Chapter 14Exporting, Importing, and Countertrade True / False Questions 1. Only large companies have benefited significantly from the moneymaking opportunities of exporting. True False 2. Firms that actively export often lose out on significant opportunities for growth and cost reduction. True False 3. While small firms tend to be proactive about seeking opportunities for profitable exporting, large firms are very reactive. True False 4. Reactive firms do not consider exporting until their domestic market is saturated. True False 5. Low growth prospects makes firms reactive about seeking opportunities for exporting. True False 6. Novice exporters easily realize the amount of management resources that have to bededicated to cultivate business in foreign countries. True False 7. Exporters often face voluminous paperwork, complex formalities, and many potential delays and errors. True False 14-1© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.8. Unlike their German and Japanese competitors, many U.S. firms do not have adequate information when they seek export opportunities. True False 9. German and Japanese firms are relatively more information disadvantaged than U.S. firms. True False 10. For U.S. firms, the most comprehensive source of information on export opportunities is the U.S. Department of Commerce. True False 11. Export Legal Assistance Network (ELAN), an organization within the U.S. Department of Commerce, is dedicated to providing businesses with assistance for attacking foreign markets. True False 12. Commercial banks and major accounting firms are less willing to assist small firms in starting export operations due to higher default risks. True False 13. Export management companies (EMCs) start exporting operations for a firm with the understanding that the firm will take over operations after they are well established. True False 14. The advantage of export management companies is that they are experienced specialists that can help the neophyte exporter identify opportunities and avoid common pitfalls. True False 15. The advantage of export management companies is that they are experienced specialists that can help the neophyte exporter identify opportunities and avoid common pitfalls. True False 16. A firm that enters many markets at once runs the risk of spreading its limited management resources too thin. True False 14-2© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.17. It often makes sense for a firm to enter a foreign market on a large scale to reduce the costs of any subsequent failure. True False 18. Exporting is often not an end in itself, but merely a step on the road toward establishment of foreign production. True False 19. Lack of trust in international trade is exacerbated by the distance between the two parties in space, language, and culture. True False 20. Issued by a bank at the request of an importer, a bill of lading states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents. True False 21. Banks charge exporters a fee for issuing a letter of credit. True False 22. A letter of credit may reduce an importer's ability to borrow funds for other purposes. True False 23. A draft, an instrument normally used in international commerce to effect payment, is also known as a letter of credit. True False 24. In international commerce, a person or business initiating a draft is known as the drafter and the party to whom the draft is presented is known as the draftee. True False 25. In domestic trade transactions, a buyer can often obtain possession of merchandise without signing a formal document acknowledging his or her obligation to pay. True False 26. In international commerce, a sight draft allows for a delay in payment. True False 14-3© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.27. In international commerce, time drafts are negotiable instruments. True False 28. A bill of lading can function as collateral against which funds are advanced to the exporter by its local bank before final payment by the importer. True False 29. The Export-Import Bank provides financing aid to prospective U.S. exporters. True False 30. The mission of the Foreign Credit Insurance Association is to provide financing aid that will facilitate exports, imports, and the exchange of commodities between the United States and other countries. True False 31. Export credit insurance protects an exporter against the possibility of a foreign importer's default on payment when there is a lack of a letter of credit. True False 32. The principle of countertrade is to trade goods and services for money. True False 33. Barter is primarily used with trading partners who are not creditworthy or trustworthy. True False 34. Offset refers to the use of a specialized third-party trading house in a countertrade arrangement. True False 35. Countertrade's main attraction is that it can give a firm a way to finance an export deal when other means are not available. True False Multiple Choice Questions 14-4© 2014 by McGraw-Hill Education. This is proprietary material solely for authorized instructor use. Not authorized for sale or distributionin any manner. This document may not be copied, scanned, duplicated, forwarded, distributed, or posted on a website, in whole or part.36. Which of the following is an advantage of exporting? A. It helps in easy currency conversion. B. It provides large revenue and profit opportunities. C. It reduces the administrative costs incurred by a company. D. It helps companies increase their unit costs. E. It reduces paperwork and complex formalities. 37. Exporting is nearly