Testbank Chapter 1: Introduction TRUE/FALSE 1.Many of the developing countries of the world experience traffic gridlock. DIF: Easy REF: Introduction 2.World trade has grown about 10 percent per year since 1950. DIF: Easy REF: 1-1 3.World trade in services representf a higher percentage of total world trade than does world trade in merchandise. DIF: Moderate REF: 1-1: Tables 1-1, 1-2, and 1-3 4.The Bretton Woods Conference triggered the creation of the World Trade Organization in 1944. DIF: Moderate REF: 1-2a 5.The Treaty of Rome in 1957 was the first step in the creation of the European Union. DIF: Easy REF: 1-2c 6.The North American Free Trade Association (NAFTA) includes only the United States and Canada. DIF: Moderate REF: 1-2c: Table 1-4 7.The euro has replaced the currencies of all of the countries of the European Union. DIF: Hard REF: Table 1-2d 8.In 2007, the United States exported more goods than any other country in the world. DIF: Moderate REF: 1-3: Figure 1-3 9.In 2007, the United States imported about 1.5 times more goods than it exported. DIF: Hard REF: 1-3: Figures 1-3 and 1-4 1.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. DIF: Moderate REF: 1-4a 1- 1
Chapter 1: Introduction 11.The “Wal-Mart effect” pushes manufacturers to sell products at ever-lower prices, often obtained by manufacturing abroad. DIF: Moderate REF: 1-4a 12.The term “outsourcing” refers to a strategy whereby a company purchases plants overseas. DIF: Moderate REF: 1-4a 13.A competitor offering a new product in a mature market can entice a company to start importing its own low-cost alternative. DIF: Moderate REF: 1-4b 14Consumers are becoming increasingly worldly and willing to purchase foreign-made products. DIF: Easy REF: 1-4c 15.According to Thomas Friedman, individuals looking for jobs now compete with hundreds of other similarly trained applicants, coming from all corners of the world. DIF: Hard REF: 1-4d 16.According to Adam Smith, countries trade when they enjoy a comparative advantage over other countries in the production of a given product. DIF: Easy REF: 1-5a 17.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. DIF: Easy REF: 1-5a
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