David_IL3e_TB_Ch01 - Testbank Chapter 1 Introduction...

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
14 Consumers 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