Which of the following observations about the International Development Association
(IDA) scheme of the World Bank is true?
A.Money is raised through bond sales in the international capital market.
B.Borrowers have up to 50 years to repay at an interest rate of less than 1 percent a
year.
C.IDA loans go only to European countries.
D.Grants and interest-free loans are denied to governments of underdeveloped nations.
E.The bank offers loans only to customers with a satisfactory credit rating.
Answer:
Which of the following statements is most likely to be true regarding private
ownership?
A.It reduces a nation’s dynamism and its investments in innovation and creativity.
B.It is most commonly found in command economies.
C.It eliminates competitors and reduces pressure to lower production costs.
D.It gives entrepreneurs an incentive to search for better ways of serving consumer
needs.
E.It is based on the philosophy that “the good of society is more important than the
interests of an individual.”
Answer:
Which of the following statements is true of facilitating payments?
A.According to the Foreign Corrupt Practices Act, “facilitating payments” are as illegal
as bribes.
B.Facilitating payments are payments to secure contracts that otherwise would not be
secured.
C.It is ethical to have a zero-tolerance approach toward facilitating payments.
D.Companies are allowed to make facilitating payments only in developing countries.
E.The concept of facilitating payments was introduced by the UN to put U.S. firms at a
competitive disadvantage.
Answer:
Which of the following is true of the determination of exchange rates?
A.Differences in relative demand and supply do not explain the determination of
exchange rates.
B.Differences in relative demand and supply explain the factors underlying the
phenomenon behind the demand for and supply of a currency.
C.The differences in relative demand and supply alone provide a high-level
understanding of what’s behind the determination of exchange rates.
D.While the differences in relative demand and supply provide an accurate explanation
for appreciation of currencies, they fail to explain depreciation.
E.The differences in relative demand and supply cannot explain or predict the
conditions under which a particular currency will be in demand or not.
Answer:
Initech Incorporated, a multinational giant, runs a number of diversified businesses.
Which of the following can be considered as an intellectual property of the firm?
A.Income arising from renting land and buildings
B.Profits arising from the sale of agricultural crops
C.Interest earned by lending capital to other firms
D.Innovations and capabilities, and skills of the employees
E.Investments made in raw materials and machinery
Answer:
The liability associated with foreign expansion is greater for foreign firms that:
A.choose to ride on an early entrant’s investments.
B.use countertrade agreements.
C.enter a national market early.
D.ride down the experience curve behind their rivals.
E.avoid pioneering costs.
Answer:
Which of the following statements reflects the changing demographics of the global
economy?
A.U.S. dominance in export markets has waned as Japan, Germany, and a number of
newly industrialized countries have taken a larger share of world exports.
B.The change in the position of the United States in terms of the share of world output
is the result of the absolute decline in the health of the U.S. economy.
C.From 1960 to 2010, countries that experienced a large decrease in their share of
world output include Japan, Thailand, Malaysia, Taiwan, and South Korea.
D.The United States is the only developed nation to see its relative standing in the share
of world output slip.
E.Today, roughly half the globethe centrally planned economies of the communist
worldis off-limits to Western international businesses.
Answer:
First-mover disadvantages refer to:
A.disadvantages associated with entering a foreign market before other international
businesses.
B.costs that a late entrant to a foreign market has to bear.
C.a direct restriction on the quantity of a good that can be imported into a country.
D.imperfections in the operation of the market mechanism.
E.disadvantages experienced by being a late entrant in a foreign market.
Answer:
Host governments use a range of controls to restrict inward FDI. The two most common
are:
A.monetary restraints and prohibition on investing in certain countries.
B.voluntary export restrictions and employment restraints.
C.ownership restraints and performance requirements.
D.tax concessions and government-backed insurance.
E.employment restraints and tax deductions.
Answer:
Which of the following is true of a letter of credit?
A.It states that the bank will pay a specified sum of money to a beneficiary on
presentation of particular, specified documents.
B.It is a document written by an exporter instructing an importer to pay a specified
amount of money at a specified time.
C.It serves as a receipt, a contract, and a document of title.
D.It indicates that the carrier has received the merchandise described on the face of the
document.
E.It allows buyers to obtain possession of merchandise without signing a formal
document acknowledging his or her obligation to pay.
Answer:
Under the Bretton Woods system, if a country developed a permanent deficit in its
balance of trade that could not be corrected by domestic policy, this would require the:
A.country to import more than it exports.
B.country to make its exports more expensive.
C.International Monetary Fund to agree to a currency devaluation.
D.government to expand monetary supply in the economy.
E.government to undertake activities that led to exchange rate appreciation.
Answer:
The main benefits of inward FDI for a host country arise from:
A.the resource-transfer effect, the employment effect, and the balance-of-payments
effect.
B.the labor-transfer effect, the technology effect, and the currency-exchange effect.
C.the cultural awareness effect, first-mover advantage effect, and economic
development effect.
D.the foreign exchange reserves effect, knowledge flow effect, and the reverse resource
transfer effect.
E.the employment effect, the labor-transfer effect, and the technology effect.
Answer:
A type of countertrade where a third-party trading house buys the firm’s
counterpurchase credits and sells them to another firm that can better use them is called:
A.barter.
B.switch trading.
C.offset.
D.buyback.
E.compensation.
Answer:
In terms of expatriate pay, which of the following is a characteristic of a foreign service
premium?
A.It allows a firm to pay expatriates’ income tax in the host country.
B.It ensures that expatriates’ children receive adequate schooling.
C.It helps to evaluate expatriates’ performance without any unintentional bias.
D.It ensures that expatriates are prepared for reentry into their home-country
organization.
E.It compensates expatriates for having to live in an unfamiliar country.
Answer:
Why did telecommunications companies welcome the telecommunication deal brokered
by WTO in 1997?
A.It enhanced protection of patents, copyrights, and trademarks (intellectual property).
B.It helped resolve deadlock situations arising out of the unwillingness to lower trade
barriers between neighboring countries.
C.It offered a greater ability for companies to offer a global, seamless service for all
their corporate needs.
D.It liberalized trade policies by eliminating tariffs, subsidies, import quotas,
antidumping duties, and local content requirements.
E.It reduced the export of pirated imitations of patented innovations pioneered in a
different country.
Answer:
Which of the following is a drawback of a push strategy?
A.It can be expensive when the distribution channel is long.
B.It decreases interaction with consumers.
C.It does not allow consumers to be educated on the benefits of a complex product.
D.It is useful only in advanced nations where consumers are sophisticated and highly
educated.
E.It can only be used to sell industrial products.
Answer:
Countries with which of the following are more likely to attain high and sustained
economic growth rates and are thus a more attractive location for international
business?
A.Weak protection of property rights
B.Democratic regimes
C.Command-based economic policies
D.Ideologies that differ from Western ideologies
E.Totalitarian dictatorships
Answer:
Which of the following is an advantage of adopting a polycentric staffing approach?
A.It is less expensive to implement as compared to other staffing approaches.
B.It gives host-country nationals unlimited opportunities to gain experience outside
their own country.
C.It increases career mobility.
D.It increases interaction between the headquarters of a firm and its foreign
subsidiaries.
E.It bridges the gap between host-country managers and parent-country managers.
Answer:
Which of the following is a possible downside of emphasizing the primacy of group
identification over individualism?
A.It encourages managerial mobility between companies.
B.It leads to a lack of dynamism and entrepreneurship.
C.It hampers team building and cooperation.
D.It raises the costs of doing business due to its adverse impact on managerial stability.
E.It leads to the lack of company-specific skills and a network of contacts among
managers.
Answer:
Which of the following occurs when lower-cost external suppliers are replaced by
higher-cost suppliers within a free trade area?
A.Trade creation
B.Strategic pricing
C.Synergy
D.Trade diversion
E.Protectionism
Answer:
In which kind of exchange rate is the value of the currency fixed relative to a reference
currency, and then the exchange rate between that currency and other currencies is
determined by the reference currency exchange rate?
A.Flexible
B.Pegged
C.Real
D.Dirty-float
E.Floating
Answer:
Meitneria and Seaboria specialize in the production of heavy machinery and textiles
respectively. While Meitneria doesn’t produce textiles, Seaboria is not as
technologically advanced as Meitneria. In this situation, according to the
Heckscher-Ohlin theory:
A.Meitneria will import textiles from Seaboria and export heavy machinery to it.
B.Meitneria will invest more than Seaboria in the production of textiles to exploit its
comparative advantage.
C.Meitneria and Seaboria will raise their trade barriers to protect their economies.
D.Seaboria will recruit experts from Meitneria to specialize in the production of heavy
machinery.
E.Meitneria will recruit workers from Seaboria to improve its standing in the textile
industry.
Answer:
Which of the following staffing policies is followed by firms that can reduce the issue
of compensation to that of how much home-country expatriates should be paid?
A.Polycentric
B.Ethnocentric
C.Geocentric
D.International
E.Global
Answer:
Which of the following refers to a 1969 agreement among Bolivia, Chile, Ecuador,
Colombia, and Peru to establish a customs union?
A.Andean Pact
B.ASEAN
C.Mercosur
D.CARICOM
E.Caribbean Single Market and Economy
Answer:
The value creation activities of a firm are categorized as:
A.primary activities and support activities.
B.strategic activities and functional activities.
C.ancillary functions and tertiary functions.
D.primary activities and core activities.
E.goal-oriented activities and organizational activities.
Answer:
The efficiency frontier has a convex shape because of:
A.a high-cost structure.
B.diminishing returns.
C.a significantly low product value.
D.low production costs.
E.high profit growth.
Answer:
Which of the following is most likely to be the effect of FDI in the form of a greenfield
investment on the host country?
A.It drives down prices and increases the economic welfare of consumers.
B.It raises unemployment levels.
C.It causes firms to fight for scarce capital investments.
D.It leads to an oligopolistic market and unfair pricing.
E.It leads to decreased productivity, product and process innovations, and lesser
economic growth.
Answer:
The economically damaging effects of the Great Depression were worsened in 1929 by
the:
A.First World War.
B.U.S. stock market collapse.
C.spread of communism through Europe.
D.Cold War between the world’s superpowers.
E.harvest failure in Great Britain and famine in Ireland.
Answer:
One of the reasons why a firm typically charges for a good or service less than the value
placed on that good or service by the customer is because:
A.the firm attempts to create value for the consumers by providing them a wide range
of products.
B.it is normally impossible to segment a market based on each customer’s reservation
price.
C.the value creation results in a corresponding reduction in costs of production.
D.the firm frequently modifies its products to compete with the products introduced by
other firms.
E.it is highly unlikely that the same good or service will be available to the customers
from other firms.
Answer:
Which of the following is true of the euro since its establishment in 1999?
A.The value of the euro has been stable against the U.S. dollar.
B.The euro’s value has steadily appreciated against the U.S. dollar.
C.The euro’s value initially appreciated and then steadily depreciated against the U.S.
dollar.
D.The euro has had a volatile trading history against the U.S. dollar.
E.The value of the euro has been constant when compared to the U.S. dollar.
Answer:
Which of the following is an implication of high degree of managerial mobility in
societies that emphasize individualism?
A.Reduced costs of doing business
B.Increased managerial loyalty and commitment to an individual company
C.Lack of company-specific experience, knowledge, and a network of contacts among
managers
D.Lack of exposure among employees to different ways of doing business
E.Inability to apply good practices and techniques developed in one firm to other firms
Answer:
Megan, a U.S. citizen, is the operations manager at the Middle East office of HS
Constructions Inc., an American firm. In this situation, she is an example of a(n):
A.immigrant manager.
B.host-country manager.
C.inpatriate manager.
D.expatriate manager.
E.virtual manager.
Answer:
Offshore production refers to FDI undertaken:
A.to focus on extractive industries, such as oil and gas.
B.to serve the home market.
C.in shipping industries.
D.to decrease the prices of products in the host countries.
E.to capture tax benefits in the host country.
Answer:
In which of the following modes of entry into foreign markets does a firm agree to set
up an operating plant for a foreign client and hand over the plant when it is fully
operational?
A.Franchising agreement
B.Turnkey project
C.Licensing agreement
D.Wholly owned subsidiary
E.Joint venture
Answer: