Question 1

For new products and technologies, firms will increasingly be forced to engage in ___________ by distributing development costs over the anticipated volume of sales.

Accepted Answer

Forward pricing involves setting the price of a product based on anticipated costs and the expected volume of sales, which is a common strategy for new products and technologies.

Question 2

Explain the four categories of the Incoterms.

Accepted Answer

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Question 3

Prices quoted ex-works (EXW)are when the seller agrees to place the goods at the disposal of the buyer at the specified place on the date or within the fixed period.At which point do these prices apply?

Accepted Answer

EXW prices apply only at the point of origin, which is usually the seller's premises. The buyer is responsible for all costs and risks associated with the transportation of the goods from the seller's premises to the final destination. Therefore, the price quoted by the seller only covers the cost of producing and placing the goods at the disposal of the buyer at the specified place on the date or within the fixed period. Any additional costs, such as transportation, insurance, and customs clearance, are the responsibility of the buyer.

Question 4

What is a Letter of Credit?

Accepted Answer

A Letter of Credit is a written commitment issued by a bank to pay a specified amount of money to the beneficiary upon presentation of certain documents. It is commonly used in international trade to provide security for both the seller and the buyer. The bank acts as an intermediary and guarantees payment to the seller if the buyer fails to fulfill their payment obligations.

Question 5

What is the process of setting an export price?

Accepted Answer

The answer of What is the process of setting an...

Question 6

Which of the following is not included in export-related costs?

Accepted Answer

The answer of Which of the following is not included...

Question 7

_______ calls for export pricing according to the dynamic conditions of the marketplace.

Accepted Answer

Market-differentiated pricing involves setting prices based on the varying conditions and demands of different markets, making it dynamic and adaptable to changes.

Question 8

Which of the following does not apply to freight forwarders?

Accepted Answer

Freight forwarders do not pay for the shipping and absorb the costs, as they charge their clients for their services.

Question 9

What is not a reason for countertrade?

Accepted Answer

Countertrade is not a reason for firms to exit markets, as it is a trade practice used to facilitate transactions and overcome obstacles in the buying and selling process. A firm may exit a market for various other reasons, such as low profitability or changes in strategic priorities. The other options (A, B, and C) provide valid reasons for countertrade.

Question 10

The International Chamber of Commerce accepted standard definition for terms of sale in 1936 and revised them in 2000 to assist buyers and sellers in the international marketplace.What are these standard definitions called?

Accepted Answer

The standard definitions for terms of sale accepted by the International Chamber of Commerce are called Incoterms.

Question 11

Which of the following is not considered in negotiating terms of payment?

Accepted Answer

Practices in the country are generally not considered in negotiating terms of payment. Negotiations typically focus on the specifics of the transaction itself, such as payment amount, financing capacity, and the relative bargaining power of the parties, rather than on broader national practices.

Question 12

___________ pricing, or intracorporate pricing, is the pricing of sales to members of the extended corporate family.

Accepted Answer

The answer of ___________ pricing, or intracorporate pricing, is the...

Question 13

The most favourable term to the exporter is

Accepted Answer

Cash in advance is the most favourable term to the exporter as it ensures that the exporter receives payment before the shipment is made, eliminating the risk of non-payment or default by the importer. This term provides the exporter with a higher level of security and reduces the financial risk involved in international trade transactions. Freight on board (FOB) and shipment in process are shipment terms, while credit with duty involves payment at a later date, which poses a higher risk for the exporter.

Question 14

Which one of the following is not descriptive of letters of credit?

Accepted Answer

Letters of credit can be instant or prolonged depending on the terms agreed upon by the parties involved. Therefore, option B is not descriptive of letters of credit. The other options listed are all descriptive of letters of credit, including whether they are irrevocable or revocable, confirmed or unconfirmed, and their frequent use in international trade.

Question 15

A more refined form of barter, aimed at reducing the effect of the immediacy of the transaction, is called:

Accepted Answer

Clearing arrangements involve a third party acting as an intermediary, allowing for multiple transactions to be consolidated and settled at a later time. This helps reduce the pressure of immediate exchange and allows for more efficient use of goods and services. Switch trading and buyback are specific types of barter, while complex barter refers to the use of multiple goods or services in one transaction.

Question 16

Destination-specific adjustment of mark-ups in response to exchange-rate changes are referred to as:

Accepted Answer

The mentioned adjustment of mark-ups in response to exchange-rate changes is known as "pricing-to-market" approach. This means varying the prices of products to remain competitive in the local market by either increasing or decreasing the mark-ups. It is a way of ensuring that the prices of goods remain reasonable even with fluctuations in the exchange rates.

Question 17

What factors should be considered when assessing a foreign private buyer?

Accepted Answer

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Question 18

Which of the following is not a typical method focusing on cost cutting?

Accepted Answer

Outsourcing R&D capabilities is not a typical method focusing on cost cutting as it involves the development of new products, which is a core function of the company, and outsourcing it may compromise the company's competitive advantage. The other options are typical methods focusing on cost cutting as they involve reducing production and operational costs.

Quiz 12: Pricing in international markets