established to mediate trade disputes among nations.

• True

• False

The purpose of enacting trade protectionism toward foreign goods is to limit competition from abroad, particularly when the country has domestic companies that produce and sell the same products and services.

• True

• False

An unfavorable balance of trade occurs when the value of

• exports exceeds the value of imports.

• imports equals the value of exports.

• cash inflows is equal to the value of cash outflows.

• imports exceeds the value of exports.

Granting a foreign company the right to manufacture your product or to use your firm's trademark in return for a fee is called:

• outsourcing.

• a joint venture.

• licensing.

• contract manufacturing.

________ 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.

• Strategic alliance

• Franchising

• Import trading

• Contract manufacturing

A(n) _____ refers to a complete ban on importing or exporting of products from a specific country.

• embargo

• absolute tariff

• quota

• protective tariff

_____ refers to society’s standards of moral behavior.

• Legality

• Responsibility

• Integrity

• Ethics

NextGen Industries ________ its products in foreign countries, where labor is less expensive and production sites are owned by other companies. This strategy allows NextGen Industries to experiment in new markets without incurring the large start-up costs involved with building its own production facilities.

• contract franchises

• pays governments to market

• globally licenses

• contract manufactures

__________ occurs when a country has a monopoly on producing a product or is able to produce it at a cost well below that of all other countries.

• Absolute advantage

• Comparative advantage

• Trade deficit

• Protectionism