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ch01
Student: ___________________________________________________________________________
1. The shift toward a more integrated and interdependent world economy is referred to as globalization.
True False
2. A company does not need a large size to facilitate, and benefit from, the globalization of markets.
True False
3. Companies hope to lower their overall cost structure or improve the quality or functionality of their
product offering through globalization of production.
True False
4. The most global markets currently are markets for consumer products.
True False
5. Outsourcing is a process that is limited to manufacturing enterprises.
True False
6. The health care sector in the U.S. cannot avail the benefits of outsourcing to low-cost producers in other
nations because of the nature of the work.
True False
7. The World Bank has focused on policing the world trading system and making sure nation-states adhere
to the rules laid down in trade treaties.
True False
8. The World Bank is known as the lender of the last resort.
True False
9. One of the UN’s central mandates is the promotion of higher standards of living, full employment, and
conditions of economic and social progress and development.
True False
10. In 2008 and 2009, the GATT became the forum though which major nations attempted to launch a
coordinated policy response to the global financial crisis, which started in America.
True False
11. The Uruguay Round, finalized in December 1993, reduced protection for patents, trademarks, and
copyrights.
True False
12. “Beggar thy neighbor” retaliatory trade policies involved countries progressively lowering trade barriers
against each other, which contributed to the Great Depression of the 1930s.
True False
13. Rivers Inc., a U.S. based sports apparel manufacturer, sets up a production unit in China to take
advantage of the lower labor costs there. This is an example of foreign direct investment.
True False
14. World Bank gives an aid of 100 million dollars to Kenya for creating rural health care facilities. This is
an example of foreign direct investment.
True False
15. The lowering of barriers to international trade enables firms to view the world, rather than a single
country, as their market.
True False
16. According to WTO data, the volume of world merchandise trade has grown faster than the world
economy since 1950.
True False
17. The expansion of world trade implies that nations are becoming less dependent on each other for
important goods and services.
True False
18. Over the past 30 years the flow of FDI has accelerated faster than the growth in world trade and world
output.
True False
19. The globalization of markets and production and the resulting growth of world trade, foreign direct
investment, and imports all imply that firms are finding their home markets protected from foreign
competitors.
True False
20. The cost of microprocessors continues to fall, while their power increases. This statement supports the
predictions made by Moore’s Law.
True False
21. Efficiency gains associated with containerization have caused transportation costs to fall
dramatically.
True False
22. Low-cost global communications networks such as the World Wide Web are helping to create electronic
global marketplaces.
True False
23. Globalization of markets has resulted in greater differentiation of consumer tastes and preferences.
True False
24. In the early 1960s, the United States was by far the world’s dominant industrial power. However by 2009,
it lost its dominant position and now, is no longer the world’s largest industrial power.
True False
25. Non-U.S. firms increasingly began to invest across national borders because they wanted to disperse
production activities to optimal locations and to build a direct presence in major foreign markets.
True False
26. A multinational enterprise (MNE) is any business that exports or imports products from other
countries.
True False
27. A current trend in international business is the decline of medium-sized and small multinationals, known
as mini-multinationals.
True False
28. The globalization of the world economy has resulted in a relative increase in the dominance of U.S. firms
in the global marketplace.
True False
29. Doing business in Russia involves risks because the country has shown signs of shifting back toward
greater state involvement in economic activity and authoritarian government.
True False
30. Current trends indicate the world is moving toward an economic system that is more favorable for
international business.
True False
31. Globalization reduces the risks of global financial contagion.
True False
32. Globalization critics argue that the decline in unskilled wage rates is due to the migration of low-wage
manufacturing jobs offshore and a corresponding reduction in demand for unskilled workers.
True False
33. Evidence suggests that technological change has had a bigger impact than globalization on the declining
share of national income enjoyed by labor.
True False
34. Recent evidence indicates that the solution to the problem of stagnant incomes among the unskilled is to
be found in increasing government regulation of markets.
True False
35. According to supporters of free trade, as countries get richer they commit greater violation of
environmental and labor regulations.
True False
36. According to critics of globalization, today’s interdependent global economy limits a nation’s national
sovereignty.
True False
37. Critics of globalization suggest that over the last century, the gap between the rich and poor nations of the
world has shrunken.
True False
38. Supporters of debt relief argue that new democratic governments in poor nations should not be forced to
honor debts incurred by corrupt and dictatorial predecessors.
True False
39. A firm does not have to become a multinational enterprise to engage in international business.
True False
40. Differences between countries require that an international business vary its practices country by
country.
True False
41. Since the collapse of communism at the end of the 1980s, the erstwhile communist nations have
transformed their economies by globalizing their markets. This involves _____.
A. regulating markets
B. privatizing state-owned enterprises
C. decreasing competition
D. reducing foreign investment
42. Which of the following is a consequence of globalization?
A. Decreasing interdependence between national economies
B. Increasing outsourcing of services
C. Differentiation of material culture
D. Increase in barriers to cross-border trade
43. Which of the following has enabled globalization of markets?
A. Differentiation amongst national markets
B. Falling barriers to cross border trade
C. Reduced homogeneity of material culture across the world
D. Increased government ownership of factors of production
44. Which of the following factors hinders globalization of consumer goods market?
A. National differences in tastes and preferences
B. Higher production costs in developed nations
C. Homogenization of material culture
D. Increasing outsourcing of goods and services
45. Globalization of markets results in markets becoming _____.
A. less interdependent
B. less diverse
C. more protected
D. less competitive
46. A U.S. Investment firm, Fin-Smart, set up a customer service call center in India to take advantage of the
lower labor costs. This is called _____.
A. homogenizing markets
B. vertical integration
C. outsourcing
D. horizontal integration
47. Early outsourcing efforts were primarily confined to _____.
A. health care
B. service activities
C. technological research
D. manufacturing activities
48. Which of the following is NOT an impediment that makes it difficult for firms to achieve the optimal
dispersion of their productive activities to locations around the globe?
A. Reduced tariffs on imports of manufactured goods
B. Government regulations
C. Issues associated with economic and political risk
D. Barriers to foreign direct investment
49. The General Agreement on Tariffs and Trade (GATT) was responsible for _____.
A. protecting government owned enterprises
B. policing the global marketplace
C. limiting nuclear testing
D. promoting environment friendly technology
50. The ______ is primarily responsible for policing the world trading system and making sure nation-states
adhere to the rules laid down in trade treaties signed by member states.
A. International Development Association
B. World Bank
C. International Court of justice
D. World Trade Organization
51. The World Trade Organization promotes _____.
A. lowering of barriers to cross-border trade and investment
B. infrastructural development in poor nations through low-interest loans
C. state ownership of major enterprises
D. regulation of national economies
52. Which of the following is true about the International Monetary Fund?
A. It is primarily responsible for policing the world trading system.
B. It is seen as the lender of last resort to nation-states whose economies are in turmoil.
C. It is responsible for establishing multinational treaties to govern the global business system.
D. It was established to formulate a coordinated policy response to financial crises in developing nations.
53. The _____ was established on October 24, 1945, by 51 countries committed to preserving peace through
international cooperation and collective security.
A. World Trade Organization
B. United Nations
C. G20tx
D. World Bank
54. The G20tx was originally established to _____.
A. preserve peace through international cooperation and collective security
B. maintain order in the international monetary system
C. formulate a coordinated policy response to financial crises in developing nations
D. manage, regulate, and police the global marketplace
55. _____ occurs when a firm exports goods or services to consumers in another country.
A. International trade
B. Foreign direct investment
C. Inward investment
D. Outsourcing
56. In late 2001, the WTO launched a new round of talks in Doha aimed at:
A. helping member states to cope with financial crisis.
B. further liberalization of the global trade and investment framework.
C. protecting national economies from global competition.
D. promoting higher standards of living in all member states.
57. Which of the following is NOT included in world merchandise trade?
A. Manufactured goods
B. Agricultural goods
C. Services
D. Mining products
58. _____ have/has the most to gain from reductions in agricultural tariffs and subsidies that are a part of the
Doha agenda.
A. The world’s developed nations
B. The world’s poorer nations
C. European nations
D. The United States
59. Which of the following is NOT a consequence of the reduction in trade barriers and restrictions on FDI
since 1950?
A
.
Firms are dispersing parts of their production process to global locations to drive down production
costs and increase product quality.
B. The economies of the world’s nation states are becoming more intertwined.
C. Nations are becoming more independent of each other for important goods and services.
D. The world has become significantly wealthier since 1950.
60. The financial crisis in the U.S. in 2009 was triggered by _____.
A. the global hike in the price of crude oil
B. the slowdown in U.S. imports
C. the problems in the U.S. subprime mortgage lending market
D. the artificial fixing of currency rate by China
61. _____ predicts that the power of microprocessor technology doubles and its cost of production falls in
half every 18 months.
A. Keynes’s Law
B. Say’s Law
C. Moore’s Law
D. Sullivan Principles
62. Containerization allows:
A. reduction of the time needed to get from one location to another.
B. simplification of transshipment from one mode of transport to another.
C. buyers and sellers to find each other easily.
D. enterprises to coordinate and control a globally dispersed production system.
63. The relative decline of the United States in the share of world output and world exports reflects
_____.
A. an increase in the barriers to foreign trade in the U.S.
B. the deepening of the global financial crisis
C. the reduced industrialization in developing nations
D. the growth in the economic development of the world economy
64. In the 1970s, many Japanese firms invested in North America and Europe:
A. to avoid a highly competitive domestic market.
B. to exploit high domestic tariff barriers.
C. as a hedge against unfavorable currency movements.
D. to take advantage of low labor costs.
65. What is the total cumulative value of foreign investments best referred to as?
A. Accumulation of foreign shares
B. Portfolio investments
C. Stock of foreign direct investments
D. Stock market investments
66. Throughout the 1990s, the amount of foreign direct investment directed at both developed and developing
nations increased dramatically. This trend reflects:
A. a slowdown in global economic activity.
B. the increasing share of the U.S. in the total FDI stock.
C. the decline in cross-border flows of foreign direct investment.
D. the increasing internationalization of business corporations.
67. Which of the following countries has been the largest recipient of foreign direct investment and received
about $60 billion to $100 billion a year in inflows in 2004-2009?
A. Brazil
B. Russia
C. India
D. China
68. A multinational enterprise (MNE) is a firm that _____.
A. exports its products to multiple countries
B. has production units in more than two countries
C. does most of its business on the Internet
D. lists its securities on a public exchange
69. Which of these statements pertaining to cross-border FDI flows is true?
A. There was a growth of FDI between 2004 and 2007.
B. A slump in FDI from 1998 to 2000 was followed by a surge from 2001 to 2003.
C. Among developing nations, the largest recipient of FDI has been Russia.
D. The dramatic increase in FDI reflects the decreasing internationalization of business corporations.
70. Since the 1960s, which of the following has been a notable trend in the demographics of the multinational
enterprise?
A. The decline of multinational companies in the manufacturing sector
B. The growth of government-owned multinational enterprises
C. The decline of non-U.S. multinationals
D. The growth of mini-multinationals
71. In the last two decades, Latin American countries like Brazil, Mexico, and Chile have _____.
A. embraced communist principles
B. promoted government ownership of enterprises
C. experienced increasing debt and inflation
D. welcomed foreign investment
72. Which of the following is a risk associated with globalization?
A. Restrictions on competition
B. Global financial contagion
C. Excessive market regulation
D. Differentiation of markets
73. Supporters of globalization maintain that the apparent decline in real wage rates of unskilled workers:
A. is due to technological changes that create greater demand for skilled workers.
B. is due to the migration of low-wage manufacturing jobs offshore.
C. can be checked by increasing government ownership of enterprises.
D. can be checked by limiting free trade and foreign investment.
74. A study published in 2011 by the OECD noted that:
A.the real household income of the unskilled workers in the U.S. increased more in comparison to that of
the skilled workers.
B. in almost all countries real income levels declined over the 20-year period studied.
C. falling unemployment rates brought gains to low-wage workers and fairly broad-based wage growth.
D. the gap between the poorest and richest segments of society in some OECD countries had widened.
75. A number of econometric studies have found consistent evidence of a hump-shaped relationship between
income levels and pollution levels. According to this, as an economy grows and income levels rise:
A. initially the pollution levels remain low
B. after a while the pollution levels decrease
C. the pollution levels also rise in proportion to the economic growth
D. there is increasing industrialization which leads to greater pollution
76. NAFTA was passed only after:
A. China agreed to establish a higher minimum wage.
B. the U.S. agreed to limit the number of jobs that could be outsourced.
C. Mexico committed to tougher enforcement of environmental protection regulations.
D. Canada committed to establish new limits on FDI.
77. Globalization is criticized because it increases the power of _____.
A. governments to own enterprises
B. unskilled labor to form labor unions
C. supranational organizations over nation-states
D. nation-states to regulate markets and reduce competition
78. The World Trade Organization has estimated that the developed nations of the world can raise global
economic welfare by $128 billion by:
A. removing subsidies given to their agricultural producers.
B. increasing tariff barriers to trade in agriculture.
C. increasing outsourcing of manufacturing processes.
D. reducing defence expenditure.
79. An international business, unlike a multinational enterprise, _____.
A. needs to have manufacturing units in at least two foreign nations
B. needs to manufacture products or provide services that target a global market
C. need not customize its products to the requirements of national markets
D. need not invest directly in operations in other countries
80. Which of the following statements is true about an international business?
A. An international business needs to invest directly in operations in other countries.
B. An international business needs to have homogenous practices across countries.
C. An international business can be managed in the same way that a domestic business is managed.
D. An international business must find ways to work within the limits imposed by government
intervention.
81. With the help of an example discuss the characteristics of globalization.
82. Explain what is meant by the globalization of markets. Provide an example. What are the most global
markets?
83. Discuss the concept of the globalization of production.
84. What is the World Trade Organization? What is its role in the world economy?
85. What is the International Monetary Fund? What is the World Bank? What is their relationship, if any,
with each other?
86. What is the Uruguay Round? List the measures implemented in the Uruguay Round?
87. Explain the trends in world trade and foreign direct investment over the last half century.
88. Explain how a company competes using outsourcing. Provide an example.
89. Discuss the impact of technological change on global markets.
90. Explain the notion of the World Wide Web emerging as an equalizer.
91. Innovations in transportation have had a major impact on global trade. Consider one of these innovations:
containerization. Why is this innovation so significant?
92. Discuss the demographics of world trade since the 1960s. How has the role of the U.S. changed? How is
world trade expected to change in the future?
93. How has the foreign direct investment picture changed since the 1960s?
94. What is a multinational enterprise (MNE)? How does a mini-multinational differ from an MNE?
95. Why does China represent both opportunities and threats for established international businesses?
96. Consider the global economy of the 21
st
century. What important changes are taking place? What do
these changes mean for international companies?
97. Consider whether the shift toward a more integrated and interdependent global economy is a good thing.
Discuss the shift from the eyes of the consumer, the worker, the company, and the environmentalist.
98. Discuss what occurred in Seattle in 1999 at the meeting of the WTO and why the events were important
to the future of global trade.
99. Falling barriers to international trade destroy manufacturing jobs in wealthy advanced economies.
Discuss this statement. Do you agree? Why or why not?
100.Why managing an international business is different from managing a purely domestic business?