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Test Bank For International Business: Environments & Operations, 14/E 14th Edition John Daniels, Lee Radebaugh, Daniel Sullivan
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Test Bank for International Business: Environments & Operations, 14/E 14th Edition John
1) ________ integration is the political and economic agreements among countries that give preference
to member countries to the agreement.
A) Global
B) Economic
C) Bilateral
D) Regional
Answer: B
Diff: 1
Learning Outcome: Define the fundamental concepts of international business
Skill: Concept
Objective: 1
2) Country A and Country B make an agreement to cooperate more closely and implement tariff
reductions. Which of the following best describes this agreement?
A) double commodity integration
B) multilateral integration
C) regional integration
D) bilateral integration
Answer: D
Diff: 1
Learning Outcome: Define the fundamental concepts of international business
Skill: Application
Objective: 1
4) Global integration occurs as countries from all over the world decide to cooperate through the
________.
A) EU
B) NAFTA agreement
C) WTO
D) CARICOM
Answer: C
Diff: 1
Skill: Concept
Objective: 1
AACSB: Multicultural and diversity understanding
1
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
5) Which of the following statements most accurately describes the relationship between trading groups
and MNEs?
A) Trading groups have no influence on the size of the regional market.
B) Regional trading groups can define the rules under which companies must operate within that region.
C) Companies never need to change their organizational structure to take advantage of regional trading
groups.
D) Regional trading groups have no influence on an MNE's strategy since they operate worldwide.
Answer: B
Diff: 2
Skill: Concept
Objective: 1
6) Anderson Enterprises is a U.S. firm that manufactures light fixtures for commercial and residential
consumers. Anderson is looking to expand internationally, so the firm should most likely ________.
A) focus on developing new recruitment strategies and selection tests
B) change their organizational structure to fit the norms of the foreign country
C) disregard changes in trading groups because they have little effect on a company
D) look to expand beyond the triad regions currently controlled by the top 500 MNEs
Answer: B
Diff: 2
Learning Outcome: Discuss factors affecting the organizational structures of international businesses
Skill: Application
Objective: 1
7) Baldani Manufacturing, an Italian firm, plans to expand into Asia. In order to take advantage of
regional trading groups, Baldani will most likely need to change its ________.
A) operating strategies
B) selection test methods
C) bilateral trade agreements
D) economic integration methods
Answer: A
Diff: 2
Skill: Application
Objective: 1
8) Which of the following is NOT one of the regions included in the triad regions of the world?
A) South America
B) Europe
C) North America
D) Asia
Answer: A
Diff: 2
Learning Outcome: Define the fundamental concepts of international business
Skill: Concept
Objective: 1
AACSB: Dynamics of the global economy
2
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9) The ________ clause embodied the fundamental principle of GATT—trade without discrimination.
A) most-favored-nation
B) nontariff barriers
C) free rider
D) normal trade relations
Answer: A
Diff: 1
Skill: Concept
Objective: 1
10) Which of the following accurately identifies a difference between GATT and the WTO?
A) GATT could enforce member compliance with agreements, but the WTO cannot.
B) At its inception, GATT had more member nations than the WTO currently has.
C) GATT withdrew the most-favored-nation clause, but the WTO reinstated it.
D) GATT rules did not cover trade in services, but the rules of the WTO do.
Answer: D
Diff: 2
Skill: Concept
Objective: 1
3
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13) Most trade groups contain countries in the same area of the world. Why is this so?
A) The distances that goods need to travel between such countries are short.
B) Distribution channels are not easily established in adjacent countries.
C) Adjacent countries are reluctant to coordinate policies.
D) Neighboring countries usually lack a common history and interests.
Answer: A
Diff: 3
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 4
AACSB: Dynamics of the global economy
14) Which of the following groups of countries is most likely to form a regional trading group?
A) India, Argentina, France
B) Canada, United States, Mexico
C) Brazil, Ukraine, Japan
D) Spain, South Africa, Mongolia
Answer: B
Diff: 2
Skill: Application
Objective: 4
AACSB: Dynamics of the global economy
15) The 27 member EU negotiates trade agreements as one. The EU and Brazil have negotiated a
strategic trade alliance which is an example of a ________.
A) customs union
B) global free trade agreement
C) bilateral agreement
D) multilateral agreement
Answer: C
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Application
Objective: 2
AACSB: Dynamics of the global economy
16) The goal of a ________ is to abolish all tariffs among member countries.
A) customs union
B) common market
C) free trade agreement
D) common internal tariff
Answer: C
Diff: 1
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 4
4
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17) Of the following possibilities, the European Union is best described as a ________.
A) customs union
B) domestic organization
C) global bargaining unit
D) common language agreement
Answer: A
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 4
AACSB: Multicultural and diversity understanding
18) A ________ results when free mobility of factors of production is added to a customs union.
A) customs union
B) common market
C) free trade agreement
D) regional trade agreement
Answer: B
Diff: 1
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 4
19) Members of the Andean Community(CAN) have a common external tariff. CAN is most likely a
________.
A) free trade agreement
B) customs union
C) domestic trade zone
D) free trade sovereignty
Answer: B
Diff: 1
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Application
Objective: 4
20) ________ effects of trade agreements are the shifting of resources from inefficient to efficient
companies as trade barriers fall.
A) Dynamic
B) Static
C) Economic
D) Barrier
Answer: B
Diff: 1
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 3
5
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21) ________ effects of economic integration are the overall growth in the market and the impact on a
company caused by expanding production and by the company's ability to achieve greater economies of
scale.
A) Dynamic
B) Static
C) Economic
D) Barrier
Answer: A
Diff: 1
Skill: Concept
Objective: 3
22) Trade shifting to countries within a regional trade agreement at the expense of trade with countries
not in the agreement is called ________.
A) a dynamic effect
B) trade creation
C) trade diversion
D) economy of scale
Answer: C
Diff: 2
Skill: Concept
Objective: 3
23) When the European Union was formed, the size of the market increased for European companies.
This is most likely an example of a ________.
A) dynamic effect
B) static effect
C) trade diversion
D) trade reflection
Answer: A
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Application
Objective: 3
AACSB: Dynamics of the global economy
24) Since production has shifted to more efficient producers due to comparative advantage, consumers
in Country X have had access to more goods at lower prices. Which of the following most likely exists?
A) trade specialization
B) trade diversion
C) trade creation
D) trade internalization
Answer: C
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Application
Objective: 3
6
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25) A free trade agreement is likely to increase efficiency because of ________.
A) decreased competition
B) increased competition
C) decreased trade diversion
D) decreased trade creation
Answer: B
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 3
26) Assume that U.S. companies are importing the same product from Mexico and Taiwan. The United
States enters into an FTA with Mexico but not with Taiwan. Consequently, the United States begins to
import more goods from Mexico (due to lower tariffs) than from Taiwan, even though the Mexican
products are not any better or cheaper. This is most likely an example of ________.
A) trade specialization
B) trade internalization
C) trade creation
D) trade diversion
Answer: D
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Application
Objective: 3
AACSB: Dynamics of the global economy
27) Because the size of the market increases when trade barriers fall, companies can increase their
production, which will result in lower costs per unit. This phenomenon is known as ________.
A) trade creation
B) economies of scale
C) diseconomies of scale
D) increased competition
Answer: B
Diff: 1
Skill: Concept
Objective: 3
28) The ________ is the European Union's ultimate decision-making body and is composed of the
different ministers of the member countries.
A) European Commission
B) Council of the European Union
C) European Parliament
D) European Court of Justice
Answer: B
Diff: 2
Skill: Concept
Objective: 5
7
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29) The three major responsibilities of the ________ are legislative power, control over the budget, and
supervision of executive decisions.
A) European Commission
B) European Council
C) European Parliament
D) European Court of Justice
Answer: C
Diff: 2
Skill: Concept
Objective: 5
30) The EU organization that provides political leadership, drafts laws, and runs the daily programs of
the EU is the ________.
A) European Commission
B) Council of Ministers
C) European Parliament
D) European Central Bureaucracy
Answer: A
Diff: 2
Skill: Concept
Objective: 5
31) The EU organization that ensures consistent interpretation and application of EU treaties is the
________.
A) European Commission
B) Council of Ministers
C) Court of Justice
D) Council of Treaties and Laws
Answer: C
Diff: 2
Skill: Concept
Objective: 5
AACSB: Ethical understanding and reasoning abilities
32) Which of the following was primarily responsible for establishing the euro?
A) Lisbon Treaty
B) Treaty of Maastricht
C) European Finance Act
D) Single European Act
Answer: B
Diff: 2
Skill: Concept
Objective: 5
8
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33) Critics of the Lisbon Treaty primarily argue that the legislation will ________.
A) reduce national sovereignty
B) implement trade restrictions
C) develop a monetary union
D) weaken decision making
Answer: A
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Application
Objective: 4
36) Which of the following members of the European Union has NOT adopted the euro?
A) United Kingdom
B) Estonia
C) Germany
D) Greece
Answer: A
Diff: 2
Skill: Concept
Objective: 5
9
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37) Hudson Manufacturing is an MNE based in the U.S. with operations in Asia. The firm is considering
expansion into the European Union. Which of the following questions is most relevant to the decision?
A) What is the primary language of most workers?
B) Which country has the best production location?
C) Which currency has the most favorable value of the euro?
D) Which country has the lowest tariffs for manufactured products?
Answer: B
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Critical Thinking
Objective: 5
AACSB: Reflective thinking skills
38) Hudson Manufacturing is an MNE based in the U.S. with operations in Asia. The firm is considering
expansion into the European Union. Executives at the firm are debating whether central Europe or
Eastern Europe would be best for the firm. Which of the following best supports a decision to establish
operations in Eastern Europe?
A) Hudson wants to implement a high-performance work system.
B) Hudson plans to staff the foreign facility with local managers.
C) Hudson wants to minimize costs by keeping wages low.
D) Hudson recently lost money in a joint venture.
Answer: C
Diff: 3
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Critical Thinking
Objective: 5
39) Korman Industries is a foreign multinational that recently established operations in the European
Union. What is the most likely advantage for Korman as a result?
A) Governance processes are streamlined because local governments have been eliminated.
B) Market size is larger because of the elimination of internal tariff barriers.
C) Differential external tariff barriers exist for product shipments.
D) The EU uses English as its official language.
Answer: B
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Application
Objective: 5
40) Which of the following recently threatened the future of the EU's common currency?
A) refusal of the UK to use the euro
B) failed mergers and acquisitions
C) debt crisis in Greece
D) human rights issues
Answer: C
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 5
AACSB: Dynamics of the global economy
10
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
41) Which of the following are members of NAFTA?
A) the United States, Canada, and Mexico
B) North America and Latin America
C) the United Kingdom, the United States, and Canada
D) the United States, Canada, and Brazil
Answer: A
Diff: 1
Skill: Concept
Objective: 5
AACSB: Multicultural and diversity understanding
42) NAFTA was primarily formed because the member nations have ________.
A) static and dynamic liberalization policies
B) similarly sized economies and resources
C) geographic proximity to each other
D) competing interests with the EU
Answer: C
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 5
44) Compared to the European Union, the North American Free Trade Agreement ________.
A) has a stronger currency linkage due to the U.S. dollar
B) has more trade problems since it is a customs union
C) is significantly larger in population and total GNI
D) is slightly smaller in population and GDP
Answer: D
Diff: 2
Skill: Concept
Objective: 5
AACSB: Dynamics of the global economy
11
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
45) Under NAFTA, rules of origin ensure that ________.
A) only goods produced mostly within the region are eligible for liberal tariff conditions
B) only American products are shipped to Canada and Mexico duty-free
C) all members import products only from member nations
D) all members have the same external and internal tariffs
Answer: A
Diff: 2
Skill: Concept
Objective: 5
46) According to regional content rules, at least ________ of the net cost of most products must come
from the NAFTA region in order to get access to the tariff reductions of NAFTA.
A) 62.5%
B) 50%
C) 45%
D) 40.5%
Answer: B
Diff: 2
Skill: Concept
Objective: 5
48) The major trade group in South America involving Brazil, Paraguay, Uruguay, and Argentina is
________.
A) MERCOSUR
B) UNASUR
C) APEC
D) CACM
Answer: A
Diff: 1
Skill: Concept
Objective: 5
12
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49) The ________ is a preferential trade agreement that was organized in 1967 and comprises Brunei,
Cambodia, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand, and Vietnam.
A) APEC
B) OAU
C) ASEAN
D) CAFTA
Answer: C
Diff: 1
Skill: Concept
Objective: 5
50) Which of the following is the primary focus of the African Union (AU)?
A) FDI influx
B) democracy
C) economic integration
D) intrazonal trade relations
Answer: B
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 5
52) Which of the following is most likely a true statement about the relationship between the United
Nations and NGOs?
A) The UN must license an NGO for it to be involved in any international relief efforts.
B) A UN committee discusses issues of importance to NGOs but does not regulate their activities.
C) The UN determines which NGOs can work on international humanitarian issues and relief efforts.
D) NGOs typically operate in only one country, whereas UN agencies can operate anywhere in the
world.
Answer: B
Diff: 3
Skill: Concept
Objective: 6
13
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53) Many NGOs, including Africa Now, Quaker Peace and Social Witness, and Save the Children, are
members of the ________.
A) Ethical Trading Initiative
B) International Red Cross Council
C) United Nations Global Compact
D) United Nations Economic and Social Council
Answer: A
Diff: 1
Skill: Concept
Objective: 6
14
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57) The Organization of Petroleum Exporting Countries ________.
A) uses import tariffs to control oil prices
B) stabilizes prices based on demand
C) uses quotas to control oil prices
D) produces all of the world's oil
Answer: C
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 6
58) Which of the following primarily triggered Toyota's investment in the European Union?
A) Europeans demanded affordable, high quality cars from Japan.
B) A common currency gave Europeans more buying power.
C) The EU lowered trade barriers on foreign auto imports.
D) Japan and the EU formed a free trade agreement.
Answer: C
Diff: 2
Skill: Concept
Objective: 2
AACSB: Analytic Skills
15
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61) Regional integration is better known as global integration through the World Trade Organization.
Answer: FALSE
Diff: 1
Skill: Concept
Objective: 2
63) As companies expand internationally, they must change their organizational structure and operating
strategies to take advantage of regional trading groups.
Answer: TRUE
Diff: 2
Skill: Concept
Objective: 2
64) Most MNEs generate a majority of their revenues in their home regions.
Answer: FALSE
Diff: 2
Skill: Concept
Objective: 2
65) GATT's contribution to trade liberalization made possible the expansion of world trade in the second
half of the twentieth century.
Answer: TRUE
Diff: 2
Skill: Concept
Objective: 1
66) The most-favored-nation policy is a WTO privilege that allows member nations to restrict tariff cuts
to members.
Answer: FALSE
Diff: 2
Skill: Concept
Objective: 1
67) One of the reasons that neighboring countries tend to ally is similar consumer tastes.
Answer: TRUE
Diff: 1
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy
16
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
68) Most trade groups contain countries in the same area of the world, even though neighboring
countries usually lack a common history and interests.
Answer: FALSE
Diff: 2
Skill: Concept
Objective: 2
AACSB: Dynamics of the global economy
69) The goal of a free trade agreement is to abolish all tariffs among member countries.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 2
70) When free mobility of factors of production is added to a common market, the result is a customs
union.
Answer: FALSE
Diff: 2
Skill: Concept
Objective: 2
71) Static effects are the overall growth in the market and the impact on a company caused by expanding
production and by the company's ability to achieve greater economies of scale.
Answer: FALSE
Diff: 1
Skill: Concept
Objective: 3
72) The shifting of resources from inefficient to efficient companies as trade barriers fall produces static
effects.
Answer: TRUE
Diff: 1
Skill: Concept
Objective: 3
73) Trade creation allows consumers access to more goods at a lower price than would have been
possible without integration.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 2
17
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
74) The shifting of trade to countries in a regional group at the expense of trade with countries not in the
group is known as trade internalization.
Answer: FALSE
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 2
75) The European Commission is the European Union's ultimate decision-making body and is composed
of the different ministers of the member countries.
Answer: FALSE
Diff: 2
Skill: Concept
Objective: 5
76) The three major responsibilities of the European Parliament are legislative power, control over the
budget, and supervision of executive decisions.
Answer: TRUE
Diff: 2
Skill: Concept
Objective: 5
77) The introduction of the euro has eliminated currency as a barrier to trade in all European countries.
Answer: FALSE
Diff: 2
Skill: Concept
Objective: 5
78) The Single European Act set steps to accomplish monetary union in the European Union, including
the creation of the euro.
Answer: FALSE
Diff: 2
Skill: Concept
Objective: 5
79) Production location is not an important choice when doing business in the European Union.
Answer: FALSE
Diff: 1
Skill: Concept
Objective: 5
80) Although the European Union is a common market, member countries have different economic
growth rates.
Answer: TRUE
Diff: 2
Skill: Concept
Objective: 5
18
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81) NAFTA is an example of a common market.
Answer: FALSE
Diff: 2
Skill: Concept
Objective: 5
82) The most important rationales for NAFTA are geographic proximity and trading importance.
Answer: TRUE
Diff: 2
Skill: Concept
Objective: 5
83) Each country in NAFTA sets its own tariffs to the rest of the world.
Answer: TRUE
Diff: 2
Skill: Concept
Objective: 5
84) The major trade groups in South America are CAN and MERCOSUR.
Answer: TRUE
Diff: 1
Skill: Concept
Objective: 5
85) The formation of CARICOM has primarily been triggered by the desire of Jamaica, Trinidad, and
Tobago to expand the region's market size and attract more FDI.
Answer: TRUE
Diff: 1
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 5
87) NGOs must be recognized by the United Nations in order to do humanitarian work in developing
countries.
Answer: FALSE
Diff: 2
Skill: Application
Objective: 6
AACSB: Analytic Skills
19
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
88) Very few commodity agreements are successful in bringing together supplier and consumer
countries to stabilize commodity prices.
Answer: TRUE
Diff: 2
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Concept
Objective: 6
89) OPEC is an example of a producer's cartel that is successful because of its ability to institute tariffs
on oil exports.
Answer: FALSE
Diff: 2
Skill: Concept
Objective: 6
90) Toyota has been successful in Europe by exporting cars to Europe as well as designing and
manufacturing cars in Europe for the European market.
Answer: TRUE
Diff: 2
Skill: Concept
Objective: 2
91) Describe the different types of regional economic integration and give an example of each type.
Answer:
a. Free trade area (FTA): The goal of a free trade area is to abolish all tariffs among member countries.
Free trade agreements usually begin modestly by eliminating tariffs on goods that already have low
tariffs, and there is usually an implementation period over which all tariffs are eliminated on all
products. In addition, each member country maintains its own external tariffs against non-FTA
countries. Examples: the North American Free Trade Agreement, the Association of South East Asian
Nations
b. Customs union: In addition to eliminating internal tariffs, member countries levy a common external
tariff on goods being imported from nonmembers. Example: MERCOSUR
c. Common market: A common market has all the elements of a customs union, plus it allows free
mobility of production factors such as labor and capital. Example: the European Union
Diff: 3
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Application
Objective: 4
AACSB: Reflective thinking skills
20
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
92) Explain the static effects and dynamic effects of economic integration. What is the difference
between trade creation and trade diversion resulting from economic integration?
Answer: Static effects are the shifting of resources from inefficient to efficient companies as trade
barriers fall. Dynamic effects are the overall growth in the market and the impact on a company of
expanding production and achieving greater economies of scale. Static effects may develop when either
of two conditions occurs:
a. Trade creation: Production shifts to more efficient producers for reasons of comparative advantage,
allowing consumers access to more goods at a lower price than would have been possible without
integration.
b. Trade diversion: Trade shifts to countries in the group at the expense of trade with countries not in
the group, even though the nonmember company might be more efficient in the absence of trade
barriers.
Dynamic effects of integration occur when trade barriers come down and the size of the market
increases, allowing companies to achieve economies of scale.
Diff: 3
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Critical Thinking
Objective: 3
AACSB: Analytic Skills
93) What are the functions of the European Commission, the European Parliament, the Council, and the
European Court of Justice?
Answer:
a. The European Commission provides the European Union's political leadership and direction. The
commission is composed of commissioners nominated by each member government and approved by
the European Parliament. It drafts laws that it submits to the European Parliament and Council of the
EU.
b. The three major responsibilities of the European Parliament are: legislative power, control over the
budget, and supervision of executive decisions. The commission presents community legislation to the
parliament. Parliament may approve legislation, amend it, or reject it outright. Parliament also approves
the EU's budget each year and monitors spending.
c. The Council is composed of the ministers of the member countries. The Council passes laws and
makes and enacts major policies. It works closely with the Commission and Parliament in adopting
policies.
d. The European Court of Justice ensures consistent interpretation and application of EU treaties.
Member states, community institutions, or individuals and companies may bring cases to the court. The
Court of Justice is an appeals court for individuals, firms, and organizations fined by the commission for
infringing treaty law. The Court of Justice is relevant to MNEs because it deals mostly with economic
matters.
Diff: 3
Skill: Application
Objective: 5
AACSB: Analytic Skills
21
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94) What are the rules of origin and regional content provisions of NAFTA?
Answer: Because NAFTA is a free trade agreement and not a customs union, each country sets its own
tariffs for the rest of the world. Rules of origin ensure that only goods that have been the subject of
substantial economic activity within the free trade area are eligible for the more liberal tariff conditions
created by NAFTA. According to regional content rules, at least 50 percent of the net cost of most
products must come from the NAFTA region. The exceptions are 55 percent for footwear, 62.5 percent
for passenger automobiles and light trucks and the engines and transmissions for such vehicles, and 60
percent for other vehicles and automotive parts.
Diff: 3
Skill: Application
Objective: 5
AACSB: Analytic Skills
95) What has been the impact of NAFTA on trade and employment in NAFTA nations?
Answer: Trade and investment among the NAFTA members has increased significantly since the
agreement was signed in 1994. The U.S. is the largest trade partner of Canada and Mexico, and both
countries are among the most important exporters and importers for the U.S. Due to lower wages in
Mexico, a lot of FDI has poured into Mexico, potentially displacing jobs in the United States. U.S. firms
have come under criticism for taking advantage of cheaper wages and lax environmental standards. In
addition, the agreement has not stopped the flow of illegal immigrants from Mexico to the U.S.
Diff: 3
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Synthesis
Objective: 2, 5
AACSB: Reflective thinking skills
22
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
96) Identify and briefly compare the major regional trading groups in Latin America, Asia, and Africa.
Answer:
a. The major trade group in South America is MERCOSUR. In 1991, Brazil, Argentina, Paraguay, and
Uruguay established MERCOSUR. MERCOSUR is significant because of its size; it generates 75
percent of South America's GNP. Another major group in South America is the Andean Group (CAN),
which is composed of Bolivia, Colombia, Ecuador, and Peru. There are three major regional trading
groups in Central America and the Caribbean: the Central American Common Market, the Central
American Free Trade Agreement-Dominican Republic (which includes the United States), and the
Caribbean Community and Common Market (CARICOM). These groups are hampered by their small
markets and dependence on the United States for trade.
b. In Asia, the key group is the Association of South East Asian Nations (ASEAN), which was
organized in 1967 and comprises Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, the
Philippines, Singapore, Thailand, and Vietnam. It is promoting cooperation in many areas, including
industry and trade. In 1993, the ASEAN countries formed the ASEAN Free Trade Area (AFTA) to deal
with the specific intrazonal trade issues.
c. The Asia Pacific Economic Cooperation (APEC) is massive since it includes every country that
borders the Pacific Ocean. In spite of the size of APEC, it does not engage in treaties like the other trade
agreements, so it has potential but not much teeth.
d. Africa is divided into many different trading groups based on geographic proximity and links to
former colonial powers. Most groups are hampered by poverty, small market size, and dependence on
former colonial powers. The African Union is modeled loosely on the EU, but that type of integration
will likely be very difficult.
Diff: 3
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Critical Thinking
Objective: 5
AACSB: Analytic Skills
23
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Test Bank for International Business: Environments & Operations, 14/E 14th Edition John
98) Why is geography important to most regional trade agreements? Provide examples of RTAs to
illustrate your answer.
Answer: There are a number of reasons why geography matters in the case of RTAs. Neighboring
countries often, though not always, share a common history, language, culture, and currency. Unless the
countries are at war with each other, they usually have already developed trading ties. Close proximity
reduces transportation costs, thereby making traded products cheaper in general. Armenia has RTAs in
force with Kazahkstan, Moldova, the Russian Federation, Turkmenistan, and Ukraine. India has a
number of trade agreements with most of the countries in its region. Germany, a member of the
European Union, exports 62.9 percent of its merchandise exports to other EU members and imports 58.3
percent from them. Switzerland, which is not a member of the EU but which has a trade agreement with
the EU, exports 59.7 percent of its merchandise exports to EU countries and imports 78 percent from
them. NAFTA includes Canada, the United States, and Mexico.
Diff: 3
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Synthesis
Objective: 2, 5
99) In a brief essay, explain the roles of the World Trade Organization and the United Nations in
international trade.
Answer: The World Trade Organization (WTO) replaced GATT in 1995 as a continuing means of trade
negotiations that aspires to foster the principle of trade without discrimination and to provide a better
means of mediating trade disputes and of enforcing agreements. The United Nations is composed of
representatives of most of the countries in the world and influences international trade and development
in a number of significant ways. The UN family of organizations is too large to list, but it includes the
WTO, the International Monetary Fund, and the World Bank. If the UN performs its responsibilities, it
should improve the environment in which MNEs operate around the world, reducing risk and providing
greater opportunities.
Diff: 3
Skill: Synthesis
Objective: 1, 6
AACSB: Dynamics of the global economy
100) What is the difference between a free trade agreement and a customs union? Provide examples of
each in your answer.
Answer: The goal of an FTA is to abolish all tariffs between member countries. It usually begins
modestly by eliminating tariffs on goods that already have low tariffs, and there is usually an
implementation period during which all tariffs are eliminated on all products. Moreover, each member
country maintains its own external tariffs against non-FTA countries. NAFTA is an example of a free
trade agreement. The EU is considered a customs union by the WTO. In addition to eliminating internal
tariffs, member countries levy a common external tariff on goods being imported from nonmembers. For
example, the EU removed internal tariffs from 1959 to 1967, when it established a common external
tariff. Now it negotiates as one region in the WTO rather than as separate countries. Customs unions
account for less than 10 percent of the RTAs identified by the WTO.
Diff: 3
Learning Outcome: Discuss arguments for and against regional economic integration
Skill: Synthesis
Objective: 4, 5
AACSB: Dynamics of the global economy
24
Copyright © 2013 Pearson Education, Inc. publishing as Prentice Hall
Author: R. K. Weekes
Language: English
A Novel
BY
ROSE K. WEEKES
“One should master one’s passions (love, in chief),
And be loyal to one’s friends.”
NEW YORK AND LONDON
HARPER & BROTHERS
PUBLISHERS · MCMIV
Copyright, 1904, by Harper &
Brothers.
Ten minutes later a train passed southwards across the arch. It had
discharged passengers at the station, and among them one who
soon came driving down the lane in a high dog-cart fitted with
pneumatic tyres, acetylene lamps, and a correct groom sitting up
behind. As it turned the corner the horse, a handsome chestnut
signally well groomed, shied violently at John Smith’s prostrate
figure, and was promptly checked by the driver, who had him well in
hand. He looked back over his shoulder. “What’s that, Simpson?”
“Drunken man, sir,” said the correct groom, stolidly.
“Pleasant weather to lie in the road. Still, will you?” He gripped the
reins as though to curb the restive horse gave him pleasure. “Just go
and see if he’s all right, Simpson. He’ll get run over lying under the
arch there.”
Simpson got down. He resented his master’s charitable fads when
they affected his comfort, but he dared not complain. It was true that
Mr. Farquhar carried generosity to his servants to its extreme limit,
but those who transgressed his laws had to go. He bent over John
Smith and announced with undeviating stolidity: “Been fighting, sir.”
“Fighting, has he? Come and hold the horse for a minute.”
Servant and master changed places, and Farquhar in his turn
scrutinised the features of John Smith. He moved the stained
handkerchief, sniffed at his lips, laid a finger on the spot where the
pulse should have beaten, and then stood up.
“Shift the seat as far forward as it’ll go. Yes; now put the cushions
in the bottom of the cart. The rug over them. Is the back let down?
That’s right.” He picked up John Smith and shouldered him as if he
were a gun. The luckless artist in words weighed less than eight
stone, but the strength required to lift him so easily was very great,
and was shown more remarkably still when Farquhar raised him up
at arm’s-length to put him into the dog-cart. Simpson lent his
assistance, protesting only by silence against the introduction of a
drunken and excessively muddy prodigal between the folds of the
new carriage-rug. His discretion was rewarded by his master, who
explained, as he took his seat again and picked up the reins: “It’s a
case of illness, poor chap. The man’s not drunk.”
“Very good, sir,” said Simpson, touching his cap; but he did not
believe it. Even the irreproachable Mr. Farquhar was no hero to his
groom.
About a mile beyond the arch Simpson had to get down to open a
gate, and the dog-cart drew up at the front door of The Lilacs, which
was the pleasing name of Farquhar’s bachelor residence. It was a
large modern villa built of red brick and white stucco, boasting
Elizabethan mullioned windows on the first floor, modern bays below,
a castellated turret, and a Byzantine porch with a cupola, which
tasteful decorations the officious ivy had done its best to veil. Inside,
the house was furnished well and, before all things, comfortably; it
was heated by an arrangement of hot-air pipes in the Russian
fashion, and cooled in summer by genuine punkahs. John Smith was
carried in and laid before the library fire; Simpson was sent to fetch
the doctor, and the master of the house himself attended on the
muddy stranger. Farquhar was a wonderfully good Good Samaritan.
He began by stripping off John Smith’s wet clothes, noting that the
shirt, which had seen its best and almost its worst days, was neatly
marked in a woman’s writing with the name of Lucian de Saumarez.
His other garments, which were in better condition, bore only the red
cotton hieroglyphics of the laundress. Few people could have
excelled Lucian de Saumarez in the art of dressing badly; his hat
alone would have roused envy in a scarecrow. Farquhar did not dare
to give him brandy, but he began to practise a remedy potent as
alcohol and safer. Kneeling beside the parchment-covered
articulated skeleton on the sofa, he ran his fingers over him with
subtle, measured movements, unpleasantly suggestive of the coiling
and uncoiling of a snake. He had learned the art of massage among
strange people in a strange land; it seemed literally to recall the spirit
to the body it had quitted.
Lucian de Saumarez became conscious of existence in a tingling
thrill of warmth which crept all over his frame. The return to life was
exquisitely delicious; a deep peace rapt him far out of reach of pain,
and his mental faculties came back one by one while yet his bodily
sense was drowned in dreams. But, suddenly, he was aware of a
change, the truth being that Farquhar had paused in his task. Vague
discomfort followed; then he opened his eyes and saw, as a vignette
beyond a tunnel of darkness, the face of a man reading a letter. That
letter, written by a woman’s hand on thick blue paper with a gilded
monogram, was familiar to Lucian; it was the same which he for nine
years had carried close to his heart. Without wonder he saw the
dream-stranger turn the page and read to the end, he watched him
fold it up and put it back in its place; and then the trance reabsorbed
him, and again he revelled in delicious dreams under the magic
touch of Noel Farquhar. Some minutes later he came to himself
completely, and discovered what was being done to his unconscious
frame. Lucian looked on massage as first cousin to hypnotism, and
hated both, with all the lively independence of a character which
could not bear to place itself, even voluntarily, even for a moment, at
the mercy of another man’s will. Prepared with a strong protest, he
opened his eyes and was struck dumb. In the open English face of
Noel Farquhar he recognized the dream-vision who had read his
letter.
“Ah, you’ve come to yourself,” said Farquhar, pleasantly. “You’re
with friends; don’t speak. The doctor will be here directly.”
Lucian put up his eyebrows, sent his eyes straying round the
room, and brought them back to his host’s face with an air of inquiry.
Farquhar smiled.
“How you came here? My horse shied at you and I picked you up.
My name’s Farquhar—Noel Farquhar.”
“M. P.?” said Lucian, who was by fits an ardent politician.
“Quite right. Can I communicate with your friends?”
“Don’t own any.”
“I hope you won’t say that long. Now you really must not talk any
more; I sha’n’t answer you if you do.”
As he evidently meant to keep his word, Lucian subsided, and
gave himself up to observing. The room was conventionally
furnished, but he saw on the floor the skin of a black panther, and
behind the door the nine-foot spiral ivory horn of a narwhal, trophies
which even Whiteley cannot provide. Himself a wanderer, he rejoiced
to see such tokens of his host’s pursuits; a sportsman is kin to a
sportsman all the world over. From studying the furniture he turned
to study Noel Farquhar.
Most people knew the name of the member for Mid-Kent, and his
face was tolerably familiar through the slanderous presentations
which the papers call portraits. He had been in Parliament for
several years, and was supposed to be a coming man. When he got
on his legs, members deferred their engagements; his speeches
were generally lively, always pithy, and never long, a trinity of virtues
rare as the Christian graces, and, like them, culminating in the last.
He had the advantage of a good voice and delivery. As a politician
he was incorruptible; he would criticise his own party, when it
seemed in danger of deviating from that ideal of rectitude which
animates the bosom of every British statesman. A Bayard without
fear or reproach, a high-souled patriot with a caustic tongue, he had
a niche all to himself among parliamentary celebrities.
He stood in his socks only five feet nine, but the width of his
shoulders was exceptional, and his frame was lean and hard and
supple as a panther’s. Every muscle had been trained and trained
again to the pitch of excellency, and every movement had the sure
grace of controlled strength. The comeliness of perfect health and
physical fitness was his; he diffused a kind of tonic energy which
acted on susceptible people almost like an electric current. For the
rest, he was the typical Englishman: fair-haired, grey-eyed, sunburnt,
pleasant, in spite of the grim curve of cheek and jaw, which matched
the almost ominous strength of his physique. Lucian, like other
people, would have accepted him for what he seemed, if he had not