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Chapter 6 Global Business

The reasons a government may nationalize a firm include:

A. to extract more money from the firm.

B. to increase the firm’s profitability.

C. to preserve jobs.

D. all of the above.

E. two of A, B, and C.

D. all of the above.
The reasons a government may nationalize a firm include:

A. to get government contracts.

B. to promote the ideology of capitalism.

C. to preserve jobs.

D. all of the above.

E. two of A, B, and C.

C. to preserve jobs.
Privately owned companies sometimes complain that government-owned companies have the following unfair advantages:

A. higher-cost financing.

B. ability to charge higher prices.

C. access to government contracts.

D. all of the above.

E. two of A, B, and C.

C. access to government contracts.
With privatization:

A. assets are transferred from the public sector to the private sector.

B. stock is bought back so that the company no longer has public shareholders.

C. state activities are moved into private management through contracts.

D. all of the above.

E. two of A, B, and C.

E. two of A, B, and C.
Nationalization and privatization are:

A. similar trends.

B. opposing trends.

C. both risks faced by privately held firms.

D. both risks not encountered in capitalist democracies.

E. two of the above.

B. opposing trends.
Government protection of economic activities is:

A. two of the following.

B. a historical function of government.

C. a recent responsibility of government.

D. a socialist characteristic.

E. stronger in democracies.

B. a historical function of government.
Kidnapping:

A. two of B, C, and D.

B. is a weapon used by some terrorists to extract ransom.

C. can result in counterproductive results if ransom is paid for hostages.

D. can be insured against by obtaining kidnapping, ransom, and extraction (KRE) insurance.

E. all of B, C, and D.

A. two of B, C, and D.
Government stability is understood to refer to a government’s:

A. policies—their ability to endure over time.

B. ability to keep itself in power.

C. two of A, B, and D.

D. ability to adjust to sudden changes by making radical policy changes.

E. all of A, B, and D.

C. two of A, B, and D.
Zimbabwe is an example of:

A. a richly endowed country that has suffered because of government instability.

B. a government that expropriated private property, that is, nationalized it, and then redistributed it.

C. a country whose leadership stole the 2008 election.

D. all of the above.

E. two of A, B, and C.

D. all of the above.
Government stability is a characteristic of a government that:

A. makes sudden radical policy changes.

B. readily shifts alliances to maintain power.

C. maintains predictability in fiscal, monetary and political policies.

D. two of the above.

E. all of A, B, and C.

C. maintains predictability in fiscal, monetary and political policies.
International business can be a powerful political force, in part because:

A. a recent Supreme Court ruling in the United States allows corporate contributions to political races.

B. many top management team members are willing to accept roles with national security agencies.

C. about half the world’s 100 largest economic units are firms.

D. business is all about achieving political goals.

E. two of the above.

C. about half the world’s 100 largest economic units are firms.
The trend for firms in regard to country risk assessment (CRA) is to:

A. avoid it as an added cost in competitive markets.

B. concentrate much more on CRA in making decisions about foreign activities.

C. use CRA in obviously dangerous locations, but only in those situations.

D. all of the above.

E. two of A, B, and C.

B. concentrate much more on CRA in making decisions about foreign activities.
What is the role of the home country in risk assessment?

A. It has no role.

B. It is a significant consideration.

C. It is used initially, but then more micro issues become the focus of CRA.

D. None of the above.

E. Two of A, B, and C.

B. It is a significant consideration.
According to the text, the type of information a firm will need to judge country risks:

A. none of B, C, and D.

B. varies according to the nature of its business.

C. varies according to its size.

D. varies according to the length of time required to yield a satisfactory return.

E. two of B, C, and D.

E. two of B, C, and D.
Among the external businesses that conduct country risk assessment are:

A. the Economist Intelligence Unit, Euromoney, the Harvard Business Review

B. Moody’s, Standard and Poor’s, STRATFOR

C. The New York Times, Wilson Quarterly, Forum

D. two of the above.

E. all of A, B, and C.

D. two of the above.
The national defense argument for trade restrictions has been used in the United States to argue for restriction on imports of:

A. munitions.

B. uniforms.

C. shoes.

D. all of the above.

E. two of A, B, and C.

C. shoes.
An argument against using trade restrictions to punish an offending nation is that:

A. sanctions seldom achieve their goal of forcing change in the offending country.

B. sanctions are relatively harmful to the citizens of the offending country.

C. sanctions are not condoned by the UN.

D. sanctions decrease the cost of doing business.

E. two of the above.

A. sanctions seldom achieve their goal of forcing change in the offending country.
An argument against the protection of an infant industry is that:

A. in the long run the industry will have a competitive advantage.

B. firms need protection from imports until the required investment capital is obtained.

C. protection of emerging industries occurs only in developing nations.

D. there can be high costs from subsidizing infant industries.

E. Two of the above.

D. there can be high costs from subsidizing infant industries.
Counterarguments to the “protect domestic jobs from cheap foreign labor” argument include:

A. the labor rate is not all of the labor cost or the production cost.

B. productivity per worker is what matters.

C. cheap foreign labor is a natural occurrence.

D. two of the above.

E. all of A, B, and C.

D. two of the above.
Arguments for trade restrictions include:

A. national defense, infant industry, and job protection.

B. punishment of offending nations.

C. fair competition and retaliation.

D. all of the above.

E. two of A, B, and C.

D. all of the above.
Dumping is:

A. selling a product abroad for less than its production cost in the importing nation.

B. selling a product abroad for less than the market price in the export nation.

C. exporting a product to a third country without correct documentation.

D. two of the above.

E. all of A, B, and C.

B. selling a product abroad for less than the market price in the export nation.
The United States became one of the first countries to prohibit dumping into its own market, in:

A. 2006.

B. 1856.

C. 1916.

D. 1776.

C. 1916.
Social dumping occurs when an exporting country:

A. imposes an export tax on domestic businesses that export, to compensate for the opportunity cost to the domestic market.

B. creates unfair competition based on lower costs, which undermines social support systems to the worker.

C. target-markets to specific vulnerable groups in the importing country.

D. exports goods that are not sellable in the domestic environment due to hazards and safety issues.

E. two of the above.

B. creates unfair competition based on lower costs, which undermines social support systems to the worker.
An example of environmental dumping can be found in the:

A. maquiladora plants of Mexico, located near the U.S. border and operating at lower environmental standards than would be required in the United States.

B. nuclear waste shipments to developing nations.

C. garbage shipments from New Jersey to developing nations.

D. all of the above.

E. two of A, B, and C.

D. all of the above.
Financial dumping is:

A. sending excess financial resources to other nations.

B. a government’s decision to subsidize low interest rates for purchases of its exports.

C. allowing a bank to have a low level of capital to total assets.

D. all of the above.

E. two of A, B, and C.

C. allowing a bank to have a low level of capital to total assets.
Cultural dumping is found in:

A. Japan’s past refusal to import American skis because Japanese snow is different, so the skis should meet different standards.

B. Saudi Arabia’s refusal to import Playboy magazine.

C. The small town of Orleans, Massachusetts, decision to prohibit franchised stores from operating in the town.

D. two of the above.

E. all of A, B, and C.

D. two of the above.
New types of dumping include:

A. cultural, social, financial services, and tax dumping.

B. truck, financial services, and black-market dumping.

C. gray-market, subsidiary, and transfer-pricing dumping.

D. two of the above.

E. all of A, B, and C.

A. cultural, social, financial services, and tax dumping.
Subsidies are problematic because they:

A. are administered as a form of political patronage.

B. aid export businesses or protect domestic businesses from imports.

C. encourage nationalization.

D. violate UN agreements.

E. two of the above.

B. aid export businesses or protect domestic businesses from imports.
The primary motivation of tariffs is to:

A. raise government revenue at the cost of importers.

B. raise the price of imports, to protect domestic goods.

C. punish countries over political issues.

D. encourage foreign consumption.

E. none of the above.

B. raise the price of imports, to protect domestic goods.
In the United States, the Smoot-Hawley Tariff Act:

A. outlawed tariffs for U.S. imports.

B. led to the Wall Street crash of 1929.

C. established some of the highest tariffs the United States has known.

D. two of the above.

E. all of A, B, and C.

D. two of the above.
Official prices ensure that:

A. imported goods will be sold at minimum prices, to avoid dumping.

B. a black market will be healthy and available for imported goods.

C. low-priced invoices to avoid tariffs will not be successful.

D. two of the above.

E. none of A, B, and C.

D. two of the above.
Import duties can be set to encourage:

A. increased imports based on sales volumes.

B. local input.

C. price-fixing.

D. imports from other suppliers.

E. all of the above.

B. local input.
Nuisance tariffs:

A. annoy the importers with red tape and administrative paperwork.

B. are a historical anomaly.

C. are found in developed nations more than in developing nations.

D. have no point other than to indicate that tariff regulations change quickly.

E. two of the above.

A. annoy the importers with red tape and administrative paperwork.
A nontariff barrier is illustrated by:

A. the French requirement in 1982 that all Japanese VCRs be inspected in Poitieres, far from the port and lacking speedy highway connection to the port.

B. the widespread Japanese belief that American rice can cause cancer.

C. the European attitude toward genetically modified crops.

D. all of the above.

E. two of A, B, and C.

D. all of the above.
Quotas are a quantitative barrier that sets:

A. limits, established by the importer.

B. goals, established by the exporter.

C. precise quantities of imports or exports, based on price.

D. expectations on domestic and foreign sales.

E. two of the above.

A. limits, established by the importer.
Transshipping is used to:

A. reduce shipping costs, like consolidation.

B. avoid import administration.

C. evade allocated quotas.

D. all of the above.

E. two of A, B, and C.

C. evade allocated quotas.
The United States allocates quotas to 40 countries for specific tonnages of:

A. sugar.

B. roast beef.

C. malt beer.

D. soybeans

E. two of the above.

A. sugar.
Unlike quotas, voluntary export restraints (VERs) are imposed by the:

A. importing country’s government.

B. exporting country’s government.

C. either the importing or exporting country’s government; what matters is that they are voluntary.

D. the importing company.

E. none of the above.

B. exporting country’s government.
The oldest orderly marketing arrangement, which was disbanded through the WTO, is the:

A. Multi-Fiber Agreement (MFA).

B. Jamaica Agreement.

C. Textile Co-operation Treaty (CTC).

D. Japanese truck export quota.

E. Paris Convention.

A. Multi-Fiber Agreement (MFA).
Nonquantitative nontariff barriers:

A. are seen by many to be the most significant nontariff barrier.

B. often involve government participation in trade, especially in customs and other administrative procedures.

C. often involve standards.

D. all of the above.

E. two of A, B, and C.

D. all of the above.
The most common form of direct government participation in trade is:

A. the subsidy.

B. shipping on national vessels.

C. import duties.

D. a combination of the above.

E. none of the above.

A. the subsidy.
Customs procedures in many countries often:

A. are transparent and fair.

B. discriminate against imports and favor exports.

C. are online and impersonal.

D. two of the above.

E. all of A, B, and C.

B. discriminate against imports and favor exports.
Standards are a way to establish nontariff barriers, and examples are:

A. all of B, C, and D.

B. Japan’s refusal to import light mayonnaise.

C. Canada’s categorization of orange juice with added calcium as a drug and subject to special requirements.

D. the prohibition of imported drugs at the consumer level in the United States.

E. two of B, C, and D.

A. all of B, C, and D.
Barriers to trade:

A. are a political issue but affect the cost of imports only marginally.

B. cost consumers billions of dollars per year.

C. save jobs in unprotected industries at $231,289 per job per year.

D. none of the above.

E. two of A, B, and C.

B. cost consumers billions of dollars per year.
Cote d’Ivoire uses child labor, often imported and kidnapped, in the cultivation and harvesting of:

A. marijuana.

B. palm oil.

C. cocoa bean.

D. poppy.

E. none of the above.

C. cocoa bean.

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