Chapter 01 - Globalization

Chapter 01
Globalization

True / False Questions

1. The notion that national economies are relatively self-contained entities is on the rise.
True False

2. The shift toward a more interated and interdependent world economy is referred to as
lobalization.
True False

!. The merin of historically distinct and separate mar"ets into one hue lobal mar"etplace
is "nown as the lobalization of mar"ets.
True False

#. The ma$ority of %.&. firms that e'port are lare multinationals that employ (00 or more
people.
True False

(. The most lobal mar"ets currently are mar"ets for industrial oods and materials that serve
a universal need the world over.
True False

). *utsourcin is a process that is limited to manufacturin enterprises.
True False

+. ,ecause of their nature- service activities cannot be outsourced to other companies.
True False

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Chapter 01 - Globalization
.. *ne of the %/ central mandates is the promotion of hiher standards of livin- full
employment- and conditions of economic and social proress and development.
True False

0. %nderlyin the trend towards reater lobalization is technoloical chane and a decline in
barriers to the free flow of oods- services- and capital.
True False

10. 1ccordin to the %nited /ations most chanes between 1002 and 200( to laws overnin
F23 have resulted in a less favorable environment for F23.
True False

11. 1ccordin to 4T* data- the volume of world merchandise trade has rown faster than the
world economy since 10(0.
True False

12. The e'pansion of world trade implies that nations are becomin less dependent on each
other for important oods and services.
True False

1!. 3n the period 10(0-1000- the world G25 showed a consistent decline as opposed to the
volume of e'ports.
True False

1#. 2urin the period 1000 - 2000- the volume of total e'ports was more than twice the world
G25.
True False

1-2
Chapter 01 - Globalization
1(. 2eclinin barriers to cross-border trade and investment cannot be ta"en for ranted.
True False

1). The lobalization of mar"ets and production and the resultin rowth of world trade-
forein direct investment- and imports all imply that firms are findin their home mar"ets
protected from forein competitors.
True False

1+. 6oore7s 8aw predicts that the power of microprocessor technoloy doubles and its cost of
production falls by half every 1. months.
True False

1.. 9fficiency ains associated with containerization have caused transportation costs to fall
dramatically.
True False

10. Today lobal communication networ"s and lobal media are creatin a worldwide
culture.
True False

20. 3n the early 10)0s- the %nited &tates was by far the world7s dominant industrial power.
:owever by 200)- it lost its dominant position and now- is no loner the world7s larest
industrial power.
True False

21. ,y 200.- the %.&. had seen its share of e'ports fall to almost half its share in the 10)0s.
True False

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Chapter 01 - Globalization
22. 1ccordin to forecasts- a further relative decline in the share of world output and world
e'ports accounted for by the %nited &tates and other lon-established developed nations is
unli"ely.
True False

2!. 1 current trend in international business is the rowth of medium-sized and small
multinationals- "nown as mini-multinationals.
True False

2#. Today- the ris"s involved in doin business in countries such as ;ussia are low- but so are
the returns.
True False

2(. 3f the free mar"et reforms in China continue for two more decades- China may move from
Third 4orld status to industrial superpower status even more rapidly than <apan did.
True False

2). Current trends indicate that the world is movin rapidly towards an economic system that
is more favorable for international business.
True False

2+. 6any economists- politicians- and business leaders believe that the shift toward a more
interated and interdependent lobal economy is a positive trend.
True False

2.. The antilobalization effort is created and supported only by a small roup of hard-core
anarchists.
True False

1-#
Chapter 01 - Globalization
20. &tudies have shown that wae rates for uns"illed wor"ers in many advanced economies
have fallen in recent years.
True False

!0. &ome critics arue that outsourcin has caused wae rates of poorer 1mericans to fall
sinificantly over the past =uarter of a century.
True False

!1. ;ecent evidence indicates that the solution to the problem of stanant incomes amon the
uns"illed is to be found in increasin society7s investment in education to reduce the supply of
uns"illed wor"ers.
True False

!2. 1 source of concern of critics of free trade is that it usually encouraes firms from
advanced countries to move manufacturin facilities to less developed countries that lac"
ade=uate reulations to protect labor and the environment from abuse.
True False

!!. 1ccordin to supporters of free trade- as countries et richer they enact touher
environmental and labor reulations.
True False

!#. 1ccordin to critics of lobalization- today7s interdependent lobal economy limits a
nation7s national sovereinty.
True False

!(. Critics of lobalization suest that over the last century- the ap between the rich and
poor nations of the world has shrun"en.
True False

1-(
Chapter 01 - Globalization
!). 2ebt continues to be a ma$or burden for poorer nations as they strive to et ahead.
True False

!+. &upporters of debt relief arue that new democratic overnments in poor nations should
not be forced to honor debts that their corrupt and dictatorial predecessors incurred and
mismanaed lon ao.
True False

!.. 1n international business is any firm that enaes in international trade or investment.
True False

!0. The manaers of an international business must decide whether it is ethical to adhere to
the lower labor and environmental standards found in many less developed nations.
True False

#0. 3n eneral- manain an international business is a more comple' tas" than manain a
business that serves only the local mar"et.
True False


Multiple Choice Questions

#1. 4hich of the followin is not characteristic of lobalization>
1. /ational economies are turnin into independent economic systems.
,. 6aterial culture is startin to loo" similar the world over.
C. 5erceived distance is shrin"in due to advances in transportation and telecommunications.
2. ,arriers to cross-border trade and investment are declinin.

1-)
Chapter 01 - Globalization
#2. Globalization has ????? the opportunities for a firm to e'pand its revenues by sellin
around the world and ????? its costs by producin in nations where "ey inputs are cheap.
1. reduced- reduced
,. increased- increased
C. increased- reduced
2. reduced- increased

#!. &ince the collapse of communism at the end of the 10.0s- the erstwhile communist nations
have transformed their economies by encourain all of the followin e'cept@
1. privatizin state-owned enterprises.
,. reulatin mar"ets.
C. increasin competition.
2. welcomin investment by forein businesses.

##. 3dentify the incorrect statement concernin lobalization.
1. 3t has been blamed for unemployment in developed nations- environmental deradation
and the 1mericanization of popular culture.
,. 3t has created new threats for businesses accustomed to dominatin their domestic mar"ets.
C. 3t is transformin industries and is hihly welcomed by those who believed their $obs were
protected from forein competition.
2. 1ccordin to most economists it is a very beneficial process where ains outweih the
losses by a wide marin.

#(. 3n the %.&.- ????? percent of firms that e'port are small companies employin fewer than
100 people.
1. 00
,. +(
C. (0
2. !0

1-+
Chapter 01 - Globalization
#). The most lobal mar"ets currently are mar"ets for@
1. services.
,. consumer oods.
C. consumer durables.
2. industrial oods.

#+. 4hich of the followin is not an impediment that ma"es it difficult for firms to achieve
the optimal dispersion of their productive activities to locations around the lobe>
1. ;educed transportation costs.
,. Government reulations.
C. 3ssues associated with economic and political ris".
2. ,arriers to forein direct investment.

#.. The ?????? is primarily responsible for policin the world tradin system and ma"in
sure nation-states adhere to the rules laid down in trade treaties sined by member states.
1. 3nternational 2evelopment 1ssociation
,. 4orld ,an"
C. 3nternational Court of $ustice
2. 4orld Trade *ranization

#0. The ????? was created in 10## by ## nations that met in ,reton 4oods- /ew :ampshire
to promote economic development.
1. 4orld ,an"
,. 3nternational Trade Center
C. 4orld Trade *ranization
2. %nited /ations

(0. The institution- created in 10## at ,retton 4oods- responsible for maintainin order in the
international monetary system is the
1. 36F.
,. 4T*.
C. %/.
2. %/9&C*.

1-.
Chapter 01 - Globalization
(1. ????? occurAsB when a firm e'ports oods or services to consumers in another country.
1. 3nternational trade
,. Forein direct investment
C. 3nward investment
2. 6erer and ac=uisitions

(2. The ????? was established to remove barriers to the free flow of oods- services- and
capital between nations.
1. %/
,. 36F
C. G1TT
2. 321

(!. 1t the 2oha ;ound of the 4T* in late 2001-
1. the 4T* was established.
,. G1TT was e'tended to include services.
C. world trade volume increased.
2. an aenda was established to phase out subsidies to aricultural producers.

(#. The reduction in the averae tariff rates on manufactured products since 10(0 implies all
of the followin e'cept that
1. firms are dispersin parts of their production process to lobal locations to drive down
production costs and increase product =uality.
,. the economies of the world7s nation states are becomin more intertwined.
C. nations are becomin increasinly independent of each other for important oods and
services.
2. the world has become sinificantly wealthier since 10(0.

1-0
Chapter 01 - Globalization
((. The rowin interation of the world economy is@
1. increasin the intensity of competition in a wide rane of manufacturin and service
industries.
,. decreasin the intensity of competition in manufacturin industries- and increasin the
intensity of competition in services.
C. increasin the intensity of competition in manufacturin industries- and decreasin the
intensity of competition in services.
2. narrowin the scope of competition in a wide rane of service- commodity- and
manufacturin industries.

(). 4hich of the followin statements reardin cross-border trade and investment is not
true>
1. C5rotectionC from forein competitors has been- at times- demanded by the %nited &tates.
,. Forecasts indicate a return to the restrictive trade policies of the 1020s and !0s.
C. 3f trade barriers decline no further they will put a bra"e upon the lobalization of both
mar"ets and production.
2. 3t is not clear whether the political ma$ority in the industrialized world favors further
reductions in trade barriers.

(+. 3dentify the incorrect statement pertainin to the 4orld 4ide 4eb.
1. 3t ma"es it much easier for buyers and sellers to find each other.
,. Diewed lobally- it is emerin as an e=ualizer.
C. 3t rolls bac" all of the constraints of location- scale- and time zones.
2. 3t allows businesses to e'pand their lobal presence at a lower cost than ever before.

(.. &ince 10.0- the world7s containership fleet has more than ?????- reflectin in part the
rowin volume of international trade.
1. doubled
,. tripled
C. =uadrupled
2. =uintupled

1-10
Chapter 01 - Globalization
(0. Technoloical innovations have facilitated all of the followin e'cept@
1. lobalization of production.
,. lobalization of mar"ets.
C. creation of electronic lobal mar"etplaces.
2. creation of absolutely homoeneous consumer mar"ets.

)0. 1lthouh the characteristics of the lobal economy have chaned dramatically over the
past !0 years- as late as the 10)0s all of the followin demoraphic characteristics were true-
e'cept@
1. the %.&. dominated the world economy.
,. small- %.&. entrepreneurial firms dominated the international business scene.
C. the %.&. dominated the world forein direct investment picture.
2. rouhly half the world was overned by centrally planned economies of the Communist
world.

)1. 4hich of the followin nation7s world output has declined the least over the last #0 years>
1. France
,. %nited &tates
C. %nited Eindom
2. Canada

)2. 4hich of the followin countries has had the ma'imum relative decline in its share of
world output since 10)!>
1. Canada
,. %nited &tates
C. <apan
2. Germany

1-11
Chapter 01 - Globalization
)!. 4hich of the followin statements pertainin to the chanin demoraphics of world
G25 and trade from 10)! to 200) is not true>
1. 1s emerin economies continue to row- a relative decline in the share of world output
and world e'ports accounted for by the %.&. seems unli"ely.
,. Forecasts predict a rapid rise in the share of world output accounted for by some
developin nations.
C. 1 decline in the share en$oyed by rich industrialized countries such as Great ,ritain-
Germany- <apan- and the %.&. is li"ely.
2. 3f current trends continue- the Chinese economy could be larer than that of the %.&. on a
purchasin power parity basis.

)#. 1ccordin to 4orld ,an" numbers-
1. developin nations currently account for more than )0 percent of world economic activity.
,. rich nations currently account for more than +0 percent of world economic activity.
C. today7s rich nations may account for (( percent of world economic activity by 2020.
2. today7s developin nations may account for more than )0 percent of world economic
activity by 2020.

)(. 3n the 10+0s- many <apanese firms invested in /orth 1merica and 9urope
1. to avoid a hihly competitive domestic mar"et.
,. to e'ploit hih domestic tariff barriers.
C. as a hede aainst unfavorable currency movements.
2. to ta"e advantae of low labor costs.

)). 4hat is the total cumulative value of forein investments best referred to as>
1. 1ccumulation of forein shares
,. 5ortfolio investments
C. &toc" of forein direct investments
2. &toc" mar"et investments

1-12
Chapter 01 - Globalization
)+. The share of the total F23 stoc" accounted for by which of the followin countries
increased mar"edly from 10.0 to 200(>
1. %nited &tates
,. France
C. %nited Eindom
2. /etherlands

).. Firms based in ????? accounted for 1#.+ percent of the stoc" of forein direct investment
in 200+- up from only 1.1 percent in 10.0.
1. 1sia
,. developin countries
C. %nited Eindom
2. /1FT1 reion

)0. 4hich of these statements pertainin to cross-border F23 flows is true>
1. The rowth of F23 resumed in 200# and continued throuh 200).
,. 1 sure in F23 from 100( to 100+ was followed by a slump from 100. to 2000.
C. 1mon developin nations- the larest recipient of F23 has been ;ussia.
2. The dramatic increase in F23 reflects the decreasin internationalization of business
corporations.

+0. 4hich of the followin countries has been the larest recipient of forein direct
investment and received about F+0 billion a year in inflows in 200( and 200)>
1. ,razil
,. ;ussia
C. 3ndia
2. China

+1. ,y 200) some 2# of the world7s 100 larest non-financial multinationals were@
1. Chinese enterprises.
,. ,ritish enterprises.
C. %.&. enterprises.
2. <apanese enterprises.

1-1!
Chapter 01 - Globalization
+2. 3dentify the incorrect statement reardin the former Communist nations of 9urope and
1sia.
1. The economies of most of the former Communist states are very stron and developed.
,. 6any of the former Communist nations of 9urope and 1sia share a commitment to free
mar"et economies.
C. 1s a result of disturbin sins of rowin unrest and totalitarian tendencies- the ris"s
involved in doin business in these countries is very hih.
2. For about half a century these countries were essentially closed to 4estern international
business.

+!. 4hich of the followin observations concernin 8atin 1merican countries is true>
1. Complete restrictions on direct investment by forein firms.
,. Characterized by low rowth- hih debt- and hyperinflation.
C. 2ebt and inflation are up compared to previous decades.
2. &ubstantial opportunities e'ist- but are accompanied by substantial ris"s.

+#. 4hich of the followin statement pertainin to chanes in the lobal economy of the 21
st

century is not true>
1. ,arriers to the free flow of oods- services- and capital have been comin down.
,. Dolume of cross-border trade and investment has been rowin more rapidly than lobal
output.
C. /ational economies are becomin more independent and movin away from the lobal
economic system.
2. 1s economies advance- more nations are $oinin the ran"s of the developed world.

