Fundamentals of Multinational Finance, 3e (Moett)
Chapter
1
Globalization and the Multinational Enterprise
1.1
Multiple Choice and True/False Questions
1)
Which of the following are critical to a firm trying to reach the top of the “firm value
pyramid”?
A)
an open market place
B)
high quality strategic management
C)
access to capital
D)
all of the above
Answer
:
A
Topic
:
Firm Value
Skill
:
Conceptual
2)
A well–established, large firm U.S.–based MNE will probably not be able to overcome which
of the following obstacles to maximizing firm value?
A)
an open market place
B)
high quality strategic management
C)
access to capital
D)
none of the above
Answer
:
D
Topic
:
Firm Value
Skill
:
Recognition
3)
Three necessary conditions for a firm to reach the top of the “firm value pyramid” are an
open market place, high quality strategic management, and access to capital.
Answer
:
TRUE
Topic
:
Firm Value
Skill
:
Conceptual
4)
A well–established, large China–based MNE will probably be most adversely affected by
which of the following elements of firm value?
A)
an open marketplace
B)
high–quality strategic management
C)
access to capital
D)
access to qualified labor pool
Answer
:
A
Topic
:
Firm Value
Skill
:
Conceptual
5)
A well–established, large, Brazil–based MNE will probably be most adversely affected by
which of the following elements of firm value?
A)
an open marketplace
B)
high–quality strategic management
C)
access to capital
D)
access to qualified labor pool
Answer
:
C
Topic
:
Firm Value
Skill
:
Conceptual
6)
The theory that suggests specialization by country can increase worldwide production is
________.
A)
the theory of comparative advantage
B)
the theory of foreign direct investment
C)
the international Fisher effect
D)
the theory of working capital management
Answer
:
A
Topic
:
Comparative Advantage
Skill
:
Recognition
7)
Which of the following would NOT be a way to implement comparative advantage?
A)
IBM exports computers to Egypt.
B)
Computer hardware is designed in the United States but manufactured and assembled in
Korea.
C)
Water of the greatest purity is obtained from wells in Oregon, bottled, and exported
worldwide.
D)
All of the above are examples of ways to implement comparative advantage.
Answer
:
D
Topic
:
Comparative Advantage
Skill
:
Conceptual
8)
Which of the following would NOT be considered a feature of comparative advantage?
A)
Exporters in Country A sell goods or services to unrelated importers in Country B.
B)
Firms in Country A specialize in making products that can be produced relatively
e>ciently, given County A’s endowment of factors of production. Firms in Country B do
likewise thus maximizing the combined output of Countries A and B.
C)
Trade exists between Counties A and B because of specialized factors of production that
cannot be moved among countries.
D)
All of the above are features of comparative advantage.
Answer
:
D
Topic
:
Comparative Advantage
Skill
:
Recognition
9)
Of the following, which would NOT be considered a way that government interferes with
comparative advantage?
A)
tari5s
B)
managerial skills
C)
quotas
D)
other non–tari5 restrictions
Answer
:
B
Topic
:
Comparative Advantage
Skill
:
Recognition
10)
Comparative advantage shifts over time as less developed countries become more
developed and realize their latent opportunities.
Answer
:
TRUE
Topic
:
Comparative Advantage
Skill
:
Recognition
11)
Comparative advantage was once the cornerstone of international trade theory, but today it
is archaic, simplistic, and irrelevant for explaining investment choices made by MNEs.
Answer
:
FALSE
Topic
:
Comparative Advantage
Skill
:
Recognition
12)
In determining why a firm becomes multinational there are many reasons. One reason is
that the firm is a market seeker. Which of the following is NOT a reason why market
seeking firms produce in foreign countries?
A)
satisfaction of local demand in the foreign country
B)
satisfaction of local demand in the domestic markets
C)
political safely and small likelihood of government expropriation of assets
D)
All of the above are market–seeking activities.
Answer
:
C
Topic
:
Comparative Advantage
Skill
:
Recognition
13)
________ investments are designed to promote and enhance the growth and profitability of
the firm. ________ investments are designed to deny those same opportunities to the firm’s
competitors.
A)
Conservative; aggressive
B)
Defensive; proactive
C)
Proactive; defensive
D)
Aggressive; proactive
Answer
:
C
Topic
:
Comparative Advantage
Skill
:
Recognition
14)
Which of the following is NOT considered to be a type of competitive advantage that may
be enjoyed by an MNE?
A)
managerial and marketing expertise
B)
superior technology due to investment in research and development
C)
increased agency costs
D)
differentiated products
Answer
:
C
Topic
:
Comparative Advantage
Skill
:
Recognition
15)
Which of the following is NOT considered to be a type of competitive advantage that may
be enjoyed by an MNE?
A)
competitiveness in their home markets
B)
foreign exchange risks
C)
economies of scale
D)
economies of scope
Answer
:
B
Topic
:
Comparative Advantage
Skill
:
Recognition
16)
The phase of the globalization process characterized by imports from foreign suppliers and
exports to foreign buyers is called the
A)
domestic phase.
B)
multinational phase.
C)
international trade phase.
D)
import–export banking phase.
Answer
:
C
Topic
:
The Globalization Process Fundamentals
Skill
:
Recognition
17)
The authors describe the multinational phase of globalization for a firm as one
characterized by the
A)
ownership of assets and enterprises in foreign countries.
B)
potential for international competitors or suppliers even though all accounts are with
domestic firms and are denominated in dollars.
C)
imports from foreign suppliers and exports to foreign buyers.
D)
requirement that all employees be multilingual.
Answer
:
A
Topic
:
The Globalization Process Fundamentals
Skill
:
Recognition
18)
Of the following, which was NOT mentioned by the authors as an increase in the demands
of financial management services due to increased globalization by the firm?
A)
evaluation of the credit quality of foreign buyers and sellers
B)
foreign consumer method of payment preferences
C)
credit risk management
D)
evaluation of foreign exchange risk
Answer
:
B
Topic
:
The Globalization Process, Financial Management
Skill
:
Recognition
19)
The authors describe the multinational phase of globalization for a firm as one
characterized by the
A)
ownership of assets and enterprises in foreign countries.
B)
potential for international competitors or suppliers even though all accounts are with
domestic firms and are denominated in dollars.
C)
imports from foreign suppliers and exports to foreign buyers.
D)
requirement that all employees be multilingual.
Answer
:
A
Topic
:
The Globalization Process Fundamentals
Skill
:
Recognition
20)
Of the following, which was NOT mentioned by the authors as an increase in the demands
of financial management services due to increased globalization by the firm?
A)
evaluation of the credit quality of foreign buyers and sellers
B)
foreign consumer method of payment preferences
