Which of the following best exemplifies the global tragedy of the commons?
A.A firm exploiting the weak employment standards in a host nation
B.A firm dumping its chemical wastes directly into an ocean
C.A firm exploiting the weak intellectual property rights in a developing nation
D.A neighboring country opposing the introduction of a free trade area
E.A country denying its citizens basic human rights
Answer:
A U.S. company that imports laptop computers from Japan knows that in 30 days it
must pay in yen to a Japanese supplier when a shipment arrives. The company will pay
the Japanese supplier 150,000 for each computer, and the current dollar/yen spot
exchange rate is $1 = 110. The importer can sell the computers the day they arrive for
$1,600 each. However, the importer will not have the funds to pay the Japanese supplier
until the computers have been sold. The importer enters into a 30-day forward exchange
transaction with a foreign exchange dealer at $1 = 105. 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 $171 per computer.
C.The importer will earn a profit of approximately $65 per computer.
D.The importer will incur a loss of approximately $67 per computer.
E.The importer will incur a loss of approximately $105 per computer.
Answer:
In the Republic of Cedia, people are extremely conscious about their social
backgrounds. This in turn regulates their relationships with members of other classes.
As a result of the heightened class consciousness:
A.the mobility between the social classes of the Cedian society will increase.
B.the level of industrial disruption and industrial disputes will be low.
C.most of the population will perceive itself to be middle class.
D.an antagonistic relationship will exist between management and labor classes.
E.successful individuals, irrespective of their origins, will be highly respected.
Answer:
Which of the following statements is true about culture?
A.Culture is static as it does not evolve.
B.Multinational enterprises can themselves be engines of cultural change.
C.The cost of doing business in a country or region is always independent of its culture.
D.It is not possible for a country to support multiple cultures.
E.The values and norms of a culture emerge fully formed.
Answer:
Which of the following is the most common political argument for government
intervention in international trade?
A.Decreasing the prices of products in the domestic market
B.Promoting strategic trade policy
C.Protecting jobs and industries from unfair foreign competition
D.Improving efficiency of domestic labor
E.Protecting human rights
Answer:
Which of the following is a typical function of a trademark?
A.It marks the sales territory for which individual salespeople are assigned.
B.It restrains authors, composers, playwrights, artists, and publishers from trading their
creative work.
C.It signifies that a country is a member of the World Trade Organization.
D.It acts as a permit to expand a business globally.
E.It allows merchants or manufacturers to designate and differentiate their products.
Answer:
A French company wants to invest 20 million euros for three months. The company
found that investing in a Thai money market account would give it a higher interest rate
than domestic investments. Which of the following is true about this investment?
A.The investment is risk-free because money market investments are considered to be
equivalent to bank deposits.
B.The investment is not risk-free because foreign currency movements in the
intervening period can affect the profitability of the firm.
C.The investment is risk-free because such investments also lock foreign exchange
rates for the duration of the investment.
D.The investment is not risk-free because money market instruments are considered to
be the most speculative of all investments.
E.The investment is risk-free because the Thai money market is considered to be more
stable and secure than other markets.
Answer:
In the context of political economy, one notable development of the past 20 years has
been the spread of:
A.centrally planned economies.
B.mixed economies.
C.totalitarian governments.
D.democracy.
E.communism.
Answer:
Which of the following is an advantage of joint ventures as a mode of entry into foreign
markets?
A.The foreign firm benefits from a local partner’s knowledge of the host country.
B.The foreign firm can protect its technology from being appropriated by its local
partner.
C.There is less cause for friction and conflict between the foreign and local partners.
D.It gives a firm tight control over subsidiaries, which enables it to realize experience
curve or location economies.
E.The foreign firm does not have to bear any development costs and risks associated
with opening a foreign market.
Answer:
According to Krugman, the ideal way for a country to respond, when the foreign
competitors of its companies are already being supported by government subsidies, is
probably not to engage in retaliatory action, but to:
A.help establish rules that minimize the use of trade-distorting subsidies.
B.adopt the strategic trade policy as a way to establish domestic firms in a dominant
position in the global industry.
C.provide a subsidy to a new industry where the foreign competitors have not had the
benefit of such strategic trade policies.
D.use a combination of home-market protection and export-promoting subsidies.
E.provide high levels of subsidies to the oldest industry in the country.
Answer:
Which of the following is a way in which an enterprise with some market power might
limit arbitrage so that their price discrimination policy works?
A.Pricing its products identically despite huge differences in demand across different
markets
B.Differentiating otherwise identical products among nations along some line, such as
design or packaging
C.Adopting a pricing strategy that matches what competitors charge in each of the
different national markets
D.Limiting sales of its products to only a few nations
E.Selling its products at higher prices than normal to break even by selling fewer units
Answer:
To reduce the risks of failure of an acquisition, managers must:
A.pay more for the acquired unit to please its existing employees.
B.encourage and facilitate management turnover.
C.acquire a firm without wasting time on screening.
D.move rapidly after an acquisition to put an integration plan in place.
E.ensure that the work cultures are significantly different from each other.
Answer:
Black economy is most likely to be prevalent when:
A.large amounts of economic activity are in the form of legally recorded cash
transactions.
B.people engage in barter agreements to avoid paying taxes.
C.a country’s GNI per capita exceeds $30,000.
D.the expenses of the government are less than its income.
E.a country is in trade surplus with another foreign country.
Answer:
Vornoda Inc., a multinational clothing and accessory brand, has been facing huge
economic losses due to unpredictable exchange rate movements. In order to gain
considerable immunity against such currency fluctuations, Vornoda Inc. should:
A.pursue strategies that increase its economic exposure.
B.avoid using instruments like forward market and swaps.
C.disperse production to different locations around the globe.
D.not contract out manufacturing.
E.restrict its low-value-added manufacturing to one location.
Answer:
In most eastern European nations, the title to urban and agricultural property is often
uncertain because of incomplete and inaccurate records, multiple pledges on the same
property, and unsettled claims resulting from demands for restitution from owners in the
pre-communist era.
Answer:
The basic philosophy behind just-in-time (JIT) inventory systems is to:
A.economize on inventory holding costs.
B.reduce inventory turnover.
C.create a buffer stock of inventory.
D.reduce costs by reducing quality.
E.increase the total working capital requirement.
Answer:
A firm builds a plant in a country and agrees to take a certain percentage of the plant’s
output as partial payment for the contract. This type of countertrade is called a(n):
A.counterpurchase.
B.offset.
C.switch trade.
D.buyback.
E.barter.
Answer:
Which of the following generally permits individual economic freedom, but restricts
individual political freedom on the grounds that it would lead to the rise of
communism?
A.Pure democracy
B.Right-wing totalitarianism
C.Free market capitalism
D.Representative democracy
E.Communist totalitarianism
Answer:
Which of the following is true when a government is strongly committed to controlling
the rate of growth in money?
A.The country’s future inflation rate may be low.
B.The country’s currency will steadily depreciate significantly and instantly in the
foreign exchange market.
C.The country’s economy will be marked by an abundance of liquidity.
D.The country will see a good number of populist measures not funded by taxation.
E.The country will struggle to match money supply with adequate supply of goods and
services.
Answer:
Which of the following is true of Alexander Yeats’s criticism of the Andean Pact?
A.He pointed out that the slowest growing items in intra-Mercosur trade were cars,
buses, agricultural equipment, and other capital-intensive goods.
B.He believed that the trade creation effects of Mercosur outweighed its trade diversion
effects.
C.He felt that Mercosur countries were prepared to compete globally once the group’s
external trade barriers came down.
D.He pointed out that Mercosur countries were insulated from outside competition by
tariffs that run as high as 70 percent of value.
E.He felt that capital was being drawn toward more efficient enterprises.
Answer:
The most important concerns regarding the costs of FDI for the home country center on
the:
A.balance-of-payments and employment effects of outward FDI.
B.technology capture effect and the perceived loss of national sovereignty.
C.reverse-resource transfer effect and the exposure to foreign markets caused by FDI.
D.import of substantial input from abroad and being held to “economic ransom.”
E.exposure to foreign markets and the decreased costs of production.
Answer:
One of the main reasons why many economists remain critical of the infant industry
argument is its reliance on the assumption that:
A.protection of manufacturing from foreign competition is harmful.
B.absolute advantage cannot sustain productivity of an industry.
C.foreign firms too come under the definition of infant industry when they newly enter
a foreign market.
D.firms are unable to make efficient long-term investments by borrowing money from
the domestic or international capital markets.
E.foreign competition will eventually cause domestic firms to improve the quality of
their products.
Answer:
Robben Inc. converts $1,000,000 into euros when the exchange rate is $1 = €0.75. After
three months, the company converts this back into dollars when the exchange rate is $1
= €0.80. Which of the following is the outcome of this transaction?
A.A loss of $62,500
B.A loss of $66,667
C.A gain of $50,000
D.A gain of $62,500
E.A loss of $50,000
Answer:
Which of the following is the most likely outcome of a foreign firm entering a
developed nation on a small scale after other international businesses in the firm’s
industry?
A.Capturing first-mover advantages
B.Higher pioneering costs
C.Rapid increase in market share
D.Limited future growth potential
E.Increase in sales volume
Answer:
Which of the following formed the crux of Porter’s study of national competitive
advantage?
A.Identifying the various stages of the life cycle of a product
B.Determining why a country achieves international success in a particular industry
C.Determining how trade barriers affect the prices of products in the international
market
D.Determining how pre-industrialization theories predict international trade patterns
E.Determining the relationship between factor endowments and economies of scale
Answer:
In a business setting, managers sometimes do not realize they are behaving unethically,
primarily because they:
A.fail to take into account the ethical dimension of business decisions.
B.ignore business variables such as cost, delivery, and product quality.
C.have a strong system of personal ethics.
D.abide by the concept of noblesse oblige.
E.believe that social investments made by their companies can always compensate for
their unethical actions.
Answer:
Which of the following is a disadvantage of barter as a countertrade arrangement?
A.It is a very complex arrangement.
B.In a barter system, if goods are exchanged simultaneously, one party ends up
financing the other.
C.Firms engaged in barter run the risk of having to accept goods they do not want or
cannot use.
D.It involves huge cash transactions.
E.It cannot be used in transactions with trading partners who are not creditworthy.
Answer:
A measure of the responsiveness of demand for a product to changes in price is known
as:
A.the demand to price ratio.
B.demand and price dynamics.
C.price-demand rigidity.
D.demand function of pricing.
E.price elasticity of demand.
Answer:
Learning effects tend to be more significant when:
A.a task involves a few simple steps.
B.a task is repeated for a period of over five years.
C.the workforce consists of unskilled labor.
D.the cumulative output becomes half of what it was originally.
E.a technologically complex task is repeated.
Answer:
Which of the following is a risk of entering developing nations like India and China on
a large scale?
A.Lower potential for long-term rewards
B.Absence of prior foreign entrants
C.Lack of control over quality
D.Fear of rapid imitation of technology
E.High management turnover
Answer:
Which of the following is true of a transnational strategy?
A.It is easy to implement because it does not place any conflicting demands on a
company.
B.It is used when the pressures for cost reductions are low.
C.It is usually used when the pressure for local responsiveness is relatively low.
D.It enables the one-way flow of core competencies.
E.It is used by firms that try to achieve low costs through location economies,
economies of scale, and learning effects.
Answer:
Spreading fixed costs over a large volume results in a cost-savings phenomenon
referred to as:
A.volume synergies.
B.economies of scale.
C.captured savings.
D.size effects.
E.location economies.
Answer: