“Facilitating payments” are payments to secure contracts that would not otherwise be
secured.
Answer:
The Andean Pact was largely based on the European Union model and was highly
successful at achieving its stated goals.
Answer:
The new trade theory suggests that a country may predominate in the export of a good
simply because it was lucky enough to have one or more pioneering firms to produce
that good.
Answer:
The fact that many countries want foreign subsidiaries to employ their citizens limits a
firm’s ability to pursue a geocentric policy.
Answer:
The attractiveness of a country as a potential market for an international business
depends solely on the size of its consumer market.
Answer:
The WTO is seen as the lender of last resort to nation-states whose economies are in
turmoil and whose currencies are losing value against those of other nations.
Answer:
If a country’s economy is to sustain long-run economic growth, the business
environment must be conducive to the consistent production of product and process
innovations and to entrepreneurial activity.
Answer:
In China, state-owned companies still dominate the banking, energy, telecom, health
care, and technology sectors.
Answer:
The European Council is composed of one representative from the government of each
member-state but the membership varies depending on the topic being discussed.
Answer:
The creation of a single market through regional economic integration offers significant
opportunities because markets that were formerly protected from foreign competition
are increasingly open.
Answer:
Bringing managers together in one location for extended periods and rotating them
through different jobs in several countries help a firm build an informal management
network.
Answer:
It is easier for companies based in countries with a high degree of class consciousness
to establish a competitive advantage in the global economy.
Answer:
Individuals become a member of the social category to which their parents belong.
Answer:
Specific tariffs are levied as a proportion of the value of the imported good.
Answer:
In an optimal currency area, similarities in the underlying structure of economic activity
make it feasible to adopt a single currency and use a single exchange rate as an
instrument of macroeconomic policy.
Answer:
By limiting imports through quotas, governments reduce the attractiveness of FDI and
licensing.
Answer:
By considering advantages and disadvantages, trade-offs can often be avoided when
selecting an entry mode.
Answer:
Author Francis Fukuyama envisioned a world split into different civilizations, each of
which has its own value systems and ideology.
Answer:
The primacy of the value of group identification encourages managers and workers to
move from company to company.
Answer:
German and Japanese firms are relatively more information-disadvantaged than U.S.
firms.
Answer:
In a pure command economy, the goods and services that a country produces, the
quantity in which they are produced, and the prices at which they are sold are all
dictated by the interaction of demand and supply.
Answer:
Pressures for greater protectionism increased around the world during the 1980s and
early 1990s due to the strain caused by the persistent trade deficit in the world’s largest
economy, Japan.
Answer:
With flexible manufacturing technologies, a firm can manufacture products customized
to various national markets at a single factory sited at the optimal location but will
nevertheless incur a significant cost penalty.
Answer:
Managers in an international business must find ways to work around the limits
imposed by specific governmental institutions.
Answer:
Many international businesses try to counter negative source effects by deemphasizing
their foreign origins.
Answer:
A firm contemplating expansion should choose a foreign market based on an
assessment of the nation’s long-run profit potential.
Answer:
In a free trade area, all barriers to the trade of goods and services among member
countries are removed and a common external trade policy is adopted.
Answer:
Multipoint competition arises when two or more enterprises encounter each other in
different regional markets, national markets, or industries.
Answer:
The advantage of export management companies (EMCs) is that they are experienced
specialists that can help the neophyte exporter identify opportunities and avoid common
pitfalls.
Answer:
A country that introduces a currency board commits itself to converting its domestic
currency on demand into another currency at a fixed exchange rate.
Answer:
The United States accounted for a significantly larger share of the world economy in
2012 than it did in the 1960s.
Answer:
By identifying and investing early in a potential future economic star, international
firms build brand loyalty and gain experience in that country’s business practices.
Answer:
Inflation occurs when the money supply in a country increases faster than output
increases.
Answer:
The Common Agricultural Policy (CAP) established by the European Union was
designed to reduce prices of domestic produce and protect consumers from unfair
premiums.
Answer:
The ability to spread fixed costs over a large volume is one of the sources of economies
of scale.
Answer:
In a typical international licensing deal, a licensor puts up most of the capital necessary
to get an overseas operation going.
Answer:
According to researchers, firms facing strong pressures for local responsiveness should
pursue a global standardization strategy.
Answer:
Despite the move toward a free market stance in recent years, many countries still have
a rather pragmatic stance toward FDI.
Answer:
Which of the following allows suppliers, shippers, and the purchasing firm to
communicate with each other via the Internet with no time delay?
A.Electronic data interchange system
B.Data warehousing system
C.Batch processing system
D.Skills inventory system
E.Just-in-time inventory system
Answer:
Which of the following is true of the barriers to international communication?
A.Noise tends to increase the probability of effective communication.
B.Source effects can be beneficial for an international business when potential
consumers in a target country have a bias against foreign firms.
C.Many international businesses try to promote positive source effects by
deemphasizing their foreign origins.
D.Fewer firms vie for the attention of prospective customers in developing countries,
thus the noise level is lower.
E.Research suggests that a consumer may use country of origin as a cue when
evaluating a product, particularly if he or she has detailed knowledge of the product.
Answer:
In January 1976, which one of the followed revised the International Monetary Fund’s
Articles of Agreement to reflect the new reality of floating exchange rates?
A.Jamaica agreement
B.Bretton Woods agreement
C.Marshall Plan
D.General agreement on Tariffs and Trade
E.Plaza Accord
Answer:
Which of the following is true about communism?
A.Communism propagates the idea of “private profit rather than public good.”
B.By the mid-1990s communism started rising worldwide.
C.China has moved sharply away from strict adherence to communist ideology in the
economic sphere.
D.Communists committed themselves to achieving socialism by turning their backs on
violent revolution and dictatorship.
E.Communism stresses that the interests of the individual should take precedence over
the interests of the state.
Answer:
Which of the following is a macro factor underlying the trend toward greater
globalization?
A.Rise of communism across the globe
B.Increase in nationalization of private organizations
C.Increase in diversity in consumer tastes and preferences
D.Increase in trade regulations across the globe
E.Dramatic developments in information processing and other technologies
Answer:
In the 1930s, countries were devaluing their currencies at will in order to boost exports,
thus shattering confidence in the:
A.floating exchange rate system.
B.gold standard system.
C.fixed exchange system.
D.Bretton Woods system.
E.managed-float system.
Answer:
The straw man approach of righteous moralism is typically associated with managers
from:
A.developing countries.
B.totalitarian nations.
C.BRIC nations.
D.developed nations.
E.war-torn countries.
Answer:
Which of the following is a consequence of improved quality control?
A.Greater warranty costs
B.Higher scrap costs
C.Direct reduction in unit costs
D.Decreased productivity
E.Reduced inventory turnover
Answer:
Ms. X is a follower of a religion that emphasizes that individuals should be judged
solely by their spiritual achievements. The caste she belongs to is of the highest order in
her religion, and hence is highly respected. She also firmly believes that she was born
into the high caste as a result of her spiritual development in her previous life. Ms. X
follows:
A.Hinduism.
B.Buddhism.
C.Confucianism.
D.Islam.
E.Christianity.
Answer:
Which of the following is the goal of the Caribbean Single Market and Economy?
A.To remove all trade barriers between member nations in practice
B.To establish a political union
C.To adopt a common currency
D.To harmonize macroeconomic and monetary policy between member-states
E.To establish an economic union
Answer:
Which of the following is most likely to be advocated by individualism?
A.Communal property is more highly productive than private property.
B.Public good should be preferred over private profit.
C.State-owned companies should monopolize certain industries.
D.The welfare of society is best served by some collective body such as government.
E.Free market ideologies should be followed for achieving better standards of living.
Answer:
A firm that enters many markets at once:
A.runs the risk of spreading its limited management resources too thin.
B.becomes established in all the markets.
C.gets the time to learn about each market.
D.has fewer export opportunities.
E.reduces the costs of any subsequent failure.
Answer:
The country of Cadmia, which is a leading producer of bauxite, had to impose trade
sanctions on Cerian soda cans in order to get the government of Ceria to enforce export
restraints. This imposition by Cadmian government was undertaken to protect domestic
producers of soda cans. Which of the following government intervention is being used
by Cadmia?
A.Diversification
B.Deregulation
C.Retaliation
D.Liberalization
E.Monopolization
Answer:
Many commentators have blamed the problems that led to global financial crisis of
2008-2009, and the recession that followed on:
A.a lack of free markets.
B.a lack of regulation.
C.the political ideologies followed in the Asian countries.
D.a strong presence of command economies.
E.a lack of privatization and liberalization.
Answer:
Which of the following comprises the euro zone?
A.The 27 member nations of the European Union
B.The member nations of the European Union and the applicants to the union
C.The 18 member nations who use the euro as their currency
D.The member nations of the European Union and countries who have pegged their
currencies to the euro
E.The 21 member nations that have their members in the European Parliament
Answer:
A strong belief that economic progress leads to adoption of a totalitarian regime
underlies the fairly permissive attitude that many Western governments have adopted
toward human rights violations in China.
Answer:
Which of the following is true of the purchasing power parity (PPP) theory?
A.A country’s “nominal” interest rate (i) is the sum of the required “real” rate of interest
(r) and the expected rate of inflation over the period for which the funds are to be lent
(I).
B.The exchange rate will not change if relative prices change.
C.The price of a “basket of goods” should be roughly equivalent in each country in
relatively efficient markets.
D.In competitive markets free of transportation costs and trade barriers, identical
products sold in different countries must sell for the same price.
E.If the law of one price were true for all goods and services, the PPP exchange rate
could not be found from any individual set of prices.
Answer:
Axiom International, an Australian company, wants to expand its operations to China, a
country that is politically, culturally, and economically different. The firm needs to
select a mode of entry that would give it access to local knowledge, allow sharing of
development costs and risks, and also be politically acceptable. Which of the following
modes of entry into foreign markets is most suitable for Axiom International?
A.Wholly owned subsidiary
B.Joint venture
C.Exporting
D.Greenfield investments
E.Licensing
Answer:
Which of the following refers to agreements among countries in a geographic region to
reduce and ultimately remove tariff and nontariff barriers to the free flow of goods,
services, and factors of production between each other?
A.Regional economic integration
B.Cross-cultural integration
C.Zoning agreement
D.Administrative trade policies
E.Balance-of-trade equilibrium
Answer:
Which of the following multilateral agreements was established under U.S. leadership
in 1947, with the objective to liberalize trade by eliminating tariffs, subsidies, import
quotas, and the like?
A.General Agreement of Tariffs and Trade (GATT)
B.North American Free Trade Agreement (NAFTA)
C.Central American Free Trade Agreement (CAFTA)
D.Free Trade Areas of the Americas (FTAA)
E.North Atlantic Treaty Organization (NATO)
Answer:
What is a firm engaging in when it insures itself against foreign exchange risk?
A.Currency speculation
B.Carry trade
C.Hedging
D.Currency swap
E.Arbitrage
Answer:
Which of the following are significant trade blocs in Europe?
A.The European Union and the European Free Trade Association
B.The European Federation and the European Trade Block
C.The European Commission and the COMINTERN
D.The European Federation and the European Trade Association
E.The European Economic Community and the European Federation
Answer:
The new trade theory states that:
A.the locus of global production initially switches from the United States to other
advanced nations.
B.world trade in certain products may be dominated by countries whose firms were first
movers in their production.
C.differences in technology may lead to differences in productivity, which in turn drives
international trade patterns.
D.differences in labor productivity between nations underlie the notion of comparative
advantage.
E.a rich country might actually be worse off by switching to a free trade regime with a
poor nation.
Answer:
Which of the following is true about firms using just-in-time (JIT) inventory system?
A.A company is more likely to have excess unsold inventory that it has to write off
against earnings.
B.Parts enter the manufacturing process immediately; they are not warehoused.
C.It is difficult to spot and fix defective inputs.
D.The amount of working capital a company needs to finance inventory increases.
E.A firm has ample buffer stock of inventory.
Answer:
Producing a standardized product in large volumes will:
A.result in diseconomies of scale.
B.increase production efficiency.
C.increase production costs.
D.result in shorter production runs.
E.result in a high minimum efficient scale of output.
Answer:
Silver Meteorite Inc. is a multinational company whose home country, Palumbia
Republic, considers grease payments as both illegal and unethical. Hence, the company
has a zero-tolerance approach toward grease payments irrespective of any of its host
nations’ perspectives toward such payments. In this context, Silver Meteorite Inc. is
following the approach to ethics known as:
A.naive immoralist.
B.righteous moralist.
C.cultural pluralist.
D.cultural relativist.
E.ethnocentric.
Answer:
Which of the following terms best represents the norms and value systems that are
shared among the employees of an organization?
A.Process scenario
B.Organizational structure
C.Business structure
D.Organizational culture
E.Management structure
Answer:
Many developing countries have a potential comparative advantage in manufacturing,
but new manufacturing industries cannot initially compete with well-established
industries in developed countries, according to:
A.economic development argument.
B.comparative advantage theory.
C.national security argument.
D.infant industry argument.
E.mixed economy theory.
Answer:
Vernon predicts that as the demand for a new product starts to grow in other advanced
countries, in the long run:
A.the cost of labor in these advanced countries begins to increase.
B.it becomes profitable for foreign firms to invest in production facilities in the United
States.
C.the firms in the United States begin to gain an absolute advantage.
D.it begins to limit the potential for exports from the United States.
E.the same product will begin to command a higher price.
Answer:
What is the shift toward a more integrated and interdependent world economy called?
A.International trade
B.Foreign direct investment
C.Globalization
D.Moore’s Law
E.Containerization
Answer:
Which of the following was established after the Uruguay Round to police the
international trading system?
A.United Nations
B.International Monetary Fund
C.Group of Twenty
D.World Trade Organization
E.World Bank
Answer:
Licensing is NOT attractive to which of the following firms?
A.Firms lacking the capital to develop operations overseas
B.Firms unwilling to commit substantial financial resources to an unfamiliar market
C.Firms requiring tight control of operations for realizing experience curve and location
economies
D.Firms wanting to explore markets but prohibited from doing so by investment
barriers
E.Firms with intangible properties with business applications that it does not want to
develop itself
Answer:
When dominant enterprises in an industry exercise a degree of pricing power, setting
different prices in different markets to reflect varying demand conditions, it is referred
to as:
A.price discrimination.
B.premium pricing.
C.psychological pricing.
D.price skimming.
E.price leadership.
Answer:
What kind of an organization culture should a business develop in order to foster ethical
behavior?
Answer:
What is meant by a marketing mix? Briefly describe how a firm configures its
marketing mix.
Answer:
Describe the pros and cons of countertrade.
Answer:
Briefly describe the changes taking place in the attitudes toward FDI in countries across
the globe.
Answer:
Discuss Samuel Huntington’s idea of the new world order. What are its implications for
international business?
Answer:
Describe the difference between fundamental analysis and technical analysis in
forecasting exchange rate movements.
Answer:
What are the various safeguards that are typically enshrined in constitutional law of an
ideal representative democracy?
Answer:
How does a caste system differ from a class system?
Answer:
How has organized labor responded to the increased bargaining power of multinational
corporations?
Answer:
Briefly describe how national differences in compensation can affect an international
business.
Answer:
Describe the global standardization strategy.
Answer:
What are the two impediments to regional economic integration?
Answer:
Elaborate on why globalization is not inevitable.
Answer:
What is the Fisher effect?
Answer:
How do patents, copyrights, and trademarks differ from each other?
Answer:
Briefly describe the concept of regional economic integration.
Answer:
How does a common law system differ from a civil law system?
Answer:
What is expatriate failure? According to Tung’s survey, what are the different reasons
for expatriate failure in U.S. multinationals?
Answer:
How do international businesses respond to violations of their intellectual property?
Answer: