Although most international trade and investment are still conducted by large firms,
many medium-size and small businesses are becoming increasingly involved in
international trade and investment.
Answer:
Firms that actively export often lose out on significant opportunities for growth and cost
reduction.
Answer:
One of the reasons for the trend toward greater protectionism was that many countries
found ways to get around GATT regulations.
Answer:
Relative monetary growth, relative inflation rates, and nominal interest rate differentials
are all moderately good predictors of long-run changes in exchange rates.
Answer:
Companies engage in currency speculation to get minimal but assured returns from idle
cash.
Answer:
A country is said to be in balance-of-trade equilibrium when the income its residents
earn from exports is greater than the money its residents pay to other countries for
imports.
Answer:
The concept of mobility between castes within an individual’s lifetime makes no sense
to traditional Hindus.
Answer:
Noblesse oblige is a French term referring to those multinationals that have unethically
used their power for private gain.
Answer:
For a firm to outperform its rivals in the global marketplace, the performance appraisal
systems it uses must measure the perceptions that it wants to encourage.
Answer:
A global standardization strategy makes most sense when there are strong pressures for
cost reductions and demands for local responsiveness are minimal.
Answer:
In Samuel Huntington’s thesis, global terrorism is a product of the tension between
civilizations and the clash of value systems and ideology.
Answer:
Export credit insurance protects an exporter against the possibility of a foreign
importer’s default on payment when there is a lack of a letter of credit.
Answer:
The indirect employment effects of FDI are often as large as, if not larger than, the
direct effects.
Answer:
In a customs union, a common currency is adopted.
Answer:
In terms of factors influencing product attributes, the impact of tradition is particularly
important in foodstuffs and beverages.
Answer:
According to a study by R. L. Tung, the most important reason for expatriate failure
among U.S. multinationals was difficulty coping with a new environment.
Answer:
It is possible that economic growth in developed nations has offset the fall in the share
of national income enjoyed by unskilled workers, raising their living standards.
Answer:
Universal needs exist when the tastes and preferences of consumers in different nations
are different.
Answer:
The activities of the International Monetary Fund have declined after the collapse of the
Bretton Woods system in 1973.
Answer:
With the advent of flexible manufacturing technologies and mass customization,
establishing manufacturing facilities in each major market in which the firm is active is
becoming less attractive.
Answer:
Proprietary software solutions to implement electronic data interchange systems now
dominate the market for global supply chain management software.
Answer:
Strategic alliances allow firms to share the fixed costs of developing new products or
processes.
Answer:
Licensing, a mode of entry into a foreign market, gives an international firm tight
control over manufacturing, marketing, and strategy that is required for realizing
experience curve and location economies.
Answer:
The shift toward deregulation has been easier for former command economies than for
mixed economies.
Answer:
Carry trade is a kind of speculation whose success is based upon a belief that there will
be no adverse movement in exchange rates.
Answer:
As a result of globalization, international businesses can avoid the haggle of currency
exchanges during cross-border transactions.
Answer:
With the signing of the Treaty of Rome in 1957, the European Free Trade Association
was established.
Answer:
Dumping 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.
Answer:
FDI has grown significantly slower than world trade and world output.
Answer:
Buddhism has the highest number of adherents in the world today.
Answer:
Islam is not just a religion; it is also the source of law, a guide to statecraft, and an
arbiter of social behavior.
Answer:
Under the International Bank for Reconstruction and Development scheme, the World
Bank offers low-interest loans to risky customers whose credit rating is often poor.
Answer:
Performance requirements are controls over the behavior of the MNE’s local subsidiary.
Answer:
Enterprises headquartered in a country which scores high on masculinity and power
distance measures are more likely to behave ethically than enterprises headquartered in
a culture where individualism and uncertainty avoidance are strong.
Answer:
According to Friedman’s doctrine, the only social responsibility of business is to
increase profits, so long as the company stays within the rules of law.
Answer:
Differences in government-mandated product standards can rule out mass production
and marketing of a standardized product.
Answer:
Under a floating exchange rate system, a country’s ability to expand or contract its
money supply as it sees fit is limited by the need to maintain exchange rate parity.
Answer:
Which of the following weakens the link between relative price changes and changes in
exchange rates predicted by purchasing power parity (PPP) theory by violating the
assumption of efficient markets?
A.Government intervention in cross-border trade
B.The relationship between money supply and price inflation
C.The impact of increase in currency on relative demand and supply conditions of
currencies
D.Excessive growth in money supply
E.The insignificant impact of transportation costs on international trade
Answer:
The failure to find a strong link between relative inflation rates and exchange rate
movements has been referred to as the:
A.currency crisis.
B.banking crisis.
C.purchasing power parity puzzle.
D.bandwagon effect.
E.foreign exchange risk.
Answer:
Spring, an American firm, recently acquired another company, Tazel Inc., in Indonesia.
The high-level managers at Tazel quit because they could not cope with the
domineering and straightforward approach of their American counterparts. This
illustrates how acquisitions may fail because:
A.managers overestimate their ability to create value from an acquisition.
B.integration of operations between the two firms takes longer than forecasted.
C.there is a clash between the cultures of the acquired and the acquiring firm.
D.an acquiring firm overpays for the assets of an acquired firm.
E.inadequate pre-acquisition screening has been done.
Answer:
Which of the following terms refers to the production of a variety of end products at a
unit cost that could once be achieved only through bulk production of a standardized
output?
A.Lean production
B.Just-in-time inventory
C.Mass customization
D.Specialized asset
E.Dynamic capability
Answer:
What gives a firm tight control for coordinating a globally dispersed value chain?
A.Signing joint-venture agreements
B.Installing manufacturing units in locations with optimal factor conditions
C.Setting up wholly owned marketing subsidiaries
D.Establishing a greenfield venture
E.Using foreign marketing agents
Answer:
Which of the following was advocated by Karl Marx?
A.Capitalist society
B.Individualism
C.Selling state-owned enterprises to private investors
D.Socialism
E.Private profit over public good
Answer:
On which of the following observations was Raymond Vernon’s product life-cycle
theory based?
A.The wealth and size of the U.S. market gave U.S. firms a strong incentive to develop
new consumer products.
B.The high cost of U.S. labor gave U.S. firms an incentive to develop cost-saving
process innovations.
C.The United States developed a very large proportion of the world’s new products for
most of the twentieth century and sold them first in the U.S. market.
D.The United States exports goods that heavily use skilled labor and imports heavy
manufacturing products that use large amounts of capital.
E.The United States has long been a substantial exporter of agricultural goods,
reflecting in part its unusual abundance of arable land.
Answer:
Which of the following statements is true about social stratification?
A.The most rigid system of social stratification is a class system.
B.Individuals are born into a particular social stratum.
C.It is not possible for people to move between social strata.
D.Britain is an example of a society where the caste system is predominant even today.
E.Individuals born into a stratum toward the bottom of the social hierarchy tend to have
better life chances.
Answer:
Which of the following has been excluded from the agenda for the Doha round of WTO
talks that began in 2001?
A.Reducing barriers to cross-border investment
B.Phasing out subsidies to agricultural producers
C.Limiting the use of antidumping laws
D.Attempts to tie trade to labor standards in a country
E.Cutting tariffs on industrial goods and services
Answer:
Which strategy refers to the means that a firm chooses for delivering a product to its
consumer?
A.Pull
B.Distribution
C.Push
D.Communication
E.Pricing
Answer:
The lowering of trade and investment barriers:
A.protects domestic industries from foreign competition.
B.was not an agenda of the Uruguay Round.
C.allows firms to base production at optimal locations outside their home country.
D.creates an unfavorable environment for FDI.
E.caused the Great depression of the 1930s.
Answer:
The cost of doing business is most likely to be the lowest in:
A.closed totalitarian states.
B.primitive or undeveloped economies.
C.open democratic societies.
D.countries where local laws and regulations set strict standards with regard to product
safety, safety in the workplace, and environmental pollution.
E.countries that lack well-established laws for regulating business practice.
Answer:
Which of the following conditions is most likely to act as a deterrent for foreign firms
willing to do business with former communist nations of East Europe and central Asia?
