There is generally a critical link among channel length, the final selling price, and the
firm’s profit margin because each intermediary in a channel adds its own markup to the
products.
Answer:
Many totalitarian regimes failed to deliver economic progress to the vast bulk of their
populations.
Answer:
The governments of China, Vietnam, and Laos are communist in name only because
those nations have adopted wide-ranging, market-based economic reforms.
Answer:
The internal stakeholders of a company do not have an exchange relationship with the
company.
Answer:
The level of output at which most plant-level scale economies are exhausted is referred
to as the maximum efficient scale of output.
Answer:
Foreign direct investment (FDI) occurs when a firm invests resources in business
activities outside its home country.
Answer:
The major drawback with a polycentric staffing policy is the gap that can form between
host-country managers and parent-country managers due to language barriers.
Answer:
According to Max Weber, Protestant ethics discouraged the development of capitalism.
Answer:
In both China and India, the shift toward a command-based economic system has
produced large gains despite weak property rights and endemic corruption.
Answer:
The flow of foreign direct investment refers to the number of countries a firm is
investing in at any given point in time.
Answer:
The Smoot-Hawley Act aimed to liberalize trade by eliminating tariffs, subsidies, and
import quotas.
Answer:
Under a cross-licensing agreement, a firm can either request a royalty payment or
license some valuable intangible property to a foreign partner.
Answer:
The concept of economies of scale tells us that as plant output expands, unit costs
decrease.
Answer:
The major advantage of mercantilism was that it viewed trade as a zero-sum game.
Answer:
The European Parliament is responsible for proposing European Union (EU)
legislation, implementing it, and monitoring compliance with EU laws by
member-states.
Answer:
Totalitarian states, by limiting human freedom, are highly conducive to progress in
terms of innovation, entrepreneurship, and economic growth.
Answer:
In practical terms, collectivism creates a more favorable environment for international
businesses to operate in than individualism.
Answer:
The stock of foreign direct investment refers to the total cumulative value of foreign
investments in a country.
Answer:
Offset refers to the use of a specialized third-party trading house in a countertrade
arrangement.
Answer:
According to Ricardo’s theory of comparative advantage, it makes sense for a country
to specialize in the production of those goods that it produces most efficiently and to
import goods that it produces less efficiently.
Answer:
Both import quotas and voluntary export restraints (VERs) benefit domestic producers
by limiting import competition.
Answer:
Economic exposure, a category of foreign exchange risk, is distinct from transaction
exposure, which is concerned with the effect of exchange rate changes on individual
transactions, most of which are short-term affairs that will be executed within a few
weeks or months.
Answer:
The firm that moves up the experience curve most rapidly will have a cost advantage
vis–vis its competitors.
Answer:
Five of the fastest growing economies of the past 30 yearsChina, South Korea, Taiwan,
Singapore, and Hong Konghad one thing in common at the start of their economic
growth: democratic governments.
Answer:
The IMF is less controversial than its sister institution, the World Bank.
Answer:
Individual firms should invest substantial financial resources in trying to build a
first-mover advantage, even if that means several years of losses before a new venture
becomes profitable.
Answer:
A concentrated retail system is one in which there are many retailers, none of which has
a major share of the market.
Answer:
Unintentional bias makes it easy to evaluate the performance of expatriate managers
objectively.
Answer:
The actions that managers take to attain the goals of the firm are referred to as a firm’s
strategy.
Answer:
Although countries such as China and India are currently relatively poor, their
economies are already large in absolute terms and growing more rapidly than those of
many advanced nations.
Answer:
Import tariffs protect domestic producers against foreign competitors.
Answer:
The international monetary system refers to a system to regulate fixed exchange rates
before the introduction of the euro.
Answer:
In recent years, time-based competition has become less important in international
business.
Answer:
If the law of one price were true for all goods and services, the purchasing power parity
(PPP) exchange rate could be found from any individual set of prices.
Answer:
Which of the following staffing policies is concerned with filling all key management
positions by parent-country nationals?
A.Ethnocentric
B.Global
C.Polycentric
D.Geocentric
E.Transnational
Answer:
Justice theories primarily focus on:
A.minimizing the amount of political liberty permitted to each person.
B.the attainment of fair and equitable distribution of economic goods and services.
C.the attainment of maximum business profits.
D.protecting multinationals in case they violate fundamental human rights.
E.minimizing the amount of economic freedom permitted to each person.
Answer:
Which of the following practices should be avoided by a company to ensure ethical
decision making?
A.Auditing past decisions made in the company
B.Protecting the fundamental rights of stakeholders
C.Taking care of the interests of external stakeholders
D.Placing its economic interests before its moral principles
E.Adopting the moral principles specified in the code of ethics of the company
Answer:
After the collapse of communism in Dehran, successful business owners often had to
pay “protection money” to the mafia or face violent retribution. In the context of
property rights, the behavior of the mafia is an example of:
A.active violation.
B.public action.
C.private action.
D.boundary spanning.
E.industrial espionage.
Answer:
Which of the following statements regarding the free market view is true?
A.According to the free market view, MNEs decrease the overall efficiency of the
world economy.
B.The free market view argues that FDI is a benefit to both the source country and the
host country.
C.According to the free market view, MNEs can never be instruments of economic
development, only of economic domination.
D.According to the free market view, FDI is beneficial to the host country of an MNE
but it is harmful for the home country of the MNE.
E.The free market view traces its roots to Marxist political and economic theory.
Answer:
Which of the following arises when people behave recklessly because they know they
will be saved if things go wrong?
A.Systemic risk
B.Moral hazard
C.Ethical dilemma
D.Tragedy of the commons
E.Risk compensation
Answer:
The European Union is by far more significant than the European Free Trade
Association (EFTA), in terms of membership as well as economic and political
influence in the world economy.
Answer:
Which of the following meets in Strasbourg, France, is primarily a consultative rather
than a legislative body, and debates legislation proposed by the commission and
forwarded to it by the council?
A.European Parliament
B.European Central Bank
C.Court of Justice
D.European Free Trade Association
E.European Community
Answer:
Shangrilah Sandals is a manufacturing firm in a developing country, where it routinely
uses grease payments to local officials to expedite overseas shipments. It has decided to
open a plant in the United States, and has determined that it would not offer any
facilitating payments to U.S. officials. Shangrilah’s behavior illustrates the straw man
approach of:
A.the righteous moralist.
B.cultural relativism.
C.ethnocentrism.
D.just distribution.
E.cultural convergence.
Answer:
Firms that emphasize global standardization try to create value by:
A.retaining products and competencies within the parent country.
B.realizing experience curve and location economies.
C.focusing on local responsiveness.
D.emphasizing localization.
E.adopting an ethnocentric staffing approach.
Answer:
Which of the following is a criticism of Hofstede’s four cultural dimensions?
A.Hofstede has ignored the one-to-one correspondence between culture and the
nation-state.
B.Most of Hofstede’s findings are in direct conflict with standard Western stereotypes.
C.Hofstede assumes that most countries have more than one cultural dimension.
D.Certain social classes were excluded from Hofstede’s work sample.
E.Hofstede’s informants belonged to several different industries, companies, and
countries hence his research lacks standardization.
Answer:
Why should a high-tech firm avoid selecting licensing as a mode of entry?
A.Threat of creating efficient partners
B.Risk of losing control over technology
C.Fear of rapid imitation of core technology
D.Lack of a transitory technological advantage
E.Inability to deter development costs
Answer:
Which of the following firms should spread its production over decentralized locations?
A.Univion Inc. operates in an industry where national differences in political economy
and culture have a substantial impact on its cost of production.
B.Saturn Inc. operates in an industry where volatile fluctuations in important exchange
rates are expected.
C.Brew Technology manufactures industrial machines and equipment that serve
universal needs.
D.Gold Dreams Inc. customizes jewelry in precious metal and stones with the aid of
flexible manufacturing technologies.
E.Uniton Inc. uses a production technology that has high fixed costs and high minimum
efficient scale.
Answer:
The practice of “gift giving” between the parties to a business negotiation is considered
right and proper behavior in many Asian cultures. However, some Westerners view the
practice as a form of bribery, and therefore unethical, particularly if the gifts are
substantial. This reflects that:
A.notions of ethics are universal.
B.Asian countries are still under the influence of totalitarianism.
C.what is ethical depends on one’s cultural perspective.
D.Asian cultures are more economically advanced.
E.there is unanimous agreement about accepted employment practices.
Answer:
Which of the following is issued to an exporter by a common carrier transporting the
merchandise and serves as a receipt, a contract, and a document of title?
A.Bill of lading
B.Collateral
C.Draft
D.Letter of credit
E.Bill of exchange
Answer:
The new trade theory diverts from its advocacy of free trade by suggesting that:
A.the price of a new product increases along with the increase in the popularity of the
product.
B.nations benefit from trade even in the absence of resource endowments and
technology.
C.there is an economic rationale for a proactive trade policy.
D.the role of luck, entrepreneurship, and innovation is important in giving a firm
first-mover advantages.
E.market expansion leads to better realization of economies of scale.
Answer:
Which of the following statements is true about minimum efficient scale of output?
A.With lesser utilization of capital equipment, the chances of a firm realizing
economies of scale increases.
B.A plant must avoid operating at the minimum efficient scale of output to realize all
major plant-level scale economies.
C.When the minimum efficient scale of production is very low relative to global
demand, it will be economical to manufacture a product at a single location.
D.An advantage of a low minimum efficient scale is that it allows the firm to
accommodate demands for local responsiveness.
E.A low minimum efficient scale increases the risk of potentially adverse fluctuations in
exchange rates.
Answer:
Which of the following can be traced to the ancient Greek philosopher Aristotle?
A.Collectivism
B.Individualism
C.Socialism
D.Totalitarianism
E.Communism
Answer:
According to Hofstede, in societies where which of the following was emphasized, ties
between individuals were tight.
A.individualism
B.collectivism
C.femininity
D.low uncertainty avoidance
E.low power distance
Answer:
Which of the following is a hidden cost to basing production in a foreign location?
A.Low employee turnover
B.Low labor costs
C.Poor product quality
D.Expensive higher education system
E.Low inventory turnover
Answer:
Which of the following is true of the export performance of the United States, Germany,
and Japan?
A.Historically, the United States has made its living as a trading nation.
B.Germany has been a relatively self-contained continental economy in which
international trade played a minor role.
C.Unlike Japan, U.S. firms have a strong information advantage when they seek export
opportunities.
D.The United States has not yet evolved an institutional structure for promoting exports
similar to that of Germany.
E.The Ministry of International Trade and Industry (MITI) in the United States is
always on the lookout for export opportunities.
Answer:
The collapse of which of the following in eastern Europe was precipitated by the
growing gulf between the vibrant and wealthy economies of the West and the stagnant
economies of the East?
A.Democracy
B.Communism
C.Free economy
D.Capitalism
E.Individualism
Answer:
Cadmium Technologies Inc. believes that the sole purpose of its existence is to
maximize profits for its stockholders. The firm has often been criticized for not
engaging in any social investments. However, the firm has been appreciated for abiding
by the laws while earning profits. According to this information, which of the following
approaches to ethics is most likely being adopted by Cadmium Technologies?
A.Friedman doctrine
B.Utilitarianism
C.Kantian ethics
D.Sullivan’s principles
E.Naive immoralist
Answer:
According to the free market view, how does FDI increase the efficiency of the world
economy through MNEs?
A.The MNE is an instrument for dispersing the production of goods and services to the
most efficient locations around the globe.
B.MNEs extract profits from the host country and take them to their home country and
help all countries realize economies of scale.
C.When an MNE produces products, profits from the investment go abroad, and hence
the MNE helps foreign exchange to rotate.
D.A foreign-owned manufacturing plant may import many components from its home
country, thus improving the balance of payments of the host country.
E.MNEs increase the efficiency of the world economy by increasing the flow of capital
in the world market.
Answer:
For an international business, which of the following is most likely to be an outcome of
protectionism and nationalism in a host-country?
A.Increase in the attractiveness of location economies
B.Pressure for localization of production
C.Requirement of standardization of products or services
D.Pressure for cost reduction
E.Decrease in the significance of local responsiveness
Answer:
While making a business decision, a manager who believes in rights theories is most
likely to focus on:
A.respecting fundamental human privileges.
B.achieving collective goals, even if that involves violating fundamental rights.
C.propagating home-country standards of ethics.
D.weighing the associated social benefits, costs, and risks.
E.maximizing stockholders’ wealth and profits.
Answer:
The Republic of Argonia, owing to its vast resources of arable land and fresh water, is
an agrarian nation. It exports agricultural products and in turn imports products that it
does not produce such as oil, machinery, computers, and electronic devices. The result
is that it spends more on imports than it gains from exports. Which of the following
theories prohibits such international trade?
A.New trade theory
B.Product life-cycle theory
C.Mercantilism
D.Heckscher-Ohlin theory
E.Theory of national competitive advantage
Answer:
Which of the following has seen a positive change from 1960 to 2012?
A.Growth of the centrally planned economies of the communist world
B.U.S. position in the world economy and world trade picture
C.The share of world output enjoyed by rich industrialized countries such as Great
Britain, Germany, and Japan
D.The share of world output accounted for by developing nations
E.Prevalence of independent and self-contained national economies
Answer:
Which of the following organizations runs the Service Corps of Retired Executives
(SCORE) program?
A.Foreign Credit Insurance Association
B.International Trade Administration
C.Small Business Administration
D.U.S. Department of Commerce
E.U.S. Commercial Service
Answer:
Which of the following is true about channel quality?
A.The quality of retailers is variable in developed nations.
B.The quality of retailers is variable in emerging markets and less developed nations.
C.Channel quality refers to a measure of the number of intermediaries between the
manufacturer and the consumer.
D.An international business cannot establish its own distribution channel when the
existing channel quality is poor.
E.The lack of a high-quality channel does not impede market entry.
Answer:
Which of the following factor endowments would be classified as a basic factor by
Michael Porter?
A.Communication infrastructure
B.Research facilities
C.Natural resources
D.Skilled labor
E.Technological know-how
Answer:
A firm will favor FDI over exporting as an entry strategy when:
A.the costs of establishing production facilities are high.
B.the transportation costs or trade barriers are high.
C.there are problems associated with doing business in a different culture.
D.the products involved have a high value-to-weight ratio.
E.the firm wants to occupy a position that falls inside the efficiency frontier.
Answer:
In response to the global financial crisis of 2008-2009, the International Monetary Fund
began to:
A.exercise tight controls on fiscal policy of the borrowing countries.
B.encourage activities that prevent high inflation rates.
C.display inflexibility in policy responses.
D.urge countries to adopt policies that included fiscal stimulus and monetary easing.
E.adopt a “one-size-fits-all” approach to macroeconomic policy.
Answer:
Explain with an example the administrative trade policies used by governments in
addition to the formal instruments of trade policy.
Answer:
What are norms? Briefly describe the two categories of norms.
Answer:
Elaborate on the caste system supported by Hinduism.
Answer:
In terms of international business, briefly describe pioneering costs.
Answer:
How does unintentional bias affect the performance appraisal of expatriates? How can it
be reduced?
Answer:
What is countertrade? When can it be used?
Answer:
Discuss the global tragedy of the commons.
Answer:
Differentiate between a lead strategy and a lag strategy.
Answer:
All International Monetary Fund loan packages come with conditions attached.
Elaborate.
Answer:
Discuss the philosophy that underlies intellectual property laws.
Answer:
Discuss the significance of legal systems in the context of shifting toward a
market-based economic system.
Answer:
Give a brief description of the origin, functions, and successes of GATT from 1947 to
1979, before protectionist trends gained momentum across the world.
Answer:
What are export management companies? What are their advantages and
disadvantages?
Answer:
What are the important strategic objectives of an international firm’s production and
logistics functions?
Answer:
Despite its advantages, FDI has been described as an “expensive” and “risky”
international growth strategy. Other things being equal, why is FDI expensive and risky
when compared to licensing and exporting?
Answer: