F: Comprehension questions

Date: 2015-10-07; view: 423.

Reading Comprehension

This lesson discusses four aspects of international business. The first deals with the reasons for the existence of international trade and how it is a logical response to the free market. The second section deals with government regulation of this free market. Next, the lesson discusses the present method of monetary exchange made necessary by the control governments exert over currencies. Finally, the concept of a multina­tional corporation is derived as a response to the effects of the other three factors. International business is a dynamic activity which changes, adapts, and responds according to conditions. When answering the following questions, it is sometimes necessary to infer an answer. The answers to some of these questions are not expressly stated in the text. Just as international business is an outgrowth of and a response to business entrepreneurship, your answers may be an outgrowth of your reading and thinking about the text.

1. How might underdeveloped countries benefit from international trade?

2. What types of business opportunities are presented as a result of interdependence among trading nations?

3. What four factors mentioned would contribute to a country's pro­duction efficiency?

4. According to the text, what is the main difference between Smith's theory and Ricardo's theory?

5. Explain how exporting countries become wealthy.

6. Why would a country object to foreign countries dumping goods?

7. Why might a government subsidize an inefficient export industry?

8. What are two forms of protectionism?

9. What is one advantage of tariffs over quotas to a government?

10. Why do tariffs and quotas have different effects on the market?

11. With a floating exchange rate, what would happen to the exchange value of currency from a country that exports more than it imports?

12. Explain why the value of the currency of a country that imports more than it exports would tend to decrease.

13. What would be a good reason for an exporting company to set up a subsidiary in the country that imports its product?

14. What is a parent company?

15. Why might a country encourage foreign investment or the establishment of subsidiaries of foreign companies?