1) entering a foreign market on a large scale provides the opportunity to learn about the
foreign country.
2) international businesses avoid or defer income taxes by establishing a wholly owned,
nonoperating subsidiary in the tax haven.
3) differences in the spot exchange rate and the 30-day forward rate are normal and
reflect the expectations of the foreign exchange market about future currency
movements.
4) dividends have certain tax advantages over royalties and fees, particularly when the
corporate tax rate is higher in the host country than in the parent’s home country.
5) bringing managers together in one location for extended periods and rotating them
through different jobs in several countries helps the firm build a formal management
network.
6) many economists, politicians, and business leaders believe that the shift toward a
more integrated and interdependent global economy is a positive trend.
7) devaluations of up to 10 percent were permitted under the bretton woods system.
8) regional economic integration can be seen as an attempt to achieve additional gains
from the free flow of trade and investment between countries.
9) individualism has led to a high degree of managerial mobility between companies
resulting in managers who have good general skills but lack company-specific
experience.
10) values are abstract ideas about what a group believes to be right, good, and
desirable.
11) according to porter, four broad attributes of a nation shape the environment in
which local firms compete including supply conditions, factor endowments, regulation,
and advanced factors.
12) the preeminent strategic goal for most firms is to maximize the value of the firm for
its owners.
13) most academics support theodore levitt’s assertion that global markets are becoming
more standardized.
14) the political economy of many of the world’s nation-states has changed radically
since the late 1980s. all of the following are trends that have been evident except:
a.a wave of democratic revolutions has swept the world
b.totalitarian governments collapsed and have been replaced by democratically elected
governments
c.there has been a strong move away from centrally planned economies toward free
market economic models
d.mixed economies are fast replacing market economies
15) the bretton woods imf articles of agreement, tried to impose discipline by adopting
a _____ exchange rate system that was seen as a mechanism for controlling inflation
and imposing economic discipline on countries.
a.fixed
b.floating
c.dirty float
d.pegged
16) which of the following is not a threat that emerges for international businesses as a
result of regional economic integration?
a.the business environment within each grouping becomes more competitive
b.there is a risk of being shut out of the single market by the creation of a “trade
fortress”
c.it limits the ability of firms to pursue the corporate strategy of their choice
d.the costs of doing business in a single market may fall
17) _____ are controls over the behavior of the mne’s local subsidiary.
a.performance requirements
b.ownership restraints
c.double taxation laws
d.greenfield restrictions
18) in 1976, the _____ formalized the floating exchange rate system that followed the
collapse of fixed exchange rate system.
a.gold standard
b.plaza accord
c.jamaica agreement
d.louvre accord
19) identify the incorrect statement about turnkey projects.
a.the contractor agrees to handle every detail of the project for a foreign client
b.they are most common in industries which use inexpensive production technologies
c.this is a means of exporting process technology to other countries
d.they create efficient global competitors in the process
20) identify the incorrect statement pertaining to foreign multinationals doing business
in countries with repressive regimes.
a.inward investment by multinationals can be a force for economic, political, and social
progress that ultimately improves the rights of people in repressive regimes
b.no multinational does business with nations that lack the democratic structures and
human rights records of developed nations
c.multinational investment cannot be justified on ethical grounds in some regimes due
to their extreme human rights violations
d.multinationals adopting an ethical stance can, at times, improve human rights in
repressive regimes
21) administrative trade policies are:
a.requirements that some specific fraction of a good be produced domestically
b.quotas on trade imposed by the exporting country
c.bureaucratic rules designed to make it difficult for imports to enter a country
d.designed to punish foreign firms that engage in dumping
22) why do many companies borrow funds in their domestic currency even though the
eurocurrency markets may offer more attractive interest rates?
a.to reduce operational expenses
b.to avoid systemic risk
c.to avoid reinvestment risk
d.to avoid foreign exchange risk
23) fdi occurs when a:
a.domestic firm imports products and services from another country
b.firm ships its product from one country to another
c.firm invests in the stock of another company
d.firm invests directly in facilities to produce or market a product in a foreign country
24) all of the following are benefits of global capital markets, except:
a.they increase the supply of funds available to borrowers
b.that the risk to the investment portfolio is reduced to below what could be achieved in
a purely domestic capital market
c.they provide a wider range of investment opportunities to investors
d.they have higher cost of capital as compared to purely domestic capital markets
25) _____ makes it difficult to evaluate the performance of expatriate managers
objectively.
a.feedback
b.hard data
c.knowledge
d.bias
26) _____ refers to the extent to which cultures socialize their members to accept
ambiguous situations.
a.noblesse oblige
b.uncertainty avoidance
c.social interaction
d.cultural dilemma
27) a distinctive aspect of _____ is the tendency to aggressively court fdi believed to be
in the national interest by, for example, offering subsidies to foreign mnes in the form
of tax breaks or grants.
a.the dogmatic view
b.pragmatic nationalism
c.the radical view
d.the conservative view
28) identify the incorrect statement regarding the differences in the treatment of
goodwill across countries.
a.when one company acquires another in a takeover, the value of the goodwill is
calculated as the amount paid for a firm above its book value
b.accounting rules in many countries allow acquiring firms to deduct the value of
goodwill from the amount of equity or net worth reported on their balance sheet
c.since 2001, the u.s. requires that goodwill associated with acquisitions has to be
amortized against earnings
d.in the united states, until recently goodwill has had to be deducted from the profits of
the acquiring firm over as much as 40 years
29) the main factor that makes the eurocurrency market attractive to both depositors and
borrowers is that:
a.it allows banks to offer lower interest rates to cash depositor on home currency
deposits than on deposits made in eurocurrency
b.it lacks government regulation and banks are given much more freedom in their
dealings in foreign currencies
c.it allows banks to charge borrowers a lower interest rate for borrowings in the home
currency than for borrowings in eurocurrency
d.the spread between the eurocurrency deposit rate and lending rate is more than the
spread between the domestic deposit and lending rates
30) which of the following statements is true regarding royalties and fees?
a.royalties may be levied as fixed charges for the particular services provided.
b.a fee may be levied as a fixed monetary amount per unit of the product the subsidiary
sells or as a percentage of a subsidiary’s gross revenues.
c.royalties may be differentiated into “management royalties” for general expertise and
advice and “technical assistance royalties” for guidance in technical matters.
d.royalties and fees are often tax-deductible locally, so arranging for payment in
royalties and fees will reduce a foreign subsidiary’s tax liability.
31) to date, the impact of the iasb standards has probably been least noticeable in the
united states because:
a.compliance is voluntary
b.most iasb standards have been consistent with opinions already articulated by the u.s.
financial accounting standards board (fasb)
c.significant differences exist between the iasb standards and generally accepted
accounting principles
d.most u.s. companies already use iasb standards to report their results
32) what is horizontal differentiation?
a.the mechanisms that enable each subunit to operate independently
b.the formal division of the organization into subunits
c.the location of decision-making responsibilities within a structure
d.the mechanisms for coordinating subunits
33) describe the current rate method used by firms to determine what exchange rate
should be used when translating financial statement currencies.
34) how will eu countries benefit from the establishment of a single currency? what, if
any, are the costs of a single currency?
35) identify the risks associated with global capital markets.
36) discuss the connection between foreign direct investment and multinational
enterprises?
37) discuss the various political ideologies and their impact on foreign direct
investment.