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By Coolarora2906Gma Feb 17, 2015 1102 Words
Practice Questions Ch 2 to 5
Chapter 5—Trading Internationally


1. Mercantilism is the direct intellectual ancestor of modern-day protectionism.True

2. The theory of comparative advantage states that even if a country does not have absolute advantage in production, the country can still profitably specialize if the country is relatively more efficient. True

3. Absolute and comparative advantages come from economic differences.False

4. Factor endowment theory is a proposition that nations will develop comparative advantage based on their locally abundant factors. True

5. Factor endowments; domestic demand; firm strategy, structure, and rivalry; and related and supporting industries are aspects of strategic trade theory. false

6. Non-tariff barriers include subsidies, import quotas, export restraints, local content requirements, administrative policies, and antidumping duties.true


7. The idea that governments should actively protect domestic industries from imports and vigorously promote exports represents: c. Protectionism

5. The theory of absolute advantage is:
b. The economic advantage one nation enjoys that is absolutely superior to other nations.

9. An economic theory that accounts for changes in the patterns of trade over time is known as: c. Product life cycle theory

10. The national competitive advantage of industries depends on: d. All of these answers

11. NTBs include:
d. All of these answers
Chapter 4—Leveraging Resources & Capabilities


12. In global business, the institution-based view deals with internal strengths and weaknesses- false

13. Tangible resources and capabilities are assets easily observable and quantified.-true

14. The value chain is a chain of horizontal activities used in the production of goods and services that may or may not add value.-

15. Benchmarking is an assessment as to whether a firm has resources and capabilities to perform a particular activity in a manner superior to competitors.

16. Commoditization is the point at which an industry specific activity becomes common across industries, after which the need to keep it proprietary no longer exists.

17. Onshoring is the opposite to offshoring, meaning outsourcing to a domestic company.


18. Which of the following is NOT an intangible asset?
d. All of these are intangible assets

19. The point at which an industry-specific activity becomes common across industries and the need to keep it proprietary no longer exists is also called: a. Commoditization
20. Setting up subsidiaries abroad when the work is done in-house only at the foreign location is also called: a. Captive sourcing
21. The difficulty of identifying the causal determinants of successful firm performance is also called: d. Causal ambiguity

Chapter 3—Emphasizing Cultures, Ethics, & Norms


21. In situations where formal institutions are unclear or fail, informal institutions play a more important role in reducing uncertainty.

22. Informal institutions are based on the rules and legal systems of an economy.

23. Ethnocentrism is the quality of a society that perceives its own culture, ethics, and norms as natural, rational, and morally right.

24. The basis behind the cluster approach is that firms are more comfortable doing business with other firms in their same cluster. 25. An example of low power distance would be when subordinates address their bosses on a first-name basis.


26. Culture is defined in the text as:
a. The communication between members of similar location. b.The collective programming of the mind, which distinguishes the members of one group or category of people from another. c. The main component of formal institutions.

d. The attitudes and behaviors characteristic of a particular social group or organization.

27. Which of the following is a factor behind English being accepted as the global business language? a. English speakers have traditionally been more mobile than non-English speakers. b. It is easiest to translate to and from English. c. English-speaking countries contribute the largest share of global output. d. English is the number one language in the world.

28. Which of the following countries can be defined as a high-context culture? a. Japan c. Finland b. France d. Canada

29. In a collective society:
a. Family units are highly valued.
b. Being an entrepreneur is a popular mindset.
c. Being different than your neighbor is important. d. Outsiders are easily trusted.

30. The greatest weakness in the fight against eradicating corruption is: a. There is too much corruption to ever win.
b. Every country must institutionalize and enforce anti-corruption laws. c. The fact that the Foreign Corrupt Practices Act is no longer being followed. d. Overseas bribes are often tax deductible.

Chapter 2—Understanding Politics, Laws, & Economics


31. Formal and informal policies are popularly known as "the rules of the game."

32. Intellectual property rights (IPRs) include rights associated with patents, trademarks, and copyrights.


33. Political risk is associated with political changes that may negatively impact domestic and foreign firms. Which statement about political risk is correct? a. Political risk only exists in communist countries.

b. Firms operating in democracies never confront political risk. c. Firms operating in democracies are subject to political risk. d. Political risk is a myth.

34. Jewish and Islamic law are examples of:
a. Common law c. Civil law b. Theocratic law d. Quasi-democracy 35 are defined as rights associated with the ownership of intellectual property. a.Patents c. Trademarks b. Copyrights d. Intellectual property rights


1. Compare and contrast absolute advantage and comparative advantage trade theories.

ANS: This is just a suggestive answer and by all means you can enrich and expand on it for a more complete answer.

The economic advantage one nation enjoys that is absolutely superior to other nations summarizes the theory of absolute advantage. According to this theory, nations should specialize in economic activities in which they have an absolute advantage and trade with others. By specializing and trading, each nation produces more and consumes more. Therefore, the wealth of trading nations and the world overall increases. Its strengths are in being the birth of modern economics, serving as the forerunner of the free trade movement, and defeating mercantilism, at least intellectually.

The weakness of the theory is that when one nation is inferior to another, the theory is unable to provide any advice, and when there are many nations, it may be difficult to find an absolute advantage. To compensate, the theory of relative advantage claims that there may be an economic activity in which a nation has a relative advantage in comparison with other nations. This theory's strengths are that it offers more realistic guidance to nations interested in trade but having no absolute advantage and explains patterns of trade based on factor endowments.

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