International Business Exam 1

Which of the following is a major benefit of engaging in free trade?

it gives countries access to products that they can not produce

New trade theorists stress the role of luck, entrepreneurship, and innovation in giving a firm first-mover advantages

true

which of the following terms refers to the unit cost reductions associated with increasing output levels?

economies of scale

Identify the theory that supports the view that, in some cases, countries export for the reason that the world market can support only a limited number of firms.

new trade theory

Which of the following is a theory that can be used to justify limited government intervention to support the development of certain-oriented industries?

new trade theory

Walmart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors. This allows Walmart to offer greater discounts to its customers. In this case, Walmart benefits from

economies of scale

Porter contends that government:

can influence each of the four components of the diamond either positively or negatively

Identify the theory that argues that advanced nations have an incentive to develop new customer products and hence such nations always tend to create a good or service for the first time

product life-cycle

The Heckscher-Ohlin theory predicts that countries will

export those goods that make intensive use of factors that are locally abundant

Company A entered the production of office software before its competitors. Because of this, the company's products are more familiar among and favored by customers. This situation exemplifies the ________.

first-mover advantage

Which of the following balance-of-payment accounts records one time payments in the stock of assets?

capital account

According to Adam Smith, a company should specialize in the production of a good when it has

an absolute advantage in the production of the good

The _______ theory was based on the observation that for the most of the twentieth century a very large proportion of the world's new products had been developed by U.S. firms and sold first in the U.S. market

product life-cycle

Identify the theory that predicts that countries will export those goods that make intensive use of factors that are locally abundant

Hecksher-Ohlin Theory

One of the advantages of being the first mover in a market is

the ability to capture scale economies ahead of late entrants

A key assumption in the Heckscher-Ohlin theory is that technologies are the same across countries

true

The commercial aircraft company can supply only a limited number of firms, largely because the existence of established firms would make it difficult to be competitive. This is a basic tenet of

new trade theory

According to Ricardo's theory of comparative advantage, countries should

specialize in the production of those goods if they have lower opportunity cost

Which of the following is a major disadvantage of the product life-cycle introduced by Vernon?

the theory's arguments seems ethnocentric and increasingly dated

Which of the following theories suggests that first mover advantage is significant in the export of a good?

new trade theory

What will happen, according to Paul Samuelson's critique, if a rich country enters into a free trade agreement with a poor country?

The poor country will rapidly improve its productivity

Some of the arguments made by the product life-cycle theory seem ethnocentric and increasingly dated when viewed from an Asian or European perspective.

true

Porter's Theory of National Competitive Advantage recommends that government should never interfere in free trade policies

false

A countries balance of payment accounts keep track of

payments to and receipts from other countries for a particular time period

The _____ argues that a large proportion of the world's new products had been developed by U.S. firms

product life-cycle

Which of the following observations is consistent with Micheal Porter's theory of national competitive advantage?

factors such as domestic demand and domestic rivalry explain nation's dominance in production

David Ricardo's theory of comparative advantage explains global trade in terms of the

opportunity cost

The theory of comparative advantage provides strong rationale for supporting the idea of

free trade

The theories of Smith and Ricardo shows that trade makes every nation better off

true

Apple's iphone was unique when it first came out, with many features that no other phones had. As such, it enjoyed great success and dominated the cell phone market. This demonstrates the first mover advantage

true

A capital-intensive country exports products that are capital intensive. What theory is this an example of?

Heckscher-Ohlin Theory

Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith's theory of absolute advantage?

Country A should import product x from country B and it should not attempt to produce it at home

Diminishing returns to specialization occur when

more units of resources are required to produce each additional unit

Which of the following factors, according to Porter, is most likely to give a country competitive advantage over another country?

skilled labor and know-how

XYZ toys manufactures and sells small quantities of each of its products, but it can still benefit from its economies of scale

true

A country has an absolute advantage in the production of a product when it

is more productive and cost efficient than any other country in producing it

Which of the following is an example of a basic factor that a nation will possess as proposed by Porter?

natural resources

According to the new trade theory, firms that establish a first mover advantage with regard to the production of a particular new product ,may subsequently dominate global trade in that product

true

Factor endowments refer to a country's factors of production such as land, labor, and capital

true

_____ argued that countries should specialize in the production of goods for which they have the absolute advantage

Adam Smith

Which of the following is a flaw associated with mercantilism?

Mercantilists view trade as a zero-sum game

The principle of mercantilism views trade as a(n) ______ game

zero-sum

_____ are unit cost reductions associated with a large scale of output

economies of scale

A country has an absolute advantage in the production of a product when it is more productive and cost efficient than any other country producing it

true

Porter argues that a nation's firms gain competitive advantage if their domestic consumers are:

sophisticated and demanding

Which of the following statements is true of the Leontief paradox?

it raised questions about the validity of the Heckscher-Ohlin theory

International businesses cannot gain economic advantages by making payments to corrupt government officials

false

Expatriate managers may experience more than the usual degree of pressure to violate their personal ethics because of which of the following?

They may be based in a culture that does not place the same value on ethical norms important in the manager's home country

The _____ approaches to ethics hold that the moral worth of actions or practices is determined by their consequences

utilitarian

Identify the incorrect statement about environmental regulations

environmental regulations are similar across developed and developing nations

Ethical strategies are the accepted principles of right or wrong governing the conduct of businesspeople

true

The veil of ignorance was developed by _____ as part of his approach to justice theories

John Rawls

According to John Rawls's difference principle,

inequalities are justified if they benefit the position of the least advantaged person

Which of the following enables managers to walk away from a decision that is profitable, but unethical?

moral courage

Building an organization culture that places a high value on ethical behavior requires incentive and reward systems

true

It is in the best interest of prospective employees to find out all they can about the

ethical climate in an organization

Which of the following refers to the values and norms that the employees of an organization share?

organization culture

_____ arguments suggest that improving working conditions beyond the level required by the law and necessary employee productivity will reduce profits and are therefore not appropriate

Friedman's

The _____ occurs when a resource that is shared by all, but owned by no one, is overused by individuals, resulting in its degradation

tragedy of the commons

A ______ asserts that if a manager of a multinational see the firms from other nations are not following ethical norms in a host nation, that manager should not either

naive immoralist

According to _______, the social responsibility of business is to increase profits, so long as the company stays within the rules of law

the Friedman doctrine

Facilitating payments are also known as

speed money or grease payments

BP, one of the world's largest oil companies, has made it part of the company policy to undertake "social investments" in the countries where it does business. There was no economic reason for BP to make this social investment, but the company believes it is morally obligated to give something back to the societies that have made their success possible. BP's actions are an example of:

noblesse oblige

Social responsibility refers to the idea that businesspeople should favor decisions that have both good economic and social consequences

true

The Friedman doctrine is the belief that ethics are nothing more than a reflection of culture therefore, a firm should adopt the ethics of the culture in which it is operating

false

Child labor is permitted and widely employed in Country X. A multinational company entering Country X decides to employ minors in its subsidiary, even though it is against the multinational's home-country ethics. Which of the following approaches to business ethics would justify the actions of the multinational company?

cultural relativism

To foster ethical behavior, many businesses draft a code of ethics, which is an informal statement of the ethical priorities the company follows

false

Grady works at a fast food restaurant. One day he noticed a co-worker giving free food to a friend. He was unsure about what to do> Grady most likely decided to follow the example of

his supervisor

Most moral philosophers see value in utilitarian and Kantian approaches to business ethics

true

According to the ____, even if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should maintain the standards of the company's home country

Righteous moralist

Facilitating payments are

permitted under the amended Foreign Corrupt Practices Act.

Max Weber believed that Protestantism encouraged capitalism's development by emphasizing the importance of wealth creation and frugality

true

Education plays an important role, from an international business prospective, as a determinant of national competitive advantage

true

International businesses that are ill-informed about the practices of another culture are likely to fail

true

Religion may be defined as

shared beliefs and rituals that are concerned with the realm of the sacred

A caste system is a closed system of stratification in which social position is determined by the family into which the person is born

true

Hofstede's concept of power distance focused on the extent to which different cultures socialized their members into tolerating uncertainty

false

Hofstede's _____ dimension measured the extent to which different cultures socialized their members into accepting and tolerating ambiguity.

uncertainty avoidance

The ____ is a research project spanning more than 100 countries that explores people's values and norms, how they change overtime, and what impact they have in society and business

World Values Survey

People who share a common set of values and norms form a

society

Culture is

not static

Because of its individualistic mindset, Japanese culture is more supportive of entrepreneurial activities than American culture.

false

Hofstede's study found that in masculine cultures, sex roles were less sharply distinguished, and little differentiation was made between men and women in the same job.

false

A condition where people tend to perceive themselves in terms of their class background and this shapes their relationship with members of other classes is known as

class consciousness

An antagonistic relationship between management and labor classes may result in lower costs of production

false

A major difference between Buddhism and Hinduism is that unlike Hinduism, Buddhism

does not support the caste system

Which of the following statements is true about the murabaha contract?

The murabaha contract is widely used among the world's Islamic banks because it is the easiest to implement

Which of the following observations is correct?

The economic principles of Islam prohibits the payment or receipt of interest

The ______ refers to the extent to which a culture programs its citizens to accept delayed gratification of their material, social, and emotional needs

long-term verses short term orientation dimension

Hofstede's masculinity versus femininity dimension looked at the relationship between gender and work roles and found that in

masculine cultures, sex roles were sharply differentiated, traditional "masculine values" determined cultural ideals

According to Geert Hofstede's study, which of the following cultural dimensions would be characterized by a greater readiness to take risks and less emotional resistance to change?

low uncertainty avoidance

______ are typically defined on the basis of characteristics such as family background, occupation, and income

social strata

What is ethnocentrism?

Belief in the superiority of one's own culture

_____ include such factors as indictments against theft, adultery, incest, and canniballism

Mores

The term social strata refers to the extent which individuals can move out of the strata into which they were born

false

Individualism versus collectivism dimension of Hofstede's study explored

the relationship between the individual and his or her fellows

Property rights can be violated in two ways- through private action and through public action

true

The Republic of Elbow has a command economy, and as such, its objective it to encourage free and fair competition between private producers

false

In a(n) _________ economy the government plans the goods and services that a country produces, the quantity in which they are produced, and the prices at which they are sold

command

Patents discourage companies from committing themselves to extensive basic research

false