1. Many of the developing countries of the world experience traffic gridlock.
*a. True
b. False

2. In constant U.S. dollars, world trade has grown about 10 percent per year between 1948 and 2015.
a. True
*b. False

3. Constant dollars are dollars whose value has been adjusted for inflation. 
*a. True
b. False

4. The countries that represents the largest share of international trade are those of the European Union. 
*a. True
b. False

5. World trade in services represents a higher percentage of total world trade than does world trade in merchandise.
a. True
*b. False

6. The Bretton Woods Conference triggered the creation of the World Trade Organization in 1944.
a. True
*b. False

7. The Treaty of Rome in 1957 was the first step in the creation of the European Union.
*a. True
b. False

8. The North American Free Trade Association (NAFTA) includes only the United States and Mexico.
a. True
*b. False

9. The euro dollar is the common currency of the European Union. 
a. True
*b. False

10. The euro has replaced the currencies of all of the countries of the European Union.
a. True
*b. False

11. In 2015, the United States exported more goods than any other country in the world.
a. True
*b. False

12. In 2015, the United States imported about 1.5 times more goods than it exported.
*a. True
b. False

13. Mercosur is a trade bloc that includes countries located in South America.
*a. True
b. False

14. The top fifteen largest exporters represent more than half of all exports in the world.
*a. True
b. False

15. A company that has to make large capital outlays before starting production will want to export in order to spread its costs over a large number of units produced.
*a. True 
b. False

16. The top three largest car manufacturers in the world are based in North America.
a. True
*b. False

17. The Walmart effect pushes manufacturers to sell products at ever-lower prices, often obtained by manufacturing abroad.
*a. True
b. False

18. The term outsourcing refers to a strategy whereby a company purchases production plants overseas.
a. True
*b. False

19. The term re-shoring refers to a strategy whereby a company brings back to the United States production that had been outsourced abroad.
*a. True
b. False

20. China produces more than twice as many automobiles as the United States.
*a. True
b. False

21. A competitor offering a new product in a mature market can entice a company to start importing its own low-cost alternative.
*a. True
b. False

22. Consumers are becoming increasingly worldly and willing to purchase foreign-made products.
*a. True
b. False

23. According to Thomas Friedman, individuals looking for jobs now compete with hundreds of other similarly trained applicants, coming from all corners of the world.
*a. True
b. False

24. According to Adam Smith, countries trade when they enjoy a comparative advantage over other countries in the production of a given product.
a. True
*b. False

25. A country enjoys an absolute advantage in the production of a particular good when it can produce it at a lower price than another country.
*a. True
b. False

26. David Ricardos Theory of Comparative Advantage explains why countries that enjoy an absolute advantage in making certain goods can still prefer to purchase these products from other countries.
*a. True
b. False

27. Most trade today is more likely to be explained by the Theory of Comparative Advantage than by the Theory of Absolute Advantage.
*a. True
b. False

28. A country often enjoys a comparative advantage because of the abundance of a particular production factor (land, labor, capital, or entrepreneurship) within its borders.
*a. True
b. False

29. The Factor Endowment Theory was developed by Raymond Vernon.
a. True
*b. False

30. The International Product Life Cycle Theory explains why there are no televisions manufactured in Great Britain and the United States, although that technology was invented in those countries.
*a. True
b. False

31. A product is invented in Country X and is first manufactured there. The International Product Life Cycle Theory holds that the product will be manufactured in developing countries within a couple of years.
a. True
*b. False

32. Michael Porter views Silicon Valley is an example of a cluster of innovation and manufacturing.
*a. True
b. False

33. Until the 1950s, most of the area rugs in the world were manufactured in Persia (Iran) and Pakistan. Artisans in these countries had developed techniques (dyes and knots) that were unique and that other production areas were not capable of reproducing. These areas enjoyed what Michael Porter would call an absolute advantage.
a. True
*b. False

34. According to Yossi Sheffi, countries with few natural resources can still develop into economic hubs by becoming manufacturing centers.
a. True
*b. False


1. The total value of international trade (2015) in services and merchandise is about
~ The total value of international trade was $21.3 trillion in 2015.  
@ The total value of international trade was $21.3 trillion in 2015.  
a. $ 21 billion. 
*b. $ 21 trillion. 
c. $ 21 million.
d. $ 21 thousand.
e. $ 21 milliard.

2. Until the end of the twentieth century, international trade was mostly concentrated among the developed countries of the Northern Hemisphere. Which country was the largest exporter of the world in 2015?
~ China is the largest exporter in the world, and exports about 30 percent more than the United States or Germany. Germany was the largest world exporter prior to 2008.
@ China is the largest exporter in the world, and exports about 30 percent more than the United States or Germany. Germany was the largest world exporter prior to 2008.
a. United States 
b. Germany
*c. China
d. Japan
e. Saudi Arabia

3. International trade is still mostly concentrated among the developed countries of the Northern Hemisphere. Which country is the largest importer of the world?
~ The United States is the largest importer in the world. It imports about 37 percent more than China and about 2.3 times as much as Germany.
@ The United States is the largest importer in the world. It imports about 37 percent more than China and about 2.3 times as much as Germany.
*a. United States 
b. Germany 
c. China
d. Japan
e. Canada

4. The European Union is an economic community that comprises how many countries?
~ The European Union had 28 members since 2013. In 2016, the United Kingdom voters decided to Brexit, but it was not implemented in 2018.
@ The European Union had 28 members since 2013. In 2016, the United Kingdom voters decided to Brexit, but it was not implemented in 2018.
a. 15 
b. 25 
c. 18
*d. 28
e. 30
 
5. The common currency of most of the countries of the European Union is called
~ The euro is the currency created in 1999 and placed in circulation in 2002. The term euro-dollar refers to U.S. dollars kept in accounts in [foreign] banks not subject to the authority of the Federal Reserve Banks, and the ECU is the original name proposed for the euro and eventually abandoned. Thaler refers to an old European currency.
@ The euro is the currency created in 1999 and placed in circulation in 2002. The term euro-dollar refers to U.S. dollars kept in accounts in [foreign] banks not subject to the authority of the Federal Reserve Banks, and the ECU is the original name proposed for the euro and eventually abandoned. Thaler refers to an old European currency.
a. the euro-dollar.
b. the European currency unit (ECU).
c. the thaler.
*d. the euro.
e. the eural.

6. NAFTA is a free-trade agreement between the countries of
~ NAFTA is the free trade agreement between the United States, Canada, and Mexico.
@ NAFTA is the free trade agreement between the United States, Canada, and Mexico.
a. North Africa. 
*b. North America.
c. North Atlantic.
d. North Asia.
e. Pacific Rim.

7. Which of the following entities was created at the Bretton Woods Conference of 1944?
~ The IMF was created at the Bretton Woods Conference. 
@ The IMF was created at the Bretton Woods Conference. 
*a. International Monetary Fund. 
b. World Trade Conference. 
c. Marshall Plan.
d. United Nations.
e. European Union.

8. A firm can respond to one of its competitors introduction of a lower-priced product by starting to produce its own lower-cost product abroad and importing it. Such a strategy is called
~ Outsourcing is the process of manufacturing abroad in order to lower production costs.
@ Outsourcing is the process of manufacturing abroad in order to lower production costs.
a. insourcing.
b. foreign investment. 
c. just-in-time.
*d. outsourcing.
e. resourcing.
 
9. On occasion, a firm will respond to a competitors move by retaliating. For example, Linde Gas (an American firm producing industrial gasses) entered the French market when Air Liquide (a French company in the same industry) decided to enter the U.S. market under the name Liquid Air. Such a move is considered a
~ Linde Gas and Air Liquide are not mentioned in the text; however, this is a typical retaliatory action that drives a company to enter a foreign market which it had no intention to enter in the first place.
@ Linde Gas and Air Liquide are not mentioned in the text; however, this is a typical retaliatory action that drives a company to enter a foreign market which it had no intention to enter in the first place.
a. cost driver. 
*b. competition driver.
c. technology driver.
d. market driver.
e. strategy driver.

10. Consumer mobility refers to the idea that consumers like to find the same products everywhere. An example of a company that sells products everywhere in the world because its customers are all over the world is
~ These three companies operate in the industries that are specifically listed in Section 1-4c as having followed their consumers worldwide.
@ These three companies operate in the industries that are specifically listed in Section 1-4c as having followed their consumers worldwide.
a. McDonalds Restaurants. 
b. Intercontinental Hotels.
c. Fuji Film.
d. HSBC Bank.
*e. All of the brands in the answers follow their customers worldwide

11. Argentina can produce 1 ton of meat (beef) using 0.1 years of labor. It can also produce 1 automobile using 2 years of labor. In order to produce 1 ton of beef, the United States uses 0.2 years of labor. It can produce an automobile using 1.5 years of labor. Argentina has
~ Argentina uses less labor for the production of 1 ton of beef than the United States does.
@ Argentina uses less labor for the production of 1 ton of beef than the United States does.
a. an absolute advantage in the production of automobiles. 
*b. an absolute advantage in the production of beef. 
c. a comparative advantage in the production of automobiles.
d. a comparative advantage in the production of beef.
e. Argentina has no advantage over the United States, either in beef or automobile production.

