The purchasing power parity for different countries is adjusted (up or down) depending
upon whether a country’s cost of living is lower or higher than the cost of living in the
United States.
Answer:
The growing income inequality is a result of the wages for skilled workers being
discounted.
Answer:
Currency appreciation can transform a low-cost location into a high-cost location.
Answer:
Under a currency board system, the government has the absolute authority to set
interest rates.
Answer:
The use of a grading system in schools teaches children the value of personal
achievement and competition.
Answer:
Profit growth is measured by the percentage increase in net profits over time.
Answer:
Governments can protect consumers from unsafe products by issuing a limit or a ban on
such products.
Answer:
In most democratic states, those who question the right of the rulers to rule find
themselves imprisoned, or worse.
Answer:
By the mid-1990s, communism was rising worldwide.
Answer:
By the early 1990s, the radical position toward FDI was in retreat due to the rise of
communism in eastern Europe.
Answer:
As the only currency that could be converted into gold, the British pound occupied a
central place in the fixed exchange rate system.
Answer:
The objectives of reducing costs and increasing quality in a firm are independent of
each other.
Answer:
There is a strict one-to-one correspondence between a society and a nation-state.
Answer:
The concept of corporate social responsibility (CSR) refers to the idea that
businesspeople should consider the social consequences of economic actions when
making business decisions.
Answer:
Under a pegged exchange rate regime, a country will peg the value of its currency to
that of a major currency, so that if the reference currency rises in value, its own
currency rises too.
Answer:
In international commerce, time drafts are negotiable instruments.
Answer:
Command economies provide a more favorable environment for innovation and
entrepreneurs than market economies.
Answer:
Maintaining the company infrastructure is a support activity.
Answer:
Business leaders should use every relevant opportunity to stress the importance of
business ethics and make sure that key business decisions not only make good
economic sense but also are ethical.
Answer:
The righteous moralist’s approach to ethics is typically associated with managers from
developed nations.
Answer:
The Uruguay Round extended GATT to cover services as well as manufactured goods.
Answer:
Some IMF economists argue that higher inflation rates might be good if the
consequence is greater growth in aggregate demand.
Answer:
Small-scale entrants are more likely to capture first-mover advantages associated with
switching costs.
Answer:
Free trade as a government policy was first officially embraced by Germany in 1846,
when the Bundestag repealed the Corn Laws.
Answer:
In terms of the various modes of entry into a foreign market, franchising is employed
primarily by service firms, whereas licensing is pursued primarily by manufacturing
firms.
Answer:
The elasticity of demand for a product in a given country is determined by a number of
factors, of which income level and competitive conditions are the two most important.
Answer:
According to the Bretton Woods agreement, if a currency became too weak to defend, a
devaluation of up to 10 percent would be allowed without any formal approval by the
International Monetary Fund.
Answer:
The benefits, costs, and risks associated with doing business in a country are
independent of that country’s political, economic, and legal systems.
Answer:
Like Christianity and Judaism, Islam is a monotheistic religion.
Answer:
Firms now typically use electronic data interchange (EDI) via the Internet to coordinate
the flow of materials into manufacturing, through manufacturing, and out to customers.
Answer:
During the late 1980s and early 1990s, totalitarian governments collapsed and were
replaced by democratically elected governments.
Answer:
According to the extreme version of radical view, no country should ever permit foreign
corporations to undertake FDI, because they can never be instruments of economic
development, only of economic domination.
Answer:
What happens in the foreign exchange market does not directly impact the sales, profits,
and strategy of a multinational enterprise.
Answer:
Most countries require extensive documentation if they wish to hire a foreign national
instead of a local national. Which of the following staffing approaches is most likely to
be affected by this?
A.Polycentric
B.Geocentric
C.Transnational
D.Ethnocentric
E.Local
Answer:
The NAFTA was formed in 1994 between:
A.Canada, Mexico, and the United States.
B.the United States, Brazil, and Argentina.
C.Canada, Argentina, and Mexico.
D.Colombia, Venezuela, and Brazil.
E.Uruguay, Colombia, and Costa Rica.
Answer:
Firms that compete in the global marketplace typically face two types of competitive
pressure:
A.pressures for increasing investment and pressures to minimize consumer surplus.
B.pressures for labor skill enhancement and pressures to minimize economies of scale.
C.pressures for cost reductions and pressures to be locally responsive.
D.pressures for global promotions and pressures to move down the efficiency frontier.
E.pressures for product standardization and pressures to move up the experience curve.
Answer:
The United Nation of Amberia, a Western European country, fought on the winning side
of the Cold War. Which of the following was most likely being propagated by the
country by participating in the Cold War?
A.Strong business regulations
B.Communist ideologies
C.Command economies
D.Totalitarian dictatorships
E.Free markets
Answer:
Which of the following is a consequence of a low minimum efficient scale?
A.Preventing a firm from utilizing capital equipment fully
B.Necessitating centralized production in a single location or a limited number of
locations
C.Preventing a firm from accommodating demands for local responsiveness
D.Increasing the unit cost of products
E.Allowing a firm to hedge against currency risk by manufacturing the same product in
several locations
Answer:
Which of the following is a drawback of the purchasing power parity theory?
A.It does not appear to be a strong predictor of short-run movements in exchange rates
covering time spans of five years.
B.It does not explain change in exchange rates in terms of change in relative prices.
C.It cannot explain when the demand of a particular currency would exceed its supply
and vice versa.
D.It does not address inflation in situations where governments control the rate of
growth in money supply.
E.It cannot predict exchange rate changes for countries with high rates of inflation and
underdeveloped capital markets.
Answer:
The United States accused Libya and Iran of supporting terrorist action and building
weapons of mass destruction. The U.S. government, therefore, imposed trade sanctions
against the two countries. Which of the following political arguments does this
exemplify?
A.Retaliation and trade war
B.Furthering foreign policy objectives
C.Strategic trade policy
D.Corporate security
E.Protecting infant industries
Answer:
In international trade, an exporter wants to be paid before a consignment is shipped.
Correspondingly, the importer wants to pay only upon receipt of the consignment.
These conflicting preferences of the parties are a manifestation of:
A.corporate greed.
B.acculturation.
C.lack of trust.
D.cultural insensitivity.
E.countertrading opportunities.
Answer:
The Convention on Combating Bribery of Foreign Public Officials in International
Business Transactions:
A.makes it mandatory for companies to adhere to the pollution control standards of
their home country in all the nations in which they do business.
B.does not consider facilitating payments a criminal offense.
C.makes grease payments mandatory in order to obtain exclusive preferential treatment
in a host nation.
D.considers payment of speed money to be moral, but illegal.
E.makes it obligatory for companies to adopt a zero-tolerance approach toward grease
payments.
Answer:
Which of the following terms best represents a situation in which a government does
not attempt to influence through quotas or duties what its citizens can buy from another
country, or what they can produce and sell to another country?
A.Free trade
B.Positive-sum game
C.Socialism
D.Absolute advantage
E.Zero-sum game
Answer:
Which of the following was a part of the agenda of the Doha Round of talks launched
by the WTO?
A.Limiting the use of antidumping laws
B.Abolishing the International Monetary Fund
C.Increasing tariffs on industrial goods, services, and agricultural products
D.Persuading member governments to cut defense spending
E.Establishing GATT as a replacement for the WTO
Answer:
An American company imports laptop computers from Japan. The company knows that
after a shipment arrives, it must pay in yen to the Japanese supplier within 30 days. In a
particular exchange, the American company must pay the Japanese supplier 150,000 for
each computer at the current dollar/yen spot exchange rate of $1 = 110. The company
intends to resell the computers the day they arrive for $1,600 each but it does not have
the funds to pay the Japanese supplier until the computers have been sold. Which of the
following will happen if the exchange rate after 30 days is $1 = 90?
A.The importer will earn a profit of approximately $236 per computer.
B.The importer will earn a profit of approximately $67 per computer.
C.The importer will incur a loss of approximately $236 per computer.
D.The importer will incur a loss of approximately $67 per computer.
E.The importer will incur a loss of approximately $90 per computer.
Answer:
Location-specific advantages for a firm are those that arise from:
A.acquiring the home markets of foreign firms that threaten a firm’s domestic market.
B.gaining a commanding position in one market and using them to subsidize
competitive attacks in other markets.
C.preferring exporting over licensing in order to retain control over know-how,
manufacturing, marketing, and strategy.
D.utilizing resource assets that are tied to a particular foreign location and valuable
enough to be combined with the firm’s own unique assets.
E.franchising and licensing.
Answer:
The Boldovian government took Sea Lion Inc., a domestic, private shipbuilding firm,
into state ownership to save the company from bankruptcy. However, the other private
competitors in the shipbuilding industry were enraged by this decision of the
government. As a result, the government had to reduce the tax burden on all other
private shipbuilding firms so that both the state-owned enterprise and private firms
could co-exist. According to this information, Boldovia has most likely adopted what
type of economy?
A.Mixed
B.Market-based
C.Command
D.Laissez-faire
E.Communist
Answer:
Which of the following instances indicates that the dollar is selling at a premium on the
30-day forward market?
A.The spot exchange rate is currently $1 = 120 and changes to $1 = 130 after 30 days.
B.The spot exchange rate is currently $1 = 120 and changes to $1 = 110 after 30 days.
C.The current spot exchange rate is $1 = 120 and the 30-day forward rate is $1 = 110
after 30 days.
D.The current spot exchange rate is $1 = 120 and the 30-day forward rate is $1 = 130
after 30 days.
E.The current spot exchange rate is $1 = 120 and the 30-day forward rate is $1 = 120.
Answer:
Which of the following stands at the center of international commercial transactions
and is issued by a bank at the request of an importer?
A.Bill of lading
B.Time draft
C.Letter of credit
D.Sight draft
E.Bill of exchange
Answer:
Which of the following of a firm is measured by the difference between the value of a
product to an average consumer and the average unit cost of producing that product?
A.Customer surplus
B.Value creation
C.Cost curve
D.Value efficiency
E.Customer reservation
Answer:
Vernon argues that early in the life cycle of a typical new product, while demand is
starting to grow rapidly in the United States, demand in other advanced countries:
A.remains limited to high-income groups.
B.necessitates production of that product in those countries.
C.necessitates outsourcing of production to low-cost locations.
D.raises the cost of production in the United States.
E.causes a shift in the position of the United States from that of an exporter to an
importer.
Answer:
What kind of demand is seen when a small change in price produces a large change in
demand?
A.Elastic
B.Inelastic
C.Relative
D.Rigid
E.Dynamic
Answer:
Which of the following modes of entry into foreign markets can result in a lack of
control over quality?
A.Exporting
B.Franchising
C.Turnkey projects
D.Wholly owned subsidiaries
E.Joint ventures
Answer:
The act that allows Americans to sue foreign firms that use property in Cuba
confiscated from them after the 1959 revolution is known as the:
A.Frederick-Peterson Act.
B.D’Amato-Perkins Act.
C.Perkins-Dole Act.
D.Helms-Burton Act.
E.Godfrey-Milliken Act.
Answer:
The number of intermediaries between the product (or manufacturer) and the consumer
is referred to as:
A.channel length.
B.channel quality.
C.channel exclusivity.
D.channel fragmentation.
E.channel concentration.
Answer:
Cadmia banned imports of Mattel toys with high levels of toxic lead, manufactured in
Argonia. The underlying motive for such a move could be:
A.protecting domestic businesses from unfair pricing.
B.protesting the pricing of toys below their costs of production.
C.protecting consumers from unsafe products.
D.increasing the trade surplus of the United States.
E.reducing dumping of cheap toys.
Answer:
Which of the following is one of the reasons for the rapid rise in the value of the dollar
between 1980 and 1985 despite a large trade deficit?
A.Political stability in all other parts of the world
B.Heavy capital outflows from the United States
C.Low real interest rates in the United States
D.Slow economic growth in the developed countries of Europe
E.Increasing exports against decreasing imports in the United States
Answer:
Which of the following theories states that in those industries where the output required
to attain economies of scale represents a significant proportion of total world demand,
the global market may be able to support only a small number of enterprises?
A.Heckscher-Ohlin
B.Comparative advantage
C.Product life-cycle
D.New trade
E.Absolute advantage
Answer:
A major cost saving from just-in-time inventory systems comes from:
A.a shift in focus away from quality.
B.increasing productivity of workers.
C.speeding up inventory turnover.
D.creating a buffer stock of inventory.
E.writing off excess unsold inventory against earnings.
Answer:
The list provided by the International Trade Administration to a potential exporter with
the names and addresses of potential distributors in foreign markets, along with
businesses they are in, is called the:
A.ELAN list.
B.”best prospects” list.
C.”comparison shopping service.”
D.SCORE list.
E.export management list.
Answer:
Which of the following is a reason for Great Britain, Denmark, and Sweden to stay out
of the euro zone?
A.The dollar peg advocated by some members of the European Union
B.The implied loss of national sovereignty to the European Central Bank
C.The volatility of the euro
D.The reluctance to compete directly against the U.S. dollar
E.The reluctance to be considered an optimal currency area
Answer:
The natives of the Republic of Coastland are always prepared to take risks and they also
demonstrate less emotional resistance to change. Apart from these characteristics, the
ties between people are loose, sex roles are less sharply distinguished, and inequalities
of power and wealth are discouraged in the country. According to this information, the
Republic of Coastland most likely demonstrates:
A.collectivism.
B.masculinity.
C.low uncertainty avoidance.
D.high power distance.
E.class consciousness.
Answer:
In the United States, the Foreign Corrupt Practices Act was passed during the 1970s
following revelations that:
A.U.S. companies had bribed government officials in foreign countries in an attempt to
win lucrative contracts.
B.U.S. companies were involved in bribing U.S. government officials in cases related to
major corporate and accounting scandals.
C.U.S. government bureaucrats demanded bribes from U.S. companies in return for a
permit to operate in a foreign country.
D.several companies were selling their products at lower prices in foreign countries
than in the United States.
E.successful business owners in the United States often had to pay “protection money”
to the Mafia or face violent retribution.
Answer:
Which of the following refers to the fact that a firm’s pricing strategy in one market
may have an impact on its rivals’ pricing strategy in another market?
A.Dumping
B.Predatory pricing
C.Leader pricing
D.Multipoint pricing
E.Price skimming
Answer:
Dumping involves foreign producers:
A.attempting hostile takeovers of domestic firms and usurping the available resources
for production.
B.indiscriminately exploiting the natural resources of a foreign country to create a later
demand that can be met only by imports.
C.eliminating competition by subsidizing prices in a foreign market with home market
profits and eventually raising prices to earn substantial profits.
D.capturing the niche market rather than the masses.
E.exporting only a small quantity of their products into an importing country.
Answer:
Which of the following is a reason why Mercosur was temporarily suspended in 2001?
A.The dotcom bust in Paraguay
B.An economic crisis in Argentina
C.The exit of Uruguay from the group
D.The devaluation of the Mexican peso
E.The Venezuelan financial crisis
Answer:
Describe how economic development influences product attributes.
Answer:
Describe the shortcomings of the product life-cycle theory.
Answer:
Define trade creation and trade diversion with respect to regional economic integration.
Answer:
Discuss the utilitarian approach to business ethics and examine its weaknesses.
Answer:
Outline the relationship between economies of scale, first-mover advantages, and the
pattern of trade as indicated by new trade theory.
Answer:
What is the role of information technology and the Internet in modern materials
management?
Answer:
What is an experience curve? What is its strategic significance?
Answer:
How do the political, economic, and legal environments of a country affect international
trade? And what factors make a country favorable for doing business?
Answer:
Gamma Gene Incorporated has sought your opinion about the overall attractiveness of
various countries as potential markets and investment sites. What would you tell them?
Answer:
Explain the factors that led to the Great Depression of the 1930s.
Answer:
Explain the organizational structure and the key functions of the WTO.
Answer:
In terms of monetary policy autonomy, how does a floating exchange rate system differ
from a fixed system?
Answer:
How do firms respond to low cost pressures and low pressures for local responsiveness?
Answer:
What are the implications of changing political economy for international business?
Answer:
What are the two ways through which property rights can be violated?
Answer: