Which term best describes an economic condition in which a nation exports more than it imports?
Correct Answer: A
A trade surplus occurs when a country exports more goods and services than it imports during a given period. This means foreign buyers purchase more from the country than the country purchases from abroad. Option A is correct because it accurately describes a positive balance of trade. A trade deficit is the opposite condition, where imports exceed exports. Mercantilism is an older trade theory that emphasized accumulating wealth through exports and limiting imports, but it is not the term for the actual trade-balance condition. Resource mobility refers to the ability of labor, capital, or other resources to move from one use or industry to another. For managers, trade surpluses can affect currency strength, export opportunities, and international competitiveness.
Question 7
What is the definition of globalization?
Correct Answer: C
InGlobal Economics for Managers, globalization is defined asthe close integration of countries and peoples of the world, which makes option C the correct and most comprehensive answer. This definition reflects the central idea that globalization is a broad process through which national economies become increasingly interconnected and interdependent. It emphasizes integration rather than any single outcome such as trade expansion or regulatory change. Globalization involves the growing cross-border movement of goods and services, capital flows, labor migration, technology transfer, and information exchange. For managers, this integration fundamentally alters business decision making by expanding market opportunities while simultaneously increasing exposure to global competition and risk. Firms must evaluate international sourcing options, global consumer demand, exchange rate movements, and geopolitical conditions when making strategic choices. Option A is incorrect because globalization is not primarily defined by the expansion of regulatory authority. While regulatory coordination may arise as economies integrate, it is a secondary effect rather than the core meaning of globalization. Option B refers to product customization and market segmentation, which are managerial marketing strategies and not a defining feature of globalization. Option D is too narrow because globalization is not limited to creating a single global market for goods and services; it also includes international financial integration, labor mobility, and the diffusion of ideas and managerial practices. According toGlobal Economics for Managers, globalization has been driven by trade liberalization, advances in transportation and communication technologies, and declining transaction costs. These forces enable firms to operate global value chains and consumers to access a wider variety of products at lower prices. At the same time, globalization introduces challenges such as increased competitive pressure, economic volatility, and political resistance, all of which managers must account for in decision making. Therefore, defining globalization as the close integration of countries and peoples accurately captures its scope and relevance within the context of business decision making in the global environment.
Question 8
What is the most basic way for nonfinancial companies to adjust to fluctuations of the foreign exchange market?
Correct Answer: A
The most basic way for a nonfinancial company to reduce exposure to foreign exchange fluctuations is to invoice customers in the company's own currency. Option A is correct because this shifts exchange-rate risk away from the seller and onto the buyer. If the firm receives payment in its home currency, its revenues are more predictable and are not directly reduced by unfavorable currency movements. Currency hedging, rate locks, and forward transactions are more formal financial or contractual tools for managing exchange risk, but they require additional planning, market access, and sometimes financial expertise. Invoicing in the home currency is operationally simpler. However, managers must remember that this approach may make the firm less attractive to foreign buyers who prefer pricing in their local currency.
Question 9
What are examples of intellectual property? (Choose TWO.)
Correct Answer: A,B
InGlobal Economics for Managers,intellectual property (IP)refers to legally protected creations of the mind. Patentsandtrademarksare two major forms of IP, making options A and B correct. Patents protect new inventions, processes, or technologies, granting exclusive rights to inventors for a limited time. Trademarks protect brand identifiers such as names and logos. Subsidies and tariffs are government policies, not intellectual property protections. Therefore, options A and B correctly identify examples of intellectual property.
Question 10
What is a key feature of an oligopoly?
Correct Answer: B
InGlobal Economics for Managers, oligopolies are often modeled as aprisoner's dilemma, making option B correct. Firms face incentives to cooperate for mutual gain but also incentives to cheat to maximize individual profit. This tension explains price rigidity, collusion instability, and strategic behavior. Other options describe competitive markets or are not universally true. Thus, option B is correct.
