International Management Ch 1 Essay

Globalization and International Linkages

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True / False Questions

1. The process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political and cultural environments is called international management. True False

2. Multinational corporations can be defined as firms having operations in more than one country, international sales and a nationality mix of managers and owners. True False

3. Internationalization is the vision of creating one world unit, a single market entity. True False

4. Nongovernmental organizations believe that everyone benefits from globalization, as evidenced in lower prices, greater availability of goods, better jobs and access to technology. True False

5. NAFTA is a free trade agreement between the United States, Canada and Mexico that has in essence removed all barriers to trade and investment between the three nations. True False

6. NAFTA is better integrated as a single market than the EU or the allied Asian countries. True False

7. The countries of the Association of Southeast Asian nations are challenging China’s position as destinations for low cost production and export. True False

8. Foreign direct investment remained strong and even grew in some regions despite the 2008-2009 global recession. True False

9. United States multinationals have more foreign direct investment in Germany than any other country. True False

10. In recent years, Canadian firms have begun investing heavily in the United States. True False

11. Mexican firms cannot export goods into the European community without paying a tariff. True False

12. Mexico believes that the United States is its most important market and that little effort should go into expanding trade with Europe and Asia at least for now. True False

13. Like most South American economies, Brazil’s economy is faced with grave economic problems. Its GDP through 2009 continued to fall and inflation and unemployment increased. True False

14. The ultimate objective of the EU is to eliminate all trade barriers among member countries. True False

15. One of the ways that Russia is attempting to get its economy going is by removing many administered prices and subsidies and letting free market forces take over. True False

16. As a result of some continuing problems, the international business climate in Poland has not done well. True False

17. A keiretsu is a government agency in South Korea.
True False

18. MITI is a South Korean government agency that identifies and ranks national commercial pursuits and guides the distribution of national
resources to meet these goals. True False

19. Chaebols are very large, family held Korean conglomerates that have considerable political and economic power. True False

20. Emerging markets are developed economies that exhibit sustained economic reform and growth. True False

Multiple Choice Questions

21. The process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political and cultural environments is: A. Strategic management

B. Internationalization
C. Globalization
D. International management

22. To qualify as a multinational corporation, a firm must meet all of the following criteria except: A. Operations in more than one country
B. International sales
C. A nationality mix of managers and owners
D. Sales of at least one million dollars per year

23. Globalization:
A. Is the growth of interstate trade, spurred on by the progress toward free-market policies B. Is the subcontracting of activities to endogenous organizations that had previously been performed within the firm C. Is the process of social, political, economic, cultural and technological integration among countries around the world D. Is the process of a business crossing national and cultural borders

24. Identify the statement that is false of globalization. A. It can be
defined as the process of social, political, economic, cultural and technological integration among countries around the world B. It is the process of a business crossing national and cultural borders C. Evidence of globalization can be seen in increased levels of trade, capital flows and migration D. It has been facilitated by technological advances in transnational communications, transport and travel

25. The subcontracting or contracting out of activities to endogenous organizations that had previously been performed by the firm is called: A. Homesourcing
B. Insourcing
C. Offshoring
D. Outsourcing

26. The process by which companies undertake some activities at offshore locations instead of in their countries of origin is: A. Homesourcing
B. Insourcing
C. Offshoring
D. Globalization

27. Antiglobalization activists:
A. Contend that even within the developing world, it is protectionist policies, not trade and investment liberalization, that result in environmental and social damage B. Believe globalization will force higher-polluting countries such as China and Russia into an integrated global community that takes responsible measures to protect the environment C. Assert that if corporations are free to locate anywhere in the world, the world’s poorest countries will relax or eliminate environmental standards and social services in order to attract first-world investment and the jobs and wealth that come with it D. Believe that industrialization will create wealth that will enable new industries to employ more modern, environmentally friendly technology

28. The global organization of countries that oversees rules and regulations for international trade and investment, including agriculture, intellectual
property, services, competition and subsidies is the: A. WTO

B. NAFTA
C. WIPO
D. ITO

29. A free-trade agreement between the United States, Canada and Mexico that has removed most barriers to trade and investment is: A. AFTA
B. CEFTA
C. CAFTA
D. NAFTA

30. The World Trade Organization (WTO) meeting in Cancun in September of 2003 was led by: A. India and Brazil
B. The U.S. and Japan
C. The U.K. and France
D. EU members

31. The World Trade Organization (WTO) meeting in Doha in November of 2001 was referred to as: A. The “Annecy Round”
B. The “Development Round”
C. The “Tokyo Round”
D. The “Torquay Round”

32. The United States, Canada and Mexico make up the _____, which in essence has removed all barriers to trade between these countries and created a huge North American market. A. General Agreement on Tariffs and Trade

B. North American Common Market
C. North American Free Trade Agreement
D. North American Trade Union

33. Agreements like NAFTA and CAFTA:
A. Not only reduce barriers to trade but also require additional domestic legal and business reforms in developing nations to protect property rights
B. Do not include supplemental commitments on labor and the environment to encourage countries to upgrade their working conditions and environmental protections like the FTAA C. Rely exclusively on MNCs exporting or setting up operations locally rather than buying out a domestic firm D. Provide firms with enough security so they cannot go out of business, which simply encourages a lack of efficiency or incentive to monitor costs

34. The NAFTA agreement and the DR-CAFTA agreement are examples of: A. Defunct bilateral agreements
B. Regional trade agreements
C. Plurilateral agreements
D. Proposed bilateral agreements

35. Due to the stalled progress with the WTO and FTAA, the United States has pursued _____ with a range of countries, including, Australia, Bahrain, Chile, Colombia, Israel, Jordan, Malaysia, Morocco, Oman, Panama, Peru, Malaysia and Singapore. A. Plurilateral trade agreements

B. Multilateral trade agreements
C. Bilateral trade agreements
D. Regional trade agreements

36. The Asian economic block, made up of Indonesia, Malaysia, the Philippines, Singapore, Brunei, Thailand, Cambodia, Myanmar and Vietnam is referred to as: A. Association of Southeast Asian Nations (ASEAN)

B. Southeast Asia Free Trade Agreement (SWAFTA)
C. Southeast Asia Common Market
D. Asian Economic Union

37. A method which adjusts GDP to account for different prices in countries is called: A. Cumulative distribution function
B. Nominal GDP
C. Current currency exchange rate
D. Purchasing power parity

38. The following are characteristics of the BRIC economies except: A. Demand for higher priced goods is expected to continue to be low in the future B. The BRIC economies share of world growth is expected to rise to about 40 percent by 2025 C. Per capita income in the BRIC countries is rising

D. Demand for basic goods will be strong

39. The Goldman Sachs global economics team:
A. Estimates that Chile will occupy a dominant role in the global economic system and will surpass the United States in output by 2035 B. Reports that the economic potential of Brazil, Russia, India and China is such that they may become among the four most dominant economies by the year 2050 C. Estimates that the BRIC economies’ share of world growth could rise from 40 percent in 2000 to more than 70 percent in 2025 D. Reports that Germany, followed by India a decade later, will overtake the United States as the world’s largest car market

40. The term used to indicate the amount invested in property, plant and equipment in another country is: A. Exporting
B. Foreign direct investment
C. Importing
D. Trade imperfection

41. In 2009, global merchandise exports and global commercial services exports: A. Declined for the first time since 1983
B. Nearly doubled
C. Remained fairly consistent
D. Decreased by almost 50 percent

42. In 2009, FDI inflows and outflows:
A. Nearly doubled
B. Nearly tripled
C. Fell substantially
D. Remained fairly constant

43. The emerging global community is becoming increasingly: A. Socially isolated
B. Economically interdependent
C. Culturally interdependent
D. Financially independent

44. A _____ is comparable to a monopoly in the sense that the organization, in this case the government, has explicit control over the price and supply of a good or service. A. Command economy
B. Market economy
C. Mixed economy
D. Socialist economy

45. A _____ exists when private enterprise reserves the right to own property and monitor the production and distribution of goods and services while the state simply supports competition and efficient practices. A. Command economy

B. Market economy
C. Mixed economy
D. Socialist economy

46. _____ is the United States’ largest trading partner, a position it has held for many years. A. England
B. Canada
C. Japan
D. Mexico

47. Which country receives the most foreign direct investment (FDI) by U.S. companies? A. Netherlands
B. Mexico
C. Great Britain
D. Canada

48. Which of the following statements is false with regard to a mixed economy? A. Regulations concerning minimum wage standards, social security, environmental protection and the advancement of civil rights may raise the standard of living B. Ownership of organizations seen as imperative to the nation may be transferred to the state to subsidize costs and allow the firm to flourish C. Regulations concerning minimum wage standards, social security, environmental protection and the advancement of civil rights ensure that those who are elderly, sick or have limited skills are taken care of D. Businesses in this model are owned by the state to ensure that investments and practices are done in the best interest of the nation despite the often opposing outcomes

49. The following statements are true about the United States and Canada except: A. The legal and business environments of the two countries are very different B. Both countries are participants in NAFTA

C. Canada is the largest trading partner of the U.S
D. In recent years, Canadian firms have begun investing heavily in the U.S
50. Which of the following statements is true of the economic system of North America? A. The free-market-based economy of this region allows for more freedom in decision-making processes of private firms B. The command economy of this region allows for greater flexibility with decisions and low barriers for other countries to establish business C. The free-market-based economy of this region results in lowering barriers when attempting to move into other countries D. The command economy of this region allows competition to strive while the government can extend assistance to individuals or companies

51. In the early 1990s, _____ had recovered from its economic problems of the previous decade and become the strongest economy in Latin America. A. Brazil
B. Argentina
C. Mexico
D. Chile

52. The United States holds a dominant position in all of the following
industries except: A. telecommunications
B. biotechnology
C. media
D. textiles

53. A factory, located in a Mexican border town, that imports materials and equipment on a duty and tariff-free basis for assembly or manufacturing and re-exports is called a: A. Vertically integrated corporation

B. Keiretsus
C. Maquiladora
D. Chaebols

54. The term “maquiladora” is used to describe a specific kind of _____ industry. A. Brazilian
B. Mexican
C. South Korean
D. Chinese

55. Identify the statement which is not true of Mexico.
A. When it joined NAFTA, Mexico was on the verge of becoming the major economic power in Latin America B. Mexico has free-trade agreements with more than 50 countries C. Mexico’s trade with Asia is declining

D. Mexico’s government are probusiness

56. Which of the following observations about NAFTA is incorrect? A. Mexican businesses are finding themselves able to take advantage of the U.S. market by replacing goods that were previously purchased from Asia B. Mexican firms are now able to produce products at highly competitive prices thanks to lower-cost labor and proximity to the American market C. Mexican firms can now export goods into the European community only by paying a heavy tariff D. Mexico’s trade with Asia is on the rise which is important to the country as it wants to reduce its overreliance on the U.S. market

57. A major development in South America is:
A. Is the implementation of the single currency and the regional central bank B. The growth of inter-country trade, spurred on by the progress toward free-market policies C. Is the privatization of traditionally nationalized industries D. Is the elimination of all trade barriers among member countries

58. A recent survey (reported in our textbook) of businesspeople from Argentina, Brazil, Chile, Columbia and Venezuela found that the _____ market, on average, was more important to their economic well being than any other. A. Mexican

B. Japanese
C. U.S
D. European Union

59. The ultimate objective of the EU is to:
A. Develop separate custom duties for member countries
B. Eliminate all trade barriers among member countries
C. Have a single government that represents all EU countries D. Increase imports into EU countries

60. The European Union:
A. Has achieved the reality of a single currency and a regional central bank B. Has eliminated all trade barriers among member countries C. Subjects member nations to quotas on the manufacture and shipment of high-quality, low-cost goods D. Imposes duties on member nations for the manufacture and shipment of high-quality, low-cost goods

61. The Central and Eastern European republics:
A. Have attempted to grow in terms of intercountry trade, spurred on by the progress toward free-market policies B. Have attempted to decrease inflation by lowering the GDP C. Are attempting to make a shift from centrally planned economies to market based economies D. Are attempting to make a shift from a centrally planned economy to a mixed economy

62. The former communist countries that have become most visible in the international arena include: A. Romania, Poland and Bulgaria
B. Czech Republic, Bulgaria and Poland
C. Hungary, Romania and Albania
D. Poland, Hungary and the Czech Republic

63. Which of the following statements is true with regard to the economy of Poland? A. The consensus decision making system of Poland turns out to be too time-consuming in the new speed-based economy B. During the 1970s and 1980s, Poland’s economic success had been without precedent C. Poland is among the largest of the former communist countries which receives the least media coverage D. Political instability and risk, large external debts, a deteriorating infrastructure and only modest education levels have led to continuing economic problems in Poland

64. Which of the following statements is not true of Hungary’s economic reform measures? A. In Hungary, state-owned hotels have been privatized
B. Western firms have been entering into joint ventures with local companies in Hungary, attracted by the low cost of highly skilled, professional labor C. Hungary had a head start on the other former communist-bloc countries in terms of adopting economic reform measures D. MNCs have been making direct investments in Hungary, as in the case of General Electric’s purchase of Tungsram

65. Which of the following statements is not true of Japan? A. During the 1970s and 1980s, Japan’s economic success had been without precedent B. During the 1970s and 1980s, the country had a huge positive trade balance, the yen was strong and they recognized as the world leaders in manufacturing and consumer goods C. Assumptions about the Japanese workforce have turned out to be more myth than reality and some of the former strengths have become weaknesses in the new economy D. Japan’s consensus decision making system turns out to be very efficient and effective in the new speed-based economy

66. An organizational arrangement in Japan in which a large group of vertically integrated companies bound together by cross-ownership, interlocking directorates and social ties provide goods and services to end users is: A. Vertically integrated corporation

B. Keiretsus
C. Maquiladora
D. Chaebols

67. MITI is a _____ government agency that identifies and ranks national commercial pursuits and guides the distribution of national resources to meet these goals. A. Chinese
B. Japanese
C. South Korean
D. Philippine

68. Despite setbacks, _____ remains a formidable international competitor and is well poised in all three major economic regions: the Pacific Rim, North America and Europe. A. Japan
B. Chile
C. China
D. Argentina

69. The four other widely recognized powerhouses in Asia, in addition to Japan and China are: A. South Korea, Hong Kong, Singapore and Taiwan
B. Indonesia, South Korea, Japan and Taiwan
C. Thailand, South Korea, Indonesia and Hong Kong
D. Singapore, South Korea, Indonesia and Thailand

70. Identify the statement false of China’s economic condition. A. China’s GDP has remained strong, maintaining at 11.5 percent growth in 2009 B. In the first quarter of 2010, China’s GDP grew at a blistering 11.7 percent causing some concerns that the Chinese government has been unable to tap the breaks on this rapid growth C. Trade relations between China and developed countries and regions, such as the United States and the EU, are lax
D. Massive savings glut in the corporate sector, the globalization of manufacturing networks are major challenges faced by China

71. Chaebols are large, family-held conglomerates in:
A. Thailand
B. Japan
C. South Korea
D. China

72. Which of the following is true of India today?
A. It has a relatively small middle class
B. Education levels tend to be low
C. It is attractive to MNCs
D. There is a distinct lack of government funds for economic development
73. Which of the following countries was not amongst the world’s 10 most competitive nations in 2010? A. United States
B. Singapore
C. United Kingdom
D. Norway

74. Identify the emerging market which is projected to have the largest market size in 2010. A. China
B. India
C. Mexico
D. Argentina

75. According to the projections for 2010, which of the following countries has the best commercial infrastructure? A. China
B. Hong Kong
C. India

Essay Questions

76. What is a multinational corporation? Why would a company want to be a multinational corporation?

77. How has NAFTA affected the economies of North America?

78. What does the term “European Union” mean? Has the European Union been successful? What is the European Union’s ultimate objective? Why has the creation of the European Union encouraged more North American and Pacific Rim companies to establish operations in Europe?

79. Explain the concept of market economy.

80. Discuss the factors that contributed to Japan’s phenomenal economic success.

Chapter 01 Globalization and International Linkages Answer Key

True / False Questions

1. (p. 4) The process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political and cultural environments is called international management. TRUE

Difficulty: Medium

2. (p. 4) Multinational corporations can be defined as firms having operations in more than one country, international sales and a nationality mix of managers and owners. TRUE

Difficulty: Easy

3. (p. 6) Internationalization is the vision of creating one world unit, a single market entity. FALSE

Difficulty: Medium

4. (p. 8) Nongovernmental organizations believe that everyone benefits from globalization, as evidenced in lower prices, greater availability of goods, better jobs and access to technology. FALSE

Difficulty: Medium

5. (p. 10) NAFTA is a free trade agreement between the United States, Canada and Mexico that has in essence removed all barriers to trade and investment between the three nations. TRUE

Difficulty: Medium

6. (p. 11) NAFTA is better integrated as a single market than the EU or the allied Asian countries. FALSE

Difficulty: Medium

7. (p. 12) The countries of the Association of Southeast Asian nations are challenging China’s position as destinations for low cost production and export. TRUE

Difficulty: Medium

8. (p. 15) Foreign direct investment remained strong and even grew in some regions despite the 2008-2009 global recession. FALSE

Difficulty: Medium

9. (p. 19) United States multinationals have more foreign direct investment in Germany than any other country. FALSE

Difficulty: Medium

10. (p. 19) In recent years, Canadian firms have begun investing heavily in the United States. TRUE

Difficulty: Medium

11. (p. 19) Mexican firms cannot export goods into the European community without paying a tariff. FALSE

Difficulty: Medium

12. (p. 19) Mexico believes that the United States is its most important market and that little effort should go into expanding trade with Europe and Asia at least for now. FALSE

Difficulty: Medium

13. (p. 24) Like most South American economies, Brazil’s economy is faced with grave economic problems. Its GDP through 2009 continued to fall and inflation and unemployment increased. FALSE

Difficulty: Medium

14. (p. 20) The ultimate objective of the EU is to eliminate all trade
barriers among member countries. TRUE

Difficulty: Medium

15. (p. 21) One of the ways that Russia is attempting to get its economy going is by removing many administered prices and subsidies and letting free market forces take over. TRUE

Difficulty: Hard

16. (p. 22) As a result of some continuing problems, the international business climate in Poland has not done well. FALSE

Difficulty: Medium

17. (p. 20) A keiretsu is a government agency in South Korea. FALSE

Difficulty: Medium

18. (p. 20) MITI is a South Korean government agency that identifies and ranks national commercial pursuits and guides the distribution of national resources to meet these goals. FALSE

Difficulty: Medium

19. (p. 23) Chaebols are very large, family held Korean conglomerates that have considerable political and economic power. TRUE

Difficulty: Medium

20. (p. 21) Emerging markets are developed economies that exhibit sustained economic reform and growth. FALSE

Difficulty: Medium

Multiple Choice Questions

21. (p. 4) The process of applying management concepts and techniques in a multinational environment and adapting management practices to different economic, political and cultural environments is: A. Strategic management

B. Internationalization
C. Globalization
D. International management

Difficulty: Easy

22. (p. 4) To qualify as a multinational corporation, a firm must meet all of the following criteria except: A. Operations in more than one country
B. International sales
C. A nationality mix of managers and owners
D. Sales of at least one million dollars per year

Difficulty: Medium

23. (p. 6) Globalization:
A. Is the growth of interstate trade, spurred on by the progress toward free-market policies B. Is the subcontracting of activities to endogenous organizations that had previously been performed within the firm C. Is the
process of social, political, economic, cultural and technological integration among countries around the world D. Is the process of a business crossing national and cultural borders

Difficulty: Medium

24. (p. 6) Identify the statement that is false of globalization. A. It can be defined as the process of social, political, economic, cultural and technological integration among countries around the world B. It is the process of a business crossing national and cultural borders C. Evidence of globalization can be seen in increased levels of trade, capital flows and migration D. It has been facilitated by technological advances in transnational communications, transport and travel

Difficulty: Medium

25. (p. 6) The subcontracting or contracting out of activities to endogenous organizations that had previously been performed by the firm is called: A. Homesourcing
B. Insourcing
C. Offshoring
D. Outsourcing

Difficulty: Medium

26. (p. 6) The process by which companies undertake some activities at offshore locations instead of in their countries of origin is: A. Homesourcing
B. Insourcing
C. Offshoring
D. Globalization

Difficulty: Medium

27. (p. 8) Antiglobalization activists:
A. Contend that even within the developing world, it is protectionist policies, not trade and investment liberalization, that result in environmental and social damage B. Believe globalization will force higher-polluting countries such as China and Russia into an integrated global community that takes responsible measures to protect the environment C. Assert that if corporations are free to locate anywhere in the world, the world’s poorest countries will relax or eliminate environmental standards and social services in order to attract first-world investment and the jobs and wealth that come with it D. Believe that industrialization will create wealth that will enable new industries to employ more modern, environmentally friendly technology

Difficulty: Medium

28. (p. 9) The global organization of countries that oversees rules and regulations for international trade and investment, including agriculture, intellectual property, services, competition and subsidies is the: A. WTO

B. NAFTA
C. WIPO
D. ITO

Difficulty: Easy

29. (p. 10) A free-trade agreement between the United States, Canada and Mexico that has removed most barriers to trade and investment is: A. AFTA
B. CEFTA
C. CAFTA
D. NAFTA

Difficulty: Easy

30. (p. 10) The World Trade Organization (WTO) meeting in Cancun in September of 2003 was led by: A. India and Brazil
B. The U.S. and Japan
C. The U.K. and France
D. EU members

Difficulty: Medium

31. (p. 9) The World Trade Organization (WTO) meeting in Doha in November of 2001 was referred to as: A. The “Annecy Round”
B. The “Development Round”
C. The “Tokyo Round”
D. The “Torquay Round”

Difficulty: Easy

32. (p. 10) The United States, Canada and Mexico make up the _____, which in essence has removed all barriers to trade between these countries and created a huge North American market. A. General Agreement on Tariffs and Trade

B. North American Common Market
C. North American Free Trade Agreement
D. North American Trade Union

Difficulty: Medium

33. (p. 11) Agreements like NAFTA and CAFTA:
A. Not only reduce barriers to trade but also require additional domestic legal and business reforms in developing nations to protect property rights B. Do not include supplemental commitments on labor and the environment to
encourage countries to upgrade their working conditions and environmental protections like the FTAA C. Rely exclusively on MNCs exporting or setting up operations locally rather than buying out a domestic firm D. Provide firms with enough security so they cannot go out of business, which simply encourages a lack of efficiency or incentive to monitor costs

Difficulty: Medium

34. (p. 11) The NAFTA agreement and the DR-CAFTA agreement are examples of: A. Defunct bilateral agreements
B. Regional trade agreements
C. Plurilateral agreements
D. Proposed bilateral agreements

Difficulty: Easy

35. (p. 11) Due to the stalled progress with the WTO and FTAA, the United States has pursued _____ with a range of countries, including, Australia, Bahrain, Chile, Colombia, Israel, Jordan, Malaysia, Morocco, Oman, Panama, Peru, Malaysia and Singapore. A. Plurilateral trade agreements

B. Multilateral trade agreements
C. Bilateral trade agreements
D. Regional trade agreements

Difficulty: Medium

36. (p. 12) The Asian economic block, made up of Indonesia, Malaysia, the Philippines, Singapore, Brunei, Thailand, Cambodia, Myanmar and Vietnam is referred to as: A. Association of Southeast Asian Nations (ASEAN)

B. Southeast Asia Free Trade Agreement (SWAFTA)
C. Southeast Asia Common Market
D. Asian Economic Union

Difficulty: Medium

37. (p. 12) A method which adjusts GDP to account for different prices in countries is called: A. Cumulative distribution function
B. Nominal GDP
C. Current currency exchange rate
D. Purchasing power parity

Difficulty: Medium

38. (p. 12) The following are characteristics of the BRIC economies except: A. Demand for higher priced goods is expected to continue to be low in the future B. The BRIC economies share of world growth is expected to rise to about 40 percent by 2025 C. Per capita income in the BRIC countries is rising

D. Demand for basic goods will be strong

Difficulty: Medium

39. (p. 12) The Goldman Sachs global economics team:
A. Estimates that Chile will occupy a dominant role in the global economic system and will surpass the United States in output by 2035 B. Reports that the economic potential of Brazil, Russia, India and China is such that they may become among the four most dominant economies by the year 2050 C. Estimates that the BRIC economies’ share of world growth could rise from 40 percent in 2000 to more than 70 percent in 2025 D. Reports that Germany, followed by India a decade later, will overtake the United States as the world’s largest car market

Difficulty: Medium

40. (p. 15) The term used to indicate the amount invested in property, plant and equipment in another country is: A. Exporting
B. Foreign direct investment
C. Importing
D. Trade imperfection

Difficulty: Medium

41. (p. 41) In 2009, global merchandise exports and global commercial services exports: A. Declined for the first time since 1983
B. Nearly doubled
C. Remained fairly consistent
D. Decreased by almost 50 percent

Difficulty: Medium

42. (p. 15) In 2009, FDI inflows and outflows:
A. Nearly doubled
B. Nearly tripled
C. Fell substantially
D. Remained fairly constant

Difficulty: Medium

43. (p. 15) The emerging global community is becoming increasingly: A. Socially isolated
B. Economically interdependent
C. Culturally interdependent
D. Financially independent

Difficulty: Medium

44. (p. 18) A _____ is comparable to a monopoly in the sense that the organization, in this case the government, has explicit control over the price and supply of a good or service. A. Command economy

B. Market economy
C. Mixed economy
D. Socialist economy

Difficulty: Medium

45. (p. 17) A _____ exists when private enterprise reserves the right to own property and monitor the production and distribution of goods and services while the state simply supports competition and efficient practices. A. Command economy

B. Market economy
C. Mixed economy
D. Socialist economy

Difficulty: Medium

46. (p. 19) _____ is the United States’ largest trading partner, a position it has held for many years. A. England
B. Canada
C. Japan
D. Mexico

Difficulty: Medium

47. (p. 19) Which country receives the most foreign direct investment (FDI)
by U.S. companies? A. Netherlands
B. Mexico
C. Great Britain
D. Canada

Difficulty: Medium

48. (p. 18) Which of the following statements is false with regard to a mixed economy? A. Regulations concerning minimum wage standards, social security, environmental protection and the advancement of civil rights may raise the standard of living B. Ownership of organizations seen as imperative to the nation may be transferred to the state to subsidize costs and allow the firm to flourish C. Regulations concerning minimum wage standards, social security, environmental protection and the advancement of civil rights ensure that those who are elderly, sick or have limited skills are taken care of D. Businesses in this model are owned by the state to ensure that investments and practices are done in the best interest of the nation despite the often opposing outcomes

Difficulty: Medium

49. (p. 19) The following statements are true about the United States and Canada except: A. The legal and business environments of the two countries are very different B. Both countries are participants in NAFTA

C. Canada is the largest trading partner of the U.S
D. In recent years, Canadian firms have begun investing heavily in the U.S

Difficulty: Hard

50. (p. 19) Which of the following statements is true of the economic system of North America? A. The free-market-based economy of this region allows for more freedom in decision-making processes of private firms B. The command economy of this region allows for greater flexibility with decisions
and low barriers for other countries to establish business C. The free-market-based economy of this region results in lowering barriers when attempting to move into other countries D. The command economy of this region allows competition to strive while the government can extend assistance to individuals or companies

Difficulty: Medium

51. (p. 19) In the early 1990s, _____ had recovered from its economic problems of the previous decade and become the strongest economy in Latin America. A. Brazil
B. Argentina
C. Mexico
D. Chile

Difficulty: Medium

52. (p. 19) The United States holds a dominant position in all of the following industries except: A. telecommunications
B. biotechnology
C. media
D. textiles

Difficulty: Medium

53. (p. 19) A factory, located in a Mexican border town, that imports materials and equipment on a duty and tariff-free basis for assembly or manufacturing and re-exports is called a: A. Vertically integrated corporation

B. Keiretsus
C. Maquiladora
D. Chaebols

Difficulty: Medium

54. (p. 19) The term “maquiladora” is used to describe a specific kind of _____ industry. A. Brazilian
B. Mexican
C. South Korean
D. Chinese

Difficulty: Medium

55. (p. 19) Identify the statement which is not true of Mexico. A. When it joined NAFTA, Mexico was on the verge of becoming the major economic power in Latin America B. Mexico has free-trade agreements with more than 50 countries C. Mexico’s trade with Asia is declining

D. Mexico’s government are probusiness

Difficulty: Medium

56. (p. 19) Which of the following observations about NAFTA is incorrect? A. Mexican businesses are finding themselves able to take advantage of the U.S. market by replacing goods that were previously purchased from Asia B. Mexican firms are now able to produce products at highly competitive prices thanks to lower-cost labor and proximity to the American market C. Mexican firms can now export goods into the European community only by paying a heavy tariff D. Mexico’s trade with Asia is on the rise which is important to the country as it wants to reduce its overreliance on the U.S. market

Difficulty: Medium

57. (p. 24) A major development in South America is:
A. Is the implementation of the single currency and the regional central bank B. The growth of inter-country trade, spurred on by the progress toward free-market policies C. Is the privatization of traditionally nationalized industries D. Is the elimination of all trade barriers among member countries

Difficulty: Medium

58. (p. 24) A recent survey (reported in our textbook) of businesspeople from Argentina, Brazil, Chile, Columbia and Venezuela found that the _____ market, on average, was more important to their economic well being than any other. A. Mexican

B. Japanese
C. U.S
D. European Union

Difficulty: Medium

59. (p. 20) The ultimate objective of the EU is to:
A. Develop separate custom duties for member countries
B. Eliminate all trade barriers among member countries
C. Have a single government that represents all EU countries D. Increase imports into EU countries

Difficulty: Medium

60. (p. 20) The European Union:
A. Has achieved the reality of a single currency and a regional central bank B. Has eliminated all trade barriers among member countries C. Subjects member nations to quotas on the manufacture and shipment of high-quality, low-cost goods D. Imposes duties on member nations for the manufacture and
shipment of high-quality, low-cost goods

Difficulty: Medium

61. (p. 21) The Central and Eastern European republics: A. Have attempted to grow in terms of intercountry trade, spurred on by the progress toward free-market policies B. Have attempted to decrease inflation by lowering the GDP C. Are attempting to make a shift from centrally planned economies to market based economies D. Are attempting to make a shift from a centrally planned economy to a mixed economy

Difficulty: Medium

62. (p. 22) The former communist countries that have become most visible in the international arena include: A. Romania, Poland and Bulgaria
B. Czech Republic, Bulgaria and Poland
C. Hungary, Romania and Albania
D. Poland, Hungary and the Czech Republic

Difficulty: Medium

63. (p. 22) Which of the following statements is true with regard to the economy of Poland? A. The consensus decision making system of Poland turns out to be too time-consuming in the new speed-based economy B. During the 1970s and 1980s, Poland’s economic success had been without precedent C. Poland is among the largest of the former communist countries which receives the least media coverage D. Political instability and risk, large external debts, a deteriorating infrastructure and only modest education levels have led to continuing economic problems in Poland

Difficulty: Medium

64. (p. 22) Which of the following statements is not true of Hungary’s economic reform measures? A. In Hungary, state-owned hotels have been
privatized
B. Western firms have been entering into joint ventures with local companies in Hungary, attracted by the low cost of highly skilled, professional labor C. Hungary had a head start on the other former communist-bloc countries in terms of adopting economic reform measures D. MNCs have been making direct investments in Hungary, as in the case of General Electric’s purchase of Tungsram

Difficulty: Medium

65. (p. 20) Which of the following statements is not true of Japan? A. During the 1970s and 1980s, Japan’s economic success had been without precedent B. During the 1970s and 1980s, the country had a huge positive trade balance, the yen was strong and they recognized as the world leaders in manufacturing and consumer goods C. Assumptions about the Japanese workforce have turned out to be more myth than reality and some of the former strengths have become weaknesses in the new economy D. Japan’s consensus decision making system turns out to be very efficient and effective in the new speed-based economy

Difficulty: Medium

66. (p. 20) An organizational arrangement in Japan in which a large group of vertically integrated companies bound together by cross-ownership, interlocking directorates and social ties provide goods and services to end users is: A. Vertically integrated corporation

B. Keiretsus
C. Maquiladora
D. Chaebols

Difficulty: Medium

67. (p. 20) MITI is a _____ government agency that identifies and ranks
national commercial pursuits and guides the distribution of national resources to meet these goals. A. Chinese
B. Japanese
C. South Korean
D. Philippine

Difficulty: Medium

68. (p. 20) Despite setbacks, _____ remains a formidable international competitor and is well poised in all three major economic regions: the Pacific Rim, North America and Europe. A. Japan
B. Chile
C. China
D. Argentina

Difficulty: Medium

69. (p. 23) The four other widely recognized powerhouses in Asia, in addition to Japan and China are: A. South Korea, Hong Kong, Singapore and Taiwan
B. Indonesia, South Korea, Japan and Taiwan
C. Thailand, South Korea, Indonesia and Hong Kong
D. Singapore, South Korea, Indonesia and Thailand

Difficulty: Medium

70. (p. 22) Identify the statement false of China’s economic condition. A. China’s GDP has remained strong, maintaining at 11.5 percent growth in 2009 B. In the first quarter of 2010, China’s GDP grew at a blistering 11.7 percent causing some concerns that the Chinese government has been unable to tap the breaks on this rapid growth C. Trade relations between China and developed countries and regions, such as the United States and the EU, are lax D. Massive savings glut in the corporate sector, the globalization of
manufacturing networks are major challenges faced by China

Difficulty: Medium

71. (p. 23) Chaebols are large, family-held conglomerates in: A. Thailand
B. Japan
C. South Korea
D. China

Difficulty: Medium

72. (p. 24) Which of the following is true of India today? A. It has a relatively small middle class
B. Education levels tend to be low
C. It is attractive to MNCs
D. There is a distinct lack of government funds for economic development

Difficulty: Medium

73. (p. 28) Which of the following countries was not amongst the world’s 10 most competitive nations in 2010? A. United States
B. Singapore
C. United Kingdom
D. Norway

Difficulty: Medium

74. (p. 28) Identify the emerging market which is projected to have the largest market size in 2010. A. China
B. India
C. Mexico
D. Argentina

Difficulty: Medium

75. (p. 28) According to the projections for 2010, which of the following countries has the best commercial infrastructure? A. China
B. Hong Kong
C. India

Difficulty: Medium

Essay Questions

76. (p. 4) What is a multinational corporation? Why would a company want to be a multinational corporation? A multinational corporation is a firm that has operations in more than one country, international sales and a nationality mix of managers and owners. Firms pursue international markets to increase their sales and net income. For example, of the 100 largest American multinational corporations, in recent years, approximately one-third have earned more annual income in the international market than in the domestic market.

Difficulty: Easy

77. (p. 10) How has NAFTA affected the economies of North America? The United States, Canada and Mexico make up the North American Free Trade Agreement (NAFTA), which in essence has removed all barriers to trade among these countries and created a huge North American market. A number of economic developments have occurred because of this agreement and are designed to promote commerce in the region. Some of the more important developments include (1) the elimination of tariffs as well as import and export quotas; (2) the opening of government procurement markets to companies in the other two nations; (3) an increase in the opportunity to
make investments in each other’s country; (4) an increase in the ease of travel between countries; and (5) the removal of restrictions on agricultural products, auto parts and energy goods.

Difficulty: Medium

78. (p. 11) What does the term “European Union” mean? Has the European Union been successful? What is the European Union’s ultimate objective? Why has the creation of the European Union encouraged more North American and Pacific Rim companies to establish operations in Europe? The European Union (EU) is a trade union consisting of 27 European nations. It has been successful and is better integrated as a single market than either NAFTA or the allied Asian countries. The ultimate objective of the EU is to eliminate all trade barriers among member countries. This helps explain why many North American and Pacific Rim countries have established operations in Europe. Products manufactured in an EU country can be sold anywhere with the EU without paying duties or being subjected to quotas or even exchange rate fluctuations with the single currency now in use. However, serious challenges face the EU throughout the process of integrating post-communist Central and Eastern European nations, many of which are recent members of the union.

Difficulty: Medium

79. (p. 17) Explain the concept of market economy.
A market economy exists when private enterprise reserves the right to own property and monitor the production and distribution of goods and services while the state simply supports competition and efficient practices. Management is particularly effective here since private ownership provides local evaluation and understanding, opposed to a nationally standardized archetype. This model contains the least restriction as the allocation of resources is roughly determined by the law of demand. Since the interaction of the community and firms guides the system, organizations must be as versatile as the individual consumer. Competition is fervently encouraged to promote innovation, economic growth, high quality and efficiency. The
government may prohibit such things as monopolies or restrictive business practices in order to maintain the integrity of the economy.

Difficulty: Medium

80. (p. 20) Discuss the factors that contributed to Japan’s phenomenal economic success. During the 1970s and 1980s, Japan’s economic success had been without precedent. The country had a huge positive trade balance, the yen was strong and the Japanese became recognized as the world leaders in manufacturing and consumer goods. Analysts ascribe Japan’s phenomenal success to a number of factors. Some areas that have received a lot of attention are the Japanese cultural values supporting a strong work ethic and group/team effort, consensus decision making, the motivational effects of guaranteed lifetime employment and the overall commitment that Japanese workers have to their organizations. However, at least some of these assumptions about the Japanese workforce have turned out to be more myth than reality and some of the former strengths have become weaknesses in the new economy. Some of the early success of the Japanese economy can be attributed to the Ministry of International Trade and Industry (MITI). Another major reason for Japanese success may be the use of keiretsus. Being able to draw from the resources of the other parts of the keiretsu, a Japanese MNC often can get things done more quickly and profitably than its international competitors.

Difficulty: Medium

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