A company does not need a large size to facilitate, and benefit from, the globalization of
markets.
Privatization refers to the process of hiring private management consultancy firms to
manage state-owned enterprises.
Most property in poor countries is owned legally by investors.
The WTO does not have the power to impose trade sanctions.
According to the pragmatic nationalistic view, the MNE is a tool for exploiting host
countries to the exclusive benefit of their capitalist-imperialist home countries.
The skills within the firm that a competitor cannot easily match or imitate are known as
core competence.
A draft is simply an order written by an exporter instructing an importer to pay a
specified amount of money at a specified time.
The objective of the government in a command economy is to encourage free and fair
competition between private producers.
Tariffs on industrial goods remain higher than tariffs on services.
A firm does not have to become a multinational enterprise to engage in international
business.
Just-in-time systems are used to economize on inventory holding costs by having
materials arrive at a manufacturing plant just in time to enter the production process and
not before.
Government projects were a factor behind the investment boom in most Southeast
Asian economies.
A tax heaven is a country that gives income tax exemptions to firms that export all or
part of its products.
By placing tariffs on imported goods, governments can increase the cost of exporting
relative to foreign direct investment and licensing.
When a time draft is drawn on and accepted by a business firm, it is called a trade
acceptance.
Governments normally are concerned when their country is running a surplus on the
current account of their balance of payments.
The production possibility frontier will be parabolic if constant return to specialization
is observed.
Human rights activists see WTO rules as outlawing the ability of nations to stop imports
from countries where child labor is used or working conditions are hazardous.
New trade theorists stress the role of luck in giving a firm first-mover advantages.
Cultural toughness refers to the relationship between the country of assignment and
how well an expatriate adjusts to a particular posting.
Firms cannot use transfer prices to move funds from a subsidiary to the parent company
when financial transfers in the form of dividends are blocked by host-country
government policies.
Contracts under a civil law system tend to be very detailed with all contingencies
spelled out.
According to critics of globalization, today’s interdependent global economy limits a
nation’s national sovereignty.
Doing business in Russia involves risks because the country has shown signs of shifting
back toward greater state involvement in economic activity and authoritarian
government.
Global learning refers to the idea that valuable knowledge does not reside just in a
firm’s domestic operations.
In a multinational enterprise, skills are always generated at the headquarters location
and are then dispersed to the rest of the organization.
A country that introduces a currency board commits itself to converting its domestic
currency on demand into another currency at a fixed exchange rate.
Firms pursuing a localization strategy tend to operate with an array of formal and
informal integrating mechanisms.
One of the successful outcomes of the Doha Round negotiations has been that many
nations have proceeded with bilateral free trade agreements.
New processes that might lead to a competitive advantage can be developed anywhere
within the organization’s global network of operations.
Max Weber thought that devout Hindus would be less likely to engage in
entrepreneurial activity than devout Protestants.
An increase in car ownership, the number of two-income households, and the number
of households with a refrigerator have all contributed to the more fragmented retail
system found in developed countries.
A country has an absolute advantage in the production of a product when it is more
efficient than any other country in producing it.
International businesses that are ill-informed about the practices of another culture are
likely to fail.
Hofstede’s concept of power distance focused on the extent to which different cultures
socialized their members into tolerating uncertainty.
The mudarabah contract is the most widely used Islamic banking method, because it is
the easiest to implement.
The current system of foreign exchange is a mixed system of government intervention
and speculative activity.
Economic problems during the Great Depression were compounded in 1930 when the
U.S. Congress passed the _____, aimed at avoiding rising unemployment by protecting
domestic industries and diverting consumer demand away from foreign products.
A. Smoot-Hawley Act
B. Antidumping Act
C. Helms-Burton Act
D. D’Amato Act
Suppose the price of a Big Mac in New York is $3.00 and the price of a Big Mac in
Paris is equivalent to $3.75 at the prevailing euro/dollar exchange rate. Using the
concept of purchasing power parity, the euro is:
A. undervalued by 25 percent against the dollar.
B. overvalued by 25 percent against the dollar.
C. appreciating relative to the dollar.
D. depreciating relative to the dollar.
In which of the following situations does the internalization theory recommend FDI as
opposed to licensing?
A. When the firm has know-how that can be adequately protected by a licensing
contract
B. When the firm produces products that have a low value-to-weight ratio
C. When a firm’s skills and know-how are amenable to licensing
D. When the firm needs tight control over a foreign entity Licensing does not give a
firm the tight control over manufacturing, marketing, and strategy in a foreign country
that may be required to maximize its profitability. When tight control over a foreign
entity is desirable, foreign direct investment is preferable to licensing.
A currency is said to be freely convertible when:
A. its exchange rate with respect to other currencies is decided by the central bank of
the country.
B. residents alone are allowed to convert it into a foreign currency without any
limitations.
C. neither residents nor nonresidents are allowed to convert it into a foreign currency.
D. both residents and nonresidents are allowed to purchase unlimited amounts of a
foreign currency with it.
_____ occurs when an individual or business capitalizes on a price differential for a
firm’s product between two countries by buying the product in the country where the
price is low and reselling it in the country where prices are higher.
A. Arbitrage
B. Strategic pricing
C. Price discrimination
D. Market pricing
Many firms pursuing a(n) _____ pricing strategy on an international scale will price
low worldwide in attempting to build global sales volume as rapidly as possible, even if
this means taking large losses initially.
A. multipoint
B. experience curve
C. predatory
D. competitive
The Kantian approach to ethics suggests that:
A. human beings have fundamental rights and privileges that transcend national
boundaries.
B. the moral worth of actions or practices is determined by their consequences.
C. people should be treated as ends and never purely as means to the ends of others.
D. ethics are nothing more than the reflection of culture.
The most typical joint venture is a _____ venture.
A. 50/50
B. 60/40
C. 75/25
D. 10/90
Packaging, which comes in all shapes, sizes, forms, and uses, can be divided into three
different types:
A. primary, secondary, and transit.
B. customer, retailer, and distributor.
C. primary, secondary, and tertiary.
D. first level, second level, and third level. Packaging comes in all shapes, sizes, forms,
and uses. It can be divided into three different types: primary, secondary, and transit.
Employees in a business often take their cue from _____.
A. other employees
B. business leaders
C. their families
D. government leaders
FDI undertaken to serve the home market is known as:
A. outsourcing.
B. FDI substitution.
C. offshore production.
D. home market FDI. The term offshore production refers to FDI undertaken to serve
the home market.
Which of the following is a major disadvantage of the product life-cycle theory
introduced by Vernon?
A. The theory’s arguments seem ethnocentric and increasingly dated.
B. The theory failed to explain the dominance of developed nations.
C. The theory applies only when a poor nation invents a new product.
D. The theory cannot be used to explain the production of luxury products.
Bringing managers together in one location for extended periods and rotating them
through different jobs in several countries helps the firm build a(n) _____.
A. expatriate community
B. formal management network
C. inpatriate community
D. informal management network
Identify the theory that argues that advanced nations have an incentive to develop a new
offering and hence such nations always tend to create a good or service for the first
time.
A. Absolute advantage
B. Ricardo
C. Product life-cycle
D. Heckscher-Ohlin
_____ is seen as a way to stimulate gains in economic efficiency by giving owners a
powerful incentive—the reward of greater profits—to search for increases in
productivity, to enter new markets, and to exit losing ones.
A. Globalization
B. Economic transformation
C. Deregulation
D. Privatization
The _____ is responsible for proposing EU legislation, implementing it, and monitoring
compliance with EU laws by member states.
A. European Parliament
B. European Commission
C. Council of the European Union
D. Court of Justice
A banker’s acceptance:
A. is payable to the drawee immediately on presentation in a bank.
B. is a time draft that has been drawn on and accepted by a bank.
C. is a sight draft that can be used as a negotiable instrument in banks.
D. allows a buyer possession of the merchandise without signing any formal
documents.
Which of the following is a consequence of subsidies?
A. Subsidies make domestic producers vulnerable to foreign competition.
B. Subsidies lead to lowered production.
C. Subsidies protect inefficient domestic producers.
D. Subsidies produce revenue for the government.
Which of the following statements about fragmented retail systems is true?
A. Countries with fragmented retail systems tend to have short channels of distribution.
B. The more fragmented the retail system, the less expensive it is for a firm to make
contact with each individual retailer.
C. Fragmented retail systems tend to promote the growth of wholesalers to serve
retailers.
D. When the retail sector is very fragmented, it makes sense for the firm to deal directly
with retailers.
Any person or institution that is capable of moral action such as a government or
corporation is a(n) _____.
A. moral agent
B. utilitarian
C. righteous moralist
D. naive immoralist
_____ are sold outside of the borrower’s country and are denominated in the currency of
the country in which they are issued.
A. Micro bonds
B. Eurobonds
C. Foreign bonds
D. Regulatory bonds
Which of the following statements is true about Samuel Huntington?
A. Samuel Huntington argues that there is a universal civilization based on widespread
acceptance of Western democratic ideals.
B. Samuel Huntington argues that the rise of Islamic fundamentalism is a response to
the alienation produced by modernization.
C. Samuel Huntington argues that global terrorism is a product of the static nature of
traditional values and religious systems.
D. Samuel Huntington argues that many societies, by adopting the material
paraphernalia of the modern world, are becoming more Western.
According to the _____ policy, subsidies can help a firm achieve a first-mover
advantage in an emerging industry.
A. strategic trade
B. antidumping
C. tariff quota
D. free trade
Foreign bonds sold in the United States are called _____.
A. Yankee bonds
B. Uncle Sam’s bonds
C. Bulldogs
D. Eagles
Which of the following accounts records transactions that involve the purchase or sale
of assets?
A. Capital account
B. Current account
C. Principal account
D. Financial account
The international Fisher effect:
A. has proven to have substantial power at predicting long-run changes in forward
exchange rates.
B. has proven to have substantial power at predicting short-run changes in spot
exchange rates.
C. is not a good predictor of long-run changes in forward exchange rates.
D. is not a good predictor of short-run changes in spot exchange rates.
Globalization of markets results in markets becoming _____.
A. more interdependent
B. less diverse
C. more protected
D. less competitive
According to pragmatic nationalist view, FDI should be allowed so long as:
A. the benefits outweigh the costs.
B. they do not aggressively court domestic firms.
C. the costs outweigh the benefits.
D. the MNE does not seek tax breaks or grants. The pragmatic nationalist view is that
FDI has both benefits and costs. FDI can benefit a host country by bringing capital,
skills, technology, and jobs, but those benefits come at a cost.
The _____ refers to systematic reductions in production costs that have been observed
to occur over the life of a product.
A. economies of scale
B. value creation
C. location economies
D. experience curve
One visible indicator of _____ tends to be a country’s inflation rate.
A. economic mismanagement
B. high GNI
C. political risks
D. low HDI
In a _____ all roles are viewed as integrating roles.
A. worldwide area structure
B. process structure
C. worldwide product division structure
D. global matrix structure
_____ uses price and volume data to determine past trends, which are expected to
continue into the future.
A. Technical analysis
B. Fundamental analysis
C. Efficient market theory
D. Value investing
Which of the following arises when a country is exporting more goods and services
than it is importing?
A. Current account surplus
B. Trade deficit
C. Trade surplus
D. Trade balance A current account surplus, or trade surplus as it is often called, arises
when a country is exporting more goods and services than it is importing.
Which of the following observations about tariffs is true?
A. Tariffs are generally anti-producer and pro-consumer.
B. Export tariffs are used to raise revenue for the government.
C. Export tariffs are far more common than import tariffs.
D. Import tariffs increase the overall efficiency of the world economy.
A Japanese car manufacturer acquires an Italian producer of car tires. This is an
example of a(n) _____.
A. acquisition
B. absolute advantage
C. greenfield investment
D. merger This is an example of an acquisition. A greenfield investment involves the
establishment of a new operation in a foreign country.
Explain the North American Free Trade Agreement and then debate its ratification.
Explain how the rivalry within an industry affects international competence.
Describe the situation where an international division makes sense. How common is
this structure? What are the disadvantages of the structure?
What are the financial advantages that make the Eurocurrency market attractive to both
depositors and borrowers?
Discuss how firms can reduce their economic exposure.
Discuss the relationship between society and the nation-state.
What is the connection between religion and ethical systems? Do they have any
implications for business?
Describe the four dimensions of culture as identified by Geert Hofstede.
Explain how the principle of diminishing returns weakens the Ricardian model.
Compare and contrast licensing agreements and franchising agreements.
Consider the importance of unspoken language. Why is it important to be familiar with
the unspoken language of another culture?
What are the two main issues that managers must be aware of when considering market
segmentation in foreign countries?
Discuss why there is inefficiency in a monopoly situation.
Explain the five reasons why a firm should decentralize its decision-making.
How will EU countries benefit from the establishment of a single currency? What, if
any, are the costs of a single currency?