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1) assembly of electronic components is a relatively labor-intensive process requiring only low-skilled labor, and cost pressures are intense. as a result, final assembly may be carried out in a country such as the united states. 2) critics of globalization […]

1) arbitrage opportunities abound in the foreign exchange markets and they tend to be available for long periods of time. 2) when substantial investments in specialized assets are required to manufacture a component, the firm will prefer to contract it […]

1) country factors, technological factors, and product factors, all influence the decision of where to produce. 2) a big impediment to exporting is the simple lack of knowledge of the opportunities available. Answer: true 3) in theory, wto rules should […]

1) most governments are in favor of transfer pricing. 2) companies can strengthen the moral courage of employees by committing themselves to retaliate against employees who exercise moral courage, say no to superiors, or otherwise complain about unethical actions. Answer: […]

1) the long-run benefits of doing business in a country are a function of factors such as the size of the market, the present wealth of consumers in that market, and the likely future wealth of customers. 2) once a […]

1) a benefit to companies of economic integration is the opportunity to centralize their production and reduce costs. 2) the financial crisis that started in the united states and swept around the world in 2008 and 2009 could be attributed […]

1) firms pursuing the global strategy and the transnational strategy disperse each value creation activity to its optimal location in the world. 2) systematic risk refers to movements in a stock portfolio’s value that are attributable to macroeconomic forces affecting […]

1) a company that depends on mass media advertising to communicate its marketing message to potential consumers is using a push strategy. 2) by 2008, the u.s. had seen its share of exports fall to almost half its share in […]

1) when a country cannot service its foreign debt obligations, a banking crisis has occurred. 2) the make-or-buy decision involves deciding whether a firm should make or buy the component parts that go into the final product. Answer: true 3) […]

1) moore’s law predicts that the power of microprocessor technology doubles and its cost of production falls by half every 18 months. 2) a source of concern of critics of free trade is that it usually encourages firms from advanced […]

1) 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 localization strategy. 2) barriers to cross-border […]

1) the naive immoralist claims that a multinational’s home country standards of ethics are the appropriate ones for companies to follow in foreign countries. 2) most international businesses require all budgets and performance data within the firm to be expressed […]

1) the ppp theory is a strong predictor of short-run movements in exchange rates covering time spans of five years or less. 2) the eximbank is a part of the wto’s efforts to facilitate trade between nations. Answer: false 3) […]

1) historically, most international businesses have been more concerned with management development than with training. 2) limits on imports are often in the interests of domestic consumers, but not domestic producers. Answer: false 3) some critics argue that outsourcing has […]

1) if the net present value of the discounted cash flows is slightly less than zero, the firm should go ahead with the project. 2) the letter of credit system effectively transfers the issue of trust to the bank. Answer: […]

1) exporting is advantageous because it avoids the cost of establishing manufacturing operations in the host country and because it may help a firm achieve experience curve and location economies. 2) as compared to exporting and licensing, fdi may be […]

1) economic freedom necessarily equates with political freedom. 2) cultural toughness can be assessed by comparing cultures. Answer: true 3) firms may choose an ethnocentric approach to staffing as opposed to a polycentric approach because of the cost savings it […]

1) the matrix structure is designed to facilitate maximum integration among subunits. 2) a lack of information about the fundamental quality of foreign investments may encourage speculative flows in the global capital market. Answer: true 3) the entry of large […]

1) when the firm simultaneously faces both strong cost pressures and strong pressures for local responsiveness, the ideal strategy to follow is the transnational strategy. 2) as a plant output expands, unit costs decrease. Answer: true 3) the sullivan principles […]

1) a central point in vernon’s product life-cycle was that demand for new products tends to be solely based on price factors. 2) beyond the initial functional division of the organization, further horizontal differentiation may be required if the firm […]

1) unlike their american and japanese counterparts, german firms are at a disadvantage when it comes to assistance in seeking export opportunities. 2) cash balances are typically deposited in liquid accounts. Answer: true 3) the andean pact is a highly […]

1) dunning, in the eclectic paradigm theory, suggests that a firm must establish production facilities where foreign assets or resource endowments necessary to the production of the product exist. 2) the global financial crisis of 2008 and 2009 focused attention […]

1) it is easier to establish free trade among a limited number of adjacent countries than it is among the world community. 2) deregulation involves removing legal restrictions to the free play of markets, the establishment of private enterprises, and […]

1) the single european act committed eu countries to adopting a common currency by january 1, 1999 . 2) the european union is an example of a perfect economic union. Answer: false 3) today, global changes in the political economy […]

1) rights theories recognize that human beings have fundamental rights and privileges that transcend national boundaries and cultures. 2) licensing increases a firm’s ability to realize experience curve and location economies by producing its product in a centralized location. Answer: […]

1) according to rawls, inequalities can be just if the system that produces inequalities is to the advantage of everyone. 2) the shift toward a more integrated and interdependent world economy is referred to as globalization. Answer: true 3) gatt […]

1) nearly all developing nations have substantial regulations governing the emission of pollutants, the dumping of toxic chemicals, the use of toxic materials in the workplace, and so on. 2) market makers are the financial service companies that connect investors […]

1) switch trading is the direct exchange of goods and/or services between parties without a cash transaction. 2) countries with fragmented retail systems tend to have long channels of distribution. Answer: true 3) adverse exchange rate movements can transform otherwise […]

1) from a profit perspective, it makes sense for a firm to disperse its productive activities to those countries where, according to the theory of international trade, they can be performed most efficiently. 2) the most attractive staffing policy is […]

1) the so-called group of five major industrial countries includes great britain, the united states, japan, switzerland, and germany. 2) a firm can lower costs by dispersing production to locations around the globe where each activity can be performed most […]

1) one criticism of the imf’s policy prescriptions is that its “one-size-fits-all” approach to microeconomic policy is inappropriate for many countries. 2) the sight draft specifies that the bank will pay a specified sum of money to the exporter upon […]

1) core competencies enable a firm to reduce the costs of value creation and/or to create perceived value in such a way that premium pricing is possible. 2) a class system is a rigid form of social stratification in which […]

1) governments do not always act in the national interest when they intervene in the economy; politically important interest groups often influence them. 2) the foreign exchange market is a market for converting the currency of one country into that […]

1) small-scale entry allows a firm to learn about a foreign market while limiting the firm’s exposure to that market. 2) host country citizens that are employed by an mne following an fdi are an example of an indirect effect […]

1) money market accounts typically offer a relatively high rate of interest. 2) outsourcing decisions pose plenty of problems for international businesses but even more problems for purely domestic businesses. Answer: false 3) the most rigid system of stratification is […]

1) by diversifying a portfolio internationally, an investor’s level of risk is increased even further because the movements of stock market prices across countries are not perfectly correlated. 2) when a company emphasizes personal selling, the company is probably using […]

1) mnes can hedge against currency fluctuations by dispersing production to different locations around the globe. 2) it is more important to have a common culture in firms employing a localization strategy than a transnational strategy. Answer: false 3) the […]

1) there are two main trading blocs in europe, the european union and the european free trade association. 2) the world bank’s initial mission was to lend money to third world nations. Answer: false 3) building an organization culture that […]

1) a firm’s organizational culture refers to the values and norms that are shared among employees of an organization. 2) according to lessard and lorange, the three exchange rates that can be used to translate foreign currencies into the corporate […]

1) people who take food or safety for granted tend to be xenophobic, are wary of political activity, have authoritarian tendencies, and believe that men make better political leaders than women. 2) the rate of new-product development seems to be […]

1) the costs and risks associated with doing business in a foreign country are typically high in an economically advanced and politically stable democratic nation. 2) it is possible that a multinational’s balance sheet may not balance when it uses […]

1) firms use countertrade to trade goods and services for other goods and services when they cannot be traded for money. 2) there is a strong relationship between economic freedom and economic growth. Answer: true 3) problems of limited liquidity […]

1) according to statement 52, “foreign currency translation,” the functional currency of an integral subsidiary is to be the home currency. 2) regardless of a firm’s domestic structure, its international division tends to be organized on economy. Answer: false 3) […]

1) a push strategy is generally favored by consumer goods firms that are trying to sell to a large segment of the market. 2) the international trade secretariats have had tremendous success. Answer: false 3) an export management company is […]

1) specific tariffs are levied as a proportion of the value of the imported good. 2) the purpose of consolidated financial statements is to provide accounting information about a group of companies that recognize their economic interdependence. Answer: true 3) […]

1) transfer pricing is consistent with a policy of treating each subsidiary in the firm as a profit center. 2) since 1973, exchange rates have been relatively stable thanks to the floating exchange rate system currently in place. Answer: false […]

1) transnational investment occurs when a firm based in one country enters another country’s capital market to raise capital from the sale of stocks or bonds. 2) when a gain by one country results in a loss by another, there […]

1) in the period 1950-1990, the world gdp showed a consistent decline as opposed to the volume of exports. 2) mercantilism advocated that countries should encourage exports and imports. Answer: false 3) historically, most fdi has been directed at the […]

1) the free trade area of the americas that was established in 2005 has thus far proven to be a success. 2) great britain, germany, and france have led the push toward a euro zone in the eu. Answer: false […]

1) myanmar has one of the worst human rights records in the world. 2) in general, economic studies suggest that countries that adopt a more open stance toward international trade enjoy higher growth rates than those who keep their economies […]

1) raymond vernon suggested that the wealth and size of the u.s. market gave u.s. firms a strong incentive to develop new consumer products. 2) without consolidated financial statements, a multinational firm could conceal losses in an unconsolidated subsidiary. Answer: […]

1) in a common law system, judges have the power to interpret the law. 2) the heckscher-ohlin theory argues that free trade is not beneficial to most nations. Answer: false 3) while popular in its time, ricardo’s theory is no […]

1) jobs created in local suppliers as a result of the mne’s investment and jobs created because of increased local spending by employees of the mne are examples of direct employment effects of fdi. 2) pricing decisions around the world […]

1) entering a foreign market on a large scale provides the opportunity to learn about the foreign country. 2) international businesses avoid or defer income taxes by establishing a wholly owned, nonoperating subsidiary in the tax haven. Answer: true 3) […]

1) according to recent studies, different national stock markets appear to be only moderately correlated. 2) the term “offshore production” refers to fdi undertaken to serve the home market. Answer: true 3) error! hyperlink reference not valid.error! hyperlink reference not […]

1) the united nations cigs establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contracts between sellers and buyers who have their places of business in different nations. 2) commercial banks bring […]

1) the world bank is responsible for maintaining order in the international monetary system. 2) empirical studies show that there is a long-run relationship between a country’s relative inflation rates and changes in exchange rates. Answer: true 3) if the […]

1) the tragedy of the commons occurs when a resource held in common by all, but owned by no one, is overused by individuals, resulting in its degradation. 2) a country’s balance of payments accounts keep track of both its […]

1) in the eu, many firms have historically been limited by a low cost structure in their ability to compete globally with north american and asian firms. 2) the maastricht treaty entails that the ecb take orders from politicians. Answer: […]

1) during the past decade, countries with high individualism and low confucian dynamics such as the united states have attained high growth rates. 2) culture is static. Answer: false 3) countertrade contracts may involve the exchange of poor-quality goods that […]

1) when a tourist changes one currency into another, the tourist is participating in the foreign exchange market. 2) firms pursuing a global standardization strategy are more centralized than enterprises pursuing a localization or international strategy. Answer: true 3) high […]

1) american exporters can minimize their risk by purchasing insurance from the foreign credit insurance association. 2) ricardo noted the importance of country factors such as domestic demand and domestic rivalry in explaining a nation’s dominance in the production and […]

1) countries cannot prohibit national firms from investing in certain countries for political reasons. 2) the failure rate for international strategic alliances is very low. Answer: false 3) the value of a currency is determined by the interaction between the […]

1) if $1 bought more yen with a spot exchange than with a 30-day forward exchange it indicates the dollar is expected to depreciate against the yen in the next 30 days. when this occurs, we say the dollar is […]

1) emcs are experienced specialists who can help the neophyte exporter avoid common pitfalls. 2) transaction exposure is the extent to which the income from individual transactions is affected by fluctuations in foreign exchange values. Answer: true 3) according to […]

1) regulated domestic currency deposits ensure that banks have enough liquid funds to satisfy demand if large numbers of domestic depositors should suddenly decide to withdraw their money. 2) the iasb has enough regulatory muscle to enforce its standards. Answer: […]

1) the governments of the argentina and brazil in 1988 agreed to enter into a free trade agreement, the goal of which was to eliminate all tariffs on bilateral trade between these countries by 1998 . 2) proponents of nafta […]

1) a global standardization strategy is appropriate when a firm is facing low pressures for cost reduction but high pressure for local responsiveness. 2) cash needs are assumed to be normally distributed in each country and independent of each other. […]

1) an oligopoly is an industry composed of a limited number of large firms. 2) a decentralized organization allows managers to respond to environmental changes more quickly than in a centralized organization. Answer: true 3) high relative price inflation, a […]

1) licensing is a good option for firms in high-tech industries where protecting firm-specific expertise is of paramount importance. 2) if the free market reforms in china continue for two more decades, china may move from third world status to […]

1) historically, the product life-cycle theory seems to be an inaccurate explanation of international trade patterns. 2) licensing gives a firm tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability. […]

1) concentrating production at an optimal location is more attractive when a product serves universal needs. 2) as an investor increases the number of stocks in her portfolio, the portfolio’s risk increases. Answer: false 3) there is now a trend […]

1) one of the sources of economies of scale is the ability to spread fixed costs over a large volume. 2) a common market has no barriers to trade between member countries, includes a common external trade policy, and allows […]

1) to survive, a firm must strive to achieve a fit between its environment, its strategy, and its organizational architecture. 2) a foreign service premium is offered as an inducement to accept foreign postings. Answer: true 3) a shotgun approach […]

1) when an investor purchases a corporate stock, he purchases the right to receive a specified fixed stream of income from the corporation for a specified number of years. 2) if a country is characterized as having a single homogenous […]

1) political risk assessment is more art than science. 2) during the period 1990 – 2000, the volume of total exports was more than twice the world gdp. Answer: true 3) a key disadvantage of the worldwide area structure is […]

1) a consolidated financial statement combines the separate financial statements of two or more companies to yield a single set of financial statements as if the individual companies were really one. 2) by centralizing decision making, a firm can avoid […]

1) smith’s theory of international trade suggests that when one country has an absolute advantage in the production of all goods, the country might not derive any benefit from international trade. 2) a geocentric staffing policy seeks the best people […]

1) fees are usually levied as a percentage of a subsidiary’s gross revenues. 2) according to the un, a typical international trade transaction can involve 50 different parties. Answer: false 3) unless there is no alternative, large, diverse multinational enterprises […]

1) skills in an mne are always generated at the headquarters location and are then dispersed to the rest of the organization. 2) the fisher effect states that a country’s real interest rate is the sum of the nominal interest […]

1) one of the problems of licensing is that it may result in a firm’s giving away valuable technological know-how to a potential foreign competitor. 2) the mission of the eximbank is to provide financing aid that will facilitate exports, […]

1) with regard to political factors, a company may have to pay off politically powerful entities in a country before the government allows it to do business there. 2) debt continues to be a major burden for poorer nations as […]

1) adam smith’s basic argument is that a country should produce goods at home even if it can buy at a lower cost from other countries. 2) a firm may be prevented from using standardized advertising because of advertising regulations. […]