Strategies that increase profitability can also expand a firm’s business and thus enable it
to attain a higher rate of profit growth.
Answer:
Limits on imports are often in the interests of domestic consumers, but not domestic
producers.
Answer:
A righteous moralist claims that while operating in a foreign country, a multinational
company should follow the ethical standards of the host country.
Answer:
Many investor nations now have government-backed insurance programs to cover
major types of foreign investment risk like the risks of expropriation (nationalization),
war losses, and the inability to transfer profits back home.
Answer:
A wide product variety makes it easier for a firm to increase its production efficiency
and thus reduce its unit costs.
Answer:
As with free trade in general, regional economic integration creates gain for consumers,
but it can be challenging for some producers.
Answer:
Strong identification with the group tends to create pressures for mutual self-help and
collective action.
Answer:
Offshore production refers to FDI undertaken to serve the host market.
Answer:
Export management companies (EMCs) start exporting operations for a firm with the
understanding that the firm will take over operations after they are well established.
Answer:
A firm may set up production activities in a foreign country, where trade barriers do not
currently exist, to reduce the threat of trade barriers being imposed later.
Answer:
Despite the short-term adjustment costs associated with adopting a free trade regime,
trade would seem to produce greater economic growth and higher living standards in
the long run.
Answer:
Entrepreneurial individuals have fewer economic incentives to develop valuable new
innovations in market economies than in planned economies.
Answer:
Market segmentation refers to identifying distinct groups of consumers whose needs,
wants, and purchasing behavior differ from others in important ways.
Answer:
The least rigid system of social stratification is a caste system.
Answer:
Exporting is often not an end in itself, but merely a step on the road toward
establishment of foreign production.
Answer:
Class membership in the United States is determined to a much greater degree by
individual background and schooling, as opposed to economic achievements.
Answer:
Organizational architecture refers to an organization’s norms and value systems.
Answer:
The International Monetary Fund can force countries to adopt the policies required to
correct economic mismanagement.
Answer:
Throughout the 1990s, the amount of investment directed at both developed and
developing nations increased dramatically.
Answer:
In a totalitarian country, all the constitutional guarantees on which representative
democracies are builtan individual’s right to freedom of expression and organization, a
free media, and regular electionsare denied to the citizens.
Answer:
According to Mendenhall and Oddou, expatriates with perceptual ability tend to be
judgmental and evaluative in interpreting the behavior of host-country nationals.
Answer:
Predatory pricing and experience curve pricing do not violate antidumping regulations.
Answer:
Strong legal protection of property rights is a requirement for a business environment to
be conducive to innovation, entrepreneurial activity, and hence economic growth.
Answer:
In international business, production and supply chain functions accommodating
demands for local responsiveness work independent of host-government demands.
Answer:
Free trade refers to a situation in which a government, through quotas or duties,
attempts to influence what its citizens can buy from another country, or what they can
produce and sell to another country.
Answer:
An international strategy involves taking products first produced for their domestic
market and selling them internationally with only minimal local customization.
Answer:
In practical terms, individualism translates into an advocacy for democratic ideals and
free market economics.
Answer:
The most typical joint venture is a 50/50 venture, in which there are two parties, each of
which holds a 50 percent ownership stake and contributes a team of managers to share
operating control.
Answer:
Government intervention in international trade can take the form of reducing
restrictions on imports and encouraging foreign direct investment.
Answer:
The shorter the distribution channel, the more intermediaries there are that must be
persuaded to carry the product for it to reach the consumer.
Answer:
When product safety laws are tougher in a firm’s home country than in a foreign
country, the ethical thing to do is to adhere to home-country standards.
Answer:
It is believed that a firm attains higher performance when its employees are predisposed
toward its value systems by their personality type.
Answer:
A technological innovation can make established products obsolete overnight.
Answer:
The term “public action” refers to the exclusive legal rights of authors, composers,
playwrights, artists, and publishers to publish and disperse their work as they see fit.
Answer:
In the Uruguay Round of the WTO, member countries sought to exempt trade in
services from GATT rules.
Answer:
Unlike the purchasing power parity theory, the international Fisher effect is a good
predictor of short-run changes in spot exchange rates.
Answer:
In the face of unpredictable exchange rate movements, a firm should pursue strategies
that reduce its economic exposure.
Answer:
A major stumbling block in the creation of the Free Trade Area of the Americas is that
the United States wants its southern neighbors to agree to higher manufacturing tariffs,
which they are not eager to embrace.
Answer:
When law courts interpret civil law, they do so with regard to tradition, precedent, and
custom.
Answer:
Free trade is likely to increase a country’s stock of resources and the efficiency with
which it utilizes those resources.
Answer:
Which of the following statements is true of flexible manufacturing technologies?
A.They promote the idea of manufacturing in each major market.
B.They fail to produce multiple models from the same line.
C.They are used to reconcile the goals of large volumes and standardized output.
D.They decrease the utilization of individual machines.
E.They allow firms to customize products to national differences at a single facility.
Answer:
Which of the following supports the economic case for regional economic integration?
A.International institutions such as the World Trade Organization have been moving the
world away from a free trade regime.
B.The greater the number of countries involved in a free trade agreement, the fewer the
perspectives that must be reconciled.
C.Coordination and policy harmonization problems are largely a function of the number
of countries that seek agreement.
D.It is difficult to establish a free trade and investment regime among a limited number
of adjacent countries as compared to the world community.
E.Since most governments do not intervene, unrestricted free trade and FDI have
become a reality.
Answer:
Which of the following is an example of an industry in which cross-licensing
agreements are increasingly becoming common?
A.Glass-blowing
B.Biotechnology
C.Organic farming
D.Basketry
E.Weaving
Answer:
Which of the following best describes the relationship between the number of ‘sigmas”
and the number of errors?
A.The higher the number of ‘sigmas,” the greater the number of errors.
B.If the number of ‘sigmas” is a positive value, then the number of errors is always a
negative value.
C.The higher the number of ‘sigmas,” the smaller the number of errors.
D.The number of ‘sigmas” is independent of the number of errors.
E.If the number of ‘sigmas” is a negative value, then the number of errors is always
positive.
Answer:
Which of the following caveats is most likely to discourage global expansion of
businesses?
A.Economies of scale
B.High consumers’ reservation prices
C.Trade barriers
D.Mass customization
E.Low transportation costs
Answer:
In a floating exchange rate, the relative value of a currency:
A.is more predictable and less volatile.
B.is determined by market forces.
C.changes infrequently only under a specific set of circumstances.
D.is set against other currencies at some mutually agreed on exchange rate.
E.does not depend on the free play of market forces.
Answer:
Which of the following statements is true regarding foreign direct investment?
A.The flow of FDI refers to the total accumulated value of foreign-owned assets at a
given time.
B.FDI has grown more rapidly than world trade and world output.
C.The general shift toward democratic political institutions has discouraged FDI.
D.Generally, free market economies oppose FDI.
E.The globalization of the world economy is having a negative effect on the volume of
FDI.
Answer:
The staffing policy that requires host-country nationals to be recruited to manage
subsidiaries, while parent-country nationals occupy key positions at corporate
headquarters, is called:
A.geocentric.
B.polycentric.
C.ethnocentric.
D.global.
E.transnational.
Answer:
Focusing primarily on increasing the attractiveness of a product is referred to as a:
A.standardization strategy.
B.differentiation strategy.
C.target-identification strategy.
D.low-cost strategy.
E.profitability strategy.
Answer:
Unipeg Corporation has uniform high sales targets for its employees all across the
globe, regardless of the environmental constraints in each market. Employees are
penalized for any shortfall. This has caused many employees to falsify the values of
their sales. In this context, the roots of unethical behavior can be traced to:
A.unrealistic performance expectations.
B.cultural differences of countries.
C.strong personal ethics among employees.
D.varying ethical standards in different nations.
E.national differences in factors of production.
Answer:
Only a totalitarian regime that is committed to which of the following is capable of
promoting economic growth?
A.A command economy
B.A dictatorship
C.Limiting human freedom
D.A market system and strong protection of property rights
E.Limiting individualism and privatization
Answer:
Which of the following postulates that top managers typically overestimate their ability
to create value from an acquisition?
A.Bandwagon effect
B.Fisher effect
C.Hubris hypothesis
D.International Fisher effect
E.Learning effect
Answer:
Which of the following groups benefits the most from the imposition of tariffs?
A.Domestic producers
B.Consumers
C.Exporters and importers
D.Foreign producers
E.International bodies such as WTO
Answer:
When compared to American society, Japanese society lacks:
A.commitment to lifetime employment.
B.emphasis on group memberships.
C.self-managing work teams.
D.close cooperation between individuals.
E.dynamism and entrepreneurship.
Answer:
Under the Plaza Accord of 1985, the Group of Five major industrial countries
concluded that it would be desirable if:
A.the countries returned to a system of fixed exchange rates.
B.the participating members reverted to the gold standard.
C.the United States adopted protectionism to improve its trade balance.
D.most major currencies appreciated vis–vis the U.S. dollar.
E.governments did not regulate the buying and selling of currency.
Answer:
Which of the following is considered to be the ultimate controlling authority within the
European Union?
A.Court of Justice
B.European Commission
C.European Council
D.European Parliament
E.European Community
Answer:
To encourage inward FDI, it is increasingly common for governments to:
A.offer tax concessions to foreign firms that invest in their countries.
B.exclude foreign companies from specific industries.
C.require that local investors own a significant proportion of the equity in a joint
venture.
D.impose high custom duties on foreign firms.
E.prohibit MNEs from joining a cartel.
Answer:
Which of the following nations is most likely to be unappealing as a place for doing
business?
A.A nation that has a market-based economic system
B.A nation that has a strong legal system
C.A nation that has a democratic political institution
D.A nation that enforces strong property rights
E.A nation that has a totalitarian political system
Answer:
Which of the following is a closed system of stratification in which social position is
determined by the family into which a person is born, and change in that position is
usually not possible during an individual’s lifetime?
A.Caste
B.Merit
C.Class
D.Economic
E.Bureaucratic
Answer:
It is most appropriate for a firm to contract out manufacturing when:
A.individual manufacturers have few firm-specific skills that contribute to the value of
their product.
B.the value of the host country currency is expected to appreciate.
C.supplier switching costs are correspondingly high.
D.firm-specific technology and expertise add significant value to the product.
E.the currency used for pricing a product is anticipated to stay weak in the long run.
Answer:
Which of the following is the first step in a typical international trade transaction?
A.The exporter agrees to ship under a letter of credit and specifies relevant information
such as prices and delivery terms.
B.The importer applies to a trusted third party (usually a bank) for a letter of credit to
be issued in favor of the exporter for the merchandise the importer wishes to buy.
C.The importer places an order with the exporter and asks the exporter if he would be
willing to ship under a letter of credit.
D.The exporter ships the goods to the importer on a common carrier. An official of the
carrier gives the exporter a bill of lading.
E.The trusted third party (usually a bank) issues a letter of credit in the importer’s favor
and sends it to the exporter’s bank.
Answer:
Uvicon Inc. and Bionor Inc. are firms that compete against each other in the global
market. Uvicon has a high level of fixed costs and high minimum efficient scale,
whereas Bionor has a low level of fixed costs and low minimum efficient scale. In this
scenario, which of the following is true?
A.Uvicon will be better prepared to hedge against potential adverse moves in currencies
than Bionor.
B.Uvicon will benefit from centralizing its production activities and Bionor from
decentralizing.
C.Uvicon will have more bargaining power over contract manufacturers than Bionor.
D.Uvicon will be better enabled to adapt to changes in consumer demand in regional
markets than Bionor.
E.Uvicon will be better prepared to accommodate demands for local responsiveness
than Bionor.
Answer:
Which of the following statements is a general implication of globalization?
A.Globalization is inevitable.
B.From a purely economic perspective, globalization is all good.
C.Globalization has no negative impacts on the economies of the developed world.
D.Globalization has reduced the risks associated with global financial contagion.
E.As a result of globalization, a severe crisis in one region of the world can affect the
entire globe.
Answer:
Which of the following statements is true regarding GATT?
A.GATT attempted to liberalize trade restrictions in one go.
B.In its early years, GATT was unsuccessful and hence was superseded by the World
Bank.
C.GATT regulations were mostly enforced by the EU nations rather than by a mutual
monitoring mechanism.
D.Tariff reductions through negotiations were completed in three rounds.
E.The last round for tariff reduction, the Uruguay Round, was launched in 1986 and
completed in December 1993.
Answer:
In comparison to market economies, command economies lack:
A.government interference in allocation of resources.
B.dynamism and innovation.
C.concern for the interests of the nation.
D.commitment to communism.
E.any opposition to private ownership.
Answer:
If one firm in an oligopoly cuts prices, then most likely, its competitors will:
A.make profits.
B.also respond with similar price cuts.
C.correspondingly raise prices.
D.capture additional market share.
E.not be impacted by the price cuts.
Answer:
Green Quantum Inc. has research and production units all across the globe. The
company expects its expatriate managers to adopt the ethics propagated by the culture
in which they operate their respective units. Even in situations when others consider
certain actions as unethical, the company allows its managers to pursue such actions if
they are permitted in the host nation. Green Quantum is most likely following:
A.the Friedman doctrine.
B.Sullivan’s principles.
C.righteous moralism.
D.Kantian ethics.
E.cultural relativism.
Answer:
A benefit of adopting the euro as a common currency is that it:
A.makes it easier to compare prices across Europe.
B.makes Europe an optimal currency area.
C.increases the range of investment options open only to institutions.
D.leads to higher prices, which translate into substantial gains for European producers.
E.decreases competition because it has become harder for consumers to shop around.
Answer:
A common feature of many right-wing dictatorships is:
A.total restriction on individual economic freedom.
B.strong commitment to socialist or communist ideas.
C.governments that are made up of military officers.
D.politicians from a particular tribe dominating the political system.
E.the direct involvement of the citizens in decision making.
Answer:
During performance appraisals, two groups evaluate the performance of expatriate
managershost-nation managers and home-office managers. This is aimed at avoiding
the problem of:
A.cultural conflict.
B.unintentional bias.
C.operational errors.
D.central tendency.
E.culture shock.
Answer:
For a firm to maximize its profitability, it is necessary that it:
A.creates products similar to the products of its competitors.
B.does not configure its internal operations to reduce costs.
C.minimizes the value of the consumer surplus.
D.picks a position on the efficiency frontier that is viable.
E.strips all the value out of its product offering.
Answer:
Which of the following refers to the extra pay an expatriate receives for working
outside his or her country of origin?
A.Parity adjustment
B.Special bonus
C.Foreign service premium
D.Expat allowance
E.Benefit
Answer:
When a country is importing more goods and services than it is exporting, it is incurring
a(n):
A.trade surplus.
B.current account deficit.
C.positive balance of payment.
D.economic recession.
E.net capital inflow.
Answer:
Janet believes that the cultural group she belongs to is superior and is hence highly
intolerant toward employees from the cultures of other countries. This behavior of Janet
is known as:
A.cultural convergence.
B.Confucian dynamism.
C.ethnocentrism.
D.ethnic gloss.
E.class consciousness.
Answer:
Financing aid that will facilitate exports, imports, and the exchange of commodities
between the United States and other countries is provided by the:
A.sogo shosha.
B.World Bank.
C.Overseas Commercial Service.
D.Ex-Im Bank.
E.Export Credit Insurance Association.
Answer:
Discuss the differences between ethnocentric, polycentric, and geocentric approaches to
staffing for international businesses. What is the rationale behind each of these
approaches?
Answer:
In terms of speculation, describe the arguments for a fixed exchange rate system.
Answer:
What is globalization? Explain, with examples, how global companies can facilitate the
creation of a global market.
Answer:
Describe Amartya Sen’s conceptions of development.
Answer:
What are some of the ways in which a firm can reduce the risk of losing its proprietary
know-how to foreign companies through licensing agreements?
Answer:
In the context of the internalization theory, explain why licensing may not be an
attractive option.
Answer:
Elaborate on the connection made between Protestant ethics and “the spirit of
capitalism.”
Answer:
Explain the concept of a currency board.
Answer:
What are the various types of risks that a business enterprise could face in doing
business in a particular country?
Answer:
What were the objectives of the Single European Act?
Answer:
How does corruption affect the economic growth rate in a country?
Answer:
Under what circumstances will a firm favor foreign direct investment over exporting as
an entry strategy?
Answer:
Describe how cultural barriers can jeopardize the effectiveness of a firm’s international
communication.
Answer:
Describe how management development programs can increase the value of human
capital in an international business firm.
Answer:
Discuss the advantages and the disadvantages of just-in-time (JIT) inventory systems.
Answer:
Briefly describe predatory pricing and multipoint pricing strategy.
Answer: