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Chapter 1 Quiz: Answers LSCM 4360

1. The four international trade drivers are: Cost, Competition, Market, and

Technology. a. True

b. False 2. Which of the following entities was created at the Bretton Woods Conference of 1944? a. b. c. International Monetary Fund World Trade Conference Marshall Plan
ANS: A -- The IMF was created at the Bretton Woods

d. e.

United Nations None of the above

Conference.

3. The International Monetary Fund was created in part to oversee exchange rates.

a. True b. False
4. 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:

a. b. c.

Insourcing Foreign Investment Just-In-Time

ANS: D -- Outsourcing is the process of manufacturing abroad in order to lower production costs.

d. e.

Outsourcing None of the above

5. The WTO is responsible for enforcing free trade globally.

a. True b. False 6. The largest exporting country in 2010 was China with over 20% of the worlds exported goods. a. True b. False: China Exported 10.4%
7. The Bretton Woods Conference triggered the creation of the World Trade

Organization in 1944.

a. True b. False: Brenton Woods created the International Monetary Fund 8. The North American Free Trade Association (NAFTA) includes only the United States and Canada. a. True b. False: US, Canada and Mexico

9. In 2010, the United States imported more goods than any other country in the

world. a. True b. False

10. In 2010, the United States imported ($1,969B) about 1.9 times more goods than it

exported ($1,278B).

a. True b. False 11. 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: Smith stated the Absolute Advantage not the Comparative Advantage

12. 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 13. 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

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b. False
14. Ford Motor Company is an example of a company employing the Comparative

Advantage Theory in that they can produce their own parts, however they choose to purchase from others who do so more efficiently and instead focus on design and assembly of their vehicles. a. True b. False

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15. Most trade today is more likely to be explained by Comparative Advantage than by

Absolute Advantage. a. True b. False 16. 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?

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a. b. c.

Land Labor Capital

ANS: D -- The four resources that economists consider scarce are land, labor, capital, and entrepreneurship.

d. e.

Education None of the above

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17. 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): a. b. c. The country of innovation only d. Developing countries e. Any country with the manufacturing technology necessary to manufacture it Other developed countries None of the above

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18. The International Product Life Cycle Theory, states three types of countries:

ANS: A -- 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.

Innovation, Other Advanced and Developing.

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a. True b. False 19. 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? a. b. They can attract talented employees d. Such concentration fosters creativity e. as All of the above None of the above

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c.

employees know-how travels from employer to employer The concentration of talent fosters Innovation
ANS: D -- All of these options are explicitly listed in the cluster theory section.

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20. Michael Porter views Silicon Valley is an example of a cluster of innovation and manufacturing. a. True b. False
21. The international environment presents challenges for the international logistician.

Which aspect of the international business environment is most likely to create frustrations?

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a. b. c.

Cultural differences Economic issues Currency differences

d. e.

Infrastructure constraints None of the above

ANS: A -- Among all of the issues listed, culture is the one clearly emphasized and explicitly indicated as the one that is most frustrating.

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22. The single most important development in international ocean shipping was the creation of containers. a. True b. False
23. Logistics is often defined as the activities that deal with the physical aspects of the

movement of goods. a. True

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b. False 24. Given the differences logistics managers may find in other countries and cultures, it is important for them to attempt to impose what is familiar to them on those other countries and cultures. a. True b. False
25. As the size of ships has increased, ports have been challenged in keeping up with

the ability to handle them.

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a. True b. False