The theory of absolute advantage destroys the mercantilist idea that international trade
is a zero-sum game.
Answer:
According to the eclectic theory that explains FDI, an ownership advantage is the
advantage that arises from internalizing a business activity rather than leaving it to a
relatively inefficient market.
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Securitization is the unbundling and repackaging of hard-to-trade financial assets into
liquid financial instruments.
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Exchange rate risk is the risk of adverse changes in exchange rates.
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One reason a home country may discourage foreign direct investment outflows is to
protect its ‘sunset” industries.
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Ethnocentricity facilitates the establishment of new businesses abroad.
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If an individual is traveling to another country and wants to exchange currencies at his
bank before departing, he will be quoted the spot rate since he is exchanging on the
spot.
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The primary disadvantage of the gold standard was that it increased exchange-rate risk.
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NAFTA is the international organization that enforces the rules of international trade
worldwide.
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If the law of one price is applied and upheld, an arbitrage opportunity arises.
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Cross licensing occurs when companies use licensing agreements to swap intangible
property with one another.
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An arm’s length price is the price that is charged for products sold among a company’s
divisions or subsidiaries.
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Both GDP and GNP measure a nation’s income per person.
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Antidumping tariffs punish producers in the offending nation by increasing the price of
their products to a fairer level.
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Nationalization describes government seizure of an entire industry, with or without
compensation.
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Assessing potential in emerging markets by ranking locations using market-potential
indicators is useful only for companies involved in exporting.
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Capacity planning applies only to manufacturing companies.
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A group of nations in a geographic region undergoing economic integration is called a
regional trading bloc.
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A joint venture is an example of a retrenchment strategy of an organization.
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Regulations for the purpose of environmental protection generally increase short-term
production costs.
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The most important disadvantage of a strategic alliance is that it can create a future
local or even global competitor.
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In foreign direct investment, complete ownership of a company guarantees its complete
control.
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Performance demands made by host countries to restrict incoming FDI apply
exclusively to businesses in cultural industries.
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The more intermediaries there are in a distribution channel, the less costly the channel
becomes.
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Product life cycles are becoming shorter because companies are undertaking new
product development at an increasingly rapid pace.
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A convertible currency is traded freely in the foreign exchange market with its price
determined by London banks.
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A major disadvantage of American Depository Receipts (ADRs) is that investors who
buy them must pay currency-conversion fees.
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A government can limit the economic activities of a foreign firm that resists its effort to
introduce home-country nationals into the company.
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U.S. individuals are exempt from being prosecuted for bribery under the Foreign
Corrupt Practices Act.
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Letters of credit are popular among traders because banks assume most of the risks.
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Matching market needs to the company’s abilities is the first step in developing a
successful export strategy.
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Agency relationships are popular among exporters because they are easy to terminate
should difficulties arise.
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Customs duties decrease the total amount of a good’s production cost.
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The income payments account includes income earned on home country assets held
abroad.
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Patient money is the cash that can be quickly withdrawn from a market in times of
crisis.
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When a country’s currency is weak relative to other nations, domestic products are more
expensive than imports.
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Sensitivity training constitutes the most basic level of cultural training for managers on
international assignments.
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A global strategy does not allow a company to modify its products except for the most
superficial features.
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Pro-globalization economists believe globalization increases wealth in both developed
and developing nations.
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A brand name can function as a legal property.
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The only Western Hemisphere nation that has been excluded from participating in the
Free Trade Area of the Americas (FTAA) is ________.
A) Argentina
B) Mexico
C) Brazil
D) Cuba
Answer:
Eventually, Wallace expects that domestic production of the mousetrap will cease
altogether. This would happen in the ________ stage of the product life cycle.
A) new product
B) maturing product
C) adapted product
D) standardized product
Answer:
Which of the following financing methods entails the greatest risk for exporters?
A) supersedeas bond
B) advance payment
C) letter of credit
D) open account
Answer:
Suppose Country A has a currency called the Pulse (P). At the beginning of the year, the
exchange rate between the Pulse and the U.S. dollar was P150/$. The inflation rate in
Country A is running at an annual rate of 250 percent, whereas inflation in the U.S. is
running at 2 percent. Which of the following would most likely be the new exchange
rate that Color-Me-Green can expect at the end of the year?
A) P525/$
B) P514.70/$
C) P43.71/$
D) $43.71/P
Answer:
Deciding the spatial arrangement of production processes within production units is
called ________.
A) facilities layout planning
B) capacity planning
C) process planning
D) location economies
Answer:
________ was the first nation to implement the gold standard in the early 1700s.
A) The United States
B) Britain
C) France
D) Japan
Answer:
Under a(n) ________ political system, the state reigns supreme over institutions such as
family, religion, business, and labor.
A) pluralistic
B) totalitarian
C) democratic
D) anarchist
Answer:
The board of directors of Sports Stuff is concerned with the firm’s lack of experience in
foreign markets. To minimize this problem, Herb recommends that the firm create a
________ with a local partner.
A) joint venture
B) turnkey project
C) wholly owned subsidiary
D) franchise
Answer:
Which of the following circumstances would best require a push strategy to be
implemented for product promotion?
A) channel members wield a great deal of power relative to that of producers
B) distribution channels are lengthy
C) buyers display a great deal of brand loyalty to particular product
D) products in question are industrial goods
Answer:
Which of the following is a reason for the failure of PPP to predict exchange rates
accurately?
A) PPP takes transportation costs into consideration while predicting exchange rates.
B) PPP assumes no barriers to international trade while predicting exchange rates.
C) PPP considers the role of people’s confidence and beliefs about a nation’s economy
in exchange rate predictions.
D) PPP does not take into account the effect of the market forces of demand and supply.
Answer:
A loan in which a parent company deposits money with a host-country bank, which
then lends the money to a subsidiary located in the host country is called a ________.
A) syndicated loan
B) back-to-back loan
C) mortgage loan
D) title loan
Answer:
Which of the following is an appropriate and widely-used method for staffing
international business operations?
A) collective narcissism
B) cronyism
C) nepotism
D) geocentric approach
Answer:
A(n) ________ structure separates domestic from international business activities by
creating a separate global branch with its own manager.
A) international area
B) international division
C) global matrix
D) global product
Answer:
The Toro-Hessians are a minority group in the Margoza Archipelago, with a set of
preferences, attitudes, and taboos, distinct from that of the national culture. Therefore,
they are often overlooked when foreign businesses choose to customize their products
for the inhabitants of the islands. The Toro-Hessian community is an example of
________.
A) cultural universal
B) monoculture
C) subculture
D) stratification
Answer:
An exchange rate system in which the exchange rate for converting one currency into
another is set by international governmental agreement is called a ________ system.
A) floating exchange-rate
B) fixed exchange-rate
C) cross rate
D) spot rate
Answer:
A business that has direct investments (in the form of marketing or manufacturing
subsidiaries) abroad in several countries is called a ________.
A) dummy corporation
B) shell corporation
C) multinational corporation
D) domestic corporation
Answer:
Money earned from the sale of goods and services is known as ________.
A) revenue
B) dividend
C) depreciation
D) book value
Answer:
Gentian Violet is a dye manufacturing company that uses computer networks to sell its
products, service customers, and collaborate with partners. Which of the following
technologies is the company engaging in this scenario?
A) rapid prototyping
B) e-business
C) simulation
D) console automation
Answer:
The lowering of taxes in the U.S. by its government is an example of the ________.
A) fiscal policy
B) monetary policy
C) social policy
D) foreign affairs policy
Answer:
Which of the following phases of human resource planning involves decruitment?
A) developing a plan to recruit and select people to fill vacant and anticipated new
positions
B) estimating the company’s future human resource needs
C) taking an inventory of the company’s current human resources
D) promoting employees to positions of greater responsibility
Answer:
Firms engage in FDI when the firms they supply have already invested abroad. This
practice of “following clients” is observed in industries having ________.
A) a huge number of clients
B) only large companies as clients
C) suppliers who are geographically scattered around the world
D) suppliers who have close working relationships with producers
Answer:
Lingua franca is ________.
A) a language spoken by all countries in a continent
B) a form of non-verbal language adopted by all nations as the official language for
business transactions
C) a unique language developed by Asian countries
D) a “link” language understood by two parties who speak different native languages
Answer:
The main benefit of a global strategy is that it allows a company to ________.
A) closely monitor buyer preferences in each local market
B) save costs due to product and marketing standardization
C) customize its products and services
D) respond effectively to emerging buyer preferences
Answer:
Which of the following is prompting farmers in many developed nations to discover
new ways to manage risk and increase agricultural efficiency?
A) enforcement of trade embargoes and tariffs
B) exposure of agribusiness to market forces
C) provision of extensive government subsidies
D) designation of agricultural products as dual use products
Answer:
Which of the following is a method of export/import financing in which the importer’s
bank issues a document stating that the bank will pay the exporter when the exporter
fulfills the terms of the document?
A) sight draft
B) bill of lading
C) letter of credit
D) bill of exchange
Answer:
If Konesia chooses to levy tariffs as a percentage of the stated price of an imported
product, this would be an example of a(n) ________.
A) compound tariff
B) specific tariff
C) ad valorem tariff
D) tariff-quota
Answer:
If the board discusses the spatial arrangement of production processes within Wilson’s
production facilities, they will be engaging in ________.
A) capacity planning
B) facilities location planning
C) process planning
D) facilities layout planning
Answer:
Which of the following philosophies maintains that a company’s sole responsibility is to
maximize profits for its owners?
A) utilitarian view
B) righteous moralist view
C) Friedman view
D) cultural relativist view
Answer:
An individual from a country with a high degree of political risk would most likely be
from ________.
A) Canada
B) Singapore
C) Iraq
D) Japan
Answer:
A folk custom can be defined as ________.
A) behavior shared by a heterogeneous group or by several groups of people
B) behavior, often dating back several generations, that is practiced by a homogeneous
group of people
C) positive or negative evaluations, feelings, and tendencies that individuals harbor
toward objects or concepts
D) positive or negative evaluations, feelings, and tendencies that individuals harbor
toward themselves
Answer:
Which of the following is true of government interventions in a country’s trade
practices?
A) A major economic motive behind government intervention in trade is the protection
of jobs.
B) A major political motive behind government intervention in trade is the protection of
infant industries.
C) Government interventions help companies take advantage of economies of scale and
be the first movers in their industries.
D) Governments intervene to protect only imports, as the protection of exports is
handled by private agencies.
Answer:
When developing a market-potential indicator for an emerging market, the size of the
market is typically estimated from the nation’s ________.
A) income elasticity
B) GDP
C) total population
D) GDP at purchasing power parity
Answer:
CADE Enterprises, a U.S. manufacturer, received assistance from the Overseas Private
Investment Corporation when it expanded operations into Saudi Arabia. Which of the
following types of support did CADE most likely receive from OPIC?
A) financial capital
B) cultural training
C) legal guidance
D) political risk insurance
Answer:
Which of the following is the lowest extent of regional economic integration?
A) free trade area
B) political union
C) common market
D) customs union
Answer:
Which of the following is a debt instrument that specifies the timing of principal and
interest payments?
A) stock
B) bond
C) share
D) equity
Answer:
Describe the potential benefits of international trade. Why would a nation trading with a
neomercantilist country be at a disadvantage?
Answer:
Briefly describe how exchange rates influence business activities.
Answer:
Describe any four factors that affect international product strategies.
Answer:
How can a lack of market understanding, theft, and corruption affect distribution?
Answer:
Explain how the theory of absolute advantage conflicts with the theory of mercantilism.
Answer:
Explain the various methods that host countries use to restrict and promote foreign
direct investment.
Answer:
Explain the differences between a monetary policy and a fiscal policy, and discuss why
the IMF was established.
Answer:
Define secondary market research and briefly discuss any three secondary data sources.
Answer:
What factors influence the wages of nonmanagerial workers?
Answer:
Discuss the standardization versus adaptation decision for managers when considering
production facilities, and describe considerations for managers when acquiring fixed
assets.
Answer:
Why is it important to assess R&D costs when considering FDI? Given its costs, how
can FDI benefit the host country with access to technology, management skills, and
employment?
Answer:
Discuss the steps companies should take to avoid export and import blunders. How can
an advance payment method help exporters reduce financial risk?
Answer:
Explain the different ways in which products can be differentiated, providing an
example of each.
Answer:
Identify the World Trade Organization’s (WTO) three main goals and explain how the
WTO differs from the General Agreement on Tariffs and Trade (GATT).
Answer:
Differentiate between the three types of staffing policies used by international
companies. What are the advantages of each?
Answer:
Discuss why companies strive toward quality improvement and the two methods of
doing so.
Answer: