The strategic trade policy arguments of the new trade theorists suggest an economic
justification for government intervention in international trade and this justification
challenges the rationale for unrestricted free trade.
Answer:
The foreign exchange market offers complete insurance against foreign exchange risk.
Answer:
Karl Marx advocated state ownership of the basic means of production, distribution,
and exchange (i.e., businesses).
Answer:
Shared ownership agreements can lead to conflicts and battles for control between
investing firms.
Answer:
The disadvantage of a pegged exchange rate regime is that it aggravates inflationary
pressures in a country.
Answer:
Expatriate failure represents the failure of a firm’s selection policies to identify
individuals who will not thrive abroad.
Answer:
After World War II, the advanced nations of the West committed themselves to
increasing barriers to the free flow of goods, services, and capital between nations.
Answer:
According to Mendenhall and Oddou, human resource managers must equate domestic
performance with overseas performance potential.
Answer:
People who cannot take food or safety for granted tend to have authoritarian tendencies,
and believe that men make better political leaders than women.
Answer:
A firm’s bargaining power is low when the host government places a low value on what
the firm has to offer.
Answer:
It often makes sense for a firm to enter a foreign market on a large scale to reduce the
costs of any subsequent failure.
Answer:
In international business, an early entrant to a foreign market may be at a disadvantage
relative to a later entrant, if regulations change in a way that diminishes the value of an
early entrant’s investments.
Answer:
A disadvantage of standardized advertising is that it increases the costs of value creation
by spreading the fixed costs of developing the advertisements over many countries.
Answer:
The Cold War was in many respects a war between collectivism, championed by the
former Soviet Union, and individualism, championed by the United States.
Answer:
The amount of value a firm creates is measured by the difference between its costs of
production and the value that consumers perceive in its products.
Answer:
For U.S. firms, the most comprehensive source of information on export opportunities
is the U.S. Department of Commerce.
Answer:
The production and supply chain management of an international firm are independent
of each other.
Answer:
The principle of countertrade is to trade goods and services for money.
Answer:
The emphasis on individualism has led to the widespread diffusion of self-managing
work teams within Japanese organizations.
Answer:
The main gains from subsidies accrue to importers, whose international competitiveness
is increased as a result of these subsidies.
Answer:
The forward exchange market is an accurate predictor of future exchange rates.
Answer:
In recent years, the trend among U.S. firms is to outsource the “production” of certain
service activities to developing nations where labor costs are lower.
Answer:
The stock of foreign direct investment refers to the total accumulated value of
foreign-owned assets at a given time.
Answer:
While small firms tend to be proactive about seeking opportunities for profitable
exporting, large firms are very reactive.
Answer:
For price discrimination to work, arbitrage opportunities must be unlimited.
Answer:
If an international business can offer a product that has been widely available in that
market, the value of that product to consumers is likely to be much greater than if the
international business offers a product that has not been widely available in that market.
Answer:
In the context of The Economist‘s “Big Mac Index,” assume that the average price of a
Big Mac in South Korea is $2.98 at the prevailing won/dollar exchange rate. The
average price of a Big Mac in the United States is $3.58. This suggests that the Korean
won is overvalued against the U.S. dollar.
Answer:
By offering the same basic product worldwide, firms help to create a global market.
Answer:
The theories of Smith, Ricardo, and Heckscher-Ohlin failed to identify the specific
benefits of international trade.
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The social democrats believed that socialism could be achieved only through violent
revolution and totalitarian dictatorship.
Answer:
Ethics officers act as an internal ombudsperson with responsibility for handling
confidential inquiries from employees.
Answer:
Reactive firms do not consider exporting until their domestic market is saturated.
Answer:
It is more costly to do business in relatively primitive or undeveloped economies
because of the lack of infrastructure and supporting businesses.
Answer:
Under a floating exchange rate regime, market forces have produced a volatile dollar
exchange rate.
Answer:
According to Freedom House, all democracies are free countries in terms of political
and civil liberties.
Answer:
The Export-Import Bank provides financing aid to prospective U.S. exporters.
Answer:
Which of the following refers to the reductions in unit cost achieved by producing a
large volume of a product?
A.Location economies
B.Learning effects
C.Standardization economies
D.Core economies
E.Economies of scale
Answer:
Which of the following creates an environment that is conducive to product and process
innovations and to entrepreneurial activity?
A.Communism
B.Centrally planned economy
C.Privatization
D.Command economy
E.Lack of strong property rights
Answer:
What can a country introduce if it wants to commit itself to converting its domestic
currency on demand into another currency at a fixed exchange rate?
A.A free-float exchange rate system
B.A clean-float exchange rate system
C.A pure-float exchange rate system
D.A currency board
E.A gold standard
Answer:
Suppose the country of Ceria and Lithinia imposed tariffs on imports from all countries,
and then they set up a free trade area, scrapping all trade barriers between themselves
but maintaining tariffs on imports from the rest of the world. Now, Ceria begins to
import sugar from Lithinia. However, Ceria had previously been importing sugar from
another country, Cadnia, which produced sugar more cheaply than Ceria or Lithinia.
This is known as:
A.trade creation
B.strategic pricing
C.synergy
D.trade diversion
E.protectionism
Answer:
A firm is most likely to favor foreign direct investment over exporting when:
A.the firm wants its technological know-how to be widely disseminated.
B.the firm wishes to maintain control over its operations and business strategy.
C.the transportation costs are low.
D.there are no trade barriers.
E.the firm wants to customize its products as per the tastes and preferences of foreign
consumers.
Answer:
Which of the following grants the inventor of a new product or process exclusive rights
for a defined period to the manufacture, use, or sale of that invention?
A.Copyright
B.Trademark
C.Patent
D.Warranty
E.Service mark
Answer:
The most comprehensive source of information on export opportunities for U.S. firms is
the:
A.Small Business Administration.
B.Department of Commerce.
C.Federal Trade Commission.
D.Bureau of Competition.
E.Bank of New York.
Answer:
Which of the following has been reduced as a result of globalization?
A.Volume of goods and services
B.Foreign exchange transactions
C.Environment and labor laws
D.Differences in material culture
E.Regulation of markets
Answer:
Which of the following is most likely to necessitate the delegation of marketing
functions to national subsidiaries?
A.Differences in distribution channels
B.Pressures for decreasing consumer surplus
C.Lack of product customization
D.Pressures for increasing economies of scale
E.Pressures for increasing consumers’ reservation price
Answer:
According to which of the following, FDI has both benefits and costs and should be
allowed only if the benefits outweigh the costs?
A.Eclectic paradigm theory
B.Free market view
C.Pragmatic nationalist view
D.Radical view
E.Internalization theory
Answer:
How are spot exchange rates determined?
A.By using historical average prices of different currencies
B.By the interaction between demand and supply of a currency relative to other
currencies
C.By taking the average of a basket of currencies
D.By government decree
E.By predicting future currency movements
Answer:
One of the reasons why protectionist pressures arose around the world during the 1980s
was:
A.the different ways many countries found to get around GATT regulations.
B.the opening up of national markets to cheap products from China.
C.the fall of the Soviet Union.
D.the persistent trade lead taken by the United States.
E.the Japanese failure in industries such as automobiles and semiconductors that
strained the world trading system.
Answer:
Which of the following is true of the Asia-Pacific Economic Cooperation (APEC)?
A.It does not include the United States, Japan, and China.
B.The meeting of APEC members in Seattle in 1993 led to greater economic
integration.
C.It was founded in 1990 at the suggestion of Australia.
D.APEC members signed a free trade agreement with China that removes tariffs on 90
percent of traded goods.
E.APEC members have established a free trade zone.
Answer:
Which of the following states that for any two countries, the spot exchange rate should
change in an equal amount but in the opposite direction to the difference in nominal
interest rates between the two countries?
A.Bandwagon effect
B.Law of one price
C.International Fisher effect
D.Helms-Burton Act
E.Purchasing power parity (PPP) theory
Answer:
The Small Business Administration oversees almost 11,500 volunteers with
international trade experience to provide one-on-one counseling to active and
new-to-export businesses through its program known as the:
A.Export Legal Assistance Network.
B.Service Corps of Retired Executives.
C.International Trade Veteran’s Group.
D.Network of Foreign Trade Executives.
E.Export Management Company.
Answer:
According to Michael Porter, what are the two basic strategies for creating value and
attaining a competitive advantage in an industry?
A.Differentiation and low-cost
B.Value creation and generalization
C.One-size-fits-all and zero-sum
D.Comparison and standardization
E.Profitability and strategic fit
Answer:
Which of the following movements started in Great Britain in the early 1980s when
then Prime Minister Margaret Thatcher started to sell state-owned assets such as the
British telephone company?
A.Nationalization
B.Privatization
C.Anti-democratic
D.Communist
E.Anti-globalization
Answer:
The Smoot-Hawley Act had a damaging effect on:
A.the balance-of-payment of the United States.
B.cash flow in the domestic economy of the United States.
C.prices of natural resources in the United States.
D.employment abroad.
E.accrued liabilities of the United States.
Answer:
According to Paul Krugman, a country that attempts to use strategic trade policy to
establish a domestic firm in a dominant position in a global industry, is most likely to:
A.dominate the industry.
B.move away from protectionism.
C.provoke retaliation.
D.incur huge financial debts.
E.upset the special-interest groups within the economy.
Answer:
If a firm is considering entering a country where incumbents exist, and if the
competitive advantage of the firm is based on the transfer of organizationally embedded
competencies, skills, routines, and culture, what would be the preferable mode of entry?
A.Greenfield venture
B.Joint venture
C.Licensing agreement
D.Franchising deal
E.Turnkey project
Answer:
A critical competitive feature of an oligopoly is the:
A.lack of interaction among the major players.
B.presence of a domestic market which is open for foreign firms.
C.desire of all the major players to avoid the phenomenon of diminishing returns.
D.interdependence of the major players.
E.lack of imitative behavior among the major players.
Answer:
To express the PPP theory in symbols, let P$ be the U.S. dollar price of a basket of
particular goods and P be the price of the same basket of goods in Japanese yen. What
does the purchasing power parity (PPP) theory predict to be the equivalent of the
dollar/yen exchange rate, E$/?
A.E$/ = (1 + P)/P$
B.E$/ = (1 + P$)/P
C.E$/ = P/P$
D.E$/ = P$/P
E.E$/ = (1 + P$)/(1 + P)
Answer:
Which of the following is true of medium-sized and small firms?
A.They are proactive about seeking opportunities for profitable exporting.
B.They consider exporting only after their domestic market is saturated.
C.They are not intimidated by the complexities of foreign legal systems.
D.They have a high degree of familiarity with foreign market opportunities.
E.They explore foreign markets to see where the opportunities lie for leveraging their
technology.
Answer:
States that limit the freedom of religious expression with laws based on religious
principles most likely follow the political system of:
A.theocratic totalitarianism.
B.communist totalitarianism.
C.right-wing totalitarianism.
D.pure democracy.
E.representative democracy.
Answer:
Brain Wing Inc. has won the bid to build airplanes for a host country government.
However, the execution of the contract has been delayed due to certain unproductive,
bureaucratic procedures in the less developed nation. In order to legally overcome this
problem, Brain Wing Inc. could resort to the payment of:
A.customs duties.
B.excise taxes.
C.expatriation taxes.
D.speed money.
E.repatriation fees.
Answer:
Which of the following is true of the East African Community (EAC)?
A.Its program includes cooperation on immigration, road and telecommunication
networks, investment, and capital markets.
B.Its aim is to eliminate import tariffs among the six original members.
C.It is the world’s largest free trade area.
D.It seeks to apply national environmental standards, provided such standards have a
scientific basis.
E.It seeks to protect intellectual property rights.
Answer:
Foreign managers trained in the latest management techniques can often help to
improve the efficiency of operations in the host country, whether those operations are
acquired or greenfield developments. This benefit of FDI falls into the category of:
A.employment effects.
B.balance-of-payments effects.
C.effects on competition.
D.resource transfer effects.
E.autonomy effects.
Answer:
Elephas Inc. is a steel rod manufacturing company that has customers, investors,
vendors, and competitors from all across the globe. Of the following business
associates, who would fall into the category of internal stakeholders?
A.Ace Globe Inc., a firm that supplies machinery to Elephas
B.Matt, a prominent member of the top management of Elephas
C.Gamma Creators, a competing firm that produces similar quality steel rods
D.The government of the home country of Elephas
E.Wendy, a major buyer of Elephas steel rods
Answer:
The effect of improved quality control is to lower the costs of value creation by
reducing production costs and:
A.decreasing inventory turnover.
B.decreasing after-sales service costs.
C.increasing scrap costs.
D.increasing warranty costs.
E.increasing time spent on fixing defects.
Answer:
According to Mendenhall and Oddou’s dimensions that predict success in a foreign
posting, relationship development refers to:
A.an expatriate’s willingness to use the host-country language.
B.the ability to understand why people of other countries behave the way they do.
C.the ability to empathize with foreign nationals.
D.the relationship between the country of assignment and how well an expatriate
adjusts to a particular posting.
E.the ability to develop long-lasting friendships with host-country nationals.
Answer:
According to Michael Porter, superior profitability goes to a firm that:
A.creates similar products as their competitors.
B.keeps the gap between value and cost of production smaller than the gap attained by
competitors.
C.drives down the cost structure of its business.
D.has the highest cost structure in the industry.
E.has the least valuable product in the industry.
Answer:
Which of the following is an empirically supported prediction of the new trade theory?
A.Trade increases the specialization of production within an industry.
B.Nations benefit from trade only when they differ in factor endowments.
C.Government intervention and strategic trade policies are more likely to harm
international trade than is free trade.
D.The locus of global production initially switches from the United States to other
advanced nations.
E.Comparative advantage arises from differences in productivity and factor
endowments.
Answer:
Critics of floating exchange rates claim that trade deficits are determined by the:
A.balance between savings and investment in a country.
B.external value of the currency of a country.
C.exchange rates of other currencies.
D.valuations made by International Monetary Fund and the World Bank.
E.mechanism of competitive currency devaluation.
Answer:
Which of the following are the two impediments to regional economic integration?
A.Labor activism and political ideologies
B.Immigration and political ideologies
C.Costs and national sovereignty
D.Political will and popular support
E.Political ideologies and international policies
Answer:
Why has FDI grown more rapidly than world trade?
A.The decline in trade barriers has erased the fear of protectionist pressures.
B.Executives of business firms see FDI as a way of circumventing future trade barriers.
C.There has been a general shift toward radical and totalitarian political institutions.
D.Privatization has made developing nations less attractive for multinational
enterprises.
E.There has been a general shift toward centrally planned command economies.
Answer:
What conclusions can be derived from economic analysis of the effect of import tariffs?
Answer:
Which types of firms do NOT risk the loss of management control? What entry modes
should such firms employ? Give examples.
Answer:
What is the purpose of cultural training before a foreign posting?
Answer:
Briefly describe the European Council.
Answer:
What are the three values that are central to the Confucian system of ethics?
Answer:
Describe the role of the U.S. Department of Commerce in helping U.S. firms increase
their knowledge of export opportunities.
Answer:
Define minimum efficient scale of output. How does this influence the location
decisions of production activities?
Answer:
What are the various disadvantages faced by societies that emphasize individual
performance?
Answer:
Discuss why command economies tend to stagnate.
Answer:
Describe the Leontief paradox.
Answer:
Briefly describe the value that an international business can create in a foreign market.
Answer:
How is managing an international business different from managing a purely domestic
business?
Answer:
In the context of international labor relations, what are the concerns of organized labor?
Answer:
Briefly describe market segmentation.
Answer:
How does Author Francis Fukuyama’s vision of the new world differ from that of the
late influential political scientist Samuel Huntington?
Answer:
What are the issues that are at the forefront of the current agenda of the WTO?
Answer:
What is franchising? With the help of a suitable example, explain how franchising can
be a profitable alternative to FDI.
Answer:
What are the two different banking methods that Islamic banks have experimented with
in order to avoid the payment or receipt of interest?
Answer:
How does the increasing integration of the world economy and internationalization of
production affect the selection of a trade policy?
Answer:
Describe how source and country of origin effects affect the effectiveness of a firm’s
international communication.
Answer: