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International Business : The Challenge of Global Competition, 8/e

Donald Ball
Wendell H. McCulloch, California State University Long Beach
Paul L. Frantz, California State University Long Beach
Michael Geringer, California Polytechnic State University
Michael S. Minor, University of Texas Pan American

Economic Theories of International Business

Multiple Choice Quiz

By understanding underlying economic theories, managers can:


1	By understanding underlying economic theories, managers can:
		A)	anticipate changes in government strategy and use this knowledge to their advantage.
		B)	focus on microeconomic issues such as supply and demand.
		C)	ignore macroeconomic policy decisions of governments.
		D)	influence legislation that will have a positive impact on their industry.


2	An economic philosophy based on the belief that a nation's wealth depends on accumulated treasure and increase wealth, and government policies should promote exports and discourage imports is known as:
		A)	socialism
		B)	capitalism
		C)	mercantilism
		D)	nationalism.


3	Adam Smith claimed that __________ should determine the direction, volume and composition of international trade.
		A)	government controls
		B)	market forces
		C)	free trade
		D)	industry.


4	The capacity of a nation to produce more of a good with the same amount of input than another country is known as:
		A)	competitive advantage.
		B)	perfect competition.
		C)	absolute advantage.
		D)	economies of scale.


5	In 1817, Ricardo demonstrated that even though a nation held an absolute advantage in the production of two goods, the two countries could still trade with advantages for each as long as the less efficient nation was not equally less efficient in the production of both goods. This is known as the theory of:
		A)	competitive advantage.
		B)	absolute advantage.
		C)	equal advantage.
		D)	comparative advantage.


6	The Heckscher-Ohlin theory of factor endowment states that international and interregional differences in production costs occur because of:
		A)	differences in the supply of production factors.
		B)	government controls.
		C)	differences in technology factors.
		D)	import and export regulations.


7	A nation can avoid losing markets and regain competitiveness in world markets through:
		A)	import/export regulation.
		B)	currency devaluation.
		C)	exchange controls.
		D)	trade negotiations.


8	The international product lifecycle is a theory explaining why:
		A)	all international products eventually lose their profitability.
		B)	a product that begins as a nation's import eventually becomes its export.
		C)	a product that begins as a nation's export eventually becomes its import.
		D)	the demand for international products changes over time.


9	The Linder theory of overlapping demand deduces that international trade in manufactured goods will be:
		A)	lesser between nations with similar levels of GNP than between those with dissimilar GNP levels.
		B)	greater between nations with similar levels of GNP than between those with dissimilar GNP levels.
		C)	lesser between nations with similar levels of per capita income than between those with dissimilar per capita income levels.
		D)	greater between nations with similar levels of per capita income than between those with dissimilar per capita income levels.


10	International trade occurs primarily because of:
		A)	price differences among nations.
		B)	supply and demand.
		C)	capitalism.
		D)	none of the above.


11	Arguments for trade restrictions include:
		A)	national defense.
		B)	protection of mature industries.
		C)	unfair competition.
		D)	all of the above.


12	Dumping is the selling of a product for less than the cost of production, the price in the home market, or the price to third countries. There are at least four new kinds of dumping for which fair-trade lobbies consider sanctions to be justified in order to level the playing field for international trade. Which of the following is not one of the four new kinds of dumping?
		A)	Social dumping.
		B)	Environmental dumping.
		C)	Economic dumping.
		D)	Cultural dumping.


13	A quota is a numerical limit placed on a specific kind of good that a country will permit to be imported without restriction during a specified period. If the quota is absolute, once the specified amount has been imported:
		A)	absolute tariffs are imposed on further importation of the product.
		B)	no additional tariffs are imposed on further importation of the product.
		C)	no additional tariffs are imposed on further importation of the product.
		D)	further importation of the product is prohibited for the rest of the period.


14	Many international trade specialists claim that the most significant non-tariff barriers are the non-quantitative type. Which of the following is not one of the three major headings under which the non-quantitative barriers can be classified?
		A)	indirect government participation in trade.
		B)	direct government participation in trade.
		C)	customs and other administrative procedures.
		D)	standards.


15	For the past three years, the US government has been urging the European Committee for Standardization to begin drafting a harmonized standard for Europe. To date the US efforts have been
		A)	very successful with harmonization well underway.
		B)	somewhat successful with harmonization beginning.
		C)	unsuccessful with little progress made.
		D)	none of the above.


16	Nations are placed into categories based on levels of economic development. The category of newly industrializing countries includes Brazil, Mexico, Malaysia, Chile, Taiwan, Hong Kong, Singapore, Thailand, and
		A)	South Korea.
		B)	China.
		C)	Indonesia.
		D)	Vietnam.


17	Purchasing power parity is:
		A)	the US dollar equivalent to buy a product outside of the US.
		B)	the number of units of a currency required to buy the same amount of goods and services in the domestic market as one dollar would buy in the US.
		C)	the foreign currency equivalent to buy a product in the US.
		D)	none of the above.


18	Which of the following is a characteristic of a developing nation?
		A)	Unequal distribution of income with a very large middle class.
		B)	Very few firms employing the latest technology.
		C)	Undisguised unemployment or underemployment.
		D)	High rate of illiteracy and insufficient educational facilities.


19	The human-needs approach defines economic development as:
		A)	supplying the basic human needs for survival.
		B)	increasing the literacy rate of a population.
		C)	reducing poverty, unemployment and inequality in the distribution of income.
		D)	ensuring that adequate medical facilities are present and that proper dietary needs are satisfied.


20	The modern monopolistic advantage theory stems from Stephen Hymer's dissertation in the 1960's in which he demonstrated that foreign direct investment occurred largely in ___________ industries.
		A)	monopolistic
		B)	oligopolistic
		C)	near-perfect competition
		D)	none of the above.

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