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Exam 3: Doing Business in Global Markets

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Question 91

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The tiny nation of Tinian is extremely efficient in the mining of tin. However, its climate and terrain makes it difficult to produce corn. According to the theory of comparative advantage, Tinian should:

A) produce both tin and corn in order to remain self-sufficient.
B) watch the global market to see which product is bringing the highest price.
C) import the resources needed to produce corn.
D) concentrate its production on tin and buy corn from an efficient producer.

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Question 92

Multiple Choice

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The Ozark Bike Company recently entered into an agreement with a large Japanese retailer to distribute its bicycles in Japan. Ozark Bike Company sees itself in a favorable position because:

A) the yen is gaining strength compared to the U.S. dollar, making it cheaper for Japanese customers to buy U.S. products.
B) the yen is down against the U.S. dollar, making it cheaper for Japanese customers to buy U.S. products.
C) it was traditionally against Japanese culture to ride bicycles, so the U.S. bike company would be dealing with a niche market.
D) the Japanese do not permit foreign direct investment. U.S. companies will make all the bikes in the U.S., which creates more jobs on U.S. soil.

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Question 93

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The Dabble Corporation wants to begin exporting its products. The company needs advice about how to get started, as well as trade-finance support. The federal government has established _____________ to help companies like Dabble Corporation.

Explain and provide at least one example of how socio-cultural differences can create trade difficulties in world markets.

Last year, the nation of Kwansai reported that it had a favorable balance of trade even though it imported $11 billion worth of goods. This indicates that Kwansai:

Global financial markets operate under a system of ___________, where the supply and demand for various currencies dictate their value at any moment in time.

Expropriation occurs when a host government takes over the assets of a foreign company.

The world market is approximately ______________.

Imported wines such as Pinot Noirs from France or Italy often sell at a higher price than wine from Napa Valley, California. This is due to the protective tariff importers pay for the foreign wine.

The United States enjoys a trade surplus in the global market.

An advantage of licensing is that licensors spend little or no money to produce and market their products. These costs are born by the licensees.

As you round out your final year of college, you are trying to decide on the last two business electives you need to take. You are leaning toward international marketing and international financing because you recall reading that Forrester Research estimates that more than 3 million jobs could move to global markets in the next 10 years.

One of the rules of a common market is that all participating nations will uphold a common tariff on goods and services that are imported from countries that are not members of the trading bloc. Goods imported from nonmember countries are more expensive than goods coming from member countries.

Dumping is the practice of selling products in foreign markets at lower prices than what domestic firms are charging for the same product.

The North American Free Trade Agreement (NAFTA) requires member nations to negotiate uniform trade agreements with nonmember nations.

Compared to many other industrialized countries, the United States has historically exported a much higher percentage of its products than other countries do.

Contract manufacturing is when a firm pays foreign manufacturers to produce its product. The foreign manufacturer places the domestic company's label on the products.

The Ozark Bike Company recently entered into an agreement with a large Japanese retailer to distribute its bicycles in Japan. Ozark Bike Company sees itself in a favorable position because the yen is gaining strength compared to the U.S. dollar making it cheaper for Japanese customers to buy U.S. products.

Since 1975, the U.S. has had a(n) ____________.

When studying abroad last year, Reilly found that his U.S. dollars did not stretch as far as he had hoped. Each time he exchanged U.S. dollars for euros, he gave up more U.S. dollars in exchange for less euros. Obviously, the dollar had strength against the euro.