Management Skills Application 14th Edition Rue Test Bank

Management Skills Application 14th
Edition Rue Test Bank

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Chapter 06 - International Business
Chapter 6
International Business
True/False Questions
[QUESTION]
1. The growth of international trade over the past several decades has been both a primary cause
and effect of globalization.
Answer: True
Difficulty: Medium
Page: 127
[QUESTION]
2. International trade can cause economic, political, and social disruptions.
Answer: True
Difficulty: Medium
Page: 127
[QUESTION]
3. A country that exports more than it imports runs a trade deficit.
Answer: False
Difficulty: Easy
Page: 130
[QUESTION]
4. A country that imports more than it exports runs a trade surplus.
Answer: False
Difficulty: Easy
Page: 130
[QUESTION]
5. Exchange rates can be quoted in dollars per unit of foreign currency or units of foreign
currency per dollar.
Answer: True
Difficulty: Easy
Page: 131
[QUESTION]
6. Protectionist measures increase the volume of international trade.
Answer: False
Difficulty: Easy
Page: 132
[QUESTION]
7. The purpose of a tariff is to raise the price of domestic goods in order to allow foreign
manufacturers to compete.
6-1
© 2013 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distribution in any
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Answer: False
Difficulty: Medium
Page: 132
[QUESTION]
8. A tariff is a tax imposed on exports.
Answer: False
Difficulty: Easy
Page: 132
[QUESTION]
9. A quota is the difference between the value of the goods a country exports and the value of the
goods it imports.
Answer: False
Difficulty: Medium
Page: 133
[QUESTION]
10. Embargoes are restrictions on the quantity of a good that can enter a country.
Answer: False
Difficulty: Medium
Page: 133
[QUESTION]
11. Embargoes usually are imposed for political rather than economic reasons.
Answer: True
Difficulty: Medium
Page: 133
[QUESTION]
12. Expansion of international trade has led to interdependencies among the nations of the world.
Answer: True
Difficulty: Easy
Page: 133
[QUESTION]
13. The rise of democracy in the world has hampered the growth of the global economy.
Answer: False
Difficulty: Easy
Page: 133
[QUESTION]
14. The largest free trade area in the world is in China.
Answer: False
Difficulty: Easy
Page: 134
6-2
[QUESTION]
15. The spread of capitalism has facilitated the growth of global economy.
Answer: True
Difficulty: Easy
Page: 134
[QUESTION]
16. The European Union (EU) is a union of 27 European countries.
Answer: True
Difficulty: Medium
Page: 134
[QUESTION]
17. A disadvantage of enforcing NAFTA is that American workers have lost their jobs as
companies are taking advantage of the lower labor costs in Mexico.
Answer: True
Difficulty: Medium
Page: 134
[QUESTION]
18. Companies that are not willing or able to invest millions of dollars in operations abroad
prefer to set up multinational corporations.
Answer: False
Difficulty: Medium
Page: 135
[QUESTION]
19. Working through a foreign intermediary saves a company the cost of setting up its own
facility in a foreign country.
Answer: True
Difficulty: Easy
Page: 135
[QUESTION]
20. Companies that expand abroad in order to take advantage of inexpensive labor costs cannot
be considered as multinational corporations.
Answer: False
Difficulty: Easy
Page: 137
[QUESTION]
21. The majority of expatriates view their international appointment as an opportunity for
personal and professional development.
Answer: True
Difficulty: Medium
Page: 138
6-3
[QUESTION]
22. Cultures that endorse low power distance expect and accept relations that are more
democratic.
Answer: True
Difficulty: Easy
Page: 138
[QUESTION]
23. In cultures that have high degree of power distance, the degree of equality is low.
Answer: True
Difficulty: Hard
Page: 138
[QUESTION]
24. In individualism, ties between individuals are strong.
Answer: False
Difficulty: Medium
Page: 138
[QUESTION]
25. In individualism, people are identified by characteristics of the group they belong to.
Answer: False
Difficulty: Medium
Page: 139
[QUESTION]
26. People in cultures with high uncertainty avoidance resist change.
Answer: True
Difficulty: Medium
Page: 139
[QUESTION]
27. In feminine cultures, the differences between gender roles are more dramatic than in
masculine cultures.
Answer: False
Difficulty: Medium
Page: 139
[QUESTION]
28. Change can occur more rapidly in cultures that have a short-term orientation.
Answer: True
Difficulty: Medium
Page: 140
6-4
[QUESTION]
29. The purpose of a coalition is to reduce import and export trade among member countries.
Answer: False
Difficulty: Medium
Page: 140
[QUESTION]
30. The Organization of Petroleum Exporting Countries’ (OPEC) effectiveness is limited
because several member countries sell and produce at levels considerably different from official
OPEC standards.
Answer: True
Difficulty: Medium
Page: 140
Multiple Choice Questions
[QUESTION]
31. Which of the following is true about international business at present?
A) Today nations have become increasingly independent.
B) Nations are separated by distance, time, transportation, and communications barriers.
C) International trade has put an end to all economic, political, and social disruptions.
D) Most of the countries depend on international trade to maintain their standards of living.
E) Political changes have no influence on the international business environment.
Answer: D
Difficulty: Easy
Page: 127
[QUESTION]
32. Which of the following is true about absolute advantage?
A) It is the ability to produce more of a good than another producer with the same quantity of
inputs.
B) All countries will produce the same amount of goods with the same quantity of inputs.
C) Individuals, companies, and countries should specialize in what they do best.
D) A product that might be in the mature stage in one country might be in the introductory stage
in another market.
E) A business can realize higher profits by setting up operations in countries where the costs of
labor and resources are lower than the costs in the domestic market.
Answer: A
Difficulty: Medium
Page: 127
[QUESTION]
33. The law of comparative advantage states that _____.
A) individuals, companies, and countries should be self-sufficient by domestically producing all
the goods they require
6-5
B) producers should produce the goods they are least efficient at producing to allow scope for
improvement
C) when introducing products to international markets, firms must decide whether the product
should be modified to meet the needs of the local culture
D) producers should produce the goods they are most efficient at producing and purchase from
others the goods they are less efficient at producing
E) to protect their own domestic industries, countries impose tariffs through taxes or fees on
imported goods
Answer: D
Difficulty: Medium
Page: 128
[QUESTION]
34. According to the law of _____, individuals, companies, and countries should specialize in
what they do best.
A) producers’ surplus
B) absolute advantage
C) comparative advantage
D) trade surplus
E) imperfect competition
Answer: C
Difficulty: Easy
Page: 128
[QUESTION]
35. When should a company ideally enter a foreign market?
A) When the foreign market is saturated
B) When the costs of labor and resources are higher than the domestic costs
C) When the demand for the product declines in the domestic market
D) When competition in the domestic market is the least
E) When protectionism is promoted
Answer: C
Difficulty: Hard
Page: 128
[QUESTION]
36. Which of the following does a country adopt to protect its own domestic industries from
international trade?
A) Increase imports
B) Impose tariffs and quotas
C) Reduce exports
D) Reduce trade barriers
E) Encourage free trade
Answer: B
Difficulty: Easy
Page: 128
6-6
[QUESTION]
37. _____ is the business strategy which involves engaging in a variety of operations so that
sluggish sales in one market can be offset by stronger sales elsewhere.
A) Diversification
B) Positioning
C) Differentiation
D) Segmentation
E) Cannibalization
Answer: A
Difficulty: Easy
Page: 129
[QUESTION]
38. Businesses like to _____ their sales so that sluggish sales in one market can be offset by
stronger sales elsewhere.
A) localize
B) recall
C) diversify
D) specialize
E) standardize
Answer: C
Difficulty: Easy
Page: 129
[QUESTION]
39. Which of the following is true of exports and imports?
A) Businesses don’t face any restrictions as exporters.
B) A country runs a trade deficit if it exports more than it imports.
C) Goods and services that are sold abroad are called imports.
D) Companies cannot import products to resell in their own countries.
E) Some countries limit the ability of exporters to take money they earn from their exports out of
the country.
Answer: E
Difficulty: Medium
Page: 129
[QUESTION]
40. _____ is the most suitable alternative for countries that want to import products but do not
have the means to make a cash payment.
A) Diversification
B) Countertrading
C) First mover advantage
D) Protectionism
E) Embargo
Answer: B
Difficulty: Easy
6-7
Page: 130
[QUESTION]
41. Which of the following best describes a barter agreement?
A) It is an agreement between the exporter and importer to trade goods and services in exchange
for other goods and services.
B) It is an agreement where the issuer makes an unconditional promise in writing to pay a certain
amount of money, at a certain time or on demand of the payee.
C) It is an agreement which permits the sale of securities and also permits the seller to buy back
the securities.
D) It is a document issued by a carrier to another party which provides details about the shipment
of merchandise.
E) It is an agreement for the hiring of a vessel that excludes the technical or maintenance aspects
of the vessel.
Answer: A
Difficulty: Medium
Page: 130
[QUESTION]
42. The _____ is the difference between the value of the goods a country exports and the value
of the goods it imports.
A) balance of trade
B) trade deficit
C) trade surplus
D) balance of payments
E) deferred balance
Answer: A
Difficulty: Easy
Page: 130
[QUESTION]
43. If the value of the goods and services a country buys from other countries exceed the value of
the goods and services it sells to other countries, then the country runs a _____.
A) trade surplus
B) trade deficit
C) budget surplus
D) budget deficit
E) surplus value
Answer: B
Difficulty: Easy
Page: 131
[QUESTION]
44. A country runs a _____, if the value of exports exceeds the value of imports.
A) trade surplus
B) trade deficit
6-8
C) surplus value
D) deferred liability
E) trade gap
Answer: A
Difficulty: Easy
Page: 131
[QUESTION]
45. Which of the following is true of trade surplus?
A) It is a negative balance.
B) It involves exporting more than importing.
C) It is also known as trade gap.
D) It is an unfavorable condition for a country.
E) It involves making payments to other countries that it imports from.
Answer: B
Difficulty: Medium
Page: 131
[QUESTION]
46. Which of the following term denotes the value of one currency in terms of another?
A) Foreign interest rate
B) Foreign exchange rate
C) Balance of payment
D) Cash reserve ratio
E) Foreign stock exchange
Answer: B
Difficulty: Easy
Page: 131
[QUESTION]
47. Which of the following is true of exchange rates and foreign currency?
A) Companies that purchase goods or services from foreign countries must pay for them with
local currency.
B) Companies purchase foreign currency from banks, which convert each currency into dollars.
C) Exchange rates remain constant.
D) Exchange rates do not have any effect on profits.
E) Exchange rate is of no prominence to businesses.
Answer: B
Difficulty: Medium
Page: 131
[QUESTION]
48. Protectionist measures, such as tariffs, quotas, and other types of restrictions are taken to
protect _____ companies.
A) foreign
B) domestic
6-9
C) international
D) multinational
E) transnational
Answer: B
Difficulty: Easy
Page: 132
[QUESTION]
49. To help domestic manufacturers compete against foreign companies, governments _____.
A) impose high tariffs on domestic companies
B) impose trade restrictions on foreign companies
C) discourage embargoes
D) discourage protectionist measures
E) create free trade areas
Answer: B
Difficulty: Medium
Page: 132
[QUESTION]
50. What term denotes tax on imports?
A) Quota
B) Embargo
C) Tariff
D) Penalty
E) Royalty
Answer: C
Difficulty: Easy
Page: 132
[QUESTION]
51. Which of the following is a protectionist measure that a country can adopt?
A) Imposing high tariffs on foreign companies
B) Decreasing import quotas
C) Supporting free trade agreements
D) Promoting free trade areas
E) Imposing high tariff on domestic companies
Answer: A
Difficulty: Medium
Page: 132
[QUESTION]
52. _____ establishes the maximum quantity of a product that can be imported or exported
during a given period.
A) Embargo
B) Tariff
C) Foreign exchange rate
6-10
D) Quota
E) Customs duty
Answer: D
Difficulty: Easy
Page: 133
[QUESTION]
53. Imposing quotas on a particular import is favorable to the _____.
A) consumers of that product in the domestic country
B) foreign companies that export the product
C) domestic companies that manufacture the same product
D) domestic companies that consume the product
E) government of the countries that export the product
Answer: C
Difficulty: Medium
Page: 133
[QUESTION]
54. Which of the following is true of protectionist measures?
A) It hinders the growth of domestic companies.
B) WTO works in favor of these measures.
C) These measures increase the volume of international trade.
D) It involves reducing tariffs, quotas, and other types of restrictions.
E) Embargo is an example of a protectionist measure a country can adopt.
Answer: E
Difficulty: Medium
Page: 133
[QUESTION]
55. Which of the following best describes an embargo?
A) It is a total ban on the import of a good from a particular country.
B) It is a restriction on the quantity of a good that can enter a country.
C) It refers to taxes imposed on imports.
D) It refers to taxes imposed on exports.
E) It refers to a region within which trade restrictions are reduced or eliminated.
Answer: A
Difficulty: Medium
Page: 133
[QUESTION]
56. _____ economy is an economy in which companies compete actively with businesses from
around the world.
A) Closed
B) Global
C) Informal
D) Autarky
6-11
E) Micro
Answer: B
Difficulty: Easy
Page: 133
[QUESTION]
57. Which of the following hampers the growth of global economy?
A) Rise of democracy
B) Spread of capitalism around the world
C) Encouraging protectionism
D) Development of the Internet
E) Terms and conditions of NAFTA
Answer: C
Difficulty: Medium
Page: 134
[QUESTION]
58. Under the terms of _____, businesses in the United States, Mexico, and Canada can sell their
products anywhere in North America without facing major trade restrictions.
A) CAFTA-DR
B) TAFTA
C) NAFTA
D) GATT
E) CEFTA
Answer: C
Difficulty: Easy
Page: 134
[QUESTION]
59. Which of the following had a negative impact with the enforcement of NAFTA?
A) Businesses in the United States
B) Consumers in the U.S., Mexico, and Canada
C) Businesses in Mexico and Canada
D) Producers within North America
E) Workers in the U.S.
Answer: E
Difficulty: Medium
Page: 134
[QUESTION]
60. Which of the following is true of foreign intermediaries?
A) They are agents who manufacture products for companies that want to do business abroad.
B) They reduce a company’s expense of setting up facilities in a foreign country.
C) They work for a single foreign company at a time.
D) They devote as much time to a single company’s products as the company’s own sales force
would.
6-12
E) They are unfamiliar with local conditions of the place where the company wants to do
business.
Answer: B
Difficulty: Hard
Page: 135
[QUESTION]
61. Which of the following is true of a licensing agreement?
A) It is not applicable to international businesses or foreign markets.
B) It restricts a company’s entry into a foreign market.
C) It permits one company to sell another company’s products abroad.
D) It involves dividing resources and skills between companies in order to achieve different
goals.
E) It involves expanding abroad in order to take advantage of inexpensive labor costs.
Answer: C
Difficulty: Easy
Page: 135
[QUESTION]
62. Companies that are willing or able to invest millions of dollars in operations abroad should
ideally operate through _____.
A) franchising agreements
B) multinational corporations
C) licensing agreements
D) foreign intermediaries
E) shell corporations
Answer: B
Difficulty: Easy
Page: 136
[QUESTION]
63. A(n) _____ is a citizen of one country who is working in another country, usually in one of
her or his company’s subsidiaries.
A) foreign affairs manager
B) international relations manager
C) expatriate manager
D) domicile manager
E) external manager
Answer: C
Difficulty: Easy
Page: 137
6-13
[QUESTION]
64. Which of the following statements is true about expatriate managers?
A) Organizations must ensure that the expatriate managers are inflexible.
B) Spouse’s inability to adapt to the new work environment has no impact on the expatriate’s
adaptability.
C) Expatriate managers must not be tolerant or open to other cultures.
D) Cross-cultural and language training is of no significance to an expatriate.
E) Social and legal systems in the host country have an impact on the expatriate’s success.
Answer: E
Difficulty: Easy
Page: 137
[QUESTION]
65. Which of the following is true of power distance?
A) Cultures that endorse low power distance expect and accept relations that are more
authoritative.
B) In cultures that endorse low power distance, the more powerful feel that they are entitled to
special rights and privileges.
C) In high power distance cultures, subordinates are more comfortable with demanding the right
to contribute to and critique the decision making of those in power.
D) In high power distance cultures, superiors and subordinates view each other as different kinds
of people.
E) People hold the belief that superiors should be readily accessible to subordinates in cultures
that endorse high power distance.
Answer: D
Difficulty: Medium
Page: 138
[QUESTION]
66. Which of the following is true about collectivism?
A) Ties between individuals are not strong.
B) People are expected to take care of themselves.
C) It is believed that if each person takes care of his or her personal interest, then everyone will
be well off.
D) People are identified by characteristics of the group they belong to.
E) It is believed that people should be free to seek autonomy, pleasure, and security through their
own efforts.
Answer: D
Difficulty: Medium
Page: 139
[QUESTION]
67. Which of the following is true of uncertainty avoidance?
A) People in cultures with high uncertainty avoidance are comfortable with unknown and
uncommon situations.
B) Low uncertainty avoidance cultures try to have as many rules as possible.
6-14
C) Low uncertainty avoidance cultures tend to resist change.

D) People in cultures with high uncertainty avoidance tend to place a premium on job security.
E) People in low uncertainty avoidance cultures are less willing to take risk.
Answer: D
Difficulty: Medium
Page: 139
[QUESTION]
68. Which of the following is of high value in feminine cultures?
A) Power
B) Ambition
C) Cooperation
D) Competitiveness
E) Material success
Answer: C
Difficulty: Easy
Page: 139
[QUESTION]
69. Which of the following is a value associated with short-term orientation?
A) Persistence in achieving goals
B) Ensuring respect for tradition
C) Protecting one’s “face”
D) Fulfilling social obligations
E) Maintaining personal stability
Answer: E
Difficulty: Easy
Page: 139
[QUESTION]
70. The purpose of the EU is to _____.
A) increase tariffs on goods sold among member countries
B) promote the fiscal, technical, and border barriers between member countries
C) increase the costs of goods and services in Europe
D) reduce the international competitiveness of European companies
E) establish Europe as a single market with exciting potential for multinational corporations
Answer: E
Difficulty: Medium
Page: 140
6-15
Essay Questions
[QUESTION]
71. List out the reasons for companies to expand into international markets.
Answer: A company can increase its profitability by taking its domestic products or services and
selling them abroad. Another reason is to extend a product’s life cycle. When a company creates
a new product, it first enjoys a clear competitive advantage. Gradually, this advantage erodes in
the domestic market when the demand for the product declines. The company responds by
exploiting untapped foreign markets. A business can realize higher profits by setting up
operations in countries where the costs of labor and resources are lower than the domestic costs.
Finally, a company might want to expand into a foreign market to enjoy a “first mover
advantage” ahead of the competition.
Difficulty: Easy
Page: 128
[QUESTION]
72. How should companies identify and evaluate possible export markets?
Answer: To determine if there is sufficient demand for their products or services overseas,
companies analyze demographic figures, economic data, country reports, consumer tastes, and
competition in the markets they are considering. Business managers contact the International
Trade Administration of the U.S. Department of Commerce, foreign consulates and embassies,
and foreign and international trade organizations. They also visit the countries they are
considering and conduct surveys in order to assess consumer demand. Businesses also need to
find out what restrictions they may face as exporters.
Difficulty: Hard
Page: 129
[QUESTION]
73. Explain the various protectionist measures that a country can adopt.
Answer: Tariffs are government-imposed taxes charged on goods imported into a country; quotas
establish the maximum quantity of a product that can be imported or exported during a given
period; an embargo stops the flow of exports to or imports from a foreign country.
Difficulty: Easy
Page: 132
Page: 133
[QUESTION]
74. How have the North American countries benefited from NAFTA?
Answer: The largest free trade area in the world is in North America. Under the terms of the
North American Free Trade Agreement (NAFTA) of 1994, businesses in the United States,
Mexico, and Canada can sell their products anywhere in North America without facing major
trade restrictions. Consumers in all three countries have benefited from lower prices on North
American imports. The price of a blouse imported from Canada or a pair of shoes imported from
Mexico, for example, is lower than it used to be, because the price no longer includes a tariff.
Many producers have also benefited from NAFTA by increasing their exports within North
6-16
America. American grain farmers, for example, have increased their sales to Mexico as a result
of NAFTA. U.S. automobile sales to Mexico also have risen.
Difficulty: Medium
Page: 134
[QUESTION]
75. Outline the different ways in which companies sell their products or services in foreign
countries.
Answer: Companies can sell their products or services in foreign countries in various ways.
Companies that are not willing or able to invest millions of dollars in operations abroad often
export their products through foreign intermediaries. Another way companies can reach foreign
consumers is by licensing a foreign company to sell their products or services abroad. Some
companies can expand into foreign markets by forming strategic alliances with foreign
companies. Companies willing to make a significant financial commitment often establish
manufacturing and distribution facilities in foreign countries. A business with such facilities is
known as a multinational corporation (MNC).
Difficulty: Medium
Page: 134
Page: 135
Page: 136
[QUESTION]
76. What are some of the challenges a manager working for a multinational corporation might
face?
Answer: Working for a multinational corporation presents many challenges. Managers must
learn to deal with customers, producers, suppliers, and employees from different countries. They
must become familiar with local laws and learn to respect local customs. They must try to
understand what customers and employees want in countries that may be very different from the
United States.
Difficulty: Easy
Page: 137
[QUESTION]
77. What are the measures that a company needs to adopt to ensure successful international
assignments?
Answer: The chances for a successful international assignment are greatly increased when
certain steps are taken by the organization. They include screening out inappropriate candidates
who are unable to familiarize themselves with, adapt to, and appreciate other cultures. Managers
and spouses who receive predeparture language and cross-cultural training are more likely to be
successful.
Difficulty: Easy
Page: 138
6-17
[QUESTION]
78. Differentiate individualism from collectivism.
Answer: Individualism emphasizes the pursuit of personal interest. Ties between individuals are
not strong, and people are expected to take care of themselves. It is based on the following
beliefs: If each person takes care of his or her personal interest, then everyone will be well off.
People should be judged based on their personal accomplishments, not by their social
background. In contrast, collectivism emphasizes that the identity of an individual is based on
her or his collective group. Group welfare is more important than personal interest even if
personal hardships must be endured occasionally. People are identified by characteristics of the
group they belong to.
Difficulty: Easy
Page: 138
Page: 139
[QUESTION]
79. Explain how managers can handle cultural differences in international trade.
Answer: Cultural differences affect our perceptions, behavior, and values found in the
workplace. Management practices must vary depending on culturally determined work values
and traditions. Managers must have a clear understanding of another country’s culture and be
sensitive to its value systems. They must tailor their management systems and behavior when
doing business in another society or when interacting with other countries’ expatriate managers.
Cultural adaptability, flexibility, open-mindedness, and tolerance are essential.
Difficulty: Medium
Page: 140
[QUESTION]
80. Explain what is meant by “coalitions of cooperating countries” with the help of examples.
Answer: International businesses must deal with coalitions of cooperating countries that are
established to improve the economic conditions of the member countries. One coalition is the
European Union. Its purpose is to reduce tariffs on goods sold among member countries. Also, it
is an attempt to eliminate the fiscal, technical, and border barriers between member countries.
Another coalition is the Organization of Petroleum Exporting Countries (OPEC), which includes
many of the oil-producing countries of the world. Its purpose is to control oil prices and
production levels among member countries.
Difficulty: Medium
Page: 140
6-18

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Multiple Choice Questions

C) Low uncertainty avoidance cultures tend to resist change.

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