AFM 131 MIDTERM EXAM QUESTIONS AND ANSWERS WITH
COMPLETE SOLUTIONS GRADED A++
Exporting
selling products to another country
Importing
buying products from another country
Free Trade
the exchange of products/goods/services between countries without political or
economic influence
Global Trade
the exchange of goods and services across national borders
Comparative Advantage Theory
theory that countries should sell what they can produce efficiently and buy what they
cannot
Absolute Advantage
when a country has a monopoly over a specific product/service and can produce it more
efficiently than other countries (rare)
Foreign Subsidiary
selling goods from an offshore branch of a Canadian company
Balance of Trade
Ratio of Exports to Imports
,Trade Surplus
When the value of a country's exports is greater than its imports
Trade Deficit
Imports > Exports
Balance of Payments
($ from exports- $ lost to imports) +/- tourism, military expenditures, etc.
Favorable Balance of Payments
Money brought in > Money being spent
Unfavourable Balance of Payments
Money being brought in < Money being spent
3 priority market types
1) emerging markets with broad Canadian interests
2) emerging markets with specific opportunities for Canadian businesses
3) established markets with broad Canadian interests
Licensing
When a firm (licensor) allows a foreign company (the licensee) the right to produce its
product in exchange for a fee (a royalty).
Franchising
A deal where an individual sells the rights for a good business idea
Contract Manufacturing (Outsourcing)
When a company attaches its brand to goods made by a third-party manufacturer or
contract manufacturer
Joint Venture
, A partnership where 2+ companies come together to do a major project
Strategic Alliance
A long-term partnership between 2+ companies that is made to help each company
build competitive market advantage
Foreign Direct Investment (FDI)
Buying permanent property and businesses in other countries
Multinational Corporation
An organization that manufactures and markets products in many different countries
and has multinational stock and management
Branch-Plant Economy
When many subsidiaries are owned by foreign companies and profits go back to the
home country instead of Canada
Culture
The set of values, beliefs, rules, and institutions held by a specific group of people
Ethnocentricity
The belief that one's culture is superior to others
Exchange Rate
The value of one nations's currency relative to the currencies of other countries
Devaluation
Lowering the value of a nation's currency relative to other currencies
Countertrading
A way of bartering in which several countries can be involved in trading goods for goods
and services for services
COMPLETE SOLUTIONS GRADED A++
Exporting
selling products to another country
Importing
buying products from another country
Free Trade
the exchange of products/goods/services between countries without political or
economic influence
Global Trade
the exchange of goods and services across national borders
Comparative Advantage Theory
theory that countries should sell what they can produce efficiently and buy what they
cannot
Absolute Advantage
when a country has a monopoly over a specific product/service and can produce it more
efficiently than other countries (rare)
Foreign Subsidiary
selling goods from an offshore branch of a Canadian company
Balance of Trade
Ratio of Exports to Imports
,Trade Surplus
When the value of a country's exports is greater than its imports
Trade Deficit
Imports > Exports
Balance of Payments
($ from exports- $ lost to imports) +/- tourism, military expenditures, etc.
Favorable Balance of Payments
Money brought in > Money being spent
Unfavourable Balance of Payments
Money being brought in < Money being spent
3 priority market types
1) emerging markets with broad Canadian interests
2) emerging markets with specific opportunities for Canadian businesses
3) established markets with broad Canadian interests
Licensing
When a firm (licensor) allows a foreign company (the licensee) the right to produce its
product in exchange for a fee (a royalty).
Franchising
A deal where an individual sells the rights for a good business idea
Contract Manufacturing (Outsourcing)
When a company attaches its brand to goods made by a third-party manufacturer or
contract manufacturer
Joint Venture
, A partnership where 2+ companies come together to do a major project
Strategic Alliance
A long-term partnership between 2+ companies that is made to help each company
build competitive market advantage
Foreign Direct Investment (FDI)
Buying permanent property and businesses in other countries
Multinational Corporation
An organization that manufactures and markets products in many different countries
and has multinational stock and management
Branch-Plant Economy
When many subsidiaries are owned by foreign companies and profits go back to the
home country instead of Canada
Culture
The set of values, beliefs, rules, and institutions held by a specific group of people
Ethnocentricity
The belief that one's culture is superior to others
Exchange Rate
The value of one nations's currency relative to the currencies of other countries
Devaluation
Lowering the value of a nation's currency relative to other currencies
Countertrading
A way of bartering in which several countries can be involved in trading goods for goods
and services for services
