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The purchasing power parity (PPP) theory tells us that a country with a high inflation
rate will:
A. export more goods to other countries.
B. see depreciation in its currency exchange rate.
C. import more goods from other countries.
D. see an appreciation in its currency exchange rate.
Which of the following is a measure that is developed by the United Nations to measure
the quality of life in different nations?
A. Gross national income
B. Human Development Index
C. Purchasing power parity
D. Gross domestic product
Which of the following theories suggests that first mover advantage is significant in the
export of a good?
A. Product life-cycle theory
B. Ricardo's theory
C. New trade theory
D. Theory of comparative advantage
_____ are the handicaps that late entrants to a market might suffer.
A. Government regulations
B. Late-mover disadvantages
C. Black economy
D. Purchasing power disparity
Since the collapse of communism at the end of the 1980s, the erstwhile communist
nations have transformed their economies by globalizing their markets. This involves
_____.
A. regulating markets
B. privatizing state-owned enterprises
C. decreasing competition
D. reducing foreign investment
Which of the following refers to a situation where a government does not attempt to
influence through quotas or duties what its citizens can buy from another country?
A. Economic patriotism
B. Protectionism
C. Free trade
D. Offshoring
By lowering production costs, _____ help domestic producers compete against foreign
imports.
A. subsidies
B. duties
C. quotas
D. tariffs
Max Weber coined the term _____ to denote the tendency on the part of Protestants to
work hard and accumulate wealth.
A. Protestant work ethic
B. Protestant belief system
C. Protestant devotion
D. Protestant morale
One of the strategies pursued by international businesses is _____, where value is
created by transferring products and competencies overseas.
A. localization
B. global standardization
C. transnational
D. international
Plato _____; he believed that society should be stratified into classes, with those best
suited to rule.
A. equated individualism with equality
B. equated collectivism with equality
C. promoted representative democracy
D. did not equate collectivism with equality
_____ refers to the number of intermediaries between the producer (or manufacturer)
and the consumer.
A. Channel length
B. Channel exclusivity
C. Channel quality
D. Channel speed
Which of the following is a disadvantage of countertrade?
A. Countertrade contracts may involve the exchange of unusable or poor-quality.
B. Countertrade requires the firm to use an out-of-house trading company to which
much of the profit will go.
C. Countertrade contracts often involve high-quality, expensive goods that the firm
cannot move enough of to be profitable.
D. Countertrade requires employing lawyers who specialize in these unique types of
contracts.
Which of the following is a direct consequence of the interdependence between firms in
an oligopoly?
A. Increased regulation
B. Increased consumer welfare
C. Imitative behavior
D. Longer product life-cycles The interdependence between firms in an oligopoly leads
to imitative behavior; rivals often quickly imitate what a firm does in an oligopoly.
_____ represent the remuneration paid to the owners for the use of technology or the
right to manufacture and/or sell products under patents or trade names.
A. Royalties
B. Transfer costs
C. Fees
D. Licensing costs
The price at which goods and services are transferred between subsidiary companies in
a multi-national firm is referred to as _____.
A. minimum retail price
B. deferral price
C. transfer price
D. transaction price
If foreigners suddenly reduced their investments in the United States, what would
happen?
A. The value of the dollar on foreign exchange markets would increase.
B. The action would have no impact on the U.S. economy.
C. The foreigners would sell U.S. dollars for another currency.
D. The price of U.S. exports would increase.
The _____ states that in competitive markets free of transportation costs and barriers to
trade, identical products sold in different countries must sell for the same price when
their price is expressed in terms of the same currency.
A. law of one price
B. principle of consistent pricing
C. model of fair pricing
D. rational price theory
_____ is the outer packaging envelope that allows for easier handling or product
transfer among international suppliers, manufacturers, distribution centers, retailers, and
any other intermediaries in the global supply chain.
A. Primary packaging
B. Performance packaging
C. Secondary packaging
D. Unit-load packaging
Globalization is criticized because it increases the power of:
A. governments to own enterprises.
B. unskilled labor to form labor unions.
C. supranational organizations over nation-states.
D. nation-states to regulate markets and reduce competition.
A capital intensive country exports products that are capital intensive. Which theory is
this an example of?
A. New trade
B. Leontief Paradox
C. Porter Diamond Model
D. Heckscher-Ohlin
In a ____, the firm owns 100 percent of the stock.
A. joint venture
B. wholly owned subsidiary
C. turnkey project
D. franchising agreement
Which of the following is a factor of production?
A. tariffs
B. transportation costs
C. capital
D. government
By pooling cash resources centrally firms can:
A. better handle short-term cash needs of subsidiaries.
B. increase liquidity of independent subsidiaries.
C. reduce the total size of the cash pool it must hold.
D. avoid government-imposed restrictions on capital flows.
FDI occurs when a firm:
A. ships its products from one country to another.
B. invests directly in facilities to produce a product in a foreign country.
C. invests in the shares of another company operating in the same country.
D. grants permission to another company in a different country to use its brand name.
Foreign direct investment (FDI) occurs when a firm invests directly in facilities to
produce or market a product in a foreign country.
The main factor that makes the Eurocurrency market attractive to both depositors and
borrowers is that it:
A. is separated from the foreign exchange market.
B. lacks government regulation.
C. is associated with low-risk.
D. gives high levels of investor protection.
Some _____ have fostered a market economy and strong property rights protection and
have experienced rapid economic growth.
A. totalitarian regimes
B. command economies
C. dictatorships
D. centrally planned systems
Max Weber theorized that there was a relationship between Protestantism and the
emergence of modern capitalism because:
A. Protestant ethics emphasize the importance of hard work and wealth creation and
frugality.
B. Protestantism promotes the hierarchical domination of religious and social life.
C. Protestantism states that spiritual growth is more important than material wealth.
D. Protestantism promotes blind loyalty to employers.
The theories of international trade claim that promoting free trade is generally in the
best interests of:
A. a country, although it may not always be in the best interest of an individual firm.
B. all multinational corporations.
C. an individual firm, although it may not always be in the best interest of a country.
D. the World Trade Organization.
A study published in 2011 by the OECD noted that:
A. the real household income of the unskilled workers in the United States increased
more in comparison to that of the skilled workers.
B. in almost all countries real income levels declined over the 20-year period studied.
C. the falling unemployment rates brought gains to low-wage workers and fairly
broad-based wage growth.
D. the gap between the poorest and richest segments of society in some OECD
countries had widened.
In a study published in 2011, the OECD found that between 1985 and 2008 real
household income (adjusted for inflation) increased by 1.7% annually among its
member states. The real income level of the poorest 10% of the population increased at
1.4% on average, while that of the richest 10% increased by 2% annually (i.e., while
everyone got richer, the gap between the most affluent and the poorest sectors of society
widened).
A pair of shoes costs £40 in Britain. An identical pair costs $50 in the United States
when the exchange rate is £1 = $1.50. Which of the following is correct?
A. The U.S. offers a better deal.
B. The deal is the same in both countries.
C. Britain offers a better deal.
D. A trader can make money by buying the shoes in Britain and selling it in the U.S. at
$50.
A _____ entails establishing a firm that is owned together by two or more otherwise
independent firms.
A. joint venture
B. licensing agreement
C. franchisee
D. turnkey contract
The _____ refers to the institutional arrangements that govern exchange rates.
A. World Bank
B. international monetary system
C. currency exchange
D. gold standard
_____ activities are basically concerned with creating the product, marketing and
delivering the product to buyers, and providing support and after-sales service.
A. Support
B. Subordinate
C. Ancillary
D. Primary
When transportation costs are added to production costs, it becomes unprofitable to ship
some products over a large distance. This is particularly true of products that:
A. have a low value-to-weight ratio.
B. have a high value-to-weight ratio.
C. can be produced only in one region.
D. require locally-sourced raw materials. When transportation costs are added to
production costs, it becomes unprofitable to ship some products over a large distance.
This is particularly true of products that have a low value-to-weight ratio and that can
be produced in almost any location.
