Trade barriers encourage firms to disperse their productive activitiesdesign, production,
and assemblyto foreign nations.
Answer:
Although mercantilism is an old and largely discredited doctrine, its echoes remain in
modern political debate and in the trade policies of many countries.
Answer:
Licensing increases the risk of losing control over a firm’s proprietary technological
know-how.
Answer:
Michael Porter argues that advanced factors are the most significant for competitive
advantage.
Answer:
Location economies are the economies that arise from performing a value creation
activity in the optimal location for that activity, wherever in the world that might be.
Answer:
The emphasis on individualism may make it difficult to build teams within an
organization to perform collective tasks.
Answer:
Citizens of a foreign country working in the home country of their multinational
employer are known as repatriates.
Answer:
The attractiveness of exporting increases in comparison to FDI or licensing when
products have a low value-to-weight ratio.
Answer:
As a result of globalization, we have been moving toward a world in which national
economies are relatively self-contained entities.
Answer:
In terms of expatriate pay, the income statement approach equalizes purchasing power
across countries so employees can enjoy the same living standard in their foreign
posting that they enjoyed at home.
Answer:
Under the Islamic banking method of mudarabah, when an Islamic bank lends money
to a business, rather than charging that business interest on the loan, it takes a share in
the profits that are derived from the investment.
Answer:
A disadvantage of the euro is that the development of a pan-European,
euro-denominated capital market will decrease the range of investment options open to
both individuals and institutions.
Answer:
One benefit of a longer distribution channel is that it cuts selling costs when the degree
of fragmentation of the retail sector is less.
Answer:
Historically, most FDI has been directed at the least developed nations of the world.
Answer:
Firms in consumer goods industries that are trying to sell to a large segment of the
market generally favor a push strategy.
Answer:
It is important that the spouse of an expatriate manager, and perhaps the whole family,
be included in cultural training programs.
Answer:
In terms of the entry modes into a foreign market, a joint venture does not give an
international firm the tight control over subsidiaries that might be required to realize
experience curve or location economies.
Answer:
Barter is primarily used with trading partners who are not creditworthy or trustworthy.
Answer:
Some economists have pointed out that the benefits of regional integration are
determined by the extent of trade diversion, as opposed to trade creation.
Answer:
In countries where inflation is expected to be high, interest rates also will be high.
Answer:
Services such as telecommunications, retailing, and many financial services, where the
service has to be produced where it is delivered, lend themselves well to exporting.
Answer:
According to Alexander Hamilton, governments must temporarily support new
industries until they have grown strong enough to meet international competition.
Answer:
In terms of attaining a competitive advantage, support activities can be as important as
the primary activities of the firm.
Answer:
Countertrade’s main attraction is that it can give a firm a way to finance an export deal
when other means are not available.
Answer:
The first step in an ethical algorithm is to identify those common resources that are not
owned by anyone in particular but are used by everybody.
Answer:
The probability of survival decreases if an international business enters a national
market after several other foreign firms have already done so.
Answer:
It can be very difficult for a small country to maintain a peg against another currency if
capital is flowing out of the country and foreign exchange traders are speculating
against the currency.
Answer:
The Buy America Act specifies that government agencies must give preference to
American products when putting contracts for equipment out for bid unless the foreign
products have a significant advantage.
Answer:
When an international firm makes an acquisition in a foreign market, it acquires
valuable intangible as well as tangible assets.
Answer:
Greenfield investment involves the establishment of a new operation in a foreign
country.
Answer:
Economists who argue that innovation and entrepreneurial activity are the engines of
long-run economic growth, define innovation broadly to include not just new products
but also new processes, new organizations, new management practices, and new
strategies.
Answer:
Which of the following indicates the difference between GATT and WTO?
A.WTO has strict time limits unlike GATT.
B.WTO operates on the basis of consensus unlike GATT.
C.GATT gives trading partners the right to compensation or, in the last resort, to impose
(commensurate) trade sanctions unlike WTO.
D.GATT’s verdict is binding unlike that of WTO’s.
E.WTO allows member-countries to block adoption of arbitration reports unlike GATT.
Answer:
Which of the following is a characteristic of fragmented retail systems?
A.Long channels of distribution
B.Single-layer distribution systems
C.Lower sales call to sales order ratio
D.Relatively smaller sales force compared to concentrated retail systems
E.Promotion of direct interaction between retailers and firms
Answer:
According to internalization theory, one of the drawbacks of licensing is that:
A.it may result in a firm’s technological know-how being restricted to a limited
knowledge base and stifles any future development.
B.it does not give a firm the tight control over manufacturing, marketing, and strategy
in a foreign country that may be required to maximize its profitability.
C.when a firm allows another enterprise to produce its products under license, the
licensee bears the costs or risks.
D.its use is restricted by the government through the imposition of tariffs and quotas.
E.it is less cost-effective than FDI.
Answer:
Which of the following refers to the idea that businesspeople should consider the social
consequences of economic actions when making business decisions, and that there
should be a presumption in favor of decisions that have both good economic and social
consequences?
A.Corporate dissonance
B.Class consciousness
C.Corporate dynamism
D.Social responsibility
E.Economies of scale
Answer:
From an exporter’s perspective, why is an offset more attractive than a straight
counterpurchase agreement?
A.It is the simplest countertrade arrangement.
B.It gives the exporter greater flexibility to choose the goods that it wishes to purchase.
C.It allows the use of a specialized third-party trading house.
D.It gives the exporter counterpurchase credits, which can be used to purchase goods
from another country.
E.It allows direct exchange of goods and/or services between two parties without a cash
transaction.
Answer:
Which of the following is one of the limitations of exporting that leads companies to
prefer FDI over exporting?
A.The presence or threat of trade barriers
B.The costs of acquiring a foreign enterprise
C.The costs of establishing production facilities in a foreign country
D.The risk of giving away valuable technological know-how to a potential foreign
competitor
E.The possibility of diminishing returns
Answer:
Which of the following strategies is pursued by international businesses that use
management development for a strong unifying corporate culture and informal
management networks to assist in coordination and control?
A.Localization
B.International
C.Transnational
D.Global standardization
E.Ethnocentric
Answer:
During the late 1980s and early 1990s, many of the world’s nation-states moved away
from:
A.democratically elected governments.
B.free market capitalism.
C.individualism.
D.political and civil freedoms.
E.totalitarian governments.
Answer:
According to the Heckscher-Ohlin theory, the pattern of international trade is
determined by differences in:
A.labor productivity.
B.diminishing returns.
C.factor endowments.
D.management practices.
E.trade barriers.
Answer:
In terms of foreign exchange, which of the following observations is true of leading and
lagging strategies?
A.They are easy to implement.
B.They primarily protect long-term cash flows from adverse changes in exchange rates.
C.Firms need minimal bargaining power to implement them.
D.They can put pressure on a weak currency.
E.They accelerate payments from strong-currency to weak-currency countries.
Answer:
The bundle of legal rights over the use to which a resource is put and over the use made
of any income that may be derived from that resource are called what type of rights?
A.Civil
B.Political
C.Shareholder
D.Property
E.Public
Answer:
Due to certain strict environmental and employment standards in its home nation,
Taurus Inc. has shifted its operations to developing nations. Hence, the firm has now
been able to gain competitive advantage by avoiding costly pollution controls. This
strategic move of Taurus Inc. will be considered:
A.illegal.
B.ethical.
C.immoral.
D.uneconomical.
E.totalitarian.
Answer:
Which of the following is a function of the foreign exchange market?
A.To provide some insurance against foreign exchange risk
B.To protect short-term cash flow from adverse changes in exchange rates
C.To eliminate volatile changes in exchange rates
D.To reduce the economic exposure of a firm
E.To enable companies to engage in capital flight when countertrade is not possible
Answer:
In the context of the 1997 Asian crisis, how did the International Monetary Fund’s
“one-size-fits-all” approach to macroeconomic policy affect South Korea?
A.It led to a decrease in the interest rates of short-term loans.
B.It made it difficult for companies to service their excessive short-term debt
obligations.
C.It decreased the probability of widespread corporate defaults.
D.South Korea failed to recover from its financial crises.
E.South Korea was forced to increase restrictions on foreign direct investment.
Answer:
Over time the euro will impact the pan-European capital market by leading to:
A.an increase in the cost of capital.
B.a decline in the overall level of savings and investment.
C.an increased efficiency with which investment funds are allocated.
D.reduced liquidity in the market.
E.reduced competition among European producers.
Answer:
Which of the following is an expected consequence of the implementation of the North
American Free Trade Agreement?
A.Low-skilled jobs will be moved out to Mexico resulting in lowering of average wage
rates in the United States and Canada.
B.Increased imports from Mexico will help reduce the huge trade deficit for United
States and Canada.
C.Lower incomes of the Mexicans would allow them to import fewer U.S. and
Canadian goods, thereby decreasing demand.
D.A large number of Mexican firms will hire low-skilled workers from the United
States.
E.Some U.S. and Canadian firms would move production to Mexico to take advantage
of lower labor costs.
Answer:
Which of the following led to the collapse of the Central American Common Market in
1969?
A.Devaluation of the Brazilian currency by 40 percent
B.A coup in Nicaragua that led to the overthrow of the incumbent regime
C.War between Honduras and El Salvador after a riot at a soccer match between teams
from the two countries
D.Withdrawal from the trade arrangement by Costa Rica
E.Collapse of monetary policy between Costa Rica and El Salvador
Answer:
Which of the following is a trade policy instrument that the GATT and WTO have been
most successful in limiting?
A.Local content requirements
B.Tariffs
C.Subsidies
D.Voluntary export restraints
E.Import quotas
Answer:
According to the theory of rights:
A.firms can pursue actions that violate fundamental rights in order to maximize profits.
B.collective good forms the basis for the moral compass that managers should use when
making ethical decisions.
C.fundamental human rights and privileges transcend national boundaries and cultures.
D.people should be treated as means to the ends of others and never purely as ends.
E.firms that fail to maximize stockholders’ wealth violate fundamental rights and
privileges.
Answer:
Sentoria is an island nation in the Pacific Ocean. Its geographical location is
advantageous since it has access to a variety of aquatic life forms and also a number of
freshwater sources that provide for fisheries. The lack of arable land drives local
demand for seafood. The competition in the domestic fishing industry is fierce and
enables Sentoria to be one of the major exporters of seafood. Which of the following
theories of international trade best explains Sentoria’s dominance as an exporter of
seafood?
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 systems is a part of the political economy?
A.Religious system
B.Value system
C.Demographic system
D.Legal system
E.Technological system
Answer:
Which of the following specifies that U.S. government agencies must give preference to
U.S. products when putting contracts for equipment out to bid unless the foreign
products have a significant price advantage?
A.Export Administration Act
B.Helms-Burton Act
C.Hawley-Burton Act
D.Buy America Act
E.Volcker Rule
Answer:
The extra profit that producers make when supply is artificially limited by an import
quota is referred to as a:
A.net profit.
B.quota rent.
C.trade surplus.
D.profit margin.
E.quota share.
Answer:
Which of the following strategies is compatible with a geocentric staffing policy?
A.Global standardization strategy
B.Localization strategy
C.International strategy
D.Ethical strategy
E.Global strategy
Answer:
Which of the following is a disadvantage of a strategic alliance?
A.Entering into a strategic alliance makes it difficult for a firm to enter into a foreign
market.
B.As a result of strategic alliance, fixed costs of developing new products tend to
increase.
C.Strategic alliance gives competitors a low-cost route to new technology and markets.
D.Firms that enter into a strategic alliance with a foreign firm tend to face higher trade
barriers.
E.Strategic alliance always leads to a loss to either of the firms involved.
Answer:
Which of the following terms best defines the relationship between the level of
corruption and economic growth rate in a country?
A.Directly proportional
B.Inversely proportional
C.Independent
D.Positive correlation
E.Zero correlation
Answer:
The WTO’s Agreement on which of the following is an attempt to narrow the gaps in
the way intellectual property rights are protected around the world and to bring them
under common international rules?
A.Intellectual Property Rights Enforcement Directive (IPRED)
B.Court of Arbitration of Intellectual Property (CAIP)
C.Trade-Related Aspects of Intellectual Property Rights (TRIPS)
D.Intellectual Property Rights Enforcement and Resolution (IPER)
E.International Body on Intellectual Property (IBIP)
Answer:
Which of the following is true of exporting?
A.It takes a very short time before all foreigners are comfortable enough to purchase in
significant quantities.
B.Novice exporters tend to overestimate the time required to cultivate business in
foreign countries.
C.Exporters often face voluminous paperwork, complex formalities, and many potential
delays and errors.
D.Large firms are usually unfamiliar with foreign market opportunities.
E.Large firms do not consider exporting until their domestic market is saturated.
Answer:
Which of the following occurs when a resource held jointly by all, but owned by no
one, is overused by individuals, resulting in its degradation?
A.Social loafing
B.Cultural relativism
C.The tragedy of the commons
D.A deadweight loss
E.Capital deepening
Answer:
In which of the following conditions does arbitrage occur?
A.When a firm offers a product at low prices through discount coupons and promotions
B.When a firm sells a product at higher prices to make a profit from relatively fewer
sales
C.When a firm imports products from a manufacturer and distributes them directly
through retail outlets
D.When a firm purchases products in a country where prices are lower and resells them
in a country where prices are higher
E.When a firm prices its products at the least cost, risking losses, in order to grab
market share
Answer:
What triggers the conflict of interest over strategy and goals in joint ventures?
A.Local partner’s knowledge of host country’s competitive conditions
B.Giving control of core technology to the foreign partner
C.Shifts in relative bargaining power of venture partners
D.Trying to realize location and experience curve economies
E.Risk of being subject to adverse government interference
Answer:
Differentiate between a free trade area and a customs union. Provide an example of
each form of economic integration.
Answer:
Who are a firm’s stakeholders? What are the two types of stakeholders?
Answer:
What is a voluntary export restraint? Why do exporting countries agree to VERs?
Explain with an example.
Answer:
“Firms prefer to acquire existing assets rather than undertake greenfield investments
while contemplating FDI.” Explain the reasons that support this argument.
Answer:
When a firm exports, it need not bear the costs associated with FDI, and it can reduce
the risks associated with selling abroad by using a native sales agent. Exporting,
however, is not without its limitations. Discuss the most common limitations of
exporting as compared to FDI.
Answer:
What is meant by carry trade? Why is it risky? Explain with an example.
Answer:
Describe the differences between distribution systems of various countries in terms of
channel quality.
Answer:
How is a common market different from an economic union?
Answer:
What is the “infant industry argument”? What are its implications for the world
economy? What are the criticisms of this argument?
Answer:
Briefly describe the influence of the location of research and development on
new-product development.
Answer:
What does the term sogo shosha mean? How do they help Japanese exporters and what
role do they play in countertrade?
Answer:
Describe the factors that explain the failure of the purchasing power parity theory to
predict exchange rates accurately.
Answer:
What are the ways in which improved quality control reduces costs?
Answer:
Discuss the concerns voiced by critics of globalization regarding labor policies and
environment.
Answer:
Explain the concepts of “globalization of markets” and “globalization of production.”
Answer:
What constitutes an organizational structure?
Answer:
Briefly describe the pegged exchange rate regime.
Answer:
Discuss the environmental issues related to businesses operating in developing nations.
Answer: