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37. Critics of globalization suggest that over the last century, the gap between the rich and poor nations of the world has shrunken. FALSE Critics of globalization argue that despite the supposed benefits associated with free trade and investment, over […]

90. Explain the notion of the World Wide Web emerging as an equalizer. In 1990, fewer than 1 million users were connected to the Internet. By 1995, the figure had risen to 50 million. By 2010 the Internet had 1.97 […]

Chapter 01 – Globalization 1-1 Globalization Learning objectives • Understand what is meant by the term globalization. • Recognize the main drivers of globalization. • Describe the changing nature of the global economy. • Explain the major arguments in the […]

Chapter 01 Globalization True / False Questions 1. The shift toward a more integrated and interdependent world economy is referred to as globalization. TRUE Globalization refers to the shift toward a more integrated and interdependent world economy. It has several […]

79. An international business, unlike a multinational enterprise, _____. A. needs to have manufacturing units in at least two foreign nations B. needs to manufacture products or provide services that target a global market C. need not customize its products […]

59. Which of the following is NOT a consequence of the reduction in trade barriers and restrictions on FDI since 1950? A. Firms are dispersing parts of their production process to global locations to drive down production costs and increase […]

61. According to the law of one price, if the exchange rate between the British pound and the dollar is £1 = $1.50, a shirt that retails for $120 in New York should sell for _____ in London. A. £180 […]

Blooms: Understand Difficulty: 2 Medium Learning Objective: 10-06 Compare and contrast the differences between translation; transaction; and economic exposure; and explain what managers can do to manage each type of exposure. Topic: Implications for Managers Multiple Choice Questions 41. Which […]

Chapter 10 – The Foreign Exchange Market 10-1 The Foreign Exchange Market Learning objectives • Describe the functions of the foreign exchange market. • Understand what is meant by spot exchange rates. • Recognize the role that foreign exchange rates […]

Chapter 10 The Foreign Exchange Market True / False Questions 1. The foreign exchange market is a market for converting the currency of one country into that of another country. TRUE The foreign exchange market is a market for converting […]

79. _____ is the impact of short-run currency exchange rates changes on the reported financial statements of a company. A. Economic exposure B. Financial exposure C. Translation exposure D. Transaction exposure Translation exposure is concerned with the present measurement of […]

60. _____ exchange rates were declared as acceptable in the Jamaica agreement of IMF. A. Pegged B. Fixed C. Floating D. Gold standard Floating rates were declared acceptable in the Jamaica agreement. IMF members were also permitted to enter the […]

40. Firms should not utilize the forward exchange market when they are faced with uncertainty about the future value of currencies. FALSE Faced with uncertainty about the future value of currencies, firms can utilize the forward exchange market. AACSB: Analytic […]

80. Increasingly the _____ has been acting as macroeconomic police of the world economy, insisting that countries seeking significant borrowings adopt certain macroeconomic policies. A. ECOSOC B. IMF C. UN D. World Bank Increasingly the IMF has been acting as […]

Chapter 11 – The International Monetary System 11-1 The International Monetary System Learning objectives • Describe the historical development of the modern global monetary system. • Explain the role played by the World Bank and the IMF in the international […]

Chapter 11 The International Monetary System True / False Questions 1. The international monetary system refers to the institutional arrangements that govern exchange rates. TRUE The international monetary system refers to the institutional arrangements that govern exchange rates. AACSB: Analytic […]

61. A Eurocurrency is any currency _____. A. banked outside of its country of origin B. that is traded in European countries C. that originates in European countries D. used to buy gold and related commodities A Eurocurrency is any […]

Multiple Choice Questions 41. A _____ brings together those who want to invest money and those who want to borrow money. A. consumer market B. value chain C. supply chain D. capital market Capital markets bring together those who want […]

Chapter 12 – The Global Capital Market 12-1 The Global Capital Market Learning objectives • Describe the benefits of the global capital market. • Identify why the global capital market has grown so rapidly over the last quarter century. • […]

Chapter 12 The Global Capital Market True / False Questions 1. A capital market brings together those who want to invest money and those who want to borrow money. TRUE Capital markets bring together those who want to invest money […]

81. What is a capital market? Define market makers. A capital market brings together those who want to invest money and those who want to borrow money. Those who want to invest money include corporations with surplus cash, individuals, and […]

77. A firm that is pursuing a(n) _____ strategy is simultaneously trying to achieve low costs through location economies, economies of scale, and learning effects, and trying to differentiate its product offering across geographic markets. A. global customization B. international […]

Chapter 13 – The Strategy of International Business 13-1 The Strategy of International Business Learning objectives • Explain the concept of strategy. • Recognize how firms can profit from expanding globally. • Understand how pressures for cost reductions and pressures […]

Chapter 13 The Strategy of International Business True / False Questions 1. A firm’s strategy can be defined as the actions that managers take to attain the goals of the firm. TRUE A firm’s strategy can be defined as the […]

89. What is a core competence? Why is it essential to the success of the firm? The term core competence refers to skills within the firm that competitors cannot easily match or imitate. These skills may exist in any of […]

57. When companies disperse different stages of the value chain to those locations around the world where perceived value is maximized or where the costs of value creation are minimized, companies create: A. a differentiated organization. B. a location economy […]

36. When a firm focuses on increasing profitability by customizing the product or service so that they provide a good match to tastes and preferences in different national markets, the firm is following a transnational strategy. FALSE A localization strategy […]

Difficulty: 1 Easy Learning Objective: 14-04 Discuss what is required for an international business to change its organization so that it better matches its strategy. Topic: Organizational Change 40. It is important to realize that organizational change will occur regardless […]

81. Explain organizational structure. A firm’s organizational structure refers to three things. First, the term refers to the formal division of the organization into subunits such as product divisions, national operations, and functions. Second, the term refers to the location […]

Chapter 14 – The Organization of International Business 14-1 The Organization of International Business Learning objectives • Explain what is meant by organizational architecture. • Describe the different organizational choices that can be made in an international business. • Explain […]

Chapter 14 The Organization of International Business True / False Questions 1. Organizational structure refers to the totality of a firm’s organization. FALSE Organizational architecture refers to the totality of a firm’s organization. Organizational structure refers to three things. First, […]

61. In which of the following organizational structures are the domestic operations and foreign operations isolated from each other leading to coordination problems? A. Global matrix structure B. International division structure C. Worldwide product division structure D. Worldwide area structure […]

92. Compare and contrast licensing agreements and franchising agreements. A licensing agreement is an arrangement whereby a licensor grants the rights to intangible property to another entity for a specified period in exchange for royalties. In contrast, franchising is basically […]

60. Cross-licensing agreements are increasingly common in the _____ industries. A. transportation B. high-technology C. construction D. consumer durables Cross-licensing agreements enable firms to hold each other hostage, which reduces the probability that they will behave opportunistically toward each other. […]

Chapter 15 – Entry Strategy and Strategic Alliances 15-1 Entry Strategy and Strategic Alliances Learning objectives • Explain the three basic differences that firms contemplating foreign expansion must make: which markets to enter, when to enter those markets, and on […]

Chapter 15 – Entry Strategy and Strategic Alliances 15–12 Toyota Corolla and Toyota Tacoma. Moreover, despite the announcement of its impending closing, the plant is still running at full capacity today, producing new Corollas and Tacomas at the rate of […]

Chapter 15 Entry Strategy and Strategic Alliances True / False Questions 1. The choice of which markets to enter should be driven by an assessment of relative long-run growth and profit potential. TRUE The choice of which markets to enter […]

40. To maximize the learning benefits of an alliance, a firm must try to learn from its partner and then apply the knowledge within its own organization. TRUE To maximize the learning benefits of an alliance, a firm must try […]

80. _____ refer to cooperative agreements between potential or actual competitors. A. Greenfield investments B. Strategic alliances C. Takeovers D. Licensing agreements Strategic alliances refer to cooperative agreements between potential or actual competitors. AACSB: Analytic Blooms: Remember Difficulty: 1 Easy […]

bank draft, which is payable in 90 days. 11. The exporter sells the draft to his bank at a discount from its face value and receives the discounted cash value of the draft in return. 12. The importer’s bank notifies […]

40. Countertrade is least attractive to large, diverse multinational enterprises. FALSE Countertrade is most attractive to large, diverse multinational enterprises that can use their worldwide network of contacts to dispose of goods acquired in countertrading. AACSB: Analytic Blooms: Understand Difficulty: […]

Chapter 16 – Exporting, Importing, and Countertrade 16-1 Exporting, Importing and Countertrade Learning objectives • Explain the promises and risks associated with exporting. • Identify the steps managers can take to improve their firm’s export performance. • Identify information sources […]

Chapter 16 Exporting, Importing, and Countertrade True / False Questions 1. Proactive firms do not consider exporting until their domestic market is saturated. FALSE Proactive firms continually seek opportunities for profitable exporting and systematically scan foreign markets to see where […]

60. The person or business initiating a draft is known as the _____. A. beneficiary B. drawee C. maker D. trustee The person or business initiating the draft is known as the maker (in this case, the U.S. exporter). The […]

80. Which of the following is a major drawback of engaging in countertrade? A. Countertrade is not useful when trading with developing nations. B. Financing is difficult when engaging in a countertrade. C. It is not attractive to small organizations. […]

82. Discuss the strategic objectives of the production and logistics functions of an international firm. The production and logistics functions of an international firm have a number of important strategic objectives. A primary objective is to lower costs. Dispersing production […]

Chapter 17 – Global Production, Outsourcing, and Logistics 17-1 Global Production, Outsourcing, and Logistics Learning objectives • Explain why production and logistics decisions are of central importance to many multinational businesses. • Explain how country differences, production technology, and product […]

Chapter 17 Global Production, Outsourcing, and Logistics True / False Questions 1. Lowering the costs is one of the objectives of the production and logistics function of an international firm. TRUE The production and logistics functions of an international firm […]

40. Just-in-time systems help a firm respond quickly to increases in demand. FALSE The drawback of a JIT system is that it leaves a firm without a buffer stock of inventory. Although buffer stocks are expensive to store, they can […]

60. Which of the following products will most likely have high value-to-weight ratios? A. Pharmaceuticals B. Refined sugar C. Bulk chemicals D. Petroleum products Many electronic components and pharmaceuticals have high value-to– weight ratios. They are expensive and they do […]

64. The most important determinant of channel length is the degree to which a retail system is ____. A. concentrated B. fragmented C. decentralized D. globalized The most important determinant of channel length is the degree to which a retail […]

102. Define market segmentation. What is its goal? Market segmentation refers to identifying distinct groups of consumers whose purchasing behavior differs from others in important ways. Markets can be segmented in numerous ways: by geography, demography, social- cultural factors, and […]

Chapter 18 – Global Marketing and R&D 18-1 Global Marketing and R&D Learning objectives • Explain why it makes sense to vary the attributes of a product from country to country. • Recognize why and how a firm’s distribution strategy […]

Chapter 18 Global Marketing and R&D True / False Questions 1. The set of choices the firm offers to its targeted markets is known as the marketing mix. TRUE The marketing mix is the set of choices the firm offers […]

84. A pull strategy should be used when: A. the firm is selling industrial products. B. the distribution channels are short. C. the distribution channels are long. D. few print or electronic media are available. Pull strategies tend to be […]

41. Tight cross-functional integration between R&D, production, and marketing maximizes the time to market. FALSE Tight cross-functional integration between R&D, production, and marketing can help a company to ensure that time to market is minimized. AACSB: Analytic Blooms: Remember Difficulty: […]

Chapter 19 – Global Human Resource Management 19-1 Global Human Resource Management Learning objectives • Summarize the strategic role of human resource management in the international business. • Identify the pros and cons of different approaches to staffing policy in […]

Chapter 19 Global Human Resource Management True / False Questions 1. An expatriate manager is a citizen of one country who is working abroad in one of the firm’s subsidiaries. TRUE An expatriate manager is a citizen of one country […]

Topic: International Labor Relations 39. Labor unions generally prefer it if an international business keeps highly skilled tasks in its home country and farms out only low-skilled tasks to foreign plants. FALSE A concern of organized labor is that an […]

80. What are the four strategies pursued by international companies, and what is the role of HRM in these? The four strategies pursued by international businesses are localization, where value is created by emphasizing local responsiveness; international, where value is […]

91. What is cultural toughness? Mendenhall and Oddou identified four dimensions that seem to predict success in a foreign posting: self-orientation, others-orientation, perceptual ability, and cultural toughness. Cultural toughness refers to the relationship between the country of assignment and how […]

60. Which dimension of Mendenhall and Oddou’s study suggests that an expatriate with high self-esteem, self-confidence, and mental well-being is likely to succeed in a foreign job posing? A. Self-orientation B. Others-orientation C. Cultural toughness D. Perceptual ability The attributes […]

79. Discuss collectivism. What ideals does the philosophy support? Where did the philosophy start? How does collectivism exist in the modern world? A collectivist political system is one that stresses the primacy of collective goals over individual goals. In that […]

Chapter 02 – National Differences in Political Economy 2-1 National Differences in Political Economy Learning objectives • Understand how the political systems of countries differ. • Understand how the economic systems of countries differ. • Understand how the legal systems […]

Chapter 02 National Differences in Political Economy True / False Questions 1. The two dimensions, according to which the political systems can be assessed, collectivism-individualism and democratic-totalitarian are independent of each other. FALSE Political systems can be assessed according to […]

Topic: Legal Systems 38. Product liability can be much lower if a product does not conform to required safety standards. FALSE Product liability involves holding a firm and its officers responsible when a product causes injury, death, or damage. Product […]

60. Which of the following statements about the legal systems of countries is NOT true? A. They can affect the attractiveness of a country as an investment site or market. B. They are influenced by the prevailing political system of […]

Chapter 20 – Accounting and Finance in the International Business 20-1 Accounting and Finance in the International Business Learning objectives • Discuss the national differences in accounting standards. • Explain the implications of the rise of international accounting standards. • […]

Chapter 20 Accounting and Finance in the International Business True / False Questions 1. Accounting information is the means by which firms communicate their financial position to the providers of capital. TRUE Accounting information is the means by which firms […]

38. Royalties represent the remuneration paid to the owners for the use of technology or the right to manufacture and/or sell products under patents or trade names. TRUE Royalties represent the remuneration paid to the owners of technology, patents, or […]

59. Transfer price refers to the _____. A. price at which goods and services are transferred to a subsidiary B. price at which the title of products is transferred to a customer C. price at which a supplier provides raw […]

78. Which of the following is a disadvantage of pursuing a transfer pricing policy? A. It is not useful in shifting earnings from a high-tax country to a low-tax one. B. Transfer pricing does not treat each subsidiary as a […]

36. By identifying and investing early in a potential future economic star, international firms can build brand loyalty and gain experience in that country’s business practices. TRUE By identifying and investing early in a potential future economic star, international firms […]

Chapter 03 Political Economy and Economic Development 1. GNI per capita can be adjusted by purchasing power to account for differences in the cost of living. TRUE To account for differences in the cost of living, one can adjust GNI […]

60. Since the late 1980s, there has been a spread of democracy. This is because _____. A. a state’s ability to control access to uncensored information has increased B. the socialist model failed to deliver economic progress to the vast […]

81. What is gross national income? Is it related to purchasing power parity? A common measure of economic development is a country’s gross national income (GNI) per head of population. GNI is regarded as a yardstick for the economic activity […]

81. According to Geert Hofstede’s study, which of the following cultural dimensions would be characterized by a greater readiness to take risks and less emotional resistance to change? A. High power distance cultures B. Low uncertainty avoidance C. High collectivism […]

Chapter 04 – Differences in Culture 4-1 Differences in Culture Learning objectives • Know what is meant by the culture of a society. • Identify the sources that lead to differences in social culture. • Identify the business and economic […]

Chapter 04 Differences in Culture True / False Questions 1. In today’s world of global communications, rapid transportation, and global markets, cultural differences have ceased to exist. FALSE In these days of global communications, rapid transportation, worldwide markets, and global […]

Difficulty: 1 Easy Learning Objective: 04-05 Demonstrate an appreciation for the economic and business implications of cultural change. Topic: Implications for Managers 39. The value systems and norms of a country are unrelated to the costs of doing business in […]

61. A _____ is a less rigid form of social stratification in which social mobility is possible. A. caste system B. normative system C. religious system D. class system A class system is a less rigid form of social stratification […]

93. What is Buddhism? Compare Buddhism with Hinduism. Buddhism was founded in India in the sixth century BC by Siddhartha Gautama, an Indian prince who renounced his wealth to pursue an ascetic lifestyle and spiritual perfection. According to Buddhism, suffering […]

36. Building an organization culture that places a high value on ethical behavior requires incentive and reward systems. TRUE Building an organization culture that places a high value on ethical behavior requires incentive and reward systems, including promotions that reward […]

Chapter 05 – Ethics in International Business 5-1 Ethics in International Business Learning objectives • Understand the ethical issues faced by international businesses. • Recognize an ethical dilemma. • Identify the causes of unethical behavior by managers. • Describe the […]

Chapter 05 – Ethics in International Business 5-13 Human rights activists have frequently voiced concern that China’s rapid pace of industrialization may come with human costs. Some worry that as the country establishes itself as the factory floor for the […]

Chapter 05 Ethics in International Business True / False Questions 1. Ethical strategies are the accepted principles of right or wrong governing the conduct of businesspeople. FALSE An ethical strategy is a strategy, or course of action, that does not […]

91. Explain the Friedman doctrine. Who developed the philosophy? How well does this approach hold up ethically? In 1970, Milton Friedman suggested that the only social responsibility of business is to increase profits, so long as the company stays within […]

78. _____ means standing in the shoes of a stakeholder and asking how a proposed decision might impact that stakeholder. A. Veil of ignorance B. Difference principle C. Moral imagination D. Noblesse oblige Stakeholder analysis involves a certain amount of […]

58. A multinational company is accused of paying bribes to the government of a host country to obtain permission to build a production factory. The public relations manager of the company defends the company’s actions as being ethically sound; he […]

Chapter 06 – International Trade Theory 6-1 International Trade Theory Learning objectives • Understand why nations trade with each other. • Summarize the different theories explaining trade flows between nations. • Recognize why many economists believe that unrestricted free trade […]

Chapter 06 International Trade Theory True / False Questions 1. Free trade refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country. TRUE Free trade refers […]

69. Wal-Mart makes bulk purchases from its vendors and hence it is able to get better deals than its competitors. This allows Wal-Mart to offer greater discounts to its customers. In this case, Wal-Mart benefits from _____. A. first mover […]

42. Which of the following is a major benefit of engaging in free trade? A. It helps to reduce the financial volatility in global markets. B. It helps the countries protect the jobs that are available to their citizens. C. […]

79. _____ are the highest rate that can be charged, which is often, but not always, the rate that is charged. A. Ad valorem tariff rates B. Tariff rents C. Specific tariff rates D. Bound tariff rates Bound tariff rates […]

Learning Objective: 07-04 Describe the development of the world trading system and the current trade issues. Topic: Development of the World Trading System 38. Tariff barriers lower the costs of exporting products to a country. FALSE Trade barriers constrain a […]

59. Local content regulations: A. protect domestic producers by limiting foreign competition. B. lower the prices of imported components. C. tend to benefit consumers and not producers. D. encourage outsourcing of production units. Local content regulations provide protection for a […]

Chapter 07 – The Political Economy of International Trade 7-1 The Political Economy of International Trade Learning objectives • Identify the policy instruments used by governments to influence international trade flows. • Understand why governments sometimes intervene in international trade. […]

Chapter 07 The Political Economy of International Trade True / False Questions 1. Tariffs are unambiguously pro-consumer and anti-producer. FALSE Tariffs are generally pro-producer and anti-consumer. While they protect producers from foreign competitors, this restriction of supply also raises domestic […]

62. Advantages that arise from using resource endowments or assets that are tied to a particular place and that a firm finds valuable to combine with its own unique assets are known as: A. location-specific advantages. B. capital-specific advantages. C. […]

81. Discuss the two main forms of FDI. FDI takes on two main forms. The first is a greenfield investment, which involves the establishment of a new operation in a foreign country. The second involves acquiring or merging with an […]

Chapter 08 – Foreign Direct Investment 8-1 Foreign Direct Investment Learning objectives • Recognize current trends regarding FDI in the world economy. • Explain the different theories of foreign direct investment. • Understand how political ideology shapes a government’s attitudes […]

Chapter 08 Foreign Direct Investment True / False Questions 1. A Japanese car manufacturer acquires an Italian producer of car tires. This is an example of a greenfield investment. FALSE This is an example of an acquisition. A greenfield investment […]

Multiple Choice Questions 41. FDI occurs when a firm: A. ships its products from one country to another. B. invests directly in facilities to produce a product in a foreign country. C. invests in the shares of another company operating […]

Learning Objective: 09-05 Understand the implications for business that are inherent in regional economic integration agreements. Topic: Implications for Managers 40. The emerging role of the European Commission in competition policy suggests the EU is increasingly willing and able to […]

Chapter 09 – Regional Economic Integration 9-13 exported from the United States. Discussion of the case can revolve around the following questions: QUESTION 1: What are the potential economic benefits of the trucking provisions in the NAFTA treaty? Who benefits? […]

Chapter 09 – Regional Economic Integration 9-1 Regional Economic Integration Learning objectives • Describe the different levels of regional economic integration. • Understand the economic and political arguments for regional economic integration. • Understand the economic and political arguments against […]

Chapter 09 Regional Economic Integration True / False Questions 1. Regional economic integration involves agreements among countries in a geographic region to reduce, and ultimately remove, tariff and nontariff barriers to the free flow of goods, services, and factors of […]

82. What are the five levels of economic integration? Briefly describe each form. There are five levels of economic integration. From least integrated to most integrated, they are a free trade area, a customs union, a common market, an economic […]

61. Which of the following was the outcome of the Treaty of Lisbon signed in 2007? A. It established the European Community. B. It resulted in the adoption of the Euro. C. It changed the name of the European Community […]