In the 1990s, most of the borrowing by the companies who invested in Asian countries
had been in local currencies.
A firm’s ability to establish a centralized depository that can serve short-term cash needs
might be limited by government-imposed restrictions on capital flows across borders.
Firms pursuing a multipoint pricing strategy on an international scale will price low
worldwide in an attempt to build global sales volume as rapidly as possible.
A global standardization strategy is appropriate when a firm is facing low pressures for
cost reduction but high pressure for local responsiveness.
To foster ethical behavior, many businesses draft a code of ethics, which is an informal
statement of the ethical priorities the company follows.
Diminishing returns show that it is feasible for a country to specialize to the degree
suggested by the simple Ricardian model.
The worldwide product division structure facilitates local responsiveness.
Research supports the view that multinational firms often transfer significant
technology when they invest in a foreign country.
Carry trade is non-speculative in nature.
A geocentric approach tends to weaken local responsiveness.
For privatization to work, it must also be accompanied by a more general deregulation
and opening of the economy.
To exploit the opportunities presented by the EU, non-EU firms must establish EU
subsidiaries.
Exporting is most appropriate when lower-cost locations for manufacturing the product
can be found abroad.
A tax treaty between two countries is formed to fix the exchange rates between the two
countries.
The World Trade Organization was created as part of the Uruguay Round.
The ethical obligations of a multinational corporation toward employment conditions,
human rights, environmental pollution, and the use of power are always clear-cut.
If a country’s economy is to sustain long-run economic growth, the business
environment must be conducive to innovations and entrepreneurial activity.
In a customs union, trade barriers are eliminated among member countries, and each
country maintains its own external trade polices with nonmember countries.
Globalization critics argue that the decline in unskilled wage rates is due to the
migration of low-wage manufacturing jobs offshore and a corresponding reduction in
demand for unskilled workers.
Systematic increases in sales that have been observed to occur over the life of the
product are referred to as the experience curve.
Export tariffs are far less common than import tariffs.
Direct contact between subunit managers is the simplest integrating mechanism.
Nearly every state in the U.S. maintains active trade commissions to promote exports.
The Council of the European Union is responsible for proposing EU legislation,
implementing it, and monitoring compliance with EU laws by member states.
A fee is compensation for professional services or expertise supplied to a foreign
subsidiary by the parent company or another subsidiary.
If the spot rate is $1 = ×120, and the 30-day forward rate is $1 = ×130, the dollar is
selling at a discount in the forward market.
The value of a currency is determined by the interaction between the demand and
supply of that currency relative to the demand and supply of other currencies.
The Andean Pact is a highly successful common market modeled after the EU.
A push strategy makes sense when distribution channels are short.
The International Monetary Fund made pegging the Mexican peso to the dollar, a
condition for lending money to the Mexican government in the 1980s.
The convergence hypothesis states that there is a slow but steady merging occurring
across different cultures towards some universally accepted values and norms.
Heckscher-Ohlin theory supports the case for unrestricted free trade between nations.
The World Bank is known as the lender of the last resort.
To establish moral intent, managers need to stand in the shoes of a stakeholder and ask
how a proposed decision might impact that stakeholder.
Firms can increase flexibility by producing all parts of a product in-house.
Product liability can be much lower if a product does not conform to required safety
standards.
The Foreign Corrupt Practices Act does not allow for grease payments.
In a command economy, the prices are determined by the free interplay of demand and
supply.
Which of the following is true of the Eurobond market?
A. There is a great deal of regulatory interference.
B. Government limitations are generally more stringent for securities denominated in
foreign currencies.
C. There are less stringent disclosure requirements than in most domestic bond markets.
D. They have an unfavorable tax status.
_____ gives a firm tight control over manufacturing, marketing, and strategy in a
foreign country that may be required to maximize its profitability.
A. Licensing
B. Internalization
C. Foreign direct investment
D. A merger 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.
Central to the concept of economies of scale is the idea that the best way to achieve
high efficiency, and hence low unit costs, is through the:
A. customization of products for each individual market.
B. mass production of a standardized output.
C. production of goods that are different from each other.
D. production of small volumes of high-quality products.
Studies of privatization in central Europe have shown that the process often fails to
deliver predicted benefits if the newly privatized firms:
A. stop receiving subsidies from the government.
B. are completely owned by private individuals.
C. are sheltered from foreign competition.
D. are allowed to restructure their operations.
_____ is the impact of short-run currency exchange rates changes on the reported
financial statements of a company.
A. Economic exposure
B. Financial exposure
C. Translation exposure
D. Transaction exposure
_____ is variously defined as selling goods in a foreign market at below their costs of
production or as selling goods in a foreign market at below their “fair” market value.
A. Export restraint
B. Dumping
C. Local content requirement
D. Ad valorem
Which of the following is one of the main instruments of trade policy?
A. Tariffs
B. Credit portfolios
C. Opportunity costs
D. Countervailing duties
A(n) _____ helps domestic producers to compete against foreign imports.
A. ad valorem tariff
B. specific tariff
C. import quota
D. subsidy
The ______ is primarily responsible for policing the world trading system and making
sure nation-states adhere to the rules laid down in trade treaties signed by member
states.
A. International Development Association
B. World Bank
C. International Court of justice
D. World Trade Organization
There are two main trading blocs in Europe, the European Union and the _____.
A. Mercosur
B. Andean Community
C. European Free Trade Association
D. European Council
_____ is pursued primarily by manufacturing firms and _____ is employed primarily by
service firms.
A. Licensing; franchising
B. Franchising; licensing
C. Franchising; exporting
D. Exporting; licensing
Which of the following enables managers to walk away from a decision that is
profitable, but unethical?
A. Noblesse oblige
B. Moral courage
C. The difference principle
D. The Friedman doctrine
In a seminal study, R. L. Tung found that for managers of European firms, the biggest
impediment to expatriate success was the:
A. manager’s inability to cope with larger overseas responsibilities.
B. lack of adequate technical training.
C. inability of the spouse to adjust.
D. manager’s inability to adjust.
The Export-Import Bank is an independent agency of the _____.
A. European Union
B. World Trade Organization
C. United Nations
D. U.S. government
The systematic risk is the:
A. movement in a stock portfolio’s value that is attributable to the individual selections
made for that portfolio.
B. level of diversifiable risk in an economy.
C. movement of the economy of a country.
D. level of non-diversifiable risk in an economy.
Between 1960 and 2013, the U.S. share of world exports of goods and services:
A. has increased from 9.7% to 38.3%.
B. has decreased from more than 20% to 9.7%.
C. has slipped to second place, behind only Japan.
D. although in decline, has remained in first place with China a close second.
Purchasing power parity theory states that given relatively efficient markets, the price
of a “basket of goods” should be:
A. much less in industrialized countries.
B. much less in third world countries.
C. variable depending upon the current rate of exchange between the producer and
consumer of the products in the “basket.”
D. roughly equivalent in each country.
Political risk tends to be:
A. greater in countries experiencing social unrest or disorder.
B. negligible for large multinational companies.
C. less in countries experiencing social unrest or disorder.
D. a consideration only for companies operating in third world countries.
Which of the following statements about the choice of distribution strategy is true?
A. The longer a channel, the greater the aggregate markup, and the higher the price that
consumers are charged for the final product.
B. If price is an important competitive weapon and if the firm does not want to see its
profit margins squeezed, other things being equal, the firm would prefer to use a longer
channel.
C. The shorter a channel, the greater the aggregate markup, and the higher the price that
consumers are charged for the final product.
D. An international business must use shorter channels in countries where the retail
sector is fragmented and longer channels in countries where the retail sector is
concentrated.
Which of the following statements is true of the deregulation of financial industry?
A. Countries can strengthen the global capital market by encouraging strict regulations.
B. Financial services have historically been the most deregulated of all industries.
C. Deregulation helped the development of an international capital market.
D. Deregulation compels financial services companies to remain as domestic
companies.
The projected rate will typically be the _____ as determined by the foreign exchange
market when firms use the projected spot exchange rate to translate both the budget and
performance figures into the corporate currency.
A. transfer price
B. forward exchange rate
C. carrying cost
D. foreign exchange rate
The establishment of integrating mechanisms that coordinate subunits is a dimension of
_____.
A. horizontal differentiation
B. organizational culture
C. vertical differentiation
D. organizational structure
Systematic risk refers to:
A. movements in a stock portfolio’s value that are attributable to macroeconomic forces
affecting all firms in an economy.
B. the level of diversifiable risk in an economy.
C. movements in a stock portfolio’s value that are attributable to microeconomic forces
affecting the specific firms invested in.
D. the microeconomic forces that affect rates of return on investments.
The total cumulative value of foreign investments is best referred to as:
A. accumulation of foreign shares.
B. portfolio investments.
C. stock of foreign direct investments.
D. stock market investments.
Which of the following is a distinct advantage of exporting?
A. It avoids the threat of tariff barriers by the host-country government.
B. Firms benefit from a local partner’s knowledge of the host country’s competitive
conditions.
C. It avoids the often substantial costs of establishing manufacturing operations in the
host country.
D. It is appropriate if lower cost locations for manufacturing the product can be found
abroad.
Which of the following is a common difficulty that traders face when exporting goods
or services to other countries?
A. Small firms tend to be more aggressive than larger firms in global trade.
B. Governments do not provide much assistance to exporters.
C. Growth opportunities are often limited in global markets.
D. Exporters often face voluminous paperwork and complex formalities.
According to John Rawls’s difference principle,
A. certain people or institutions are obligated to provide benefits or services that secure
the rights of others.
B. fundamental human rights should transcend national borders and cultures.
C. the best decisions are those that produce the greatest good for the greatest number of
people.
D. inequalities are justified if they benefit the position of the least-advantaged person.
It may be more costly to do business in relatively primitive or undeveloped economies
because of:
A. international trade restrictions.
B. the lack of governmental support.
C. difficulty obtaining workers.
D. the lack of infrastructure and supporting businesses.
The World Trade Organization promotes the:
A. lowering of barriers to cross-border trade and investment.
B. development of poor nations through low-interest loans.
C. state ownership of major enterprises.
D. regulation of national economies.
This type of factory—often with the same standards as the top factories in the global
firm’s system—is set up to overcome intangible and tangible barriers in the global
marketplace.
A. Contributor factory
B. Source factory
C. Lead factory
D. Server factory .
Governments use _____ to boost exports and restrict imports.
A. subsidies
B. local content requirements
C. administrative trade policies
D. formal instruments of trade policy
_____ costs are incurred every time a firm changes cash from one currency into another
currency.
A. Dividend
B. Capital
C. Fixed
D. Transaction
What are the determinants of culture?
Discuss the Buy America Act and its connection with local content requirements.
Discuss the advantage of establishing a greenfield venture in a foreign country.
What are the main uses of foreign exchange markets for international business?
Discuss the failure of PPP theory to predict exchange rates accurately.
Why are expatriate managers at a greater risk of violating their personal code of ethics?
Discuss the importance of the Export-Import Bank, its goals, and its operations.
Compare and contrast time drafts and sight drafts.
Why did Karl Marx criticize capitalism?
Explain the Paul Samuelson’s critique.
What are learning effects? When are learning effects most significant?
What are the shortcomings of IASB?
What is international monetary system? What are the major trading currencies?
Explain the concept of free trade.
What is gold standard? What was the major advantage of the system?
Managing an international business is much easier than managing a domestic business.
What is the Foreign Credit Insurance Association?
Explain the disadvantages of government protectionism as it relates to competitive
advantage.
What are the three types of staffing policies in international business? Briefly describe
each one. Which is the most attractive approach and why?
From a profit perspective, it makes sense for firms to disperse their productive activities
to those countries where they can be performed most efficiently.