Which of the following is a major limitation of the simple Ricardian model of
comparative advantage?
A. The model ignores the principle of diminishing marginal returns.
B. The model recommends excessive governmental intervention in trade.
C. The outcome of the model suggested by Ricardo is a zero-sum game.
D. The model is against the idea of engaging in free trade with nations.
To ensure that a free trade agreement does not result in trade diversion, which of the
following has to come within the scope of WTO?
A. Nontariff barriers
B. Services
C. Energy markets
D. Tax rates
Identify an advantage of adopting a low minimum efficient scale.
A. It helps companies reduce the level of initial capital required for business.
B. It allows the firm to accommodate demands for local responsiveness.
C. It allows firms discount political risks and other global capital risks.
D. A minimum efficient scale of a plant allows decentralization of production.
Inadequate protections for intellectual property:
A. increase the incentive for innovation.
B. led to the Smooth-Hawley Act.
C. reduce the incentive for innovation.
D. are one of the issues addressed by the local content requirement.
The identification of distinct groups of consumers whose purchasing behavior differs
from others in important ways is known as _____.
A. market segmentation
B. market penetration
C. diversification strategy
D. differentiation
The _____ theory was based on the observation that for most of the twentieth century a
very large proportion of the world’s new products had been developed by U.S. firms
and sold first in the U.S. market.
A. product life-cycle
B. Heckscher-Ohlin
C. new trade
D. Ricardo
If a company recruits host-country nationals to manage subsidiaries while
parent-country nationals occupy key positions at corporate headquarters, the firm is
following a(n) _____ staffing policy.
A. polycentric
B. ethnocentric
C. geocentric
D. internal
Which of the following statements concerning a voluntary export restraint is true?
A. It benefits domestic producers by limiting import competition.
B. In most cases, it benefits consumers.
C. It lowers the domestic price of an imported good.
D. It is a variant of the ad valorem tariff.
Which of the following is a function of World Bank?
A. Implementing a rigid fixed exchange rate regime
B. Promoting the gold standard across the world
C. Lending money to governments for development
D. Implementing a flexible fixed exchange rate regime
In the last two decades, Latin American countries like Brazil, Mexico, and Chile have
_____.
A. embraced communist principles
B. promoted government ownership of enterprises
C. experienced increasing debt and inflation
D. welcomed foreign investment
A multinational company is accused of paying bribes to the government of a host
country to obtain permission to build a production factory. The public relations manager
of the company defends the company’s actions as being ethically sound; he states that in
the host country, paying bribes to government officials is the accepted norm and is in
keeping with the social practices in the host country. The public relations manager is
using which of the following philosophical doctrines to defend the actions of the
company?
A. The Friedman doctrine
B. Righteous moralist
C. Noblesse oblige
D. Cultural relativism
Which of the following summarizes the total amount of resources invested in factories,
stores, office buildings, and the like?
A. Gross capital index
B. Gross fixed capital formation
C. Gross domestic product
D. Gross national product Gross fixed capital formation summarizes the total amount of
capital invested in factories, stores, office buildings, and the like.
_____ limits the ability of the government to print money and, thereby, create
inflationary pressures.
A. A dirty-float system
B. A managed-float system
C. The European Monetary System
D. A currency board system
A French wind power company gives an Indonesian company the right to produce and
sell wind turbines in return for a royalty fee on every unit sold. Which business practice
is this an example of?
A. Acquisition
B. Licensing
C. Exporting
D. Greenfield investment Licensing involves granting a foreign entity (the licensee) the
right to produce and sell the firm’s product in return for a royalty fee on every unit sold.
When a country’s currency is nonconvertible, a firm may turn to _____.
A. countertrade
B. hedging
C. carry trade
D. dumping
According to Lessard-Lorange model, _____ rate refers to the spot exchange rate when
the budget is adopted.
A. ending
B. initial
C. ideal
D. projected
Factor endowments refer to the extent to which a country:
A. supports education, research, and development.
B. develops the infrastructure to support industrialism.
C. supports free trade.
D. is endowed with such resources as land, labor, and capital.
An American manager in Colombia routinely pays off the local drug lord to guarantee
that his plant will not be bombed and that none of his employees will be kidnapped. The
manager argues that such payments are ethically defensible because everyone is doing
it. The manager’s argument exemplifies which of the following ethical approaches?
A. Naive immoralist
B. Kantian ethics
C. Righteous moralist
D. Noblesse oblige
In the classic global matrix structure, horizontal differentiation proceeds along two
dimensions. These dimensions are:
A. hierarchy and overall strategy.
B. target returns and sales potential.
C. marketing strategy and sales potential.
D. product division and geographic area.
Which term refers to the rate at which one currency is converted into another?
A. Basis point
B. Spread
C. Exchange rate
D. Interchange rate
An exchange rate of €1 = $1.30 indicates that:
A. $1 is worth 1.30 euros.
B. one could get 1.30 euros for $1.
C. one euro buys 1.30 dollars.
D. one euro buys 0.77 dollars.
Which of the following associations accounts for about 55 percent of the world’s GNP
and 49 percent of world trade?
A. NAFTA
B. APEC
C. ASEAN
D. EFTA
The theory of comparative advantage provides strong rationale for supporting the idea
of _____.
A. business nationalism
B. free trade
C. protectionism
D. governmental intervention in trade
_____ is a direct restriction on the quantity of some good that may be imported into a
country.
A. Import tariff
B. Import quota
C. Import subsidy
D. Ad valorem tariff
Learning effects:
A. tend to be less significant when a technologically complex task is repeated.
B. will be less significant in an assembly process involving 1,000 complex steps than in
one of only 100 simple steps.
C. typically disappear after a while, in spite of the complexity of the task.
D. are more significant after two or three years of the introduction of a new process.
The _____ is primarily a consultative rather than legislative body.
A. European Parliament
B. Court of Justice
C. Council of the European Union
D. European Commission
Antidumping duties are often called:
A. special circumstance duties.
B. positive duties.
C. retroactive duties.
D. countervailing duties.
One key components of a country’s legal system is:
A. establishing a mixed economy.
B. taking a hands-off approach to business practices.
C. defining the rights and obligations of those involved in business transactions.
D. leaving the monitoring of the way business transactions are executed to the United
Nations.
A political system that prioritizes the needs of the society over individual freedoms is
called _____.
A. totalitarianism
B. collectivism
C. capitalism
D. egalitarianism
Which of the following is a reason that firms take a reactive approach to exporting
rather than a proactive approach?
A. Most firms are familiar with the foreign market opportunities and therefore do not
need to utilize proactive approaches.
B. They are intimidated by the complexities and mechanics of exporting to countries
where business practices, language, culture, legal systems, and currency are very
different from the home market.
C. Most firms already know where the market potential and opportunities are and they
do not need to be proactive.
D. They are not intimidated by the complexities and mechanics of exporting to foreign
countries and can, therefore, use the same reactive approaches that work in their home
market.
Which of the following terms refers to the metrics used to measure the performance of
subunits and make judgments about how well managers are running those subunits?
A. Key processes
B. Control systems
C. Knowledge networks
D. Job assignments
Market makers are:
A. financial service companies that connect investors and borrowers.
B. nonbank financial institutions who want to invest money.
C. high net worth individuals with surplus cash to reinvest.
D. those who want to borrow money including individuals, companies, and
governments.
The production possibility frontier will be _____ if constant return to specialization is
observed.
A. convex
B. parabolic
C. a straight line
D. logarithmic
Anecdotal comparisons suggest that the assertion that nations that invest more in _____
will have higher growth rates is true.
A. infrastructure
B. centralized urban centers
C. education
D. manufacturing