Chapter 1 Review
Page 32 #1 – 12
Page 33 #18, 25, 26
1. Why is it important that Canada produce value-added products?
The more value we can add in Canada, the more jobs are created here. Each time more value is added to
a product in Canada, the less reliant Canadians are on foreign businesses.
2. Explain Canada’s interdependence with the United States?
U.S. businesses depend upon raw materials from Canada, which they use to manufacture goods that
Canadians need.
3. What are Canada’s historical trade connections with:
a) Europe
The first settlers in Canada were European, and they brought European goods and services to Canada.
b) The United States
The U.S. became a manufacturing centre sooner than Canada, and relied upon our natural resources for
their factories.
c) Asia
High-quality, low-priced goods became a feature of Asian economies after the Second World War, and
Canadian retailers began to import Asian goods at this time.
4. The marketplace is becoming increasingly global. How has this affected consumer demand?
Consumers demand a wide variety of products, as well as low prices and high quality. These demands
can only be met by developing foreign markets where labour costs are low. The Internet connects
consumers to businesses all over the world, so local businesses now must compete on an international
scale.
5. Think of a specific product you use on a daily basis.
a) Trace the product through its primary and secondary industries.
Exemplar answer: orange juice:
Primary industry: orange growers
Secondary Industries: packaging companies, orange juice manufacturers
b) Name three tertiary industries that are involved with this product: transportation, warehousing and
storage, advertising, retailing
c) Explain briefly how value has been added to this product by primary, secondary, and tertiary
industries.
Primary industry: grows the orange, adds value by creating a raw material.
Secondary industry: makes orange juice from the oranges and packages it, adding value by creating a
product consumers want.
Tertiary industries add value by getting the orange juice to a place where the consumer can buy it.
6) Answer will vary
7) Answers will vary
8. State where three articles of clothing you are wearing were made.
Answers will vary, but very few articles of clothing (if any!) will have been made in Canada.
9. State three products you ate today that were produced in Canada.
examples include meat, milk, eggs, fish
10. State three products you ate today that were not produced in Canada.
orange juice, almost any fruit or vegetable in the winter, any imported foods from China, India, etc.
11. Explain, using factual examples, why Canada is a trading nation.
■ Canada has a relatively short growing season and cold winters. Much of the food we need in the
winter must be imported.
■ Canada produces a surplus of raw materials, and can trade those raw materials for finished products.
■ The cost of labour in Canada is considerably higher than the cost of labour in many other nations.
Canadians enjoy lower priced goods as a result of trade.
■ The Internet connects us with the world, so that we know what products are available in other
nations, and we have become global consumers.
12. One of Canada’s major imports is pharmaceuticals. Explain how a Canadian’s life would be altered if
these products were not imported.
Canadians who needed drugs to treat their illnesses might not be able to find the drugs they need if they
had to depend on Canadian made products, and would not get well, or may die. Even if they could find
the drugs they needed from Canadian suppliers, they would have to pay significantly more for them.
18. Give one reason why businesses in Canada trade with the following countries. Try to give a different
reason for each country.
■ Japan highly developed high tech-industries; top-quality products
■ The United States close to Canada; highly developed consumer products industries
■ Great Britain historical connection
■ China inexpensive products
■ Mexico duty-free goods
If you were going to invest in one of two new fresh lemonade companies, which one would you pick:
Acme Fresh Lemonade, in Naples, Florida, or Ace Fresh Lemonade in Truro, Nova Scotia? Provide one or
more reasons for your choice.
Florida is the logical answer because lemons are grown in Florida and not in Nova Scotia. The N.S. firm
would have much greater shipping costs than the Florida company and would therefore make less
profit, if all things were equal
26. What international businesses do you use on a regular basis? Some possible answers:
■ Pizza Hut or other foreign-owned fast food restaurants
■ The Gap or other foreign-owned clothing retailers
■ Blockbuster Video
■ Coca-Cola or another soft drink brand
■ NBC or other U.S. media
Chapter 2 Review
Page 58 #1 – 16
Page 59 #20-22
1. Why do countries import and export products? Countries import products to get access to different
products, cheaper products, and different technologies. Countries export products to increase profits
and access more markets.
2. Explain why a company would use a licensing agreement. A company would give permission for
another company to use its product, service, brand name, or patent to achieve faster growth, gain
flexibility, markets, and increase profits. A company would pay for a licensing agreement to get access to
a well-known brand name, new technology, and exclusive distribution rights.
3. What are the advantages and disadvantages of a franchise? Advantages for franchisor: money, do not
have to run all of the businesses. Advantages for the franchisee: financing, less risk, support for
operations, human resources, marketing, quality control, advertising. Disadvantages for the franchisor:
loss of control. Disadvantages for the franchisee: less profits, stringent guidelines, and loss of control.
4. Explain why a company would choose a licensing agreement over a franchise. The licensing
agreement is often used for manufacturing processes. It is easier for the company granting the license
because it does not have to run the franchise or business, just collect the licensing fees. The risk is lower.
5. What are the advantages and disadvantages of a joint venture? Advantages: access to countries
(specifically with centrally planned economies), access to markets, products, and customers not
previously available, sharing financing, managerial expertise, technology, cultural information,
economies of scale, and risk reduction. Disadvantages: 50 percent of all joint ventures fail.
6. Why would a company set up a foreign subsidiary? This decentralized decision-making process allows
the local management to incorporate the host country’s culture and customs.
7. Why is the Canadian government against protectionism? When one country implements a tariff, its
trading partner will retaliate with a tariff of its own. NAFTA is a trade agreement that eliminates trade
barriers such as tariffs between Canada, the United States, and Mexico.
8. Why is the Canadian dollar trading well against the U.S. dollar? During the economic crisis in 2008,
the United States suffered financial institution failures, a credit crisis, a housing slump, and budget
deficits. In comparison to Canada, the United States had more problems to solve, which caused its
currency to devalue. In addition, Canada’s natural resources remained in high demand on the world
market.
9. How has communication technology expanded international business? Communication technology
has allowed business to operate twentyfour hours a day. Emails, texts, phone calls, and conference calls
can be made easily throughout the world.
10. Which of Canada’s major imports provide value added? machinery, equipment, motor vehicles and
parts, consumer goods. Why is this important information? The businesses that make these products
make a greater proportion of the profits from the production of the product.
11. Which of Canada’s major exports provide value added? motor vehicles and parts, industrial
machinery, aircraft, telecommunications equipment, plastics, and fertilizers Why is this important
information? Canada makes a greater proportion of the profits from the production of the products.
12. One of the imports Canadians enjoy the most is fresh fruit. Explain how a Canadian’s life would be
altered if fruit was not imported. We would only be able to eat fruit that we could grow—apples, grapes,
cherries, peaches, etc., but it would be fresh only in the summer months. Otherwise, we would have to
can and freeze the fruit for consumption in the rest of the year. We would not have access to oranges,
grapefruit, pineapple, etc.
13. Answers will vary
14. Answers will vary
15. Answers will vary
16. Why do companies speculate? To profit from the fluctuations in the price of currency.
20. A Canadian company can produce a mattress using $160 worth of raw materials and $120 worth of
labour, and shipping costs will be $27. A Chinese company can produce the mattress using $160 of raw
materials and $40 for labour, with $50 for shipping. Assume that the Canadian tariff for mattresses is 50
percent. The Canadian retailer has a profit margin of 150 percent.
a) Calculate the price of the Canadian-produced mattress.
Raw materials $160
Labour $120
Shipping $27
Total $307
Profit Margin ($307*1.5) $460.50
Selling Price $767.50
b) Calculate the price of the Chinese-produced mattress before the tariff.
Raw materials $160
Labour $40
Shipping $50
Total $250
Profit margin ($250 *1.5) $375
Selling Price $625
c) Calculate the price for the Chinese-produced mattress after the tariff.
Raw materials $160
Labour $40 Tariff (($160+40) * .5) $100
Shipping $50
Total $350
Profit Margin ($350*1.5) $525
Selling Price $875
22. As a Canadian manufacturer, you have a choice to purchase raw materials from three countries. The
United States is offering to sell the goods for USD$1.2 million, the United Kingdom for GBP 650,000 and
South Korea for KRW1.7 billion.
a) Which is the better deal? Answers may change over time, however, the United Kingdom will probably
be the correct answer.
b) Why would you want the supplier to be ISO certified? You could be certain that the product you are
purchasing meets ISO standards. This ensures that your purchase is of good quality.
c) What other considerations would you take into account when making your decision? tariffs, shipping
costs, quality of goods, economic stability of country, method of shipping, time for delivery, conditions
of contract, etc.