Many totalitarian regimes were able to deliver economic progress to the vast bulk of
their populations, which curbed the spread of democracy during the late 1980s.
A central reason for the establishment of the EU was the devastation of Western Europe
during two world wars and the desire for a lasting peace.
Organizations are under pressure to produce products in the optimal location and to
serve the world market from there if their products have low value-to-weight ratios.
Most expatriates believe that more weight should be given to an on-site manager’s
appraisal than to an off-site manager’s appraisal.
Capital budgeting is the technique financial managers use to try to quantify the benefits,
costs, and risks of an investment.
An expatriate needs to have language fluency to show willingness to communicate.
Hofstede’s research has been criticized because it was culturally bound.
A regional free trade agreement will benefit the world only when the amount of trade it
creates exceeds the amount of trade it diverts.
Unlike other trade policies, local content regulations tend to benefit consumers and not
producers.
Tangible property includes patents, designs, copyrights, and trademarks.
A strategic commitment can be reversed by the top management according to their
convenience.
The communists believed that socialism could be achieved by democratic means, and
turned their backs on violent revolution and dictatorship.
The choice of which markets to enter should be driven by an assessment of relative
long-run growth and profit potential.
According to Hofstede, the concept of Confucian dynamism captures attitudes toward
time, persistence, protection of face, and respect for tradition.
First-mover advantages are the economic and strategic advantages that accrue to early
entrants into an industry.
The central message of collectivism is that individual economic and political freedoms
are the ground rules on which a society should be based.
The simple model of free trade assumed away transportation costs between countries.
Governments give banks less freedom when they deal in foreign currencies.
The preeminent strategic goal for most firms is to maximize the value of the firm for its
owners.
Many of the world’s larger trading nations, including India and the United Kingdom,
have not ratified the United Nations Convention on Contracts for the International Sale
of Goods (CISG).
In mixed economies, governments also tend to take into state ownership troubled firms
whose continued operation is thought to be vital to national interests.
Research has shown that in the modern multinational enterprise, core competencies and
skills typically reside in the home country.
The Treaty of Rome, signed in 1957, established the European Free Trade Association.
Individualism has led to a high degree of managerial mobility between companies
resulting in managers who have good general skills but lack company-specific
experience.
Firms should not utilize the forward exchange market when they are faced with
uncertainty about the future value of currencies.
Property rights can be violated in two ways—through private action and through public
action.
Products such as electronic components and pharmaceuticals have low value-to-weight
ratios.
Economic freedom necessarily equates with political freedom.
Lessard and Lorange recommend that firms use the projected spot exchange rate to
translate both the budget and performance figures into the corporate currency.
Banks charge borrowers a lower interest rate on Eurocurrency borrowings than for
borrowings in the home currency.
Tariff barriers lower the costs of exporting products to a country.
Licensing involves the establishment of a new operation in a foreign country.
Predatory pricing refers to the fact that a firm’s pricing strategy in one market may have
an impact on its rivals’ pricing strategy in another market.
In a competitive market, prices have to be higher than in a market where the firm has a
monopoly.
The customer is able to garner the benefit of the consumer surplus because one firm is
competing with other firms for the customer’s business, so the firm must charge a lower
price than it could if it were a monopoly supplier.
Governments allow convertibility to preserve their foreign exchange reserves.
Which of the following is one of the four elements that constitute a firm’s marketing
mix?
A. Inventory accounting
B. Product reengineering
C. Reverse engineering
D. Distribution strategy
A _____ may be paid to ensure that the expatriate can afford the same quality of
housing in the foreign country as in the home country.
A. cost-of-living allowance
B. hardship allowance
C. housing allowance
D. differential allowance
Research and development, production, marketing and sales, and customer service are
all examples of _____.
A. core competencies
B. primary activities
C. value creation
D. secondary activities
Which of the following statements about price discrimination is true?
A. It exists whenever consumers in a country are charged different prices for the same
product.
B. A necessary condition for profitable price discrimination is different price elasticities
of demand in different countries.
C. It is the use of price as a competitive weapon to drive weaker competitors out of a
national market.
D. It makes economic sense to charge the same prices across countries.
A German firm raising capital by selling stock through the London Stock Exchange is
an example of _____.
A. transnational financing
B. service exporting
C. indirect financing
D. transnational investment
_____ occurs when a political party that represents the interests of a particular tribe
(and not always the majority tribe) monopolizes power.
A. Tribal dictatorship
B. Communist totalitarianism
C. Tribal totalitarianism
D. Privatization
The downside of increased globalization is:
A. global financial contagions are less likely.
B. a severe crisis in one region can affect the entire globe.
C. one nation may become too powerful.
D. the potential for increased exploitation of undeveloped nations by developed nations.
In the modern era, the concept of countertrade arose as a way for the _____ to purchase
imports.
A. United States
B. European Union
C. ASEAN countries
D. Soviet Union and the Communist states of Eastern Europe
The United States had large and growing trade deficit between 1980 and 1985. Despite
this, the value of U.S. dollar rose during this period. Which of the following is a factor
that caused this occurrence?
A. United States attracted heavy inflows of capital from foreign investors during this
period.
B. Banks in the United States offered low interest rates to investors during this period.
C. Markets across the world witnessed strong economies during this period.
D. Developed countries in Europe maintained trade equilibrium and supplied goods to
underdeveloped countries.
Which of the following is referred to as the purchasing power parity puzzle?
A. Reduced levels of inflation in countries where the growth in the money supply is
faster than the growth in its output.
B. The reason why countries with high inflation rates see depreciation in their currency
exchange rates.
C. Identical products being sold in different countries for the same price when their
price is expressed in terms of the same currency.
D. The failure to find a strong link between relative inflation rates and exchange rate
movements.
From least integrated to most integrated, the levels of economic integration are a:
A. common market, a free trade area, an economic union, a customs union, and a
political union.
B. free trade area, a customs union, a common market, an economic union, and a
political union.
C. customs union, a free trade area, a common market, a political union, and an
economic union.
D. common market, an economic union, a customs union, a free trade area, and a
political union.
Which of the following is a disadvantage of using a rigid policy of fixed exchange
rates?
A. It is likely to create high unemployment in some cases.
B. It will lead to inflationary economies across the world.
C. It is likely to bring about trade wars between nations.
D. It will instigate competitive devaluations and intense competition.
A _____ represents the remuneration paid to the owners of technology, patents, or trade
names for the use of that technology or the right to manufacture and/or sell products
under those patents or trade names.
A. fronting loan
B. fee
C. royalty
D. transfer price
What term refers to a situation in which a government does not attempt to restrict what
its citizens can buy or sell to another country?
A. Tariffs
B. Import quotas
C. Free trade
D. Subsidies
If a high-tech firm sets up operations in a foreign country to profit from a core
competency in technological know-how, which of the following entry strategy is best?
A. joint ventures
B. licensing
C. wholly owned subsidiaries
D. turnkey contacts
As transportation costs or trade barriers increase, exporting becomes unprofitable, and
the choice is between FDI and _____.
A. subsidies
B. incentives
C. licensing
D. resource endowments As transportation costs or trade barriers increase, exporting
becomes unprofitable, and the choice is between FDI and licensing.
_____ argues that FDI is a benefit to both the source country and to the host country.
A. Pragmatic nationalism
B. The free market view
C. The noninterventionist principle
D. The radical view The free market view argues that international production should
be distributed among countries according to the theory of comparative advantage.
The volume of world trade in merchandised goods has been:
A. growing at the same rate as world GDP.
B. growing faster than world GDP.
C. growing slower than world GDP.
D. declining faster than world GDP.
_____ are the highest rate that can be charged, which is often, but not always, the rate
that is charged.
A. Ad valorem tariff rates
B. Tariff rents
C. Specific tariff rates
D. Bound tariff rates
Max Weber was a German sociologist who, in 1904, made the connection between
_____ and “the spirit of capitalism.”
A. Protestant ethics
B. ethnocentrism
C. cross-cultural literacy
D. collectivism
The agreement reached at Bretton Woods established the _____.
A. International Monetary Fund
B. World Economic Forum
C. United Nations
D. International Atomic Energy Agency
Under the veil of ignorance, everyone is imagined to be ignorant of:
A. all of his/her particular characteristics.
B. fundamental rights and privileges.
C. the moral worth of actions or practices.
D. the minimum levels of morally acceptable behavior.
Investors are able to reduce risks by diversifying an investment portfolio
internationally, and the risk reduction effects would be greater if not for:
A. volatile exchange rates associated with the current floating exchange risk regime.
B. the different kinds of tax regimes in different countries.
C. the inaccessibility of foreign stock exchanges to most investors.
D. the poor quality of many stocks in international start-up firms.
There are several disadvantages of franchising as an entry mode. Which of the
following is one of them?
A. There is little incentive for the franchisee to build a profitable operation as quickly as
possible.
B. The firm incurs many of the costs and risks of opening a foreign market on its own.
C. Franchising may inhibit the firm’s ability to use the profits obtained to open
additional businesses in the same country.
D. Franchising may inhibit the firm’s ability to take profits out of one country to support
competitive attacks in another.
Which of the following is a disadvantage of using a letter of credit (L/C)?
A. A letter of credit does not give protection to the importer.
B. A letter of credit does not give protection to the exporter.
C. The exporter cannot avail pre-export financing when using a L/C.
D. The importer must pay a bank fee for the letter of credit.
Supporters of floating exchange rates:
A. argue that floating rates help adjust trade imbalances.
B. argue that floating rates lead to a more stable world monetary system.
C. claim that trade deficits are determined by the balance between savings and
investment in a country.
D. claim that trade deficits are not determined by the external value of currency.
Assume that the law of one price holds. A shirt that retails for $120 in New York sells
for £60 in London. The exchange rate between the British pound and the dollar is £1 =
$1.50. Assuming away transportation costs and trade barriers, this creates a
profit-making opportunity called ____.
A. currency swap
B. arbitrage
C. carry trade
D. straddle
Which of the following statements is true of the gold standard?
A. Gold standard was adopted only by the smaller nations of the world.
B. Currencies were pegged to gold under the gold standard.
C. Convertibility to gold was not guaranteed under the gold standard.
D. Gold standard was not helpful in maintaining balance-of-trade equilibrium.
In late 2001, the WTO launched a new round of talks in Doha aimed at:
A. helping member states to cope with financial crisis.
B. liberalizing of the global trade and investment framework.
C. protecting national economies from global competition.
D. promoting higher standards of living in all member states.
The relatively low correlation between the movement of stock markets in different
countries indicates that:
A. diversifying a portfolio will increase the risk of investing.
B. most countries face similar economic conditions.
C. countries pursue different macroeconomic policies.
D. different stock markets are not segmented from each other.
In countries where the value of _____ identification is considered to be primary,
managers and workers are discouraged from moving from company to company.
A. individual
B. group
C. cultural
D. primary
In which of the following economies would the government be most likely to take into
state ownership troubled firms whose continued operation is thought to be vital to
national interests?
A. Market economies
B. Laissez-faire economies
C. Liberal economies
D. Mixed economies
In a _____, individual managers belong to two hierarchies (a divisional hierarchy and
an area hierarchy) and have two bosses (a divisional boss and an area boss).
A. worldwide product division structure
B. classic matrix structure
C. worldwide area structure
D. performance structure
_____ activities of the value chain provide inputs that allow the primary activities to
occur.
A. Complementary
B. Basic
C. Core
D. Support
Discuss the notion of cross-functional teams and their role in cross-functional
integration.
Consider why a firm should enter a market via a wholly owned subsidiary. What are the
advantages and disadvantages of this type of strategy?
Ethics officers are hired by many businesses to make sure that all employees are trained
to be ethically aware and that ethical considerations enter the business decision-making
process at all levels of the organization.
Describe the information sources that are available to American companies to learn
about export opportunities.
Compare and contrast folkways and mores.
Describe the major arguments put forth by Edward Deming.
Discuss the advantages and disadvantages of a polycentric approach to staffing.
Write a brief note on foreign exchange risks and the cost of capital.
With the help of an example, explain how a tourist participates in the foreign exchange
market.
Discuss the naive immoralist’s approach to business ethics.
Discuss the characteristics of a firm that is pursuing an international strategy.
What is the Bretton Woods agreement? How was it different from the gold standard?
Explain how a company competes using outsourcing.
What are the two types of competitive pressures that firms competing in the global
marketplace face? How do firms respond to these pressures?
Discuss the economic case for economic integration.
One way to reduce risks associated with a JIT global supply chain is to source inputs
from several suppliers located in different countries.
TRUE There are ways of reducing the risks associated with a global supply chain that
operates on just-in-time principles. To reduce the risks associated with depending on
one supplier for an important input, some firms source these inputs from several
suppliers located in different countries.
Explain Ricardo’s theory of comparative advantage.
Enterprises that pursue an international strategy tend to decentralize control over
marketing and product strategies.
