Chapter 3

Question 1

international business

Answer 1

all business activities that involve exchanges across national boundries

Question 2

absolute advantage

Answer 2

the ability to produce a specific product more efficiently than any other nation.

Question 3

comparative advantage

Answer 3

the ability to produce a specific product more efficiently than any other product.

Question 4

exporting

Answer 4

selling and shipping raw materials or products to other nations

Question 5

importing

Answer 5

purchasing raw materials or products in other nations and bringing them into one’s own country,

Question 6

trade deficit

Answer 6

a negative balance of trade

Question 7

balance of payments

Answer 7

the total flow of money into a country minus the total flow of money out of that country over some period of time

Question 8

AKA “Import Duty”

Answer 8

Tariff

Question 9

Import Duty (Tariff)

Answer 9

a tax levied on a particular foreign product entering a country

Question 10

dumping

Answer 10

exportation of large quantities of a product at a price lower than that of the same product in the home market.

Question 11

nontariff barrier

Answer 11

a nontax measure imposed by government to favor domestic over foreign suppliers

Question 12

import quota

Answer 12

a limit on the amount of a particular good that may be imported into a country during a given period of time.

Question 13

embargo

Answer 13

to complete halt to trading with a particular nation in a particular product.

Question 14

foreign-exchange control

Answer 14

a restriction on the amount of a particular foreign currency that can be purchased or sold

Question 15

currency devaluation

Answer 15

the reduction of the value of a nations currency to the currencies of other countries.

Question 16

Four examples of nontariff barriers

Answer 16

1. import quota
2. embargo
3. foreign-exchange control
4. currency devaluation

Question 17

Reasons for trade restrictions

Answer 17

1. to equalize a nation’s balance of payments.
2. to protect new or weak industries
3. to protect national security
4. to retaliate for another nation’s trade restrictions
5. to protect domestic jobs

Question 18

Reasons against trade restrictions

Answer 18

1. higher prices for consumers
2. restriction of consumers’ choices
3. misallocation of international resources
4. loss of jobs

Question 19

GATT

Answer 19

General Agreement on Tariffs and Trade

Question 20

General Agreement on Tariffs and Trade (GATT)

Answer 20

An international organization of 153 nations dedicated to reducing or eliminating tariffs and other barriers to world trade

Question 21

WTO

Answer 21

World Trade Organization

Question 22

World Trade Organization (WTO)

Answer 22

powerful successor to GATT that incorporates trade in goods, services, and ideas.

Question 23

economic community

Answer 23

an organization of nations formed to promote the free movement of resources and products among members and to create common economic policies

Question 24

NAFTA

Answer 24

North American Free Trade Agreement (1994)

Question 25

licensing

Answer 25

a contractual agreement in which one firm permits another to produce and market is product and use its brand name in return for royalty or other compensation

Question 26

8 Methods of Entering International Business

Answer 26

1. Licensing 2. Exporting 3. Joint Ventures 4. Totally Owned Facilities 5. Strategic Alliances 6. Trading Companies 7. Countertrade 8. Multinational Firms

Question 27

bill of lading

Answer 27

document issued by a transport carrier to an exporter to prove that merchandise has been shipped

Question 28

draft

Answer 28

issued by the exporter's bank, ordering the importer's bank to pay for the merchandise, thus guaranteeing payment once accepted by the importer's bank.

Question 29

letter of credit

Answer 29

issued by a bank on request of an importer stating that the bank will pay an amount of money to a stated beneficiary

Question 30

strategic alliance

Answer 30

a partnership formed to create competitive advantage on a worldwide basis

Question 31

trading company

Answer 31

provides a link between buyers and sellers in different countries

Question 32

countertrade

Answer 32

an international barter transaction

Question 33

multinational enterprise

Answer 33

a firm that operates on a worldwide scale without ties to any specific nation or region

Question 34

10 Largest Multinational Corporations

Answer 34

1. Royal Dutch/Shell Group 2. ExxonMobil 3. Walmart Stores 4. BP 5. Chevron 6. Total 7. Conoco Phillips 8. ING Group 9. Sinopec 10. Toyota Motor

Question 35

Export-Import Bank of the United States

Answer 35

an independent agency of the U.S. government whose function is to assist in financing the exports of American firms

Question 36

multilateral development bank (MDB)

Answer 36

an internationally supported bank that provides loans to developing countries to help them grow.

Question 37

MDB

Answer 37

multilateral development bank

Question 38

IMF

Answer 38

International Monetary Fund

Question 39

International Monetary Fund (IMF)

Answer 39

an international bank with 186 member nations that makes short-term loans to developing countries experiencing balance-of-payment deficits