12. Russia can produce 25 tons of steel or 5 automobiles using the same amount of resources. Using the exact same amount of resources, India can produce 18 tons of steel and 3 automobiles. According to the theory of comparative advantage, the countries will trade with each other. What will Russia produce?
~ Russia has a comparative advantage in making automobiles; it costs Russia 5 tons of steel to make an automobile, and it costs India 6 tons of steel to make an automobile. Russia makes automobiles more efficiently than it makes steel, and the countries will trade as long as the price of automobiles is higher than 5 tons of steel (otherwise Russia will not sell) and lower than 6 tons of steel (otherwise India will not buy).
@ Russia has a comparative advantage in making automobiles; it costs Russia 5 tons of steel to make an automobile, and it costs India 6 tons of steel to make an automobile. Russia makes automobiles more efficiently than it makes steel, and the countries will trade as long as the price of automobiles is higher than 5 tons of steel (otherwise Russia will not sell) and lower than 6 tons of steel (otherwise India will not buy).
a. steel.
*b. automobiles.
c. some steel and some automobiles.
d. Impossible to determine with the information given.

13. Russia can produce 25 tons of steel or 5 automobiles using the same amount of resources. Using the exact same amount of resources, India can produce 18 tons of steel and 3 automobiles. According to the theory of comparative advantage, at what price will Russia and India trade chairs?
~ Russia has a comparative advantage in making automobiles; it costs Russia 5 tons of steel to make an automobile, and it costs India 6 tons of steel to make an automobile. Russia makes automobiles more efficiently than it makes steel, and the countries will trade as long as the price of automobiles is higher than 5 tons of steel (otherwise Russia will not sell) and lower than 6 tons of steel (otherwise India will not buy).
@ Russia has a comparative advantage in making automobiles; it costs Russia 5 tons of steel to make an automobile, and it costs India 6 tons of steel to make an automobile. Russia makes automobiles more efficiently than it makes steel, and the countries will trade as long as the price of automobiles is higher than 5 tons of steel (otherwise Russia will not sell) and lower than 6 tons of steel (otherwise India will not buy).
*a. India will buy automobiles as long as the price is lower than 6 tons of steel. 
b. India will sell automobiles as long as the price is higher than 5 tons of steel.
c. Russia will buy automobiles as long as the price is lower than 6 tons of steel.
d. Impossible to determine with the information given.

14. The Heckscher-Ohlin Theory holds that countries that have an abundance of certain resources enjoy an absolute or comparative advantage over other countries. Which of the following is NOT one of the factors that Heckscher and Ohlin considers scarce?
~ The four resources that economists consider scarce are land, labor, capital, and entrepreneurship. Depending on the background of the students in economics, this can be an easy question or a difficult one.
@ The four resources that economists consider scarce are land, labor, capital, and entrepreneurship. Depending on the background of the students in economics, this can be an easy question or a difficult one.
a. land.
b. labor. 
c. capital.
*d. education.
e. entrepreneurship.

15. According to the International Product Life Cycle Theory, the country(ies) most likely to manufacture a product that has been recently developed (one that is the result of a brand-new design and uses patented technology) and is in its first commercialization year, is (are)
~ According to Vernon, the only country in which products that are newly developed are manufactured is the country of innovation. The manufacturing eventually shifts to other developed countries and then to developing countries.
@ According to Vernon, the only country in which products that are newly developed are manufactured is the country of innovation. The manufacturing eventually shifts to other developed countries and then to developing countries.
*a. the country of innovation only. 
b. developing countries.
c. any country with the manufacturing technology necessary to manufacture it.
d. other developed countries.
e. Any country can manufacture a newly introduced product.

16. Porters Cluster Theory holds that geographical areas with a large concentration of a certain type of companies allow that area to obtain an absolute or comparative advantage. How do those companies benefit from the presence of other companies like them in the same area?
~ All of these options are explicitly listed in the cluster theory section.
@ All of these options are explicitly listed in the cluster theory section.
a. they can attract talented employees 
b. such concentration fosters creativity as employees know-how travels from employer to employer
c. the concentration of talent fosters innovation
*d. All of the answers listed here have an impact on the development of an area's economic advantage.
e. None of the answers listed here have an impact on the development of an area's economic advantage.

17. The international environment presents challenges for the international logistician. Which aspect of the international business environment is most likely to create frustrations? 
~ Among all of the issues listed, culture is the one clearly emphasized and explicitly indicated as the one that is most frustrating.
@ Among all of the issues listed, culture is the one clearly emphasized and explicitly indicated as the one that is most frustrating.
*a. cultural differences.
b. economic issues.
c. currency differences.
d. infrastructure constraints.
e. socio-economic constraints.

18. Brigham Young University publishes a series of pamphlets that describe the cultural traits of a country particularly clearly and accurately. Such pamphlets are called
~ Brigham Young University publishes CultureGrams, which are excellent synopses of a given countrys culture.
@ Brigham Young University publishes CultureGrams, which are excellent synopses of a given countrys culture.
a. Culturama. 
*b. CultureGrams. 
c. Country Cultural Guides.
d. World Culture Books.
e. Culture Snapshots.

19. Information on foreign countries, including their economic environment, their political environment, and their geography, can easily be found in several publications. Which is NOT one of the organizations that publishes background information on countries?
~ All of these options are explicitly listed in Section 1-6, except the UNICEF, which is the United Nations Childrens Fund (changed from the United Nations International Childrens Emergency Fund in the 1950s).
@ All of these options are explicitly listed in Section 1-6, except the UNICEF, which is the United Nations Childrens Fund (changed from the United Nations International Childrens Emergency Fund in the 1950s).
a. The Economists Intelligence Unit. 
b. The Central Intelligence Agency.
c. The U.S. Department of Commerce.
*d. The United Nations UNICEF.
e. Wikipedia.

20. An international logistician cannot possibly learn all of the cultural subtleties of a particular country; however, in order to avoid frustrations and difficulties, it would be advisable that s/he study
~ Learning about Intercultural Communication is the single best strategy to learn how to handle cultural differences, often ahead of learning a foreign language and learning the traditional social sciences. 
@ Learning about Intercultural Communication is the single best strategy to learn how to handle cultural differences, often ahead of learning a foreign language and learning the traditional social sciences. 
a. sociology. 
b. anthropology.
*c. intercultural communication.
d. psychology.
e. marketing.



Type: F
1. The ____________________, signed in 1957, led to the creation of the European Union.
a. Treaty of Rome

Type: F
2. The ____________________ succeeded the General Agreement on Tariffs and Trade created by the Bretton Woods Conference.
a. World Trade Organization

Type: F
3. In 1995, the World Trade Organization succeeded the ____________________ that had been created at the Bretton Woods Conference in 1944.
a. General Agreement on Tariffs and Trade
b. GATT

Type: F
4. The General Agreement on Tariffs and Trade was an effort at reducing tariffs and non-tariff trade barriers. These reductions took place through year-long discussions that were called ____________________.
a. rounds

Type: F
5. The euro is the currency of ____________________ of the twenty-eight countries of the European Union.
a. Nineteen
b. 19

Type: F
6. When a large retailer asks a company to manufacture a product so that it can be sold at a low(er) price point, the company is often constrained to outsource its production overseas. Such a phenomenon is called the ____________________.
a. Walmart effect

Type: F
7. The Theory of Absolute Advantage was first coined by ____________________.
a. Adam Smith
b. Smith
c. Smith, Adam
d. A. Smith
e. A Smith

Type: F
8. The Theory of Comparative Advantage was first coined by Robert Torrens, but popularized by ____________________.
a. David Ricardo
b. D. Ricardo
c. Ricardo
d. D Ricardo
e. Ricardo, David

Type: F
9. The Heckscher-Ohlin Theory can also be called the ____________________.
a. Factor-Endowment Theory
b. factor endowment theory
c. factor endowment

Type: F
10. The International Product Life Cycle Theory was developed by ____________________.
a. Raymond Vernon
b. Vernon
c. Vernon, Raymond
d. R. Vernon
e. R Vernon

Type: F
11. The Cluster Theory, developed by Michael Porter, argues that geographic areas benefit from having a high concentration of companies in a particular industry. The area of Sassuolo, in Italy, has a high concentration of ____________________ companies.
a. ceramic tile
b. tile

Type: F
12. The concept that encompasses the heritage of a countrys population, including their language, their customs, their traditions, their morals, and their beliefs is that countrys ____________________.
a. culture