+(. 4hich of the followin does not help create an economic system that is favorable to
international business>
1. 2ecreased privatization
,. 4idespread dereulation
C. *pen mar"ets
2. Fallin trade and investment barriers

1-1#
Chapter 01 - Globalization
+). 4hen a company Ce'ports $obsC overseas- the company is@
1. helpin domestic wor"ers by pushin up wae rates.
,. increasin the demand of =ualified domestic wor"ers.
C. ta"in advantae of lower waes in forein mar"ets.
2. deceivin the supporters of lobalization.

++. 3f the critics of lobalization are correct- all of the followin thins must be shown
e'cept@
1. the share of national income received by labor- as opposed to the share received by the
owners of capital should have declined in advanced nations.
,. even thouh labor7s share of the economic pie may have declined- livin standards need not
deteriorate if the size of the total pie has increased sufficiently to offset the decline in labor7s
share.
C. the decline in labor7s share of national income must be due to movin production to low-
wae countries- as opposed to improvin production technoloy and productivity.
2. economic rowth in developed nations has offset the fall in uns"illed wor"ers7 share of
national income- raisin their livin standards.

+.. 1 study by the *9C2- whose members include the 20 richest economies in the world-
noted all of the followin e'cept@
1. the ap between the poorest and richest sements of society in some *9C2 countries
widened.
,. in almost all countries real income levels rose over the 20-year period studied.
C. fallin unemployment rates brouht ains to low-wae wor"ers and fairly broad-based
wae rowth.
2. the ap between rich and poor had narrowed in all *9C2 countries.

+0. Critics of lobalization maintain that the apparent decline in real wae rates of uns"illed
wor"ers
1. owes far more to a technoloy-induced shift within advanced economies toward $obs that
re=uire sinificant education and s"ills.
,. is due to the miration of low-wae manufacturin $obs offshore and a correspondin
reduction in demand for uns"illed wor"ers.
C. has been impacted most by technoloical chane.
2. can be chec"ed by increasin society7s investment in education to reduce the supply of
uns"illed wor"ers.

1-1(
Chapter 01 - Globalization
.0. ,efore /1FT1 was passed
1. 6e'ico areed to establish a hiher minimum wae.
,. the %.&. areed to limit the number of $obs that could be e'ported to 6e'ico.
C. 6e'ico committed to touher enforcement of environmental protection reulations.
2. Canada committed to establish new limits of F23.


Essay Questions

.1. 4ith the help of an e'ample discuss the characteristics of lobalization.




.2. 2efine lobalization and discuss it has chaned the business environment>




.!. 9'plain what is meant by the lobalization of mar"ets. 5rovide an e'ample. 4hat are the
most lobal mar"ets>




1-1)
Chapter 01 - Globalization
.#. 2iscuss the concept of the lobalization of production.




.(. 4hat is the 4orld Trade *ranization> 4hat is its role in the world economy>




.). 4hat is the 3nternational 6onetary Fund> 4hat is the 4orld ,an"> 4hat is their
relationship- if any- with each other>




.+. 9'plain how a company competes usin outsourcin. 5rovide an e'ample.




1-1+
Chapter 01 - Globalization
... 9'plain the trends in world trade and forein direct investment over the last half century.




.0. :ow has technoloical chane affected lobal mar"ets> 4hat "ey innovations have
chaned the nature of how Cwe do business>C




00. 9'plain the notion of the 4eb emerin as an e=ualizer.




01. 3nnovations in transportation have had a ma$or impact on lobal trade. Consider one of
these innovations@ containerization. 4hy is this innovation so sinificant>




1-1.
Chapter 01 - Globalization
02. 2iscuss the demoraphics of world trade since the 10)0s. :ow has the role of the %.&.
chaned> :ow is world trade e'pected to chane in the future>




0!. :ow has the forein direct investment picture chaned since the 10)0s>




0#. 4hat is a multinational enterprise A6/9B> :ow does a mini-multinational differ from an
6/9>




0(. 6any companies are "eepin their eyes on China. 4hy is China so important to
international business>




1-10
Chapter 01 - Globalization
0). Consider the lobal economy of the 21
st
century. 4hat important chanes are ta"in
place> 4hat do these chanes mean for international companies>




0+. Consider whether the shift toward a more interated and interdependent lobal economy
is a ood thin. 2iscuss the shift from the eyes of the consumer- the wor"er- the company- and
the environmentalist.




0.. 2iscuss what occurred in &eattle in 1000 at the meetin of the 4T* and why the events
were important to the future of lobal trade.




00. Fallin barriers to international trade destroy manufacturin $obs in wealthy advanced
economies. 2iscuss this statement. 2o you aree> 4hy or why not>




1-20
Chapter 01 - Globalization
100. 2iscuss the effect of lobalization on national sovereinty.




1-21
Chapter 01 - Globalization
Chapter 01 Globalization 1nswer Eey


True / False Questions

1. (p. 4) The notion that national economies are relatively self-contained entities is on the rise.
FALSE
4e are movin away from a world in which national economies were relatively self-contained
entities.

AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'('

2. (p. )) The shift toward a more interated and interdependent world economy is referred to as
lobalization.
TRE

AACSB: Analytic
Bloom's: Comp!e*ension
Difficulty: +asy
ea!ning "#$ecti%e: &'('

1-22
Chapter 01 - Globalization
!. (p. )) The merin of historically distinct and separate mar"ets into one hue lobal
mar"etplace is "nown as the lobalization of mar"ets.
TRE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: +asy
ea!ning "#$ecti%e: &'('

#. (p. )) The ma$ority of %.&. firms that e'port are lare multinationals that employ (00 or more
people.
FALSE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: +asy
ea!ning "#$ecti%e: &'('

(. (p. '') The most lobal mar"ets currently are mar"ets for industrial oods and materials that
serve a universal need the world over.
TRE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'('

). (p. ,) *utsourcin is a process that is limited to manufacturin enterprises.
FALSE

AACSB: -eflecti%e .*in/ing
Bloom's: Comp!e*ension
Difficulty: Medium
ea!ning "#$ecti%e: &'('

1-2!
Chapter 01 - Globalization
+. (p. ,) ,ecause of their nature- service activities cannot be outsourced to other companies.
FALSE

AACSB: -eflecti%e .*in/ing
Bloom's: Comp!e*ension
Difficulty: Medium
ea!ning "#$ecti%e: &'('

.. (p. '') *ne of the %/ central mandates is the promotion of hiher standards of livin- full
employment- and conditions of economic and social proress and development.
TRE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'('

0. (p. '') %nderlyin the trend towards reater lobalization is technoloical chane and a
decline in barriers to the free flow of oods- services- and capital.
TRE

AACSB: -eflecti%e .*in/ing
Bloom's: Comp!e*ension
Difficulty: Medium
ea!ning "#$ecti%e: &'(0

10. (p. '0) 1ccordin to the %nited /ations most chanes between 1002 and 200( to laws
overnin F23 have resulted in a less favorable environment for F23.
FALSE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'(0

1-2#
Chapter 01 - Globalization
11. (p. '0) 1ccordin to 4T* data- the volume of world merchandise trade has rown faster
than the world economy since 10(0.
TRE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'(0

12. (p. '0) The e'pansion of world trade implies that nations are becomin less dependent on
each other for important oods and services.
FALSE

AACSB: -eflecti%e .*in/ing
Bloom's: Comp!e*ension
Difficulty: Medium
ea!ning "#$ecti%e: &'(0

1!. (p. '1) 3n the period 10(0-1000- the world G25 showed a consistent decline as opposed to
the volume of e'ports.
TRE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'(0

1#. (p. '0) 2urin the period 1000 - 2000- the volume of total e'ports was more than twice the
world G25.
TRE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'(0

1-2(
Chapter 01 - Globalization
1(. (p. '4) 2eclinin barriers to cross-border trade and investment cannot be ta"en for ranted.
TRE

AACSB: -eflecti%e .*in/ing
Bloom's: Comp!e*ension
Difficulty: Medium
ea!ning "#$ecti%e: &'(0

1). (p. '1) The lobalization of mar"ets and production and the resultin rowth of world trade-
forein direct investment- and imports all imply that firms are findin their home mar"ets
protected from forein competitors.
FALSE

AACSB: Analytic
Bloom's: Comp!e*ension
Difficulty: +asy
ea!ning "#$ecti%e: &'(0

1+. (p. '4) 6oore7s 8aw predicts that the power of microprocessor technoloy doubles and its
cost of production falls by half every 1. months.
TRE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'(0

1.. (p. '2) 9fficiency ains associated with containerization have caused transportation costs to
fall dramatically.
TRE

AACSB: -eflecti%e .*in/ing
Bloom's: Comp!e*ension
Difficulty: Medium
ea!ning "#$ecti%e: &'(0

1-2)
Chapter 01 - Globalization
10. (p. ')) Today lobal communication networ"s and lobal media are creatin a worldwide
culture.
TRE

AACSB: .ec*nology
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'('

20. (p. ')) 3n the early 10)0s- the %nited &tates was by far the world7s dominant industrial
power. :owever by 200)- it lost its dominant position and now- is no loner the world7s
larest industrial power.
FALSE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: Medium
ea!ning "#$ecti%e: &'(1

21. (p. '3) ,y 200.- the %.&. had seen its share of e'ports fall to almost half its share in the
10)0s.
TRE

AACSB: Analytic
Bloom's: Knowledge
Difficulty: 4a!d
ea!ning "#$ecti%e: &'(1

22. (p. '3) 1ccordin to forecasts- a further relative decline in the share of world output and
world e'ports accounted for by the %nited &tates and other lon-established developed
nations is unli"ely.
FALSE

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1-2+
Chapter 01 - Globalization
2!. (p. 0') 1 current trend in international business is the rowth of medium-sized and small
multinationals- "nown as mini-multinationals.
TRE

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2#. (p. 01) Today- the ris"s involved in doin business in countries such as ;ussia are low- but so
are the returns.
FALSE

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ea!ning "#$ecti%e: &'(1

2(. (p. 01) 3f the free mar"et reforms in China continue for two more decades- China may move
from Third 4orld status to industrial superpower status even more rapidly than <apan did.
TRE

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2). (p. 04) Current trends indicate that the world is movin rapidly towards an economic system
that is more favorable for international business.
TRE

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1-2.
Chapter 01 - Globalization
2+. (p. 04) 6any economists- politicians- and business leaders believe that the shift toward a
more interated and interdependent lobal economy is a positive trend.
TRE

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2.. (p. 0)) The antilobalization effort is created and supported only by a small roup of hard-
core anarchists.
FALSE

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20. (p. 0,) &tudies have shown that wae rates for uns"illed wor"ers in many advanced
economies have fallen in recent years.
TRE

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!0. (p. 0)) &ome critics arue that outsourcin has caused wae rates of poorer 1mericans to fall
sinificantly over the past =uarter of a century.
TRE

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1-20
Chapter 01 - Globalization
!1. (p. 05) ;ecent evidence indicates that the solution to the problem of stanant incomes
amon the uns"illed is to be found in increasin society7s investment in education to reduce
the supply of uns"illed wor"ers.
TRE

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!2. (p. 05) 1 source of concern of critics of free trade is that it usually encouraes firms from
advanced countries to move manufacturin facilities to less developed countries that lac"
ade=uate reulations to protect labor and the environment from abuse.
TRE

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!!. (p. 05) 1ccordin to supporters of free trade- as countries et richer they enact touher
environmental and labor reulations.
TRE

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!#. (p. 1') 1ccordin to critics of lobalization- today7s interdependent lobal economy limits a
nation7s national sovereinty.
TRE

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1-!0
Chapter 01 - Globalization
!(. (p. 1') Critics of lobalization suest that over the last century- the ap between the rich
and poor nations of the world has shrun"en.
FALSE

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!). (p. 10) 2ebt continues to be a ma$or burden for poorer nations as they strive to et ahead.
TRE

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!+. (p. 10) &upporters of debt relief arue that new democratic overnments in poor nations
should not be forced to honor debts that their corrupt and dictatorial predecessors incurred and
mismanaed lon ao.
TRE

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!.. (p. 11) 1n international business is any firm that enaes in international trade or
investment.
TRE

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1-!1
Chapter 01 - Globalization
!0. (p. 11) The manaers of an international business must decide whether it is ethical to adhere
to the lower labor and environmental standards found in many less developed nations.
TRE

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#0. (p. 11) 3n eneral- manain an international business is a more comple' tas" than manain
a business that serves only the local mar"et.
TRE

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Multiple Choice Questions

#1. (p. 4) 4hich of the followin is not characteristic of lobalization>
A! /ational economies are turnin into independent economic systems.
,. 6aterial culture is startin to loo" similar the world over.
C. 5erceived distance is shrin"in due to advances in transportation and telecommunications.
2. ,arriers to cross-border trade and investment are declinin.
4e have been movin away from a world in which national economies were relatively self-
contained entities. 1nd we are movin toward a world in which barriers to cross-border trade
and investment are declinin.

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1-!2
Chapter 01 - Globalization
#2. (p. 4) Globalization has ????? the opportunities for a firm to e'pand its revenues by sellin
around the world and ????? its costs by producin in nations where "ey inputs are cheap.
1. reduced- reduced
,. increased- increased
C! increased- reduced
2. reduced- increased
The lobal e'pansion of enterprises has been facilitated by favorable political and economic
trends.

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ea!ning "#$ecti%e: &'('

#!. (p. 2) &ince the collapse of communism at the end of the 10.0s- the erstwhile communist
nations have transformed their economies by encourain all of the followin e'cept@
1. privatizin state-owned enterprises.
"! reulatin mar"ets.
C. increasin competition.
2. welcomin investment by forein businesses.
&ince the collapse of communism at the end of the 10.0s- the pendulum of public policy in
nation after nation has swun toward the free mar"et end of the economic spectrum. This has
allowed businesses both lare and small- from both advanced nations and developin nations-
to e'pand internationally.

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1-!!
Chapter 01 - Globalization
##. (p. 2) 3dentify the incorrect statement concernin lobalization.
1. 3t has been blamed for unemployment in developed nations- environmental deradation
and the 1mericanization of popular culture.
,. 3t has created new threats for businesses accustomed to dominatin their domestic mar"ets.
C! 3t is transformin industries and is hihly welcomed by those who believed their $obs were
protected from forein competition.
2. 1ccordin to most economists it is a very beneficial process where ains outweih the
losses by a wide marin.
1s lobalization unfolds- it is transformin industries and creatin an'iety amon those who
believed their $obs were protected from forein competition.

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#(. (p. )) 3n the %.&.- ????? percent of firms that e'port are small companies employin fewer
than 100 people.
A! 00
,. +(
C. (0
2. !0
/early 00 percent of firms that e'port are small businesses employin less than 100 people-
and their share of total %.&. e'ports has rown steadily over the last decade to now e'ceed 20
percent.

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1-!#
Chapter 01 - Globalization
#). (p. )) The most lobal mar"ets currently are mar"ets for@
1. services.
,. consumer oods.
C. consumer durables.
#! industrial oods.
The most lobal mar"ets currently are not mar"ets for consumer productsGwhere national
differences in tastes and preferences are still often important enouh to act as a bra"e on
lobalizationGbut mar"ets for industrial oods and materials that serve a universal need the
world over.

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#+. (p. 5) 4hich of the followin is not an impediment that ma"es it difficult for firms to
achieve the optimal dispersion of their productive activities to locations around the lobe>
A! ;educed transportation costs.
,. Government reulations.
C. 3ssues associated with economic and political ris".
2. ,arriers to forein direct investment.
&ubstantial impediments still ma"e it difficult for firms to achieve the optimal dispersion of
their productive activities to locations around the lobe. These impediments include formal
and informal barriers to trade between countries- barriers to forein direct investment-
transportation costs- and issues associated with economic and political ris".

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1-!(
Chapter 01 - Globalization
#.. (p. 5) The ?????? is primarily responsible for policin the world tradin system and ma"in
sure nation-states adhere to the rules laid down in trade treaties sined by member states.
1. 3nternational 2evelopment 1ssociation
,. 4orld ,an"
C. 3nternational Court of $ustice
#! 4orld Trade *ranization
1s of 2000- 1(! nations that collectively accounted for 0+ percent of world trade were 4T*
members- thereby ivin the oranization enormous scope and influence. The 4T* is also
responsible for facilitatin the establishment of additional multinational areements between
4T* member states.

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#0. (p. '&) The ????? was created in 10## by ## nations that met in ,reton 4oods- /ew
:ampshire to promote economic development.
A! 4orld ,an"
,. 3nternational Trade Center
C. 4orld Trade *ranization
2. %nited /ations
The 4orld ,an" has focused on ma"in low-interest loans to cash-strapped overnments in
poor nations that wish to underta"e sinificant infrastructure investments.

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1-!)
Chapter 01 - Globalization
(0. (p. '&) The institution- created in 10## at ,retton 4oods- responsible for maintainin order
in the international monetary system is the
A! 36F.
,. 4T*.
C. %/.
2. %/9&C*.
The 36F is often seen as the lender of last resort to nation-states whose economies are in
turmoil and currencies are losin value aainst those of other nations.

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(1. (p. '') ????? occurAsB when a firm e'ports oods or services to consumers in another
country.
A! 3nternational trade
,. Forein direct investment
C. 3nward investment
2. 6erer and ac=uisitions
Forein direct investment AF23B occurs when a firm invests resources in business activities
outside its home country.

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1-!+
Chapter 01 - Globalization
(2. (p. '') The ????? was established to remove barriers to the free flow of oods- services- and
capital between nations.
1. %/
,. 36F
C! G1TT
2. 321
%nder the umbrella of G1TT- eiht rounds of neotiations amon member states Anow
numberin 1(!B have wor"ed to lower barriers to the free flow of oods and services. The
most recent round of neotiations to be completed- "nown as the %ruuay ;ound- were
finalized in 2ecember 100!.

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(!. (p. '0) 1t the 2oha ;ound of the 4T* in late 2001-
1. the 4T* was established.
,. G1TT was e'tended to include services.
C. world trade volume increased.
#! an aenda was established to phase out subsidies to aricultural producers.
The 2oha aenda includes cuttin tariffs on industrial oods- services- and aricultural
productsH phasin out subsidies to aricultural producersH reducin barriers to cross-border
investmentH and limitin the use of antidumpin laws.

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1-!.
Chapter 01 - Globalization
(#. (p. '1) The reduction in the averae tariff rates on manufactured products since 10(0 implies
all of the followin e'cept that
1. firms are dispersin parts of their production process to lobal locations to drive down
production costs and increase product =uality.
,. the economies of the world7s nation states are becomin more intertwined.
C! nations are becomin increasinly independent of each other for important oods and
services.
2. the world has become sinificantly wealthier since 10(0.
1s trade e'pands- nations are becomin increasinly dependent on each other for important
oods and services.

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((. (p. '1) The rowin interation of the world economy is@
A! increasin the intensity of competition in a wide rane of manufacturin and service
industries.
,. decreasin the intensity of competition in manufacturin industries- and increasin the
intensity of competition in services.
C. increasin the intensity of competition in manufacturin industries- and decreasin the
intensity of competition in services.
2. narrowin the scope of competition in a wide rane of service- commodity- and
manufacturin industries.
The rowin interation of the world economy into a sinle- hue mar"etplace is increasin
the intensity of competition in a rane of manufacturin and service industries.

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1-!0
Chapter 01 - Globalization
(). (p. '4) 4hich of the followin statements reardin cross-border trade and investment is not
true>
1. C5rotectionC from forein competitors has been- at times- demanded by the %nited &tates.
"! Forecasts indicate a return to the restrictive trade policies of the 1020s and !0s.
C. 3f trade barriers decline no further they will put a bra"e upon the lobalization of both
mar"ets and production.
2. 3t is not clear whether the political ma$ority in the industrialized world favors further
reductions in trade barriers.
1lthouh a return to the restrictive trade policies of the 1020s and !0s is unli"ely- it is not
clear whether the political ma$ority in the industrialized world favors further reductions in
trade barriers.

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(+. (p. '4) 3dentify the incorrect statement pertainin to the 4orld 4ide 4eb.
1. 3t ma"es it much easier for buyers and sellers to find each other.
,. Diewed lobally- it is emerin as an e=ualizer.
C! 3t rolls bac" all of the constraints of location- scale- and time zones.
2. 3t allows businesses to e'pand their lobal presence at a lower cost than ever before.
3t rolls bac" some of the constraints of location- scale- and time zones. The 4eb ma"es it
much easier for buyers and sellers to find each other- wherever they may be located and
whatever their size. 3t allows businesses- both small and lare- to e'pand their lobal presence
at a lower cost than ever before.

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1-#0
Chapter 01 - Globalization
(.. (p. '2) &ince 10.0- the world7s containership fleet has more than ?????- reflectin in part the
rowin volume of international trade.
1. doubled
,. tripled
C! =uadrupled
2. =uintupled
1s a result of the efficiency ains associated with containerization- transportation costs have
plummeted- ma"in it much more economical to ship oods around the lobe- thereby helpin
to drive the lobalization of mar"ets and production.

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(0. (p. ')) Technoloical innovations have facilitated all of the followin e'cept@
1. lobalization of production.
,. lobalization of mar"ets.
C. creation of electronic lobal mar"etplaces.
#! creation of absolutely homoeneous consumer mar"ets.
4hile modern communication and transportation technoloies are usherin in the Clobal
villae-C sinificant national differences remain in culture- consumer preferences- and
business practices.

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1-#1
Chapter 01 - Globalization
)0. (p. ')) 1lthouh the characteristics of the lobal economy have chaned dramatically over
the past !0 years- as late as the 10)0s all of the followin demoraphic characteristics were
true- e'cept@
1. the %.&. dominated the world economy.
"! small- %.&. entrepreneurial firms dominated the international business scene.
C. the %.&. dominated the world forein direct investment picture.
2. rouhly half the world was overned by centrally planned economies of the Communist
world.
3n 10)! the %nited &tates accounted for #0.! percent of world economic activity- measured by
Gross 2omestic 5roduct AG25B. ,y 200.- the %nited &tates accounted for 20.+ percent of
world G25- still the world7s larest industrial power but down sinificantly in relative size
since the 10)0s.

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)1. (p. '3) 4hich of the followin nation7s world output has declined the least over the last #0
years>
1. France
,. %nited &tates
C. %nited Eindom
#! Canada
Table 1.2@ The Chanin 2emoraphics of 4orld G25 and Trade

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1-#2
Chapter 01 - Globalization
)2. (p. '3) 4hich of the followin countries has had the ma'imum relative decline in its share
of world output since 10)!>
1. Canada
"! %nited &tates
C. <apan
2. Germany
Table 1.2@ The Chanin 2emoraphics of 4orld G25 and Trade

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)!. (p. '3) 4hich of the followin statements pertainin to the chanin demoraphics of world
G25 and trade from 10)! to 200) is not true>
A! 1s emerin economies continue to row- a relative decline in the share of world output
and world e'ports accounted for by the %.&. seems unli"ely.
,. Forecasts predict a rapid rise in the share of world output accounted for by some
developin nations.
C. 1 decline in the share en$oyed by rich industrialized countries such as Great ,ritain-
Germany- <apan- and the %.&. is li"ely.
2. 3f current trends continue- the Chinese economy could be larer than that of the %.&. on a
purchasin power parity basis.
1s emerin economies such as China- 3ndia- and ,razil continue to row- a further relative
decline in the share of world output and world e'ports accounted for by the %nited &tates and
other lon-established developed nations seems li"ely.

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1-#!
Chapter 01 - Globalization
)#. (p. '3) 1ccordin to 4orld ,an" numbers-
1. developin nations currently account for more than )0 percent of world economic activity.
,. rich nations currently account for more than +0 percent of world economic activity.
C. today7s rich nations may account for (( percent of world economic activity by 2020.
#! today7s developin nations may account for more than )0 percent of world economic
activity by 2020.
The 4orld ,an" has estimated that today7s developin nations may account for more than )0
percent of world economic activity by 2020- while today7s rich nations- which currently
account for more than (( percent of world economic activity- may account for only about !.
percent.

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)(. (p. '5) 3n the 10+0s- many <apanese firms invested in /orth 1merica and 9urope
1. to avoid a hihly competitive domestic mar"et.
,. to e'ploit hih domestic tariff barriers.
C! as a hede aainst unfavorable currency movements.
2. to ta"e advantae of low labor costs.
,einnin in the 10+0s- 9uropean and <apanese firms bean to shift labor-intensive
manufacturin operations from their home mar"ets to developin nations where labor costs
were lower. 3n addition- many <apanese firms invested in /orth 1merica and 9uropeGoften
as a hede aainst unfavorable currency movements and the possible imposition of trade
barriers.

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1-##
Chapter 01 - Globalization
)). (p. '5) 4hat is the total cumulative value of forein investments best referred to as>
1. 1ccumulation of forein shares
,. 5ortfolio investments
C! &toc" of forein direct investments
2. &toc" mar"et investments
The stoc" of forein direct investment refers to the total cumulative value of forein
investments.

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)+. (p. '5) The share of the total F23 stoc" accounted for by which of the followin countries
increased mar"edly from 10.0 to 200(>
1. %nited &tates
"! France
C. %nited Eindom
2. /etherlands
The share of the total stoc" accounted for by %.&. firms declined from about !. percent in
10.0 to 1+.0 percent in 200+. 6eanwhile- the shares accounted for by France and the world7s
developin nations increased mar"edly.

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1-#(
Chapter 01 - Globalization
).. (p. '5) Firms based in ????? accounted for 1#.+ percent of the stoc" of forein direct
investment in 200+- up from only 1.1 percent in 10.0.
1. 1sia
"! developin countries
C. %nited Eindom
2. /1FT1 reion
Firms based in :on Eon- &outh Eorea- &inapore- Taiwan- 3ndia and mainland China
accounted for much of this investment.

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)0. (p. 0&) 4hich of these statements pertainin to cross-border F23 flows is true>
A! The rowth of F23 resumed in 200# and continued throuh 200).
,. 1 sure in F23 from 100( to 100+ was followed by a slump from 100. to 2000.
C. 1mon developin nations- the larest recipient of F23 has been ;ussia.
2. The dramatic increase in F23 reflects the decreasin internationalization of business
corporations.
1 sure in forein direct investment from 100. to 2000 was followed by a slump from 2001
to 200!. 1mon developin nations- the larest recipient of forein direct investment has been
China. Throuhout the 1000s- the amount of investment directed at both developed and
developin nations increased dramatically- a trend that reflects the increasin
internationalization of business corporations.

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1-#)
Chapter 01 - Globalization
+0. (p. 0&) 4hich of the followin countries has been the larest recipient of forein direct
investment and received about F+0 billion a year in inflows in 200( and 200)>
1. ,razil
,. ;ussia
C. 3ndia
#! China
1mon developin nations- the larest recipient of forein direct investment has been China-
which in 200#-200. received F)0-F00 billion a year in inflows.

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+1. (p. 0') ,y 200) some 2# of the world7s 100 larest non-financial multinationals were@
1. Chinese enterprises.
,. ,ritish enterprises.
C! %.&. enterprises.
2. <apanese enterprises.
,y 200) thins had shifted sinificantly. &ome 2# of the world7s 100 larest non-financial
multinationals were %.&. enterprisesH 1! were FrenchH 12- GermanH 12- ,ritishH and 0-
<apanese. The lobalization of the world economy has resulted in a relative decline in the
dominance of %.&. firms in the lobal mar"etplace.

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1-#+
Chapter 01 - Globalization
+2. (p. 01) 3dentify the incorrect statement reardin the former Communist nations of 9urope
and 1sia.
A! The economies of most of the former Communist states are very stron and developed.
,. 6any of the former Communist nations of 9urope and 1sia share a commitment to free
mar"et economies.
C. 1s a result of disturbin sins of rowin unrest and totalitarian tendencies- the ris"s
involved in doin business in these countries is very hih.
2. For about half a century these countries were essentially closed to 4estern international
business.
The economies of many of the former Communist states are still relatively undeveloped- and
their continued commitment to democracy and free mar"et economics cannot be ta"en for
ranted.

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+!. (p. 01) 4hich of the followin observations concernin 8atin 1merican countries is true>
1. Complete restrictions on direct investment by forein firms.
,. Characterized by low rowth- hih debt- and hyperinflation.
C. 2ebt and inflation are up compared to previous decades.
#! &ubstantial opportunities e'ist- but are accompanied by substantial ris"s.
Throuhout most of 8atin 1merica- debt and inflation are down- overnments have sold state-
owned enterprises to private investors- forein investment is welcomed- and the reion7s
economies have e'panded. These chanes have increased the attractiveness of 8atin 1merica-
both as a mar"et for e'ports and as a site for forein direct investment.

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1-#.
Chapter 01 - Globalization
+#. (p. 04) 4hich of the followin statement pertainin to chanes in the lobal economy of the
21
st
century is not true>
1. ,arriers to the free flow of oods- services- and capital have been comin down.
,. Dolume of cross-border trade and investment has been rowin more rapidly than lobal
output.
C! /ational economies are becomin more independent and movin away from the lobal
economic system.
2. 1s economies advance- more nations are $oinin the ran"s of the developed world.
The volume of cross-border trade and investment has been rowin more rapidly than lobal
output- indicatin that national economies are becomin more closely interated into a sinle-
interdependent- lobal economic system.

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+(. (p. 04) 4hich of the followin does not help create an economic system that is favorable to
international business>
A! 2ecreased privatization
,. 4idespread dereulation
C. *pen mar"ets
2. Fallin trade and investment barriers
3n "eepin with the normative prescriptions of liberal economic ideoloy- in country after
country we have seen state-owned businesses privatized- widespread dereulation adopted-
mar"ets opened to more competition- and commitment increased to removin barriers to
cross-border trade and investment.

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Chapter 01 - Globalization
+). (p. 0)) 4hen a company Ce'ports $obsC overseas- the company is@
1. helpin domestic wor"ers by pushin up wae rates.
,. increasin the demand of =ualified domestic wor"ers.
C! ta"in advantae of lower waes in forein mar"ets.
2. deceivin the supporters of lobalization.
C// news anchor 8ou 2obbs has been runnin TD shows that are hihly critical of the trend
by 1merican companies to ta"e advantae of lobalization and Ce'port $obsC overseas. 1s the
world slipped into a recession in 200.- 2obbs stepped up his anti lobalization rhetoric.

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++. (p. 0,) 3f the critics of lobalization are correct- all of the followin thins must be shown
e'cept@
1. the share of national income received by labor- as opposed to the share received by the
owners of capital should have declined in advanced nations.
,. even thouh labor7s share of the economic pie may have declined- livin standards need not
deteriorate if the size of the total pie has increased sufficiently to offset the decline in labor7s
share.
C. the decline in labor7s share of national income must be due to movin production to low-
wae countries- as opposed to improvin production technoloy and productivity.
#! economic rowth in developed nations has offset the fall in uns"illed wor"ers7 share of
national income- raisin their livin standards.
This is the position arued by supporters of lobalization.

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Chapter 01 - Globalization
+.. (p. 0,) 1 study by the *9C2- whose members include the 20 richest economies in the
world- noted all of the followin e'cept@
1. the ap between the poorest and richest sements of society in some *9C2 countries
widened.
,. in almost all countries real income levels rose over the 20-year period studied.
C. fallin unemployment rates brouht ains to low-wae wor"ers and fairly broad-based
wae rowth.
#! the ap between rich and poor had narrowed in all *9C2 countries.
1 study by the *ranization for 9conomic Cooperation and 2evelopment- whose members
include the 20 richest economies in the world- noted that while the ap between the poorest
and richest sements of society in some *9C2 countries had widened- this trend was by no
means universal.

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+0. (p. 05) Critics of lobalization maintain that the apparent decline in real wae rates of
uns"illed wor"ers
1. owes far more to a technoloy-induced shift within advanced economies toward $obs that
re=uire sinificant education and s"ills.
"! is due to the miration of low-wae manufacturin $obs offshore and a correspondin
reduction in demand for uns"illed wor"ers.
C. has been impacted most by technoloical chane.
2. can be chec"ed by increasin society7s investment in education to reduce the supply of
uns"illed wor"ers.
&upporters of lobalization maintain that the apparent decline in real wae rates of uns"illed
wor"ers owes far more to a technoloy-induced shift within advanced economies away from
$obs where the only =ualification was a willinness to turn up for wor" every day and toward
$obs that re=uire sinificant education and s"ills.

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Chapter 01 - Globalization
.0. (p. 05) ,efore /1FT1 was passed
1. 6e'ico areed to establish a hiher minimum wae.
,. the %.&. areed to limit the number of $obs that could be e'ported to 6e'ico.
C! 6e'ico committed to touher enforcement of environmental protection reulations.
2. Canada committed to establish new limits of F23.
&upporters of free trade point out that it is possible to tie free trade areements to the
implementation of touher environmental and labor laws in less developed countries.
/1FT1- for e'ample- was passed only after side areements had been neotiated that
committed 6e'ico to touher enforcement of environmental protection reulations.

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Essay Questions

.1. (p. 4) 4ith the help of an e'ample discuss the characteristics of lobalization.
Globalization refers to a fundamental shift in the world economy in which national economies
are no loner relatively self-contained entities. 3nstead- nations are movin toward an
interdependent lobal economic system. 4ithin this new lobal economy- an 1merican miht
drive to wor" in a car desined in Germany that was assembled in 6e'ico by
2aimlerChrysler from components made in the %.&. and <apan that were fabricated from
Eorean steel and 6alaysian rubber. 1 company does not have to be the size of these
multinational iants to facilitate- and benefit from- the lobalization of mar"ets.

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1-(2
Chapter 01 - Globalization
.2. (p. 4(2) 2efine lobalization and discuss it has chaned the business environment>
Globalization has created many opportunities for businesses to e'pand their revenues by
sellin around the world while at the same time reducin their costs by producin in nations
where labor and other inputs are cheap. :owever- lobalization has also produced new threats
for companies in the form of increased competition.

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.!. (p. )(3) 9'plain what is meant by the lobalization of mar"ets. 5rovide an e'ample. 4hat
are the most lobal mar"ets>
The lobalization of mar"ets refers to the idea that historically distinct and separate national
mar"ets are merin into a sinle- hue lobal mar"etplace. For e'ample- Coca-Cola-
&tarbuc"s- and 6c2onald7s offer the same basic product worldwide- and are in fact- not only a
part of the trend- but facilitators of the trend as well. The most lobal mar"ets are not actually
for consumer oods- but instead are for industrial oods and materials that serve the same
needs across the world.

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.#. (p. 3(5) 2iscuss the concept of the lobalization of production.
The lobalization of production refers to the sourcin of oods and services from locations
around the world to ta"e advantae of national differences in the cost and =uality of factors of
production. Companies that capitalize on this trend are able to outsource production to the
best suppliers in the world- and should therefore end up with a better final product.

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Chapter 01 - Globalization
.(. (p. 5('&) 4hat is the 4orld Trade *ranization> 4hat is its role in the world economy>
The 4orld Trade *ranization A4T*B is primarily responsible for policin the world tradin
system and ma"in sure nation-states adhere to the rules laid down in trade treaties sined by
4T* members. The 4T* currently has 1#. members that collectively account for 0+ percent
of world trade. The 4T* has been instrumental in lowerin barriers to cross-border trade and
investment. 3n addition to these responsibilities- the 4T* also facilitates the establishment of
additional areements between member states.

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.). (p. '&) 4hat is the 3nternational 6onetary Fund> 4hat is the 4orld ,an"> 4hat is their
relationship- if any- with each other>
The 3nternational 6onetary Fund A36FB was created to maintain order in the international
monetary system. The 4orld ,an" was established to promote economic development. ,oth
oranizations were launched as part of the 10## ,retton 4oods 1reement- and have emered
as sinificant players in the lobal economy. The 36F is often seen as the lender of last resort
to nation-states whose economies are in turmoil and currencies are losin value aainst those
of other nations.

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Chapter 01 - Globalization
.+. (p. '0) 9'plain how a company competes usin outsourcin. 5rovide an e'ample.
Companies compete by outsourcin manufacturin activities to the optimal location wherever
in the world that may beH iven production and transportation costs. Thus- a firm miht desin
a product in one country- produce component parts in two other countries- assemble the
product in yet another country- and then e'port the finished product around the world. 3,6
for e'ample- desined a laptop computer in the %.&.- outsourced production of the case-
"eyboard- and hard drive to Thailand- produced the display screen and memory in &outh
Eorea- the wireless card in 6alaysia- and the microprocessor in the %.&. The final product
was assembled in 6e'ico- and was then e'ported to the %.&. for sale.

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... (p. '1('4) 9'plain the trends in world trade and forein direct investment over the last half
century.
&ince 10(0- the volume of world merchandise trade has rown faster than the world economy.
3n particular- there has been acceleration in world trade since 10.0. This trade and investment
pattern implies that firms are dispersin parts of their production to different locations around
the world to drive down production costs and increase product =uality- that the economies of
the world7s nation states are becomin more intertwined- that forein direct investment is
playin an increasin role in the lobal economy as firms increase their cross-border
investments- and that the world has become sinificantly wealthier over the last (0 years.

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1-((
Chapter 01 - Globalization
.0. (p. '4) :ow has technoloical chane affected lobal mar"ets> 4hat "ey innovations have
chaned the nature of how Cwe do business>C
6a$or advances in communication- information processin- and transportation technoloy
have facilitated the lobalization of mar"ets and production. The microprocessor and the
3nternet have been central to the technoloy e'plosion. The development of the
microprocessor vastly increased the amount of information that can be processed by
individuals and firms- and the rowth of the 3nternet has allowed companies to e'pand their
lobal presence at a fraction of the cost of more traditional methods of business.

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00. (p. '4) 9'plain the notion of the 4eb emerin as an e=ualizer.
3n 1000- fewer than one million users were connected to the 3nternet. ,y 6ay 2000 the
3nternet had 1.) billion users. For companies- the 4eb is emerin as an e=ualizer as it
minimizes the constraints of location- scale- and time zones. %sin the 3nternet- buyers and
sellers can find each other reardless of location- allowin businesses- both lare and small-
the opportunity to e'pand their lobal presence at a lower cost than ever before.

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1-()
Chapter 01 - Globalization
01. (p. '4('2) 3nnovations in transportation have had a ma$or impact on lobal trade. Consider
one of these innovations@ containerization. 4hy is this innovation so sinificant>
Containerization has revolutionized the transportation business- sinificantly lowerin the
costs of shippin oods over lon distances. 9merin in the 10+0s and 10.0s-
containerization spelled an end to the costly and lenthy business of loadin and unloadin
ships- truc"s- and trains. Cost savins associated with containerization are sinificant.
,etween 1020 and 1000- averae ocean freiht and port chares per ton fell from F0( to F20.
1ir transportation saw a similar decline- as did truc"in.

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02. (p. ')(',) 2iscuss the demoraphics of world trade since the 10)0s. :ow has the role of the
%.&. chaned> :ow is world trade e'pected to chane in the future>
3n the early10)0s- the %.&. was the world7s dominant industrial power accountin for over #0
percent of world output. ,y 200.- the %nited &tates accounted for 20.+ percent of world G25-
still the world7s larest industrial power but down sinificantly in relative size since the 10)0s.
*ther industrialized countries also saw their relative standin slip. Ta"in their place as active
e'porters are the newly industrializin countries of &outh Eorea and China. 6ost forecasts
predict that the share of world output accounted for by developin countries such as China-
3ndia- and 6e'ico will rise over the ne't 20 years- while at the same time rich industrialized
countries will continue to see their share of world output decline.

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1-(+
Chapter 01 - Globalization
0!. (p. ',(0&) :ow has the forein direct investment picture chaned since the 10)0s>
The %.&. accounted for about two-thirds of worldwide forein direct investment flows in the
10)0s- followed by ,ritish firms with about 10 percent of F23 flows- and <apanese firms with
2 percent. 1s barriers to trade fell- non-%.&. firms increased their investments around the
world in search of optimal production locations and a direct presence in ma$or mar"ets.
2urin the 1000s- F23 to both developed and developin nations increased dramatically.
China also emered as an important destination for F23.

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0#. (p. 0&(0') 4hat is a multinational enterprise A6/9B> :ow does a mini-multinational differ
from an 6/9>
1 multinational enterprise is any business that has productive activities in two or more
countries. 3n the10)0s nearly half of the world7s 2)0 larest 6/9s were 1merican. ,y 200)-
some 2# of the world7s 100 larest non-financial multinationals were now %.&. enterprises.
Firms from developin countries are e'pected to emere as important competitors in the
world economy. The number of mini-multinationals is also on the rise. 6ini-multinationals
are medium-sized and small 6/9s.

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1-(.
Chapter 01 - Globalization
0(. (p. 01) 6any companies are "eepin their eyes on China. 4hy is China so important to
international business>
3nternational companies are e'cited about China because with its 1.! billion people it
represents a hue- and larely untapped mar"et for oods and services. Companies are so
interested in its potential that F23 to China sured between 10.! and 200#- oin from less
than F2 billion in 10.! to F+0 billion in 200). :owever- while China remains a very attractive
mar"et- companies must beware of the competition that is beinnin to emere from the
country.

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0). (p. 04) Consider the lobal economy of the 21
st
century. 4hat important chanes are ta"in
place> 4hat do these chanes mean for international companies>
The last 2( years have been a time of reat chane in the lobal economy. ,arriers to the free
flow of oods- services- and capital have been fallin- national economies are becomin more
interated- and more countries are $oinin the ran"s of the developed world. 1ll of these
chanes point toward an economic system that is more favorable for international business.

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1-(0
Chapter 01 - Globalization
0+. (p. 04(1') Consider whether the shift toward a more interated and interdependent lobal
economy is a ood thin. 2iscuss the shift from the eyes of the consumer- the wor"er- the
company- and the environmentalist.
There are many advantaes of lobalization. From a broad perspective- lobalization creates
economic activity Awhich stimulates economic rowthB- creates $obs- raises income levels- and
provides consumers with more choices in reard to the products and services that are
available to them. From the perspective of an individual firm- lobalization has the potential
to increase revenues Athrouh e'panded mar"et potentialB- drive down costs Athrouh
additional economies of scaleB- and boost profits.
:owever- critics arue that lobalization destroys manufacturin $obs in wealthy countries
and contributes to pollution. Critics arue that fallin trade barriers allow firms in
industrialized countries to move their manufacturin activities offshore to countries where
wae rates are much lower. Critics also arue that lobalization encouraes firms from
advanced nations to move manufacturin facilities offshore to less developed countries to
avoid the more strinent pollution controls in place in their home countries.

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0.. (p. 02(0)) 2iscuss what occurred in &eattle in 1000 at the meetin of the 4T* and why the
events were important to the future of lobal trade.
3n 2ecember 1000- more than #0-000 protesters bloc"ed the streets of &eattle in an effort to
shut down a 4T* meetin bein held in the city. The issue was $ob losses in industries under
attac" from forein competitors- fallin wae rates of uns"illed wor"ers- environmental
deradations- and cultural imperialism of lobal media and 6/9s. 5rotesters believed that all
of these issues were the result of lobalization- and felt that the 4T*- as a promoter of
lobalization- was a leitimate taret for blame. The protest was a violent one and
emboldened by the e'perience its e'perience- antilobalization protesters now turn up at
almost every ma$or meetin of a lobal institution.

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1-)0
Chapter 01 - Globalization
00. (p. 0)(05) Fallin barriers to international trade destroy manufacturin $obs in wealthy
advanced economies. 2iscuss this statement. 2o you aree> 4hy or why not>
Critics arue that fallin trade barriers allow firms to move manufacturin activities to
countries where wae rates are much lower. ,ecause of such moves they arue that- the wae
rates of poorer 1mericans have fallen sinificantly over the past =uarter of a century.
&upporters of lobalization reply that critics of these trends miss the essential point about free
tradeGthe benefits outweih the costs. They arue that free trade will result in countries
specializin in the production of those oods and services that they can produce most
efficiently- while importin oods and services that they cannot produce as efficiently.

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100. (p. 1') 2iscuss the effect of lobalization on national sovereinty.
Critics of lobalization arue that today7s increasinly interdependent lobal economy shifts
economic power away from national overnments and toward supranational oranizations.
They feel that unelected bureaucrats now impose policies on the democratically elected
overnments of nation-states- thereby underminin the sovereinty of those states and
limitin the nation7s ability to control its own destiny.
3n contrast many economists and politicians maintain that the power of supranational
oranizations is limited to what nation-states collectively aree to rant. They arue that these
bodies e'ist to serve the collective interests of member states- not to subvert those interests.
&upporters of supranational oranizations point out that the power of these bodies rests
larely on their ability to persuade member states to follow a certain action. 3n this view- real
power still resides with individual nation-states- not supranational oranizations.

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1-)1