Globalization & Global Marketplace
What is the term for the growing connection of countries through increased trade, communication, and technology?
Globalization
What do we call a product brought into a country from another country?
Import
Define absolute advantage in simple terms.
Absolute advantage: When a country can produce goods more efficiently than another country (using fewer resources or producing more output).
What is a trade surplus?
Trade surplus: When a country exports more goods than it imports.
What does MNC stand for and what is it?
MNC: Multinational Corporation — a company that does business in more than one country.
Name two benefits businesses gain from participating in the global
Examples: Access to a larger customer base/new markets; access to cheaper raw materials or lower labor costs; technology transfer.
Define a tariff
Tariff: A tax on imported goods that makes foreign products more expensive
Define comparative advantage.
Comparative advantage: When a country can produce goods at a lower opportunity cost than another country.
What is a trade deficit?
Trade deficit: When a country imports more goods than it exports.
What is the difference between outsourcing and offshoring?
Outsourcing: Hiring an outside party to perform services (can be domestic or foreign). Offshoring: Moving a business process or factory to a different country (usually to reduce costs).
Give one example of a product that the U.S. commonly imports and one example of a product the U.S. commonly exports (from the provided content).
Example import: Electronics (such as smartphones) or crude oil. Example export: Agricultural products (like soybeans) or aircraft.
What is a quota and how does it affect imports?
Quota: A limit on the quantity of a good that may be imported, which restricts supply and can raise domestic prices.
Why is comparative advantage considered the main reason nations should trade even if one country has an absolute advantage in everything?
Because comparative advantage focuses on lowest opportunity cost; even if one country is better at producing everything, both countries benefit if each specializes in goods they give up least to produce and then trade.
Identify one negative problem a large, long-running trade deficit can cause for a country (from the provided content).
Negative problem: Decrease in domestic manufacturing jobs and potentially a weakening of the national currency over time.
Give one real-world reason a U.S. company might move its manufacturing to another country (from the provided content).
Example: To reduce manufacturing costs by taking advantage of lower labor costs in another country (offshoring).
Explain one challenge that globalization can create for domestic workers or industries.
Example answer: Job losses in domestic industries that cannot compete with cheaper foreign imports; pressure on wages; widening inequality; loss of some local industries.
What is an exchange rate?
Exchange rate: The value of one country’s currency compared to another country’s currency.
A country can produce cloth using fewer resources than another country, but it gives up more food production to do so. Which advantage does it have and why? (Identify and explain.)
The country has an absolute advantage in cloth production (produces cloth more efficiently) but may not have a comparative advantage if it sacrifices more of another good (food). If it gives up more food, it may not have comparative advantage — careful explanation should mention opportunity cost.
Explain how a trade surplus could affect a country's economy positively.
Positive effect: Increased production for export can boost domestic industries, raise incomes, and strengthen the national currency.
What is the main role of the World Trade Organization (WTO) as noted in the content?
Main role of the WTO: To supervise and liberalize international trade by resolving trade disputes and negotiating trade agreements between nations.
Describe how a company might gain from operating in multiple countries (use the concept of market access and resources).
Example answer: Operating in multiple countries gives market access to more customers, can lower production costs by locating near cheaper labor or inputs, and enables firms to diversify risk and adopt local advantages.
Contrast protectionism and free trade in one or two sentences.
Protectionism uses trade barriers (tariffs, quotas) to shield local businesses from foreign competition; free trade reduces such barriers to promote more open exchange of goods and services.
Provide a brief numeric example (two countries, two goods) showing how comparative advantage leads to beneficial trade. (Keep numbers simple.)
Sample numeric example:
Country A: 1 unit of cloth costs giving up 2 units of food.
Country B: 1 unit of cloth costs giving up 4 units of food. Country A has comparative advantage in cloth (lower opportunity cost); Country B has comparative advantage in food. They specialize and trade for mutual gain.
Give two policy tools a government might use to reduce the number of imported goods (draw from the provided content).
Policy tools: Tariffs and quotas (protectionist measures). (Also possible: subsidies for domestic producers, trade negotiations to open foreign markets.)
Explain how tariffs and quotas might affect multinational corporations' decisions about where to locate production.
Explanation: Tariffs raise the cost of exporting into certain markets and quotas limit quantities — these raise production costs or limit sales potential, so MNCs may locate production in regions with lower barriers or closer to target markets to avoid tariffs/quotas.