Question 1

The United States bans Cuban cigars and other Cuban products from entering the United States due to political difficulties. This action is called a(n)
A)embargo.
B)import quota.
C)trade ban.
D)foreign-exchange control.
E)import duty.

Accepted Answer

The United States ban on Cuban products is an embargo, which is a governmental action that restricts the free trade of goods or services with one or more countries for political or economic reasons.

Question 2

The payments portion of the balance of payments--that is, payments made by the United States--does not include
A)exports.
B)imports.
C)military spending.
D)foreign aid.
E)investments.

Accepted Answer

The payments portion of the balance of payments only includes payments made by the United States to other countries, such as imports, military spending, foreign aid, and investments. Exports, on the other hand, are accounted for in the receipts portion of the balance of payments.

Question 3

A newly formed country in the Caribbean has no high tariffs, yet other countries find it difficult to trade with the new country because of its requirements for labeling, product testing, and certifications. These restrictions can best be classified as
A)embargos.
B)currency devaluations.
C)import quotas.
D)quality import restrictions.
E)bureaucratic red tape.

Accepted Answer

The requirements for labeling, product testing, and certifications are bureaucratic procedures that can make it difficult for other countries to trade with the new country, even without high tariffs. This can be classified as bureaucratic red tape.

Question 4

In 1967, several Asian countries banded together to reduce the trade barriers between them and encourage trading among themselves. This is known as
A)a GATT.
B)the European Union.
C)the Association of Southeast Asian Nations.
D)a multinational.
E)an orderly marketing agreement.

Accepted Answer

The Association of Southeast Asian Nations (ASEAN) was formed in 1967 by several Asian countries with the goal of reducing trade barriers and promoting economic cooperation and development within the region. It is not the European Union (B), which was formed in 1993 and consists of European countries, or a GATT (A), which refers to the General Agreement on Tariffs and Trade, a global trade agreement signed in 1947. It is also not a multinational (D), which refers to a company that operates in multiple countries, or an orderly marketing agreement (E), which is a type of agreement between producers to regulate the supply and price of a commodity.

Question 5

​Panama is considering instituting trade restrictions in order to balance its payments, protect new businesses, and protect domestic jobs. What may be some of the reasons it would not want to institute trade restrictions?
A)​Higher prices for consumers, restrictions of consumers' choices, misallocation of international resources, and loss of jobs.
B)​Lower prices for consumers, more consumer choices, proper allocation of international resources, and increase in employment.
C)​Sluggish market improvements, high retail prices, and lack of international resources.
D)​Loss of jobs, lack of national innovation, and high interest rates.

Accepted Answer

Instituting trade restrictions can lead to higher prices for consumers as domestic producers have less competition, and restrictions on imports can limit the choices available to consumers. Additionally, trade restrictions can lead to misallocation of international resources as countries may not be able to specialize in producing goods that they are most efficient at. Finally, trade restrictions can lead to the loss of jobs in export industries as other countries may retaliate with their own trade restrictions.

Question 6

Who are the members of NAFTA?
A)The United States, Canada, and Mexico
B)Greenland, Iceland, and Canada
C)Guatemala, Honduras, and Mexico
D)The United States, Mexico, and Japan
E)The United States, Canada, and the United Kingdom

Accepted Answer

NAFTA consists of the United States, Canada, and Mexico.

Question 7

The World Trade Organization was created by the
A)Kennedy Round.
B)United Nations.
C)League of Nations.
D)Tokyo Round.
E)Uruguay Round.

Accepted Answer

The World Trade Organization (WTO) was created as a result of the Uruguay Round of negotiations which began in 1986 and lasted until 1994. The Uruguay Round was a series of international trade negotiations that resulted in the creation of the WTO in 1995.

Question 8

Several European countries have banded together to reduce the trade barriers between them and encourage trading among themselves. This is known as
A)a GATT.
B)the European Union.
C)a cartel.
D)a multinational.
E)an orderly marketing agreement.

Accepted Answer

The European Union is a political and economic union between several European countries that aims to reduce trade barriers and encourage trade among its members. It is a regional integration organization.

Question 9

Which is the largest emerging Asian market?
A)Japan
B)Indonesia
C)Korea
D)Malaysia
E)China

Accepted Answer

China is the largest emerging Asian market with a population of over 1.4 billion and a rapidly growing economy. It is also the world's second-largest economy after the United States.

Question 10

Foreign licensing is similar to
A)starting from scratch.
B)franchising.
C)wholesaling.
D)establishing a subsidiary in another country.
E)establishing a sales office in a foreign country.

Accepted Answer

Foreign licensing is similar to franchising, where a company grants a foreign entity the right to use its intellectual property, such as trademarks, patents, and copyrights, in exchange for royalties or fees. This allows a company to expand its reach without having to invest in opening its own foreign operations.

Question 11

The New United Motor Manufacturing, Inc., formed by Toyota and General Motors to make cars, is an example of a(n)
A)strategic alliance.
B)licensing agreement.
C)exporting agency.
D)trading company.
E)countertrade.

Accepted Answer

The New United Motor Manufacturing, Inc. is an example of a strategic alliance, which is a cooperative agreement between two or more firms to work together towards a common goal. In this case, Toyota and General Motors collaborated to produce cars.

Question 12

A favorable balance of payments means that
A)exports exceed imports.
B)imports exceed exports.
C)payments exceed trade.
D)exports and other payments exceed imports and other receipts.
E)total receipts exceed total payments.

Accepted Answer

The answer of A favorable balance of payments means that
A)exports...

Question 13

Miller Beer allows a Canadian firm to use its name, formula, and brands in return for a royalty. This is known as
A)exporting.
B)licensing.
C)direct investment.
D)manufacturing in foreign countries.
E)none of the above.

Accepted Answer

This is an example of licensing, where Miller Beer has granted permission to a Canadian firm to use its name, formula, and brands in exchange for a royalty. This is a common practice for companies looking to expand their reach into foreign markets without having to invest in expensive manufacturing or operations.

Question 14

Howard believes that there should be no trade restrictions for any reason. What effect would Howard say that trade restrictions have on prices?
A)He would argue that by encouraging competition with trade restrictions, prices are likely to decrease.
B)He would argue that restrictions would cause greater competition and therefore lead to higher prices.
C)He would say that trade restrictions have no impact on prices, but they do restrict consumers' choices.
D)He would say that restrictions reduce competition and therefore cause an increase in prices.
E)He would argue that trade restrictions increase prices because they break up domestic monopolies.

Accepted Answer

Howard believes that trade restrictions reduce competition, which leads to an increase in prices. Alternatively, if there are no trade restrictions, businesses will have more competition which will drive prices down.

Question 15

Who are the two largest contributors to the Asian Development Bank?
A)China and Japan
B)Japan and India
C)The United States and Japan
D)Russia and China
E)China and Indonesia

Accepted Answer

The two largest contributors to the Asian Development Bank are the United States and Japan. These countries hold the largest shares of capital in the ADB, reflecting their significant financial contributions to the bank.

Question 16

Arguments for imposing trade restrictions include
A)the misallocation of international resources.
B)equalizing a nation's balance of payments.
C)higher prices for consumers.
D)restriction of consumers' choices.
E)none of the above.

Accepted Answer

The answer of Arguments for imposing trade restrictions include
A)the misallocation...

Question 17

By definition, every country has a(n) ____ advantage in some product.
A)relative
B)absolute
C)comparative
D)superior
E)inferior

Accepted Answer

Comparative advantage refers to a country's ability to produce a good or service at a lower opportunity cost than other countries. This means that every country has a comparative advantage in some product, as they will always be able to produce something more efficiently than another country. Absolute advantage refers to a country's ability to produce more of a good or service with the same resources as another country, which is not necessarily true for every country. Superior and inferior are subjective terms and do not have a clear economic definition in this context. Relative advantage is not a commonly used economic term.

Question 18

A medium-sized hardware manufacturer wants to become deeply involved in exporting, but it does not yet wish to actually manufacture any of its products overseas. The company wants to maintain control over its sales while gaining experience in foreign markets. Which option would be best for this company?
A)Licensing its products for sale in foreign countries
B)Selling its products outright to an export/import merchant
C)Establishing its own sales offices in foreign countries
D)Developing totally owned facilities in a foreign market
E)Hiring an export/import agent to assist with foreign sales

Accepted Answer

The answer of A medium-sized hardware manufacturer wants to become...

Question 19

Mexico is experiencing balance-of-payments deficits and is seeking financial support. Mexico probably should seek assistance from
A)the Export-Import Bank of the United States.
B)a multilateral development bank.
C)the Export-Import Bank of the United States
D)the IMF.
E)the World Bank.

Accepted Answer

The IMF (International Monetary Fund) is the most appropriate choice for a country experiencing balance-of-payments deficits and seeking financial support. The IMF specializes in providing financial assistance to countries facing economic difficulties, and it works to promote economic growth and employment more broadly through its agreements with member countries. Multilateral development banks like the World Bank are focused more on long-term development projects, while the Export-Import Bank of the United States provides assistance primarily for American businesses seeking to export goods and services.

Question 20

If Japan were regarded as the best electronics manufacturer in the world, what would be true?
A)Japan would have a comparative advantage in electronics manufacturing.
B)Japan would have a positive balance of trade.
C)The United States would have a comparative advantage in electronics.
D)Japan would have an absolute advantage in electronics production.
E)Japan would have a trade deficit with the United States.

Accepted Answer

The answer of If Japan were regarded as the best...

Quiz 3: Exploring Global Business

The United States bans Cuban cigars and other Cuban products from entering the United States due to political difficulties. This action is called a(n)

The payments portion of the balance of payments--that is, payments made by the United States--does not include

A newly formed country in the Caribbean has no high tariffs, yet other countries find it difficult to trade with the new country because of its requirements for labeling, product testing, and certifications. These restrictions can best be classified as

In 1967, several Asian countries banded together to reduce the trade barriers between them and encourage trading among themselves. This is known as

​Panama is considering instituting trade restrictions in order to balance its payments, protect new businesses, and protect domestic jobs. What may be some of the reasons it would not want to institute trade restrictions?

Who are the members of NAFTA?

The World Trade Organization was created by the

Several European countries have banded together to reduce the trade barriers between them and encourage trading among themselves. This is known as

Which is the largest emerging Asian market?

Foreign licensing is similar to

The New United Motor Manufacturing, Inc., formed by Toyota and General Motors to make cars, is an example of a(n)

A favorable balance of payments means that

Miller Beer allows a Canadian firm to use its name, formula, and brands in return for a royalty. This is known as

Howard believes that there should be no trade restrictions for any reason. What effect would Howard say that trade restrictions have on prices?

Who are the two largest contributors to the Asian Development Bank?

Arguments for imposing trade restrictions include

By definition, every country has a(n) ____ advantage in some product.

Mexico is experiencing balance-of-payments deficits and is seeking financial support. Mexico probably should seek assistance from

If Japan were regarded as the best electronics manufacturer in the world, what would be true?

Panama is considering instituting trade restrictions in order to balance its payments, protect new businesses, and protect domestic jobs. What may be some of the reasons it would not want to institute trade restrictions?