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Exam 3: Doing Business in Global Markets

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Question 31

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The theory of comparative advantage exists because:

A) there are too many products and services to choose from today.
B) customers are always comparing the quality of service from companies in the same industry.
C) no nation can produce all the products its people want and need.
D) free trade agreements became the trend during the past 15 years.

E) A) and B)
F) All of the above

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Question 32

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The United States currently enjoys a comparative advantage in _________.

A) diamonds
B) sheep production
C) coffee
D) software services

E) C) and D)
F) None of the above

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Question 33

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Opportunities for college graduates in international business continue to decrease as it gets more expensive to travel abroad. Business graduates today have many opportunities to work for companies that participate in international trade.The consumer market for international trade is 6.8 billion,as opposed to the market of over 300 million people in the U.S.

A devaluation of the U.S.dollar would make American goods cheaper to foreign buyers. After devaluation,it would take less foreign currency to acquire U.S.dollars.Therefore foreign buyers would find that it costs less of their currency to buy U.S.made goods.

Contract manufacturing requires heavy start-up costs by the domestic company.

Products made in Canada are sold in the U.S.because these two nations agree to eliminate economic and political barriers between nations.They participate in free trade. Free trade is the buying and selling between and among nations without political or economic barriers.

Casey is typical of many U.S.businesspeople.Casey feels the U.S.culture defines the model for the rest of the world,and that the "American way" of doing things is the best.Casey is guilty of:

In southern California,there are banana plantations.These plantations cannot produce all the bananas consumed by persons in the U.S.The fact that the U.S.grows and sells bananas gives it a comparative advantage in bananas.It is not an absolute advantage and that is why we choose to import bananas from other countries,as well. The U.S.does not have a comparable advantage or an absolute advantage in bananas.We cannot produce bananas as efficiently as other nations (Comparative advantage)and we are not the only nation in the world that produces bananas (Absolute advantage).

_________________ differences such as insufficient electrical power and transportation systems can present special problems for U.S.firms when attempting to enter global markets.

A small Italian grocery store sells five varieties of feta cheese.It offers Bulgarian,French,Danish,Greek,and one that is processed and sold from Tillamook,Oregon.The domestic variety (from Oregon) sells for $1.99/pound,while all the others sell for more than $2.99/pound,and the Greek variety is priced at $6.99/pound.The domestic variety is much cheaper because:

The traditional Japanese keiretsu has increased trade opportunities for U.S.firms. The keiretsu is an alliance of Japanese suppliers,distributors and customers that,with the support of the government,were designed to develop strategies for their mutual benefit,at the expense of firms outside the alliance.This is an example of a nontariff barrier to trade.

General Electric's (GE)website recently noted,"Russia has been one European country in which GE has made significant investments.GE is one of the largest foreign companies in Russia,operating multiple businesses including an equipment fleet with more than 1,500 large units." With physical presence in Russia,Argentina,Australia,Belgium,Greece,Kenya,Canada and other countries,GE is an example of a multinational company. A multinational corporation is a company with a physical presence in several different nations.

Through licensing,domestic firms give foreign manufacturers/producers the right to produce their product and use their trademark in exchange for royalties.

Which of the following is an advantage of offshore outsourcing?

CAFTA consists of:

Companies may have several reasons for creating joint ventures.Which of the following statements is one reason why firms may decide to form a joint venture?

When entering a foreign market,Mountain Stream Brewery entered into an agreement with a local firm to brew and market Mountain Stream's beer.This is an example of:

Only large firms have the resources needed to successfully compete in the global environment. Small businesses are often better prepared to take the leap into global markets than large,cumbersome corporations saddled with bureaucracies.

A specialized organization that assists businesses in creating relationships with foreign customers and suppliers is known as a(n) :

Global markets rely on the U.S.dollar as the universal currency.