Most economists prefer Ricardo’s theory to the Heckscher-Ohlin theory because it
makes fewer simplifying assumptions.
Answer:
According to Michael Porter, all positions on the efficiency frontier are viable.
Answer:
Porter’s theory has been subjected to detailed empirical testing and it is proven that it
accurately predicts international trade patterns.
Answer:
A draft, an instrument normally used in international commerce to effect payment, is
also known as a letter of credit.
Answer:
According to Paul Krugman, a country that adopts a strategic trade policy aimed at
establishing domestic firms in a dominant position in a global industry will probably
provoke retaliation.
Answer:
In terms of exchange rate forecasting, the efficient market school argues that companies
should spend additional money trying to forecast short-run exchange rate movements.
Answer:
Governments of developed nations are setting an example by unilaterally lowering their
trade barriers.
Answer:
Kantian ethics asserts that if a manager of a multinational sees that firms from other
nations are not following ethical norms in a host nation, that manager should not either.
Answer:
Economic theories suggest that free trade and investment is a positive-sum game, in
which all participating countries stand to gain.
Answer:
Given a common gold standard, the value of any currency in units of any other currency
(the exchange rate) was easy to determine.
Answer:
According to many influential economists, the increase in international trade and
cross-border investment will result in an increase in the prices of goods and services.
Answer:
The stated aim of the Asia-Pacific Economic Cooperation is to increase multilateral
cooperation in view of the economic rise of the Pacific nations and the growing
interdependence within the region.
Answer:
The experience curve refers to systematic increases in production costs that have been
observed to occur over the life of a product.
Answer:
Exporting, as a mode of entry into foreign markets, does not help a firm achieve
experience curve and location economies.
Answer:
If an international firm’s core competence is based on proprietary technology, entering a
joint venture might risk losing control of that technology to the joint-venture partner.
Answer:
Paul Krugman asserts that a strategic trade policy is almost certain to be captured by
special-interest groups within the economy, who will distort it to their own needs.
Answer:
In terms of channel length, the more fragmented the retail system, the less expensive it
is for a firm to make contact with each individual retailer.
Answer:
The real costs of information processing and communication have fallen dramatically in
the past two decades.
Answer:
A firm that improves its quality control cannot reduce its costs of value creation
simultaneously.
Answer:
The Andean Community now operates as a customs union.
Answer:
When a firm exports its products to a foreign country, foreign direct investment occurs.
Answer:
Leading and lagging strategies involve accelerating payments from weak-currency to
strong-currency countries and delaying inflows from strong-currency to weak-currency
countries.
Answer:
The new trade theory emerged from the thought that the ability of firms to attain
economies of scale might have important implications for international trade.
Answer:
W. Edward Deming believed that achieving better quality requires the commitment of
everyone in a company.
Answer:
By placing tariffs on imported goods, governments can increase the cost of exporting
relative to foreign direct investment and licensing.
Answer:
Beginning in the 1970s, European and Japanese firms began to shift labor-intensive
manufacturing operations from developing nations to their home countries where labor
costs were lower.
Answer:
For a market segment to transcend national borders, consumers in that segment must
have some compelling similarities along important dimensions such as age, values, and
lifestyle choices.
Answer:
According to the product life cycle theory, as demand for a product starts to grow in
other advanced countries, potential for exports from the United States will gradually
increase.
Answer:
Government intervention can be self-defeating because it tends to protect the inefficient
rather than help firms become efficient global competitors.
Answer:
Diminishing returns imply that when a firm already has significant value built into its
product offering, increasing value by a relatively small amount requires only minimal
additional costs.
Answer:
An advantage of establishing a greenfield venture in a foreign country is that it gives
the firm a much greater ability to build the kind of subsidiary company that it wants.
Answer:
Which of the following is an argument put forth by critics of the IMF?
A.It increases barriers to the free flow of goods and investment across national borders.
B.It provides assistance only to developing nations and completely ignores the
developed nations.
C.It is not powerful enough to ensure that the nation-states adhere to the rules laid down
in trade treaties.
D.It promotes the rise of communism across the globe.
E.It usurps the sovereignty of nation-states by telling governments what economic
policies they must adopt.
Answer:
Due to strong legal protection of property rights, businesses and individuals will:
A.invest more in innovations.
B.face a huge burden from excessive taxation.
C.face more corruption.
D.move away from entrepreneurial activity.
E.run the risk of their profits being expropriated.
Answer:
An exporter has to forgo a letter of credit when:
A.competing exporters also require letters of credit.
B.the importer is facing stiff competition from other importers.
C.the exporter is a dominant player in a noncompetitive market.
D.the importer is in a strong bargaining position.
E.he or she knows that the importer will default on payment.
Answer:
Which of the following is NOT an option, due to the fact that many services have to be
produced where they are sold?
A.FDI
B.Franchising
C.Greenfield investment
D.Exporting
E.Outsourcing
Answer:
According to the noted economist Jeffrey Sachs, the International Monetary Fund
should:
A.not be accountable to anyone as it is a powerful institution.
B.bail out banks that have rash lending policies.
C.have a “one-size-fits-all” approach to macroeconomic policy.
D.keep its operations open to greater outside scrutiny.
E.lend only to countries with safe credit ratings.
Answer:
Which of the following statements best supports the claim that greater uniformity
replaces diversity in the context of global markets?
A.Differences in business systems and legal regulations lead companies to customize
their marketing strategies, product features, and operating practices to best match
conditions in a particular country.
B.As rival global firms follow each other across countries, they bring with them their
brand names, products, and marketing strategies from other national markets, thus
creating homogeneity across markets.
C.Truly innovative companies succeed by developing products that serve specific needs
of the local markets.
D.The volume of goods, services, and investment crossing national borders has
expanded at a slower rate than world output for more than half a century.
E.The most global of markets are not typically markets for consumer products, as
significant differences in consumer tastes and preferences still exist among national
markets.
Answer:
Which of the following best exemplifies foreign direct investment (FDI)?
A.Pure Pearls, a jewelry store in the United States, imports harvested pearls from
Indonesia, Philippines, and Australia.
B.Chivalry, a U.S.-based phone manufacturing company, has set up its own assembly
plant in Japan to cater to the needs of the Asian market.
C.Delicate Love, a reputable florist company in Holland, exports tulips and roses
throughout the globe.
D.Samantha started an Italian restaurant in her home country, the United States, after
she took cooking lessons from a well-known chef in Italy.
E.Yin and Yang Inc., a Chinese firm, supplies buttons and zippers to major denim
brands in the United Kingdom.
Answer:
Which of the following refers to the activity that controls the transmission of physical
materials through the value chain, from procurement through production and into
distribution?
A.Promotion
B.Recruitment
C.Logistics
D.Benchmarking
E.Inshoring
Answer:
Which of the following is a drawback of ISO 9000 certification?
A.It is bureaucratic and costly for many firms.
B.It is an impossible standard to achieve.
C.It is losing its prominence in international business.
D.It is ineffective in improving processes.
E.It is ineffective in bringing about quality improvement.
Answer:
Which of the following is a major type of foreign investment risk that is insurable
through government-backed programs?
A.Lack of funds
B.Risk of transaction loss
C.Poor strategic tie-ups
D.Risks of expropriation
E.Losses due to natural calamities
Answer:
Which of the following was the weakness of the Bretton Woods system?
A.It could be wrecked by heavy borrowings from the World Bank and the International
Monetary Fund.
B.It could not work if the U.S. dollar was under speculative attack.
C.The inflexibility of the system resulted in high unemployment.
D.It forced fiscal and monetary discipline on participating nations.
E.It allowed the countries to engage in competitive currency devaluations.
Answer:
Which of the following is an additional and difficult dimension to the long-standing
problem of expatriate failure due to the inability of the spouse to adjust?
A.Formal training
B.Dual-career families
C.Cultural diversity
D.Single parenting
E.Cultural toughness
Answer:
Product safety and product liability laws are enforced to protect:
A.intellectual property rights.
B.companies from their domestic competitors.
C.companies from their foreign competitors.
D.consumers.
E.product inventors.
Answer:
The Cedian government believes that its citizens should have complete freedom in their
economic and political pursuits, and the Cedian ideology is “private profit over public
good.” In this context, it can be said that Cedia most likely follows the philosophy of:
A.totalitarianism.
B.socialism.
C.individualism.
D.communism.
E.Marxism.
Answer:
Which of the following is a disadvantage of an ethnocentric staffing policy?
A.It leads to resentment in the host country.
B.It isolates the headquarters from foreign subsidiaries.
C.It does not allow transfer of core competencies.
D.It leads to a dearth of qualified managers in the host nation.
E.It diversifies corporate culture.
Answer:
According to the new trade theory, how does trade offer an opportunity for mutual gain
when countries do not differ in their resource endowments or technology?
A.Trade results in a contraction of the size of the markets of individual firms.
B.Trade allows for production of products at higher prices.
C.Trade increases the variety of goods available to consumers and lowers the costs of
those goods.
D.Trade allows countries to attain self-sufficiency in the production of all goods.
E.Trade guarantees first-mover advantages to all the countries that engage in trade.
Answer:
Which of the following best exemplifies an ethical dilemma?
A.Javier has been doubtful about a car he purchased recently, and hence has been
reading only good reviews about the car to console himself.
B.After seeing a whole new collection of phones at a store, Max is regretting the
purchase of an outdated phone he made last month.
C.The manager at Almas Inc. has to make a vendor choice between his underqualified
cousin and a highly experienced, trusted supplier.
D.Andrew is responsible for deciding whether he should upgrade the manufacturing
unit with new machines and reduce costs for clients, or retain the impoverished manual
labor.
E.Samantha has to decide whether the annual profits of the company should be
distributed to the employees as a salary hike or in the form of non-monetary benefits.
Answer:
Which of the following is a consequence of tight cross-functional integration between
research and development (R&D), production, and marketing?
A.Maximizing the time to market a product
B.Letting R&D dictate terms to marketing and production
C.Keeping development costs in check
D.Ensuring that product development projects are driven by organizational needs
E.Increasing selling costs and maximizing profits
Answer:
In international business, a product that is not widely available in a foreign market and
satisfies an unmet need:
A.is likely to have greater value.
B.will have to be priced relatively low.
C.will see a decrease in sales volume.
D.is not suited to that particular market.
E.will fail to make a profit.
Answer:
Which of the following refers to a trade pact among Costa Rica, El Salvador,
Guatemala, Honduras, and Nicaragua, which began in the early 1960s but collapsed in
1969 due to war?
A.Central American Common Market
B.Free Trade Area of the Americas
C.Caribbean Single Market and Economy
D.Mercosur
E.CARICOM
Answer:
In a society, actions of people directed toward one another are governed by a set of
social rules called:
A.norms.
B.manifestoes.
C.structures.
D.scriptures.
E.dialects.
Answer:
Which of the following was a reason that led to the collapse of the gold standard in
1939?
A.Difficulty and complexity in using the gold standard to determine the exchange rate
B.Agreement by governments to convert paper currency into gold on demand at a fixed
rate
C.A cycle of competitive currency devaluations by various countries
D.Expansion in the volume of international trade in the wake of the Industrial
Revolution
E.The inability of the gold standard to act as a mechanism for achieving
balance-of-trade equilibrium by all countries
Answer:
Which of the following refers to the amount of FDI undertaken over a given period
(normally a year)?
A.Portfolio
B.Flow
C.Status
D.Stock
E.Fragment
Answer:
Which of the following is most likely to be protected by a copyright?
A.A new manufacturing process invented in a company
B.A newly invented telecommunication device
C.Tangible property like land and building
D.Movies produced and directed by a person
E.A new type of car invented by an automobile company
Answer:
Discuss the concept of an ethical dilemma.
Answer:
Which of the following is true of barter as a countertrade arrangement?
A.It is a very complex arrangement.
B.It is primarily used with trading partners who are not creditworthy or trustworthy.
C.It involves cash transactions.
D.When goods are exchanged simultaneously, one partner ends up financing the other.
E.It is the most flexible countertrade arrangement.
Answer:
Which of the following is a dimension of social structure that is particularly important
when explaining differences between cultures?
A.The average income of the people who belong to a particular culture
B.The dominant race and the gender in the society
C.The extent to which work is viewed as more important than family
D.The degree to which the society is stratified into classes or castes
E.The degree to which a society supports multiple subcultures
Answer:
A firm is most likely to pursue a global standardization strategy when:
A.it wants to implement a high-cost strategy on a global scale.
B.it wants to reduce consumer surplus.
C.there are no universal needs to be served.
D.there are strong demands for local responsiveness.
E.there are strong pressures for cost reduction.
Answer:
The 1944 Bretton Woods conference created two major international institutions that
play a role in the international monetary systemthe International Monetary Fund (IMF)
and the:
A.United Nations.
B.European Union.
C.World Trade Organization.
D.World Bank.
E.G20.
Answer:
Amber Engineers Inc. wants to be able to customize products for different national
markets and in turn increase its customer responsiveness. However, the fixed costs
associated with its production are high. Hence, these functions will be performed most
efficiently if Amber Engineers:
A.sets up a production facility that is well suited for mass production.
B.establishes multiple manufacturing facilities in each major national market.
C.increases each manufacturing unit’s minimum efficient scale of output.
D.adopts flexible manufacturing technologies to help achieve mass customization.
E.locates its production unit in countries that have fluctuations in exchange rates.
Answer:
In the context of international labor relations, which of the following is true of
organized labor?
A.It supports the pursuit of a transnational standardization strategy.
B.It supports the pursuit of a global standardization strategy.
C.It increases unintentional bias in evaluating the performance of expatriate managers.
D.It limits a firm’s ability to integrate and consolidate its global operations.
E.It reduces a firm’s ability to understand host-country cultural differences that require
different approaches to marketing.
Answer:
In exporting, problems with local marketing agents can be overcome by:
A.selling intangible property to a franchisee and insisting on rules to conduct the
business.
B.changing agents frequently.
C.engaging in turnkey projects and exporting process technology to foreign firms.
D.entering into cross-licensing agreements with foreign firms.
E.setting up wholly owned subsidiaries in foreign nations to handle local marketing.
Answer:
Which of the following is true of price elasticity of demand?
A.The price elasticity of demand is only defined by the competitive conditions in a
country.
B.Demand is said to be inelastic when a large change in price produces a large change
in demand.
C.Demand is said to be elastic when a large change in price produces a small change in
demand.
D.Price elasticity tends to be greater in countries with low income levels.
E.The elasticity of demand is inversely proportional to the number of competitors
offering a particular product.
Answer:
What are the consequences of an international firm entering a foreign market on a
significant scale?
Answer:
Why do many neophyte exporters have problems when trying to do business abroad for
the first time? What are the common pitfalls experienced by such exporters?
Answer:
How has the volatility of the current global exchange rate regime affected international
businesses? How can the problem be tackled?
Answer:
Briefly describe the Bretton Woods agreement of 1944.
Answer:
Briefly describe the schools of thought regarding exchange rate forecasting.
Answer:
What are the advantages of strategic alliances?
Answer:
What are the two political factors that led to the creation of the European Union?
Answer:
What are strategic alliances?
Answer:
Explain how investor psychology and bandwagon effects impact the movement in
exchange rates.
Answer:
Discuss the concept of deregulation.
Answer:
Explain the concepts of transaction exposure and translation exposure.
Answer:
Discuss the two basic strategies for locating production facilities. When is it most
appropriate to centralize production?
Answer:
What is meant by the term foreign direct investment? Describe the difference between
the flow of foreign direct investment and the stock of foreign direct investment.
Answer:
Describe any two components of a typical expatriate compensation package.
Answer:
How do trade barriers constrain a firm’s ability to disperse its productive activities?
Answer:
What are the sources of pressures for local responsiveness?
Answer:
Describe the drawbacks of the euro.
Answer: