The architects of the Bretton Woods agreement wanted to avoid high unemployment, so
they built the fixed exchange rate system to be highly inflexible.
Answer:
According to the free market view, countries should specialize in the production of
those goods and services that they can produce most efficiently.
Answer:
Antidumping actions seem to be concentrated in certain sectors of the economy such as
basic metal industries (e.g., aluminum and steel), chemicals, plastics, and machinery
and electrical equipment.
Answer:
Smith, Ricardo, and Heckscher-Ohlin suggested that a country’s economy would gain
only if its citizens buy products that are made in that country.
Answer:
While Vernon’s theory is useful for explaining the pattern of international trade in the
modern world, its relevance during the period of American global dominance seemed
more limited.
Answer:
Max Weber argued that the ascetic principles embedded in Hinduism encourage the
kind of entrepreneurial activity in pursuit of wealth creation that we find in
Protestantism.
Answer:
Despite all the talk about the emerging global village, differences between countries
such as cultures and political systems are very profound and enduring.
Answer:
David Ricardo’s theory of comparative advantage was the first to explain why
unrestricted free trade is beneficial to a country.
Answer:
According to Geert Hofstede, high power distance cultures were found in societies that
tried to play down inequalities of power and wealth as much as possible.
Answer:
Factor endowments refer to the extent to which free trade impacts the wealth of a
country.
Answer:
The threat of antidumping action enhances the ability of a firm to use aggressive pricing
to gain market share in a country.
Answer:
A common market has no barriers to trade among member countries, includes a
common external trade policy, and allows factors of production to move freely among
members.
Answer:
Since refined sugar has a low value-to-weight ratio, even if it is shipped halfway around
the world, the transportation costs would account for a very small percentage of total
costs.
Answer:
Technical analysis, an approach to foreign exchange forecasting, does not rely on a
consideration of economic fundamentals.
Answer:
Firms based in less developed nations tend to build a lot of extra performance attributes
into their products.
Answer:
According to David Ravenscraft and Mike Scherer’s study, many acquisitions destroy
rather than create value.
Answer:
Firms can reduce the failure of product development by ensuring that research and
development, marketing, and production functions work independently.
Answer:
According to the concept of cultural relativism, a firm, while operating in any host
country, should adopt the ethics of the culture that is predominant in its home country.
Answer:
The human resource management function can help a firm achieve its primary strategic
goals of reducing the costs of value creation and adding value by better serving
customer needs.
Answer:
Political systems that emphasize collectivism tend to be democratic, while political
systems that place a high value on individualism tend to be totalitarian.
Answer:
Factor endowments are unit cost reductions associated with a large scale of output.
Answer:
In American society, the high degree of social mobility and the extreme emphasis on
individualism have resulted in the emergence of class consciousness.
Answer:
A localization strategy involves some duplication of functions and smaller production
runs.
Answer:
The short-term movement of funds from one currency to another in the hopes of
profiting from shifts in exchange rates is known as countertrade.
Answer:
Acquiring firms often overpay for the assets of the acquired firms.
Answer:
According to the United Nations, the majority of changes made worldwide between
1992 and 2009 in the laws governing foreign direct investment have created a more
favorable environment for FDI.
Answer:
In a fixed exchange rate system, the central bank of a country will intervene in the
foreign exchange market to try to maintain the value of its currency if it depreciates too
rapidly against an important reference currency.
Answer:
The power of a multinational corporation is constrained not only by laws and
regulations, but also by the discipline of the market and the competitive process.
Answer:
A bill of lading can function as collateral against which funds are advanced to the
exporter by its local bank before final payment by the importer.
Answer:
Without a legal system that protects property rights, and without the machinery to
enforce that system, the incentive to engage in economic activity can be reduced
substantially by private and public entities.
Answer:
A pull strategy refers to a marketing strategy that emphasizes personal selling rather
than mass media advertising in the promotional mix.
Answer:
When firms do not wish to accept the Contracts for the International Sale of Goods,
they often opt for arbitration by a recognized arbitration court to settle contract
disputes.
Answer:
From a strategic perspective, a compensation system must reward managers for taking
actions that are consistent with the strategy of the enterprise.
Answer:
Under a just-in-time inventory system, a company can reduce the amount of working
capital it needs to finance inventory, freeing capital for other uses and/or lowering the
total capital requirements of the enterprise.
Answer:
Compared to a common law system, it is more expensive to draw up contracts in a civil
law jurisdiction.
Answer:
In international business, a relatively high level of fixed costs can make it economical
to perform a particular activity in several locations at once.
Answer:
The integration of financial centers implies there can be no significant difference in
exchange rates quoted in the foreign exchange trading centers.
Answer:
The Foreign Corrupt Practices Act does not allow for “facilitating payments.”
Answer:
Growing income inequality between the skilled and unskilled workers in advanced
nations, such as the United States, is a result of the:
A.wages for skilled workers being bid up by the labor market and the wages for
unskilled workers being discounted.
B.decrease in the outsourcing of low-wage manufacturing jobs offshore and a
corresponding increase in demand for unskilled workers.
C.shift within advanced economies toward jobs where the only qualification is the
willingness to turn up for work every day.
D.increasing wage gap between developing and developed nations.
E.shortage of unskilled workers and an excess supply of highly skilled workers.
Answer:
Which of the following was responsible for the World Bank shifting its focus from
Europe to third-world nations?
A.The Great Depression
B.The Jamaica agreement
C.World War II
D.The Marshall Plan
E.The Bretton Woods agreement
Answer:
The utilitarian philosophy for business ethics primarily focuses on:
A.applying home-country standards of ethics in foreign countries.
B.adopting the ethics of the culture in which a business operates.
C.maximizing business profits by increasing employee productivity.
D.ensuring justified treatment of any minority.
E.weighing the benefits, costs, and risks associated with a course of action.
Answer:
The law of one price states that:
A.by comparing the prices of identical products in different currencies, it would be
possible to determine the “real” or PPP exchange rate that would exist if markets were
efficient.
B.a country’s “nominal” interest rate (i) is the sum of the required “real” rate of interest
(r) and the expected rate of inflation over the period for which the funds are to be lent
(I).
C.a country in which price inflation is running wild should expect to see its currency
depreciate against that of countries in which inflation rates are lower.
D.when the growth in a country’s money supply is faster than the growth in its output,
price inflation is fueled.
E.in competitive markets free of transportation costs and trade barriers, identical
products sold in different countries must sell for the same price when their price is
expressed in terms of the same currency.
Answer:
Which of the following statements is true of purchasing power parity (PPP)?
A.PPP figures can be misleading because they don’t consider differences in the cost of
living.
B.The PPP for different countries is adjusted (up or down) depending upon whether the
cost of living is lower or higher than in Great Britain.
C.The PPP data gives a static picture of economic development.
D.China’s GNI PPP per capita is higher than that of the United States.
E.PPP adjustment does not allow for a direct comparison of living standards in different
countries.
Answer:
Dunning’s theory helps explain:
A.how firms try to match each other’s moves in different markets to try to hold each
other in check.
B.the interdependence between firms in an oligopoly that leads to imitative behavior
among the rivals.
C.why a greenfield investment in a new facility is better than an acquisition of or a
merger with an existing local firm.
D.the problems associated with doing business in a different culture where the rules of
the game may be very different.
E.how location factors affect the direction of FDI.
Answer:
According to the results of a seminal study by R. L. Tung, the top reason why Japanese
expatriate managers fail is:
A.the inability of their spouses to adjust.
B.the lack of technical competence.
C.their personal or emotional problems.
D.the inability to cope with larger overseas responsibilities.
E.their inability to deal with difficulties in the new environment.
Answer:
Which of the following is an observation made by researchers Bartlett and Ghoshal
regarding modern multinational enterprises?
A.Global logistics industry makes the concept of “location economies” redundant for
international firms.
B.Core competencies and skills can develop in any of the firm’s worldwide operations.
C.Flow of skills between a firm and its global subsidiaries should be unidirectional.
D.Differentiating across geographic markets helps a firm in reducing costs.
E.Customer demands for local customization are on the decline worldwide.
Answer:
In international commerce, an order written by an exporter instructing an importer to
pay a specified amount of money at a specified time is known as a:
A.bill of lading.
B.draft.
C.letter of credit.
D.counterpurchase.
E.buyback.
Answer:
A buying agreement where the exporting country can fulfill the agreement with any
firm in the country to which the sale is being made is called a(n):
A.switch trade.
B.offset.
C.buyback.
D.arbitrage.
E.barter.
Answer:
Which of the following is an implication of a currency crisis?
A.It occurs due to a sharp appreciation in the value of a currency.
B.It forces authorities to block large volumes of international currency reserves.
C.A country in currency crisis is not eligible for loans from the International Monetary
Fund.
D.It results in the government sharply increasing interest rates to defend the prevailing
exchange rate.
E.A country in currency crisis faces sharp decreases in stock and property prices.
Answer:
Which of the following is a straw man approach to business ethics?
A.The Friedman doctrine
B.Kantian ethics
C.Sullivan’s principles
D.Utilitarian philosophy
E.Just distribution
Answer:
In terms of expatriate pay, what does a firm typically do when a reciprocal tax treaty is
not in force?
A.The firm requires the expatriate to pay one-third of the income tax to the host-country
government.
B.The firm requires the expatriate to pay 50 percent of the income tax to the
host-country government.
C.The firm pays the expatriate’s income tax to the host-country government.
D.The firm requires the expatriate to pay the income tax to both the host-country and
home-country governments.
E.The firm pays the expatriate’s income tax to the home-country government.
Answer:
Which of the following is a drawback of relying on an export management company
(EMC)?
A.It does not provide references and has no antecedents.
B.The exporting company can fail to develop its own exporting capabilities.
C.It does not have expert specialists to help a neophyte exporter identify opportunities.
D.It typically lacks information about local business regulations.
E.The exporting company cannot avoid the common pitfalls of exporting.
Answer:
Which of the following religions does not owe its founding to any one particular
individual?
A.Buddhism
B.Hinduism
C.Christianity
D.Islam
E.Confucianism
Answer:
Who asserted that the only social responsibility of business is to increase profits, so
long as the company stays within the rules of law?
A.Milton Friedman
B.Leon Sullivan
C.Karl Marx
D.Immanuel Kant
E.David Hume
Answer:
Which of the following is consistent with the central beliefs of mercantilism?
A.A country’s government should intervene to achieve a surplus in the balance of trade.
B.A large volume of trade is essential regardless of whether it comes from imports or
exports.
C.Trade is a positive-sum game in which all countries benefit from trading with each
other.
D.A country that has an absolute advantage in the production of all goods derives no
benefits from international trade.
E.Potential world production is greater with unrestricted free trade than it is with
restricted trade.
Answer:
Which of the following refers to an attempt to establish a free trade area between
Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore,
Thailand, and Vietnam?
A.Asia-Pacific Economic Cooperation
B.South Asian Association for Regional Cooperation
C.Asian Clearing Union
D.Association of Southeast Asian Nations
E.Maastricht Treaty
Answer:
When a time draft is presented to a drawee, he or she signifies acceptance of it by:
A.delivering the goods immediately.
B.paying the draft amount immediately.
C.providing a collateral for the amount specified in the bill.
D.writing or stamping a notice of acceptance on its face.
E.selling the draft to an investor at a discount from its face value.
Answer:
In the modern world, corporations can worsen the global tragedy of the commons by:
A.moving production to locations where they are free to pump pollutants into the
environment.
B.imposing stringent environmental standards on developing countries.
C.creating common environmental and employment standards for all nations.
D.adopting costly pollution controls and in turn losing out on economic advantages.
E.adhering to civil laws rather than common laws in case of any environmental
violations.
Answer:
Which of the following is a consequence of changes in exchange rates that result in
appreciation of the local currency?
A.More foreign direct investment into the country
B.Decrease in the dollar cost of products exported from the country
C.Diminishing of a country’s attractiveness as a manufacturing base
D.Transformation of the country into a low-cost location
E.Decrease in the amount of imports brought into the country
Answer:
What is meant by translation exposure?
A.The long-run effect of changes in exchange rates on future prices, sales, and costs
B.The impact of currency exchange rate changes on the reported financial statements of
a company
C.The extent to which a firm’s future international earning power is affected by changes
in exchange rates
D.The extent to which the income from individual transactions is affected by
fluctuations in foreign exchange values
E.The obligations for the purchase or sale of goods and services at previously agreed
prices
Answer:
The Foreign Credit Insurance Association (FCIA) is an association of private
commercial institutions operating under the guidance of the:
A.Federal Mediation and Conciliation Service.
B.U.S. Department of Commerce.
C.Export-Import Bank.
D.International Trade Administration.
E.Ministry of International Trade and Industry.
Answer:
Which of the following strategies focuses on increasing profitability by customizing the
firm’s goods or services so that they provide a good match to tastes and preferences in
different national markets?
A.International strategy
B.Global standardization strategy
C.Localization strategy
D.Transnational strategy
E.Nationalization strategy
Answer:
Which of the following was a pervasive finding of Porter’s study?
A.Successful industries within a country tend to be grouped into clusters of related
industries.
B.Trade increases the specialization of production within an industry.
C.The pattern of trade we observe in the world economy may be the result of
first-mover advantages.
D.Purchasing power parity of a country determines its demand conditions.
E.Differences in technology may lead to differences in productivity, which in turn,
drives international trade patterns.
Answer:
Which of the following refers to a quota on trade imposed by the exporting country,
typically at the request of the importing country’s government?
A.Tariff rate quota
B.Quota rent
C.Voluntary export restraint (VER)
D.Quota share
E.Export embargo
Answer:
Which of the following was abandoned as per the Jamaica agreement of 1976?
A.Floating exchange rate system
B.U.S. dollar as the reference currency
C.Gold as a reserve asset
D.Membership to the International Monetary Fund
E.Granting International Monetary Fund loans to less developed countries
Answer:
Which of the following refers to documents that specify the conditions under which an
exchange is to occur and detail the rights and obligations of the parties involved?
A.Memoranda
B.Manifestoes
C.Contracts
D.White papers
E.Minutes
Answer:
Which of the following countries has adopted the euro as its currency?
A.Great Britain
B.France
C.Denmark
D.Sweden
E.Switzerland
Answer:
Which of the following is true with regard to an economic union?
A.There are restrictions on immigration, emigration, or cross-border flow of capital
among member countries.
B.It entails less economic integration and cooperation than a common market.
C.It involves the free flow of products and factors of production among member
countries.
D.It is defined as a central political apparatus that coordinates the economic, social, and
foreign policy of the member-states.
E.It does not adopt a common external trade policy.
Answer:
Which of the following functions creates a perception of superior value in the minds of
consumers by solving consumer problems and by supporting them after they have
purchased the product?
A.Production
B.Marketing and sales
C.Human resources
D.Customer service
E.Logistics
Answer:
Which of the following is true of the costs and risks associated with doing business in a
foreign country?
A.They are greater for late entrants.
B.They are higher in politically democratic nations.
C.They are less pronounced in the case of licensing.
D.They are lower in economically advanced nations.
E.They are called opportunity costs.
Answer:
What were the implications of the Uruguay Round held under the umbrella of GATT for
international business?
Answer:
What are the sources of economies of scales?
Answer:
How does an increase in money supply in an economy lead to inflation?
Answer:
Describe the disadvantages of licensing as a mode of entry into the foreign market.
Answer:
Describe the advantages of turnkey projects as a mode of entry into a foreign market.
Answer:
How do country-specific factors affect a country’s attractiveness as a manufacturing
base?
Answer:
Describe the Six Sigma methodology.
Answer:
How do foreign exchange markets benefit international businesses?
Answer:
Describe the influence of integrating research and development, marketing, and
production on new-product development.
Answer:
Briefly describe the implications of the strategic trade policy as applied to international
trade.
Answer:
Define local content requirements. Explain how this helps domestic firms.
Answer:
What is a wholly owned subsidiary? List its advantages.
Answer:
Describe the significance of Contracts for the International Sale of Goods (CIGS).
Answer:
How does a firm’s decision regarding the location of its production facilities vary based
on the availability of flexible manufacturing technologies?
Answer:
The rise in the value of the dollar between 1980 and 1985 occurred when the United
States was running a large and growing trade deficit. Explain the factors that led to this
rise.
Answer:
Discuss Adam Smith’s concept of absolute advantage.
Answer:
What are core competencies? What are their advantages?
Answer: