Ricardo’s theory of comparative advantage is a major intellectual weapon for advocates
of free trade because it provides a strong rationale for encouraging free trade.
Answer:
Consumer surplus captures some of the value of a product thereby reducing the price a
firm can charge for it.
Answer:
John Rawls’s veil of ignorance is a conceptual tool that contributes to the moral
compass that managers can use to help them navigate through difficult ethical
dilemmas.
Answer:
When companies wish to convert currencies, they typically enter the foreign exchange
market directly.
Answer:
Many of the ethical issues in international business are rooted in the fact that political
systems, law, economic development, and culture vary significantly from nation to
nation.
Answer:
The World Trade Organization, the International Monetary Fund and its sister
institution the World Bank, and the United Nations were all created by voluntary
agreement between individual nation-states.
Answer:
In domestic trade transactions, a buyer can often obtain possession of merchandise
without signing a formal document acknowledging his or her obligation to pay.
Answer:
Successful global expansion requires the transfer of core competencies to foreign
markets where indigenous competitors lack them.
Answer:
Leon Sullivan argued that it was ethically justified for Western businesses to operate in
South Africa so long as the companies obeyed the apartheid laws.
Answer:
In general, command and mixed economies failed to deliver the kind of sustained
economic performance that was achieved by countries adopting market-based systems.
Answer:
Subsidies are a trade policy instrument.
Answer:
Ethical dilemmas are situations in which only one of the available alternatives seems
ethically acceptable.
Answer:
A critical aspect of the marketing function is identifying gaps in the market so that a
firm can develop new products to fill those gaps.
Answer:
The basic objective of the Association of Southeast Asian Nations is to foster freer trade
among member countries and to achieve cooperation in their industrial policies.
Answer:
A common law system tends to be less adversarial than a civil law system.
Answer:
One of the tenets of collectivism is that the welfare of society is best served by letting
people pursue their own economic self-interest.
Answer:
Learning effects will be more significant in an assembly process which involves 100
simple steps than in an assembly process which involves 1,000 complex steps.
Answer:
Dispersing research and development activities to many locations around the world
allows a firm to stay close to the center of leading-edge activity to gather scientific and
competitive information and to draw on local scientific resources.
Answer:
A political union addresses the issue of how to make a coordinating bureaucracy
accountable to the citizens of member nations of an economic union.
Answer:
All right-wing dictatorships display an affinity toward socialist or communist ideas.
Answer:
A certain amount of friction is involved when resources are required to move from one
economic activity to another.
Answer:
In terms of pricing strategies, dumping occurs whenever an international firm sells a
product for a price that is less than the price charged by domestic producers.
Answer:
Unless a host country has a reciprocal tax treaty with the expatriate’s home country, an
expatriate must pay income tax to both the home- and host-country governments.
Answer:
In terms of Six Sigma, the higher the number of ‘sigmas,” the greater the number of
errors.
Answer:
The drawback of a just-in-time inventory system is that it leaves a firm with excess
unsold inventory that it has to write off against earnings or price low to sell.
Answer:
An international firm that enters into a turnkey deal has a long-term interest in the
foreign country.
Answer:
Historically, most international businesses have centralized international labor relations
activities.
Answer:
The emphasis on individualism results in a low degree of managerial mobility between
companies.
Answer:
In international businesses, firms pursue a polycentric staffing policy because they see
it as the best way to maintain a unified corporate culture.
Answer:
New trade theory stresses that in some cases countries specialize in the production of
particular products because of underlying differences in factor endowments.
Answer:
Political arguments for government intervention are usually concerned with protecting
consumer interests within the country.
Answer:
According to the pragmatic nationalist view, no country should ever permit foreign
corporations to undertake FDI.
Answer:
Which of the following statements is true about Hinduism?
A.Hinduism supported India’s caste system.
B.Hinduism allows mobility between castes within an individual’s lifetime.
C.Max Weber argued that Hinduism encourages entrepreneurial activity.
D.Hindus do not believe in reincarnation, or rebirth into a different body, after death.
E.Hinduism was founded by Siddhartha Gautama, an Indian prince.
Answer:
In countries where inflation is expected to be high, interest rates also will be high,
because investors want compensation for the decline in the value of their money. This
relationship is referred to as the:
A.PPP theory puzzle.
B.lead strategy.
C.Fisher effect.
D.bandwagon effect.
E.international Fisher effect.
Answer:
Which of the following is true of price discrimination?
A.It involves charging whatever the market will bear.
B.In a competitive market, prices may have to be higher than in a market where the
firm has a monopoly.
C.It makes economic sense to charge the same prices in different countries.
D.It exists whenever consumers in different countries are charged the same price for the
same product, irrespective of variations.
E.It cannot help a company maximize its profits.
Answer:
The country of Argonia imposes an ad valorem tariff of 10 percent on 1 million tons of
rice imports, after which an out-of-quota tariff of 80 percent is applied. Which of the
following trade policy instruments is Argonia using?
A.Subsidy
B.Tariff rate quota
C.Voluntary export restraint
D.Tariff ceiling
E.Local content requirement
Answer:
Which of the following refers to countertrade?
A.A short-term movement of funds from one currency to another in the hopes of
profiting from shifts in exchange rates
B.The exchange rate at which a foreign exchange dealer will convert one currency into
another that particular day
C.Simultaneous purchase and sale of a given amount of foreign exchange for two
different value dates
D.The purchase of securities in one market for immediate resale in another to profit
from a price discrepancy
E.A range of barter-like agreements by which goods and services can be exchanged for
other goods and services
Answer:
In the Republic of Lantharia, the state-owned telephone company enjoys a monopoly.
The government of Lantharia Republic wants to maximize the operating efficiency of
this company by privatizing it. Which of the following is most likely to help the
government succeed in this endeavor?
A.Imposing high corporate taxes on the company immediately after its privatization
B.Increasing barriers to foreign direct investment
C.Intervening in the company’s operations by exercising price controls
D.Splitting the company into independent units to compete with each other
E.Prohibiting foreign companies from entering into the field of telecommunication in
the Republic of Lantharia
Answer:
What was the effect of the Marshall Plan?
A.The United States lent money directly to European nations to help them rebuild their
economies.
B.Member countries of the International Monetary Fund were free to engage in
competitive currency devaluations.
C.The World Bank lent funds to reconstruct the war-torn economies of Europe.
D.The United States lent money to third-world nations to support their public-sector
projects.
E.The World Bank lent money to the International Monetary Fund so that it could
finance deficit-laden countries.
Answer:
Which of the following terms, developed by Rawls, indicates that inequalities are
justified if they benefit the position of the least-advantaged members of society?
A.Difference principle
B.The tragedy of the global commons
C.The theory of private equity
D.Unity of command
E.Laws of equivalent trade
Answer:
Which of the following terms means standing in the shoes of a stakeholder and asking
how a proposed decision might impact that stakeholder?
A.Corporate espionage
B.Ethical dilemma
C.Cultural relativism
D.Moral imagination
E.Moral courage
Answer:
What is the advantage of a geocentric staffing policy?
A.It requires firms to provide little or no documentation to hire a foreign national.
B.It enables firms to build a cadre of international executives who feel at home working
in a number of cultures.
C.It is inexpensive to implement the policy in a firm.
D.It allows all key management positions of the firms and their subsidiaries to be filled
by parent-country nationals.
E.It helps firms to follow a localization strategy.
Answer:
The Andean Community now operates as a(n):
A.common market.
B.economic union.
C.customs union.
D.command economy.
E.political union.
Answer:
Which of the following was the initial mission of the World Bank?
A.Maintaining order in the international monetary system
B.Financing the building of Europe’s economy by providing low-interest loans
C.Taking over as the successor to the International Monetary Fund
D.Reviving the gold standard system
E.Enforcement of the floating exchange rate system
Answer:
Which of the following statements is true about the Sullivan principles?
A.They were widely opposed by U.S. firms, such as General Motors, operating in South
Africa.
B.They promoted the abolition of apartheid laws.
C.It has been argued that they led to the violation of human rights in South Africa.
D.They were against the introduction of democratic elections in South Africa.
E.Western businesses that followed them were considered unethical.
Answer:
Which of the following increases under just-in-time (JIT) inventory system?
A.Amount of working capital for inventory
B.Inventory turnover
C.Number of defective parts
D.Inventory holding costs
E.Storage costs
Answer:
In which of the following situations can an international business command higher
prices for a particular product in a foreign market?
A.When the product is widely available in the foreign market
B.When sales volumes is relatively low in the foreign market
C.When the product offers greater value to customers in the foreign market
D.When the product is more suitable to other foreign markets
E.When domestic competitors are selling alternatives at reduced prices
Answer:
Which of the following is a disadvantage of adopting a geocentric staffing approach?
A.Cultural myopia negatively influences effective management control.
B.Training and relocation costs increase when transferring managers from country to
country.
C.Host-country nationals cannot progress beyond senior positions in their own
subsidiary.
D.A gap forms between host-country managers and parent-country managers.
E.The lack of management transfers leads to a lack of integration between corporate
headquarters and foreign subsidiaries.
Answer:
In international commerce, the party initiating a draft is known as the:
A.maker.
B.drawee.
C.buyer.
D.agent.
E.drafter.
Answer:
Which of the following is a consequence of an electronic data interchange system?
A.Increased in production costs
B.Reduction in paperwork between suppliers, shippers, and the purchasing firm
C.Helps a firm centralize materials management decisions
D.Decrease in flexibility and responsiveness of the supply system
E.Leaves a firm without a buffer stock of inventory
Answer:
The advent of containerization has:
A.made the economies of the world’s nation-states less intertwined.
B.made moving goods from one mode of transport to another extremely labor-intensive.
C.significantly lowered the costs of shipping goods over long distances.
D.slowed down the globalization of markets and production.
E.increased costs of coordinating and controlling a global organization.
Answer:
Which of the following refers to carry trade?
A.Providing insurance or hedging against the risks that arise from volatile changes in
exchange rates
B.A transaction between two parties that involves exchanging currency and executing a
deal at some specific date in the future
C.Simultaneous purchase and sale of a given amount of foreign exchange for two
different value dates
D.The purchase of securities in one market for immediate resale in another to profit
from a price discrepancy
E.Borrowing in one currency where interest rates are low and then using the proceeds to
invest in another currency where interest rates are high
Answer:
According to Mendenhall and Oddou, which of the following is a dimension that
predicts success and allows expatriates to adapt their interests in food, sport, and music?
A.Perceptual ability
B.Self-orientation
C.Others-orientation
D.Cultural toughness
E.Empathy
Answer:
Which of the following Confucian ethics is central to the Chinese concept of guanxi?
A.Holding all material possessions in trust for God
B.Renunciation of the material world
C.Devoting life to a spiritual quest
D.Reciprocal obligations
E.Individual progress
Answer:
In which of the following tasks will the learning effects be most significant?
A.Pizza delivery for a fast-food major
B.Data entry for a loan recovery center
C.Assembly process involving 1,000 complex steps
D.Sewing buttons onto shirts in a garment factory
E.Delivering letters to different recipients
Answer:
The government of Nerumbia wants to open the country’s economy to international
business, and increase its overall attractiveness as a potential market or investment site.
Which of the following will facilitate this decision of the Nerumbian government?
A.Shifting toward command economy or an economy where property rights are not
enforced strictly
B.Investing in infrastructure and in the required supporting businesses
C.Frequently changing the government and the government policies
D.Maintaining a high inflation rate
E.Adopting a legal system which does not provide any protection for intellectual
property rights
Answer:
Which of the following factors constrains the globalization of markets?
A.Differences in technical standards
B.Uniform standard of living
C.Cosmopolitan tastes and preferences
D.Market segments that transcend national borders
E.Convergence of cultures
Answer:
QFresh, a brand for energy drinks, launched a healthy lime-based drink without
preservatives. Immediately after this another brand, Fast Fizz, which manufactures
energy drinks, also announced the launch of a new refreshing drink without
preservatives. Then Ignite, a third brand of energy drinks, reduced the price of its
apple-based drink. Which of the following is most likely to happen in this oligopolistic
market setup?
A.QFresh and Fast Fizz will reduce the prices of their respective drinks.
B.Fast Fizz will launch another new drink.
C.QFresh will link up with Ignite to launch a completely new product.
D.Fast Fizz and Ignite will collaborate against QFresh.
E.QFresh will have an increased domestic consumption.
Answer:
In Samuel Huntington’s thesis, global terrorism is a product of the:
A.clash of value systems and ideology between civilizations.
B.widespread acceptance of universal global civilization.
C.declining liberal democratic ideals.
D.differences in the factor endowments between countries.
E.geographical differences between nations.
Answer:
Which of the following refers to the sourcing of goods and services from locations
around the globe to take advantage of national differences in the cost and quality of
factors such as labor, energy, land, and capital?
A.Globalization of markets
B.Containerization of production
C.Dispersal of production
D.Globalization of production
E.Industrialization of markets
Answer:
Which of the following is a reason why firms often overpay for the assets of an
acquired firm?
A.Studies supporting the rise of failed companies post acquisitions
B.Evidence of high management turnover post acquisitions
C.The success rate of acquisitions exceeding that of failures
D.Interest of more than one party in acquiring a particular firm
E.Inevitable clash between cultures of acquiring and acquired firms
Answer:
The phenomenon of capital flight is most likely to occur when:
A.the recovery phase post an economic depression nears its end.
B.the value of the domestic currency depreciates rapidly because of hyperinflation.
C.a country’s economic prospects are stable and indicate growth.
D.interest rates are low for a prolonged period of time.
E.governments lift convertibility restrictions on their currency.
Answer:
Which of the following is illustrated by the Big Mac Index published by The
Economist?
A.The law of one price
B.The purchasing power parity theorem
C.The Fisher effect
D.Flow of FDI
E.The bandwagon effect
Answer:
Which of the following explains the rise of the dollar against most major currencies in
the late 1990s, even though the United States was still running a significant
balance-of-payments deficit?
A.Reduced government intervention in the foreign exchange market
B.Increased foreign investments in U.S. financial assets
C.Low real interest rates in the United States compared to the rest of the world
D.Increased exports as opposed to imports
E.Increased communism in the United States
Answer:
An important objective shared by both production and logistics functions of an
international firm is to:
A.increase profits by lowering quality.
B.increase foreign competition.
C.lower costs by dispersing production activities.
D.decrease inventory turnover.
E.stock excess inventory on hand.
Answer:
Japan’s great trading houses are referred to as:
A.kaizen.
B.sogo shosha.
C.zaibatsu.
D.guanxi.
E.kanban.
Answer:
Briefly explain how demand conditions shape the environment in which local firms
compete.
Answer:
What is meant by a currency swap?
Answer:
In the context of international trade and investment, describe how the former
communist nations of Europe and Asia have been changing.
Answer:
Explain the concept of economic exposure. How is it different from transaction
exposure?
Answer:
Describe the Foreign Corrupt Practices Act.
Answer:
Describe the five-step process involved in ethical decision making.
Answer:
Describe the localization strategy.
Answer:
What are the benefits of FDI to the home (source) country?
Answer:
Describe human resource management.
Answer:
What is an Ex-Im Bank? What is its mission and how does it pursue it?
Answer:
Describe the pros and cons of greenfield ventures.
Answer:
What are the various reasons that account for the spread of democracy?
Answer:
Why are market economies more conducive to innovation and entrepreneurship than
planned or mixed economies?
Answer:
Describe the Central American Common Market and the Central America Free Trade
Agreement.
Answer:
How do the purchasing power parity theory and the law of one price relate the prices of
commodities to exchange rate movements?
Answer:
In the context of FDI, describe the political ideologies of the radical view, the free
market view, and pragmatic nationalism.
Answer: