Bus 2900 Final Exam - questions from study guide

Jarinia, a leading global economic power, lets the foreign exchange market determine the relative value of its currency, called the junid. Jarnia's exchange rate regime is called a _____ exchange rate. A. fixed B. floating C. forward D. pegged E. nominal

B. floating

The developing country of Nambodia has a retail system that has many independent retailers, no one of which has a major share of the market. What is Nambodia's retail system called? A. concentrated B. fragmented C. focused D. consolidated E. exclusive

B. fragmented

In deciding on the firm's distribution strategy in the United Kingdom, Arlene Smith of Wendell Products found that the country's retail sector was very concentrated. When the retail sector is very concentrated A. it is more expensive for a firm to make contact with each individual retailer. B. it makes sense for a firm to deal directly with retailers, cutting out wholesalers. C. a relatively large sales force is required to deal with the retail sector. D. the channels of distribution tend to be long. E. the growth of wholesalers is promoted.

B. it makes sense for a firm to deal directly with retailers, cutting out wholesalers

Sphericals, Inc. approach to international markets is to grant a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit sold. Sphericals, Inc.'s approach is called A. outsourcing B. licensing C. franchising D. exporting E. diversifying

B. licensing

What can happen if a country's government does not control the rate of growth in money supply? A. Its future inflation rate will be low. B. Its taxes will decrease in the future. C. It will see reduced spending on public infrastructure projects. D. Its currency could depreciate in the future. E. Its output of goods and services will exceed money supply, thereby fueling deflation

D. Its currency could depreciate in the future.

Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m. is 125 yen = 1 dollar. Sylvia finds out that the rate quoted in New York at 10:00 a.m. New York time (3:00 p.m. in London) is 130 yen = 1 dollar. Sylvia decides to buy yen in New York and sell it in London. Sylvia is engaging in A. currency swapping. B. currency speculation. C. carry trade. D. arbitrage. E. hedging.

D. arbitrage

The government of Darnia allows its currency to nominally float freely against other currencies, but the government has the right to intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value. What Darnia is doing is called a _____ float. A. fixed B. clean C. pegged D. dirty E. capital

D. dirty

Coca-Cola and PepsiCo compete against each other not only in the U.S., but also all across Europe, Asia, and Africa. Coca-Cola and PepsiCo are A. a monopoly. B. Engaged in cooperation C. a cartel. D. engaged in multipoint competition. E. an oligopsony

D. engaged in multipoint competition

A country's currency is referred to as _____ when its government allows both residents and nonresidents to purchase unlimited amounts of a foreign currency with it. A. externally convertible B. nonconvertible C. leading D. freely convertible E. lagging

D. freely convertible

A critical competitive feature of an oligopoly is the A. lack of interaction among the major players. B. presence of a domestic market which is open for foreign firms. C. desire of all the major players to avoid the phenomenon of diminishing returns. D. interdependence of the major players. E. lack of imitative behavior among the major players.

D. interdependence of the major players

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

D. limited future growth potential

What is the result of the threat of antidumping action? A. helps the firm raise capital in the primary market B. limits the ability of a firm to raise prices in response to high demand C. enhances the firm's ability to disperse its productive activities in an efficient manner D. limits the ability of a firm to use aggressive pricing to gain market share in a country E. enhances a firm's competitive advantage to indigenous competitors in that country

D. limits the ability of a firm to use aggressive pricing to gain market share in a country

Jade, a working professional, began driving rashly ever since she got her car insured against damage. She believed that the insurance claim would cover her in case of any accidents. What does Jade's behavior display? A. cognitive dissonance B. conflict of interest C. systemic risk D. moral hazard E. tragedy of the commons

D. moral hazard

Omega, Inc., a maker of personal fitness trackers (like Fitbit) was the first mover into the country of Malnesia. As the first mover in a new product area, Omega, Inc. had to spend a lot of money educating the population of Malnesia about fitness and tracking one's fitness. In addition, they also had to spend money in developing a distribution channel. The costs that Omega, Inc. incurred in Malnesia as the first mover are called A. retail costs. B. competitive costs. C. greenfield costs. D. pioneering costs. E. moving costs.

D. pioneering costs.

Which of the following marketing strategies relies on access to advertising media? A. personal selling B. direct selling C. push strategy D. pull strategy E. copy testing

D. pull strategy

General Electric (GE) built an operation from scratch in Nigeria. This is an example of a(n) A. merger. B. acquisition. C. strategic alliance. D. FDI stock. E. greenfield investment.

E. greenfield investment.

A charge of 15-20% was levied by the government of Cadmia on the value of automobile accessories imported from a neighboring country. This increased the price of those imported car accessories for the consumers in Cadmia. Which of the following instruments of trade policy is being used by the government of Cadmia? A. local content tariff B. ad valorem tariff C. subsidies D. import quotas E. antidumping duties

B. ad valorem tariff

If a basket of goods costs $100 in the United States and €120 in Europe, what would the purchasing power parity theory's prediction of the dollar/euro exchange rate be? A. $1 = €1.20 B. $1 = €1 C. $1 = €0.80 D. $1 = €0.90 E. $1 = €1.10

A. $1 = €1.20

The country of Ambos Republic defined its currency, ambos, as being equivalent to 16 grains of "fine" (pure) gold. Assuming that there are 480 grains in an ounce, the gold par value of the ambos is A. 30. B. 28. C. 20. D. 22 E. 14

A. 30

Which of the following multilateral agreements was established under U.S. leadership in 1947, with the objective to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like? A. General Agreement on Tariffs and Trade (GATT) B. North American Free Trade Agreement (NAFTA) C. Central American Free Trade Agreement (CAFTA) D. Free Trade Areas of the Americas (FTAA) E. North Atlantic Treaty Organization (NATO)

A. General Agreement on Tariffs and Trade (GATT)

Which of the following is a drawback of a push strategy? A. It can be expensive when the distribution channel is long. B. It decreases interaction with consumers. C. It does not allow consumers to be educated on the benefits of a complex product. D. It is useful only in advanced nations where consumers are sophisticated and highly educated. E. It can only be used to sell industrial products.

A. It can be expensive when the distribution channel is long

Which of the following is true of price discrimination? A. It involves charging whatever the market will bear. B. In a competitive market, prices may have to be higher than in a market where the firm has a monopoly. C. It makes economic sense to charge the same prices in different countries. D. It exists whenever consumers in different countries are charged the same price for the same product, irrespective of variations. E. It cannot help a company maximize its profits.

A. It involves charging whatever the market will bear.

Which of the following is a major reason why many economists remain critical of the infant industry argument? A. It makes the domestic industry inefficient. B. It does not provide guaranteed employment for citizens. C. It affects the standards of living and per capita income of the people. D. It promotes foreign direct investment. E. It leads to reduced prices in domestic markets.

A. It makes the domestic industry inefficient.

Which of the following is a definition of market segmentation? A. It refers to identifying distinct groups of customers whose needs, wants, and purchasing behavior differ from others. B. It refers to developing existing market segments and increasing market share within those segments. C. It refers to identifying the need for new products in existing markets and developing products for those markets. D. It refers to identifying new markets that can buy existing products. E. It refers to identifying the needs of a new market and developing new products for that market

A. It refers to identifying distinct groups of customers whose needs, wants, and purchasing behavior differ from others.

_____ is/are an element of a firm's marketing mix. A. Product attributes B. Employee management C. Customer service D. Population demographics E. Domestic competition

A. Product attributes

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

A. The MNE is an instrument for dispersing the production of goods and services to the most efficient locations around the globe

Which of the following is true regarding the difference between GATT and WTO? A. The WTO was encouraged to extend its reach to encompass regulations governing foreign direct investment 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.

A. The WTO was encouraged to extend its reach to encompass regulations governing foreign direct investment unlike GATT.

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 little cause for friction and conflict between the foreign and local partners. D. It gives the foreign 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.

A. The foreign firm benefits from a local partner's knowledge of the host country

If a firm is seeking to enter a market via a wholly owned subsidiary where there are already well established incumbent enterprises, and where global competitors are also interested in establishing a presence, a suitable mode of entry is a(n) A. acquisition. B. licensing deal. C. greenfield venture. D. turnkey project. E. exporting deal

A. acquisition

An advantage of choosing exporting as a mode of entry into foreign markets is that a firm A. can avoid the cost of establishing manufacturing operations in the host country. B. shares the development costs and risks with its host partner. C. can earn returns from process technology skills in countries where FDI is restricted. D. has access to local partner's knowledge. E. has the ability to engage in global strategic coordination

A. can avoid the cost of establishing manufacturing operations in the host country

Which of the following groups benefits the most from the imposition of tariffs? A. domestic producers B. consumers C. exporters and importers D. foreign producers E. international bodies such as WTO

A. domestic producers

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

A. elastic

Which of the following is a reason for the emergence of the gold standard? A. expansion in the volume of international trade due to the Industrial Revolution B. inability of governments to convert gold into paper currency on demand at a fixed rate C. widening gap between the developed and the developing nations D. failure of the Bretton Woods fixed exchange rate system E. failure of the U.S. dollar to act as a reference currency

A. expansion in the volume of international trade due to the Industrial Revolution

3M, an American firm, manufactures adhesive tapes in St. Paul, Minnesota, and ships the tapes to South Korea for sale. According to this information, which of the following is being done by 3M? A. exporting B. licensing C. franchising D. insourcing E. outsourcing

A. exporting

Which of the following weakens the link between relative price changes and changes in exchange rates predicted by purchasing power parity (PPP) theory by violating the assumption of efficient markets? A. government intervention in cross-border trade B. relationship between money supply and price inflation C. impact of increase in currency on relative demand and supply conditions of currencies D. excessive growth in money supply E. insignificant impact of transportation costs on international trade

A. government intervention in cross-border trade

The main benefits of inward FDI for a host country arise from A. the resource-transfer effect, the employment effect, and the balance-of-payments effect. B. the labor-transfer effect, the technology effect, and the currency-exchange effect. C. the cultural awareness effect, first-mover advantage effect, and economic development effect. D. the foreign exchange reserves effect, knowledge flow effect, and the reverse resource transfer effect. E. the employment effect, the labor-transfer effect, and the technology effect

A. the resource-transfer effect, the employment effect, and the balance-of-payments effect

Jupiter Systems is a high-tech firm looking to set up operations in a foreign country. The firm's core competency is in technological know-how. Which of the following modes of entry would be most favorable to the firm if it wants to keep a tight control over its technology? A. wholly owned subsidiary B. joint venture C. franchising D. licensing E. turnkey project

A. wholly owned subsidiary

According to the Fisher effect, if the "real" rate of interest in a country is 4 percent and the expected annual inflation is 9 percent, what would the "nominal" interest rate be? A. 5 percent B. 13 percent C. 9 percent D. 36 percent E. 2.25 percent

B. 13 percent

Which of the following was the weakness of the Bretton Woods system? A. It could be wrecked by heavy borrowings from the World Bank and the International Monetary Fund. B. It could not work if the U.S. dollar was under speculative attack. C. The inflexibility of the system resulted in high unemployment. D. It forced fiscal and monetary discipline on participating nations. E. It allowed the countries to engage in competitive currency devaluations.

B. It could not work if the U.S. dollar was under speculative attack

Which of the following is an advantage of turnkey projects as a mode of entry into foreign markets? A. It is an ideal way to gain entry into a country where FDI is not limited by government regulations. B. It is a useful strategy to earn great returns from the know-how of a technologically complex process. C. It is an ideal way to establish a firm's long-term presence in a foreign country. D. It helps protect a firm's competitive advantage. E. The firm that enters into a turnkey project with a foreign enterprise avoids giving rise to potential competitors.

B. It is a useful strategy to earn great returns from the know-how of a technologically complex process

For years, the world had used the country of Votnam as a place to assemble goods because of the country's availability of cheap labor. To shift its manufacturing base from simple assembly to full-fledged manufacture of components and finished goods, Votnam introduced a policy that 35 percent of the value of a product must be produced locally. This is an example of a(n) A. international allocation requirement B. local content requirement C. specific quota requirement D. ad valorem portion requirement E. domestic sales requirement

B. local content requirement

The value of Surnum's, a developing economy, currency is fixed relative to the U.S. dollar. The exchange rate between the Surnum currency and other currencies is determined by the dollar exchange rate. Surnum's exchange rate is A. flexible. B. pegged. C. real. D. dirty-float. E. floating

B. pegged.

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.

B. the transportation costs or trade barriers are high.

Tom boasts that he is often one of the first buyers of any new technology product. Tom saw a new Apple watch at the Amsterdam airport when he was hurrying to catch a flight back home to New York. Tom saw that the watch sold for 100 Euros. Tom did not have time to buy the watch in Amsterdam. Assume that the euro/dollar exchange rate is €1 = $1.20. According to the law of one price, at what price would it make sense to buy the watch in New York? A. $150 B. $140 C. $120 D. $125 E. $150

C. $120

Which of the following is not an argument in favor of standardized advertising? A. One large effort to develop a campaign often produces better results than 40 or 50 smaller efforts. B. It projects a single brand image around the globe. C. Cultural diversity makes it hard to develop advertising themes that are effective around the world. D. It lowers the costs of value creation. E. Campaigns like the Marlboro Man have worked very well

C. Cultural diversity makes it hard to develop advertising themes that are effective around the world.

Which of the following is a disadvantage of franchising? A. The franchiser has to bear development costs and risks associated with foreign expansion. B. Franchising leads to undesirable results for service firms. C. It is difficult to maintain quality control across foreign franchisees that are distant from the franchiser. D. The franchiser has no long-term interests in the foreign country. E. It forces a franchiser to take out profits from one country to support competitive attacks in another.

C. It is difficult to maintain quality control across foreign franchisees that are distant from the franchiser

Which of the following was a reason that led to the collapse of the gold standard in 1939? A. difficulty and complexity in using the gold standard to determine the exchange rate B. agreement by governments to convert paper currency into gold on demand at a fixed rate C. cycle of competitive currency devaluations by various countries D. expansion in the volume of international trade in the wake of the Industrial Revolution E. inability of the gold standard to act as a mechanism for achieving balance-of-trade equilibrium by all countries

C. cycle of competitive currency devaluations by various countries

Dumping takes place when foreign producers A. attempt hostile takeovers of domestic firms and usurp the available resources for production. B. indiscriminately exploit the natural resources of a foreign country to create a later demand that can be met only by imports. C. eliminate competition by subsidizing prices in a foreign market with home market profits and eventually raise prices in the foreign market to earn substantial profits. D. capture the niche market rather than the masses. E. export only a small quantity of their products into an importing country

C. eliminate competition by subsidizing prices in a foreign market with home market profits and eventually raise prices in the foreign market to earn substantial profits.

The country of Maroji is a major exporter of dairy products. The country of Hipon is a major exporter of heavy machinery but also has a sizeable domestic dairy industry. Since it imports a sizeable amount of heavy machinery from Hipon, Maroji, at the request of Hipon, limited the amount of dairy products it exports to Hipon each year. This is an example of A. tariff rate quota B. quota rent C. voluntary export restraint (VER) D. quota share E. export embargo

C. voluntary export restraint (VER)

Radical writers argue that A. a multinational enterprise (MNE) is an instrument of economic development rather than economic domination. B. MNEs are more beneficial to host countries than to their home countries. C. important jobs in the foreign subsidiaries of MNEs go to host-country nationals rather than to citizens of the home country. D. FDI by the MNEs of advanced capitalist nations keeps the less developed countries of the world relatively backward. E. MNEs exploit their home countries for the exclusive benefit of their host countries

D. FDI by the MNEs of advanced capitalist nations keeps the less developed countries of the world relatively backward.