Global Marketing 3rd Edition by Gillespie – Test Bank

Global Marketing 3rd Edition by Gillespie – Test Bank

Chapter 12—

Pricing for International and Global Markets

TRUE/FALSE

1. Variable costs change directly with the volume of output. ANS: T PTS: 1 DIF: Easy REF: p. 342 NAT: Analytic 2. Many companies charge higher prices in foreign markets than in their domestic markets because of transportation costs. ANS: T PTS: 1 DIF: Easy REF: p. 344 NAT: Analytic 3. Ro-ro carriers have made exporters more competitive with local manufacturers. ANS: T PTS: 1 DIF: Moderate REF: p. 344 NAT: Analytic 4. The WTO works with member countries to raise tariffs to protect their local industries. ANS: F PTS: 1 DIF: Easy REF: p. 345 NAT: Analytic 5. High tariffs make exporters more competitive with local manufacturers. ANS: F PTS: 1 DIF: Moderate REF: p. 345 NAT: Analytic 6. In 2002, the EU and the United States agreed on a standard tax for digitally downloadable goods of virtual products from the Internet. ANS: F PTS: 1 DIF: Moderate REF: p. 345 NAT: Analytic 7. Outside of the United States, many countries have longer distribution channels thereby increasing channel costs. ANS: T PTS: 1 DIF: Easy REF: p. 346 NAT: Analytic 8. Countries with high-income levels often display lower price elasticities for necessities such as food, shelter, and medical care. ANS: T PTS: 1 DIF: Easy REF: p. 347 NAT: Analytic 9. In a market with few large buyers, prices are usually lower than in markets with many small buyers. ANS: T PTS: 1 DIF: Moderate REF: p. 347 NAT: Analytic 10. In a market with few large buyers, prices are usually higher than in markets with many small buyers. ANS: F PTS: 1 DIF: Moderate REF: p. 347 NAT: Analytic 11. A firm acting as the sole supplier of a product in a given market enjoys greater pricing flexibility. ANS: T PTS: 1 DIF: Easy REF: p. 347 NAT: Analytic 12. Websites in China encourage consumers to form buying teams to bargain for quantity discount from retailers. ANS: T PTS: 1 DIF: Easy REF: p. 349 NAT: Analytic 13. Foreign exchange fluctuations can affect a firm’s profitability forcing it to lower or raise prices to maintain margins. ANS: T PTS: 1 DIF: Easy REF: p. 350 NAT: Analytic 14. Inflation can be managed by lowering interest rates whenever the economy starts to heat up, keeping inflation at 0 to 2 percent. ANS: F PTS: 1 DIF: Difficult REF: p. 351 NAT: Analytic 15. Price controls are enforced to combat inflation. ANS: T PTS: 1 DIF: Easy REF: p. 351 NAT: Analytic 16. Price controls are usually temporary. ANS: T PTS: 1 DIF: Easy REF: p. 351 NAT: Analytic 17. Across-the-board price controls are more common than industry-specific price controls. ANS: F PTS: 1 DIF: Moderate REF: p. 351 NAT: Analytic 18. Antidumping actions are allowed against firms if they sell at less than fair value and cause material injury to a domestic industry. ANS: T PTS: 1 DIF: Moderate REF: p. 352 NAT: Analytic 19. Many antidumping cases brought to the WTO are brought by developing countries against developed countries. ANS: T PTS: 1 DIF: Easy REF: p. 352 NAT: Analytic 20. Cell phone penetration in rural India was stymied by unreliable mail service. ANS: T PTS: 1 DIF: Difficult REF: p. 353 NAT: Analytic 21. An international transfer price is the price paid by the importing or buying unit of a firm to the exporting unit of the same firm. ANS: T PTS: 1 DIF: Easy REF: p. 354 NAT: Analytic 22. CIF refers to credit, insurance, and freight. ANS: F PTS: 1 DIF: Moderate REF: p. 354 NAT: Analytic 23. CIF refers to cost, insurance, and freight. ANS: T PTS: 1 DIF: Moderate REF: p. 354 NAT: Analytic 24. CIF refers to classified industrial freight. ANS: F PTS: 1 DIF: Moderate REF: p. 354 NAT: Analytic 25. CFR refers to cost, freight and return. ANS: F PTS: 1 DIF: Moderate REF: p. 354 NAT: Analytic 26. Free on board (FOB) designates that the seller is responsible for the costs of shipping and insuring a purchased product. ANS: F PTS: 1 DIF: Moderate REF: p. 354 NAT: Analytic 27. Free on board (FOB) designates that the buyer is responsible for the costs of shipping and insuring a purchased product. ANS: T PTS: 1 DIF: Difficult REF: p. 354 NAT: Analytic 28. Companies try to accumulate more profits in a high-tax country in order to help governments increase tax revenue. ANS: F PTS: 1 DIF: Difficult REF: p. 355 NAT: Analytic 29. Governments often examine transfer prices carefully as they are often aimed at supporting parallel imports. ANS: F PTS: 1 DIF: Moderate REF: p. 355 NAT: Analytic 30. When two currencies are involved, there is the risk that a change in exchange rates may occur between the invoicing date and the settlement date for the transaction. ANS: T PTS: 1 DIF: Easy REF: p. 356 NAT: Analytic 31. Parallel imports are the import of illegal products through legal channels. ANS: F PTS: 1 DIF: Moderate REF: p. 358 NAT: Analytic 32. Parallel imports hurt governments because they do not pay taxes. ANS: F PTS: 1 DIF: Moderate REF: p. 358 NAT: Analytic 33. Parallel imports are often supported by governments because they increase tax revenues considerably. ANS: F PTS: 1 DIF: Easy REF: p. 359 NAT: Analytic 34. Parallel imports are commonly used by MNCs to optimize global pricing. ANS: F PTS: 1 DIF: Moderate REF: p. 358 NAT: Analytic 35. National exhaustion provides that once a firm has sold its trademarked product in a specific country, it cannot restrict the further distribution of that product in that country. ANS: T PTS: 1 DIF: Easy REF: p. 359 NAT: Analytic 36. Firms can control parallel imports by reducing prices in higher priced markets and limiting supplies to wholesalers in lower priced markets. ANS: T PTS: 1 DIF: Easy REF: p. 360 NAT: Analytic 37. A South African law requires parallel importers to alert consumers to the fact that authorized dealers are under no obligation to honor the manufacturer warranty of a parallel import. ANS: T PTS: 1 DIF: Easy REF: p. 360 NAT: Analytic 38. A South African law requires parallel importers to alert consumers to the fact that their products might be counterfeit. ANS: F PTS: 1 DIF: Moderate REF: p. 360 NAT: Analytic 39. Countertrade is popular among customers who prefer to pay with hard currency. ANS: F PTS: 1 DIF: Easy REF: p. 363 NAT: Analytic 40. Compensation transactions are typical for large governmental purchases, such as defense projects, especially when a country wants to obtain some extra exports in exchange for the awarding of a contract. ANS: T PTS: 1 DIF: Moderate REF: p. 363 NAT: Analytic 41. The offset deal is the most basic type of countertrade. ANS: F PTS: 1 DIF: Easy REF: p. 363 NAT: Analytic 42. Payment for new textile machinery with the output produced by the new machinery is an example of a cooperation agreement. ANS: T PTS: 1 DIF: Moderate REF: p. 363 NAT: Analytic 43. Countertrade is complex and time consuming, and it is sometimes difficult to find a buyer for the merchandise accepted as a part of a transaction. ANS: T PTS: 1 DIF: Moderate REF: p. 364 NAT: Analytic MULTIPLE CHOICE 1. Costs that do not vary over a given range of output are referred to as ____ costs. a. variable b. fixed c. incremental d. marginal ANS: B PTS: 1 DIF: Easy REF: p. 342 NAT: Analytic 2. Tariffs are a. levied on locally made products. b. the same as sales taxes. c. levied on the landed costs of an imported product. d. levied on the final selling price of an imported product. ANS: C PTS: 1 DIF: Moderate REF: p. 345 NAT: Analytic 3. Reclassifying a product may be a way to a. discourage parallel imports. b. lessen tariffs costs. c. lessen transportation costs. d. encourage cartelling. ANS: B PTS: 1 DIF: Moderate REF: p. 345 NAT: Analytic 4. Sometimes firms attempt to avoid or lessen the cost effects of tariffs by a. reclassifying their product. b. increasing the VAT of their product. c. parallel importing. d. All of the above. ANS: A PTS: 1 DIF: Moderate REF: p. 345 NAT: Analytic 5. The European VAT is a form of a. tariff. b. quota. c. sales tax. d. “sin” tax. ANS: C PTS: 1 DIF: Easy REF: p. 345 NAT: Analytic 6. Sweden’s joining of the EU helped to undermine its a. alcohol taxes. b. cigarette taxes. c. VAT on digital products. d. surtax on computers. ANS: A PTS: 1 DIF: Moderate REF: p. 345 NAT: Analytic 7. Mexico is attractive to U.S. candy manufacturers because a. its youthful market like sweets. b. wage rates are relatively low. c. sugar is cheaper there than in the Untied States. d. All of the above. ANS: D PTS: 1 DIF: Moderate REF: p. 346 NAT: Analytic 8. Channel costs are a function of a. cost of raw materials. b. sales taxes. c. channel length and distribution margin. d. All of the above. ANS: C PTS: 1 DIF: Moderate REF: p. 346 NAT: Analytic 9. Young populations of Southeast Asia are an attractive target for companies because of their ____ income. a. low discretionary b. high per-capita c. low per-capita d. high discretionary ANS: D PTS: 1 DIF: Moderate REF: p. 347 NAT: Analytic 10. The ____ of 20-somethings in Asia is increased because most still live with their parents. a. income b. discretionary income c. income taxes d. None of the above ANS: B PTS: 1 DIF: Moderate REF: p. 347 NAT: Analytic 11. In Southeast Asia, consumers in their twenties have a very high discretionary income as a percentage of total income compared to their U.S. counterparts because a. they go to work in their teens. b. they save more money. c. they marry younger. d. many still live with their parents. ANS: D PTS: 1 DIF: Easy REF: p. 347 NAT: Analytic 12. In China, McDonald’s originally priced its hamburger below full costs in order to a. compete with Burger King. b. attract more customers. c. comply with Chinese controls. d. All of the above. ANS: B PTS: 1 DIF: Easy REF: p. 347 NAT: Analytic 13. General Motors developed a Farmers Car because a. rural Chinese have less income than urban Chinese. b. farmers in India required a different product from urban Indians. c. the World Bank subsidized the project. d. the Indonesian government subsidized the project. ANS: A PTS: 1 DIF: Moderate REF: p. 348 NAT: Analytic 14. Price levels in the United States are a. set by cartels. b. determined by agreements among competitors. c. set by the U.S. Justice department. d. set by the respective companies. ANS: D PTS: 1 DIF: Moderate REF: p. 349 NAT: Analytic 15. Thai consumers are more likely than Americans to infer product quality from price because a. Thais rate themselves lower on product knowledge. b. Thais have less money to spend. c. Thais belong to a collectivist culture. d. All of the above ANS: A PTS: 1 DIF: Moderate REF: p. 349 NAT: Analytic | Diversity 16. Chinese vitamin producers defended their cartel by arguing a. their costs were very high. b. they raised prices to avoid accusations of dumping. c. they were incompliance with U.S. law. d. All of the above ANS: B PTS: 1 DIF: Difficult REF: p. 350 NAT: Analytic | Ethics 17. When the value of the euro drops against the U.S. dollar, a. European products become cheaper in the U.S. market. b. European products become more expensive to sell in the U.S. market. c. there are no changes in the prices. d. European product quality decreases. ANS: A PTS: 1 DIF: Moderate REF: p. 351 NAT: Analytic 18. The main reason governments impose price control is to a. raise taxes. b. encourage local businesses. c. combat inflation. d. discourage hedging. ANS: C PTS: 1 DIF: Easy REF: p. 351 NAT: Analytic 19. Canada, Japan, and many European states have price controls on a. alcohol. b. cigarettes. c. pharmaceuticals. d. accounting firms. ANS: C PTS: 1 DIF: Easy REF: p. 351 NAT: Analytic 20. The practice of selling a product at a price below actual costs is referred to as a. cartelling. b. economies of scale. c. hedging. d. dumping. ANS: D PTS: 1 DIF: Moderate REF: p. 352 NAT: Analytic 21. My Dollarstores charged higher prices in India than in the USA because of a. transportation costs. b. tariffs. c. an affluent target market. d. All of the above ANS: D PTS: 1 DIF: Moderate REF: p. 354 NAT: Analytic 22. The price paid by an importing or buying unit of a multinational firm to an exporting unit of the same firm is known as a. marginal price. b. international transfer price. c. transaction risk. d. fixed price. ANS: B PTS: 1 DIF: Moderate REF: p. 355 NAT: Analytic 23. Governments examine international transfer prices because transfer prices can a. lower tax revenues. b. lower GDP. c. lower exchange rates. d. increase political risk. ANS: A PTS: 1 DIF: Moderate REF: p. 355 NAT: Analytic 24. Fluctuating currency values contribute to a. transaction risk. b. parallel imports. c. Both a and b. d. None of the above. ANS: C PTS: 1 DIF: Moderate REF: p. 356-358 NAT: Analytic 25. Sellers can protect themselves against transaction risks through a. spot pricing. b. forward pricing. c. hedging. d. All of the above. ANS: D PTS: 1 DIF: Moderate REF: p. 356-357 NAT: Analytic 26. Most developing countries have adopted which principle for dealing with parallel imports? a. National exhaustion b. Regional exhaustion c. International exhaustion d. International exhaustion ANS: C PTS: 1 DIF: Moderate REF: p. 359 NAT: Analytic 27. The EU has adopted which principle for dealing with parallel imports? a. National exhaustion b. Regional exhaustion c. International exhaustion d. International exhaustion ANS: B PTS: 1 DIF: Easy REF: p. 359 NAT: Analytic 28. Parallel imports exist due to a. inflation. b. differences in prices across markets. c. uniform pricing. d. government price controls. ANS: B PTS: 1 DIF: Easy REF: p. 358 NAT: Analytic 29. A law in South Africa requires parallel importers to alert consumers to the fact that a. the product they sell can be purchased cheaper elsewhere. b. the product they sell might be counterfeit. c. authorized dealers need not honor the manufacturer warranty on a parallel import. d. authorized dealers could sue the purchaser of a parallel import. ANS: C PTS: 1 DIF: Easy REF: p. 360 NAT: Analytic 30. Global price fixing is encouraged by a. variable tariffs. b. government price controls. c. global segments. d. intense competition. ANS: D PTS: 1 DIF: Moderate REF: p. 364 NAT: Analytic 31. What differences prevent a company from setting a uniform global pricing strategy? a. Tax rates b. Trade margins c. Customs duties d. All of the above ANS: D PTS: 1 DIF: Moderate REF: p. 363 NAT: Analytic 32. The problem with countertrade is that a. it is complex and time consuming. b. it leads to a shortage of hard currency. c. there may be difficulties in finding a buyer. d. Both a and c. ANS: D PTS: 1 DIF: Moderate REF: p. 363 NAT: Analytic 33. Karavel Foods entered the Latin American market 20 years ago targeting the urban elites. What should Karavel Foods consider concerning its pricing in the region? a. Raise prices because Latin America’s GDP has increased b. Lower prices to discourage parallel imports across the region c. Lower prices to avoid dumping charges d. Lower prices to target middle classes ANS: D PTS: 1 DIF: Difficult REF: p. 349 NAT: Reflective KEY: Application Questions 34. ABC Automobiles entered Asian markets 20 years ago targeting the urban elites. What should ABC consider concerning its pricing in the region? a. Lower prices because Asia’s GDP has increased b. Raise prices because Latin America’s GDP has increased c. Lower prices to target middle classes d. Raise prices to discourage parallel imports across the region ANS: C PTS: 1 DIF: Difficult REF: p. 349 NAT: Reflective KEY: Application Questions 35. Paris Pharmaceuticals entered Middle East markets 20 years ago targeting the urban elites. What should Paris Pharmaceuticals consider concerning its pricing in the region? a. Raise prices because the population has increased b. Lower prices to avoid dumping charges c. Raise prices to avoid dumping charges d. Lower prices to target middle classes ANS: D PTS: 1 DIF: Difficult REF: p. 349 NAT: Reflective KEY: Application Questions 36. LeBlanc Enterprises markets high-end purses and scarves. When determining a pricing policy for its Latin American markets, the firm should consider a. income of buyers. b. discretionary income of buyers. c. independent income of buyers. d. variable income of buyers. ANS: B PTS: 1 DIF: Easy REF: p. 347 NAT: Reflective KEY: Application Questions 37. Latin Shoes markets high-end footwear. When determining a pricing policy for its Asian markets, the firm should consider a. income of buyers. b. variable income of buyers. c. independent income of buyers. d. discretionary income of buyers. ANS: D PTS: 1 DIF: Difficult REF: p. 347 NAT: Reflective KEY: Application Questions 38. Action Toys markets toys for children and adults. When determining a pricing policy for its Middle East markets, the firm should consider a. income of buyers. b. discretionary income of buyers. c. variable income of buyers. d. independent income of buyers. ANS: B PTS: 1 DIF: Difficult REF: p. 347 NAT: Reflective KEY: Application Questions 39. Paris Pharmaceuticals, a French company, has been invited to join a cartel. What advice would you give the firm? a. Don’t. It’s illegal. b. Don’t. It will cause your prices to decrease. c. Do. It will decrease your costs. d. Do. It will increase your market coverage. ANS: A PTS: 1 DIF: Easy REF: p. 349 NAT: Reflective KEY: Application Questions 40. Taberet, a German company, has been invited to join a cartel. What advice would you give the firm? a. Do. It will increase your market coverage. b. Do. It will decrease your costs. c. Don’t. It will cause your prices to decrease. d. Don’t. It’s illegal. ANS: D PTS: 1 DIF: Easy REF: p. 349 NAT: Reflective KEY: Application Questions 41. Tunetoy Industries, a U.S. MNC, has been invited to join a cartel. What advice would you give the firm? a. Do. It will decrease your costs. b. Do. It will increase your market coverage. c. Don’t. It will cause your prices to decrease. d. Don’t. It’s illegal. ANS: D PTS: 1 DIF: Easy REF: p. 349 NAT: Reflective KEY: Application Questions 42. Tottenham Tartans, a British clothing firm, is concerned about export price escalation in its Brazilian market. It should consider a. establishing a cartel. b. increasing its transfer prices to Brazil. c. establishing price controls. d. promoting its products as luxury items. ANS: D PTS: 1 DIF: Difficult REF: p. 355 NAT: Reflective KEY: Application Questions 43. Tunetoy Industries is concerned about export price escalation for its personal computers in its Thai market. It should consider a. promoting its products as luxury items. b. establishing a cartel. c. joining a cartel. d. increasing its transfer prices to Thailand. ANS: A PTS: 1 DIF: Moderate REF: p. 349 NAT: Reflective KEY: Application Questions 44. Taberet, a German firm, is concerned about export price escalation in its U.S. market. It should consider a. increasing its transfer prices to the U.S. b. promoting its products as luxury items. c. joining a U.S. cartel. d. joining a German cartel. ANS: B PTS: 1 DIF: Moderate REF: p. 349 NAT: Reflective KEY: Application Questions 45. Paris Pharmaceuticals wishes to establish a pricing policy to avoid dumping charges in a West African country. Three global pharmaceutical firms export to the country, but there is no local manufacture of pharmaceuticals. Paris Pharmaceuticals should a. be sure its prices are not much higher than the prices of the other MNCs. b. be sure its prices are not much lower than the prices of the other MNCs. c. ask for price controls. d. None of the above ANS: D PTS: 1 DIF: Moderate REF: p. 352 NAT: Reflective KEY: Application Questions 46. Indopharm wishes to establish a pricing policy to avoid dumping charges in a small Asian country. Three global pharmaceutical firms export to the country, but there is no local manufacture of pharmaceuticals. Indopharm should a. receive price approval from the local government. b. be sure its prices are not much higher than the prices of the other MNCs. c. be sure its prices are not much lower than the prices of the other MNCs. d. None of the above ANS: D PTS: 1 DIF: Moderate REF: p. 352 NAT: Reflective KEY: Application Questions 47. MabHill Corporation markets widgets to manufacturers worldwide and wishes to establish a pricing policy to avoid dumping charges in a Latin American country. Besides MabHill, 3 MNCs export to the country. There is no local manufacture of widgets. What is wrong with this scenario? a. MabHill should be sure its prices are not much higher than the prices of the other MNCs. b. MabHill should be sure its prices are not much lower than the prices of the other MNCs. c. Dumping doesn’t apply when there is no local manufacturing. d. Dumping doesn’t apply to B2B marketing. ANS: C PTS: 1 DIF: Difficult REF: p. 352 NAT: Reflective KEY: Application Questions 48. Taberet, a German company, has an Argentine marketing subsidiary that complains that export price escalation makes Taberet products too expensive to sell in Argentina. The subsidiary wants Taberet to adjust the transfer price to Argentina. What should Taberet do about the transfer price? a. Decrease it. Transportation costs will decrease. b. Decrease it. Tariff costs will decrease. c. Decrease it. Transport and tariff costs will both decrease. d. Do nothing. Transfer prices do not affect either transport or tariff costs. ANS: B PTS: 1 DIF: Difficult REF: p. 355 NAT: Reflective KEY: Application Questions 49. Indopharm has a Bulgarian marketing subsidiary that complains that export price escalation makes the firm’s products too expensive to sell in Bulgaria. The subsidiary wants the firm to adjust he transfer price to Bulgaria. What should Indopharm do about the transfer price? a. Increase it. Tariff costs will decrease. b. Decrease it. Tariff costs will decrease. c. Decrease it. Transportation costs will decrease. d. Do nothing. Transfer prices do not affect either transport or tariff costs. ANS: B PTS: 1 DIF: Difficult REF: p. 355 NAT: Reflective KEY: Application Questions 50. Swiss Pharmaceuticals has a Malaysian marketing subsidiary that complains that export price escalation makes the firm’s products too expensive to sell in Malaysia. The subsidiary wants Swiss Pharmaceuticals to lower the transfer price to Malaysia. Should the firm lower the transfer price? a. Yes. It will decrease transportation costs. b. No. International exhaustion laws forbid it. c. No. National exhaustion laws forbid it. d. None of the above. ANS: D PTS: 1 DIF: Difficult REF: p. 355 NAT: Reflective KEY: Application Questions 51. The government of Thailand is concerned that MNCs are adjusting transfer prices to their Thai subsidiaries in order to decrease their income tax liability in Thailand. The Thai government should a. review increases in transfer prices. b. review decreases in transfer prices. c. initiate price controls. d. require forward pricing of all transfer prices. ANS: A PTS: 1 DIF: Moderate REF: p. 355 NAT: Reflective KEY: Application Questions 52. The government of Saudi Arabia is concerned that MNCs are adjusting transfer prices to their Saudi subsidiaries in order to decrease tariff payments in Saudi Arabia. The Saudi government should a. review increases in transfer prices. b. review decreases in transfer prices. c. initiate price controls. d. require forward pricing of all transfer prices. ANS: B PTS: 1 DIF: Moderate REF: p. 355 NAT: Reflective KEY: Application Questions 53. The government of Saudi Arabia is concerned that MNCs are adjusting transfer prices to their Saudi subsidiaries in order to decrease their income tax liability in Saudi Arabia. The Saudi government should a. require spot pricing of all transfer prices. b. require forward pricing of all transfer prices. c. review increases in transfer prices. d. review decreases in transfer prices. ANS: C PTS: 1 DIF: Moderate REF: p. 355 NAT: Reflective KEY: Application Questions 54. The government of Indonesia is concerned that MNCs are adjusting transfer prices to their Indonesian subsidiaries in order to decrease tariff payments in Indonesia. The Indonesian government should a. review increases in transfer prices. b. review decreases in transfer prices. c. require spot pricing on all transfer prices. d. require forward pricing of all transfer prices. ANS: B PTS: 1 DIF: Moderate REF: p. 355 NAT: Reflective KEY: Application Questions 55. Latin Shoes wants to shut down parallel imports into the Egyptian market. Why might this be difficult to do? a. Egypt applies the national exhaustion principle. b. Egypt applies the international exhaustion principle. c. Shoes cannot be trademarked. d. None of the above ANS: B PTS: 1 DIF: Difficult REF: p. 359 NAT: Reflective KEY: Application Questions 56. Latin Shoes wants to shut down parallel imports between France and Germany. Why might this be difficult to do? a. France applies the national exhaustion principle. b. Germany applies the national exhaustion principle. c. The EU applies the international exhaustion principle. d. The EU applies the regional exhaustion principle. ANS: D PTS: 1 DIF: Difficult REF: p. 359 NAT: Reflective KEY: Application Questions 57. Texas Tents, a U.S. firm, wants to stop parallel imports between Italy and Germany. Why might this be difficult to do? a. Italy applies the national exhaustion principle. b. Germany applies the national exhaustion principle. c. The U.S. applies the national exhaustion principle. d. None of the above ANS: D PTS: 1 DIF: Difficult REF: p. 359 NAT: Reflective KEY: Application Questions 58. Tottenham Tartans is concerned about parallel imports entering the German market from France. The firm should a. sue parallel importers under the international exhaustion principle. b. sue parallel importers under the regional exhaustion principle. c. establish a uniform pricing policy across Germany and France. d. reassess its transfer pricing policy to independent distributors. ANS: C PTS: 1 DIF: Difficult REF: p. 359 NAT: Reflective KEY: Application Questions 59. Tin City Bicycles is concerned about parallel imports entering the German market from the U.K. The firm should a. sue parallel importers under the international exhaustion principle. b. sue parallel importers under the regional exhaustion principle. c. reassess its transfer pricing policy to independent distributors. d. None of the above ANS: D PTS: 1 DIF: Difficult REF: p. 359 NAT: Reflective KEY: Application Questions 60. Indopharm is negotiating for a major contract to supply pharmaceuticals to the Malaysian military. However, the Malaysian government wants the firm to take half payment in Malaysian palm oil. The firm should a. insist on a buyback. b. insist on a switch trade. c. insist that the palm oil be replaced by a soft good. d. raise its proposed price for the contract. ANS: D PTS: 1 DIF: Moderate REF: p. 363-365 NAT: Reflective KEY: Application Questions 61. ABC Automobiles is negotiating for a major contract to supply police cars to Malaysia. However, the Malaysian government wants the firm to take half payment in Malaysian palm oil. The firm should a. insist on a buyback. b. insist on a switch trade. c. raise its proposed price for the contract. d. decrease its proposed price for the contract. ANS: C PTS: 1 DIF: Moderate REF: p. 363-365 NAT: Reflective KEY: Application Questions 62. Indopharm is negotiating for a major contract to supply pharmaceuticals to the Brazilian health care system. However, the Brazilian government wants the firm to take half payment in Brazilian commodities. The firm should a. insist on a buyback. b. insist that the commodities be replaced by a soft goods. c. raise its proposed price for the contract. d. All of the above ANS: C PTS: 1 DIF: Moderate REF: p. 363-365 NAT: Reflective KEY: Application Questions COMPLETION 1. ____________________ costs change directly with volume of output produced. ANS: Variable PTS: 1 DIF: Easy REF: p. 342 NAT: Analytic 2. The amount of money left after the basic necessities of food, shelter, and clothing are met is known as ____________________ income. ANS: discretionary PTS: 1 DIF: Easy REF: p. 347 NAT: Analytic 3. The practice of selling a product at a price below actual costs is referred to as ____________________. ANS: dumping PTS: 1 DIF: Easy REF: p. 352 NAT: Analytic 4. The price paid by the importing or buying unit of a firm to the exporting unit of the firm is known as the ____________________ price. ANS: international transfer PTS: 1 DIF: Easy REF: p. 354 NAT: Analytic 5. ____________________ is the risk when two currencies are involved and a change in exchange rates may occur between the invoicing date and the settlement date. ANS: Transaction risk PTS: 1 DIF: Easy REF: p. 356 NAT: Analytic 6. To reduce the transaction risk, a company can opt to contract through financial intermediaries for future delivery of foreign currency at a set price, regardless of the spot price at that time, which is known as ____________________. ANS: hedging PTS: 1 DIF: Easy REF: p. 357 NAT: Analytic 7. ____________________ occur when individual buyers step in and buy products in low-price countries to re-export to high-price countries, profiting from the price differential. ANS: Parallel imports PTS: 1 DIF: Easy REF: p. 358 NAT: Analytic 8. When the selling company guarantees to use some products or services from the buying country in the final product, it is known as a(n) ____________________ deal. ANS: offset PTS: 1 DIF: Moderate REF: p. 363 NAT: Analytic