A. The high levels of economic development in these countries
B. The signs of growing unrest and totalitarian tendencies seen in these countries
C. A strong commitment to market-based economic systems seen in these countries
D. The collapse of communism in these countries
E. Low returns involved in doing business in these countries
Answer:
Which of the following is an advantage of having a letter of credit?
A.It allows payment for merchandise after its delivery.
B.It facilitates an exporter to obtain pre-export financing.
C.It allows an exporter to get a higher price for his or her goods.
D.It helps exporters incur lower shipping costs.
E.It does not require the importer to pay any fee.
Answer:
In the Swiss firm Terabithia Systems AG, all the important positions in its international
operations are held by Swiss nationals. What is the staffing policy followed by
Terabithia?
A.Eurocentric
B.Ethnocentric
C.Polycentric
D.Geocentric
E.Transnational
Answer:
Which of the following refers to the bandwagon effect?
A.Securities are purchased in one market for immediate resale in another.
B.Dominant enterprises exercise a degree of pricing power, setting different prices in
different markets to reflect varying demand conditions.
C.Traders move like a herd, all in the same direction and at the same time, in response
to each other’s perceived actions.
D.Governments routinely intervene in international trade, creating tariff and nontariff
barriers to cross-border trade.
E.The output of goods and services grows at a lesser rate than that of the money supply.
Answer:
The drawback of a just-in-time inventory system is that it:
A.increases the total capital required by a firm.
B.leaves a firm without a buffer stock of inventory.
C.increases inventory holding costs, such as warehousing and storage costs.
D.is less efficient than traditional system in spotting and fixing defective inputs.
E.lowers a company’s profitability as measured by return on capital invested.
Answer:
Countertrade is most likely to be used when:
A.the foreign currency is easily convertible.
B.the exporter has a letter of credit.
C.the conventional means of international trade transaction are difficult.
D.there is mutual trust between the exporter and the importer.
E.an export management company is used.
Answer:
According to the new trade theory:
A.the ability to capture first-mover advantages is restricted in a world that disallows
trade.
B.differences in labor productivity between nations underlie the notion of comparative
advantage.
C.a country may predominate in the export of a good because it has firms that were
among the first to produce that good.
D.to ensure economic progress, countries should implement several trade barriers.
E.different goods use resources in different proportions and this leads to constant
returns to specialization.
Answer:
Universal Lingo, a U.K.-based language translation company employing just 65 people
worldwide, has an annual turnover of $1.5 million. In this context, Universal Lingo is
most likely to be classified as a(n):
A.large domestic firm.
B.mini-multinational firm.
C.greenfield firm.
D.foreign firm.
E.multinational giant.
Answer:
Assume that the dollar is selling at a premium on the 30-day dollar/euro forward
market. Which of the following is true of the foreign exchange dealers’ market’s
expectations about the dollar over the next 30 days?
A.The dollar will depreciate against the euro.
B.The market is undecided about the direction of currency movement.
C.The dollar will appreciate against the euro.
D.The dollar/euro exchange rate will be steady.
E.The dollar will buy more euros with a spot exchange than with a 30-day forward
exchange.
Answer:
A difference in the attitudes of people toward time in different cultures is an example of
which of the following in individual cultures?
A.Folkways
B.Religious doctrines
C.Mores
D.Laws
E.Social structures
Answer:
In a business setting, which of the following practices is most likely to be considered as
unethical?
A.Allowing managers within a company to act in accordance with rights theories
B.Promoting employees who engage in ethical behavior and penalizing those who do
not
C.Hiring independent auditors to ensure that subcontractors used by the company are
living up to its code of conduct
D.Making sure that key business decisions make good economic sense irrespective of
their social costs and risks
E.Informing prospective employees about the ethical climate in the organization
Answer:
An American manager of a multinational company who is working in one of the
company’s production plants located in the country of Cadmia employs child labor at
the manufacturing unit he is in charge of. On being criticized as unethical, the manager
argues that such actions are ethically defensible because everyone in Cadmia is doing it.
Which of the following straw men approaches to ethics is most likely demonstrated by
the manager?
A.Utilitarianism
B.The righteous moralist
C.The naive immoralist
D.Kantian ethics
E.Ethnocentrism
Answer:
The needs of society as a whole are generally viewed as being more important than
individual freedoms when the emphasis is on:
A.democracy.
B.collectivism.
C.individualism.
D.capitalism.
E.privatization.
Answer:
Which of the following is a feature of the current monetary system?
A.It is free from government intervention.
B.It is free from volatile movements in exchange rates.
C.It has increased foreign exchange risk for businesses.
D.It has made it easier to get insurance coverage against exchange rate changes.
E.Instruments like forward market and swaps have lost their importance in the present
system.
Answer:
Which of the following is most likely to be the consequence of economic progress?
A.Adoption of communism
B.Adoption of democracy
C.Adoption of a command economy
D.Adoption of a totalitarian government
E.Restriction on individual freedom
Answer:
Steven converted $1,000 to 105,000 for a trip to Japan. However, he spent only 50,000.
During this period, the value of the dollar weakened against the yen. Considering a
current exchange rate of $1 = 100, how many dollars did Steven spend on the trip?
A.$550
B.$523
C.$450
D.$600
E.$500
Answer:
Which of the following is most likely to indicate that the nation of Erbia has adopted
deregulation?
A.The Erbian government exercises tight control over the prices of food grains.
B.The establishment of private enterprises in steel industry is prohibited by the Erbian
government.
C.The retail sector in Erbia has been opened for foreign direct investment.
D.The Erbian government has been criticized for its inability to introduce a legal
system to safeguard property rights.
E.Erbia ranks the lowest among the countries that grant both political and economic
freedoms to its citizens.
Answer:
The fascist regimes that ruled Germany and Italy in the 1930s and 1940s had adopted:
A.right-wing totalitarianism.
B.theocratic totalitarianism.
C.representative democracy.
D.pure democracy.
E.totalitarian democracy.
Answer:
Which of the following means an understanding of how cultural differences across and
within nations can affect the way business is practiced?
A.Ethnocentrism
B.Cross-cultural literacy
C.Pan-culture integration
D.Cultural lag
E.Cultural capitalism
Answer:
Critics of globalization say that exporting jobs to low-wage nations results in higher
unemployment and lower living standards in their home nations. Which of the
following statements does NOT support this argument?
A.Globalization destroys manufacturing jobs in wealthy advanced economies.
B.Globalization demonstrates a structural adjustment to a more integrated global
economy.
C.Globalization results in depressed wages in developed nations.
D.Globalization leads to economic dislocation in most cases.
E.Globalization induces a decline in the share of labor in national income.
Answer:
Which of the following pricing strategies can run afoul of antidumping regulations?
A.Experience curve pricing
B.Premium pricing
C.Market-based pricing
D.Dynamic pricing
E.Price skimming
Answer:
What is meant by the term free trade? Is free trade compatible with the concept of
mercantilism?
Answer:
Briefly describe the benefits of inward FDI for a host country that arise from
employment effects and balance-of-payments effects.
Answer:
Describe the differences in distribution systems between countries in terms of retail
concentration.
Answer:
Discuss why supply must not be restricted for a pure market economy to function.
Answer:
Define an expatriate manager. Describe the dimensions of self-orientation and
others-orientation that predict success in a foreign posting.
Answer:
What is class-consciousness? What is its impact on businesses?
Answer:
What constitutes the revised case for free trade?
Answer:
How should a firm choose between a greenfield venture and an acquisition?
Answer:
Describe the role of the WTO in the liberalization of FDI.
Answer:
Describe how cultural differences affect product attributes.
Answer:
What changes have occurred in the political economy of most of the world’s
nation-states since the late 1980s?
Answer:
Describe the entry modes that a firm with core competency in technological know-how
can choose.
Answer:
What is a multinational enterprise? What have been the two most notable trends in
multinational enterprises since the 1960s?
Answer:
Briefly describe the benefits of the euro.
Answer:
What changes have occurred in the International Monetary Fund in recent years?
Answer:
Compare and contrast cultural relativism and righteous moralism.
Answer:
How does the theory of comparative advantage suggest that trade is a positive-sum
game to a greater degree than the theory of absolute advantage?
Answer:
How does a lack of trust affect firms engaged in international trade? How can the
problem be solved?
Answer: