International Business Midterm Q's
Which of the following statements is true about caste system?
A caste system is a rigid form of social stratification. -change is not possible for an individual
Which of the following accounts for about 55 percent of the world's GNP and 49 percent of world trade?
APEC
Which of the following theories proposes that a country should specialize in producing those goods for which it has an absolute advantage?
Adam Smith's theory
The practice of "gift-giving" between the parties to a business negotiation is considered right and proper behavior in many Asian cultures, while some Westerners view the practice as a form of bribery. What is this an example of?
An ethical dilemma
According to the findings of the World Values Survey
As countries get richer, there seems to be a shift from survival values to well-being values. -traditional --> secular rational and survival values --> well being values
which of the following is a more attractive place to do business? a) nation that lacks democratic institutions b) nation with state regulated economic activity c) nation w/ market based economy d) nation where rule of law does not take precedence over business
C; ant place with democratic system, market based economy, property rights and limited corruption
Which of the following philosophies can be traced back to the ancient Greek philosopher Plato?
Collectivism - needs of society > needs of individuals
Which of the following is the African grouping that started to implement a customs union in 2005?
EAC -In 2005 the EAC started to implement a customs union, although many tariffs remained in place until 2010.
What are first-mover advantages?
Economic and strategic advantages that accrue to early entrants into an industry. -A second theme in new trade theory is that the pattern of trade we observe in the world economy may be the result of economies of scale and first-mover advantages. First-mover advantages are the economic and strategic advantages that accrue to early entrants into an industry.
What is the term for unit cost reductions associated with a large amount of output?
Economies of scale -The new trade theory began to emerge in the 1970s when a number of economists pointed out that the ability of firms to attain economies of scale might have important implications for international trade. Economies of scale are unit cost reductions associated with a large scale of output.
The emerging role of the _____ in competition policy suggests the EU is increasingly willing and able to intervene and impose conditions on companies proposing mergers and acquisitions.
European Commission
An import quota is a specific tax levied on imports.
FALSE -An import quota is a direct restriction on the quantity of some good that may be imported into a country.
Governments always act in the national interest of their countries when they intervene in the economy.
FALSE Governments do not always act in the national interest when they intervene in the economy; politically important interest groups often influence them.
T/F: "Not free" countries are characterized by some restrictions on political rights and civil liberties, often in the context of corruption, weak rule of law, ethnic strife, or civil war.
False
The emergence of single markets will make the business environment within each grouping less competitive.
False -Just as the emergence of single markets creates opportunities for business, it also presents a number of threats. For one thing, the business environment within each grouping will become more competitive.
T/F: Kantian ethics hold that the moral worth of actions or practices is determined by their consequences.
False -Kantian ethics hold that people should be treated as ends and never purely as means to the ends of others. People have dignity and need to be respected as such.
T/F: cultural differences have no effect on the way an int'l firm conducts its business around the globe
False; diff among countries require that an int'l business vary its practices country by country
A firm needs to develop a mechanism for ensuring it maintains an appropriate mix of tactics and strategies for minimizing its foreign exchange exposure. Which of the following is one of the common tactics that should be employed?
Firms need to, as far as possible, model and forecast future exchange rate movements.
Identify the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements.
Free trade areas -In a free trade area, all barriers to the trade of goods and services among member countries are removed. Free trade agreements are the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements.
In the 1986 Uruguay Round, GATT members sought to write rules for promoting which of the following?
GATT's monitoring and enforcement mechanisms -In the Uruguay Round, member countries sought to extend GATT rules to cover trade in services. They also sought to write rules governing the protection of intellectual property, to reduce agricultural subsidies, and to strengthen the GATT's monitoring and enforcement mechanisms.
Which of the following is a home-country policy aimed at limiting outward FDI flow?
Limiting capital outflows -Virtually all investor countries, including the United States, have exercised some control over outward FDI from time to time. One policy has been to limit capital outflows out of concern for the country's balance of payments.
The creation of a single market through regional economic integration offers significant opportunities. Which of the following is one of these opportunities?
Markets that were formerly protected from foreign competition are increasingly open.
_____ argues that a strategic trade policy aimed at establishing domestic firms in a dominant position in a global industry is a beggar-thy-neighbor policy that boosts national income at the expense of other countries.
Paul Krugman
Which of the following is a feature of right-wing totalitarianism?
Provision of partial individual economic freedom along with restricted individual political freedom. *RW generally permits economic freedom but restricts individual political freedom to prevent communism
_____ can be seen as an attempt to achieve additional gains from the free flow of trade and investment between countries beyond those attainable under global agreements.
Regional economic integration
Which of the following theories explains global trade in terms of the international differences in labor productivity?
Ricardo's theory of comparative advantage
_____ suggests that a government should use subsidies to support promising firms that are active in newly emerging industries.
Strategic trade policy
The GATT was a multilateral agreement whose objective was to liberalize trade.
TRUE
T/F: Dumping is viewed as a method by which firms unload excess production in foreign markets.
TRUE In the context of international trade, dumping is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value. Dumping is viewed as a method by which firms unload excess production in foreign markets.
The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade.
TRUE The strategic trade policy arguments of the new trade theorists suggest an economic justification for government intervention in international trade. This justification challenges the rationale for unrestricted free trade found in the work of classic trade theorists such as Adam Smith and David Ricardo.
A pen costs £50 in Britain. An identical pen costs $70 in the United States when the exchange rate is £1 = $1.50. Which of the following is correct?
The U.S. offers a better deal.
Which of the following is true about the economic risks of doing business in a country?
The inflation rate in a country is an indicator of the economic risks of doing business in a country. - can also be seen in level of business and government debt in the country
Which of the following is one of the attractions of the Eurobond market?
The tax status is favorable. -Three features of the Eurobond market make it an appealing alternative to most major domestic bond markets, specifically: an absence of regulatory interference, less stringent disclosure requirements than in most domestic bond markets, a favorable tax status.
Many of the national markets of Eastern Europe, Latin America, Africa, and Asia may still be underdeveloped, but they are potentially enormous. Which of the following is a risk to businesses moving into these regions?
There is no guarantee that democracy will thrive in many of the world's newer democratic states. - esp if states have to grapple with severe economic setbacks
Tariff barriers raise the costs of exporting products to a country (or of exporting partly finished products between countries). Which of the following is a likely consequence of these barriers?
This may put a firm at a competitive disadvantage to indigenous competitors in that country.
A country has an absolute advantage in the production of a product when it is more efficient than any other country in producing it.
True
According to the radical view, the MNE is a tool for exploiting host countries to the exclusive benefit of their capitalist-imperialist home countries.
True
Direct effects arise when a foreign MNE employs a number of host-country citizens.
True
T/F: Building an organizational culture that places a high value on ethical behavior requires incentive and reward systems that reward people who engage in ethical behavior.
True
T/F: Underlying most trade theories is the notion that different countries have particular advantages in different productive activities.
True
T/F: early 20th century, socialist ideology split into two broad camps: communist and social democrats
True
T/F: Hofstede's power distance dimension focused on how a society deals with the fact that people are unequal in physical and intellectual capabilities.
True - lower uncertainty cultures were characterized by a greater readiness to take risks and less emotional resistance to change
A Chinese petroleum company sets up a crude oil refining facility in Vietnam. This is an example of a greenfield investment.
True -A greenfield investment involves the establishment of a new operation in a foreign country.
T/F: A mudarabah contract of Islamic banks is similar to a profit-sharing scheme.
True -A mudarabah contract is similar to a profit-sharing scheme. Under 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.
T/f: Theories of international trade claim that promoting free trade is generally in the best interests of a country, although it may not always be in the best interest of an individual firm.
True -Because of their pivotal role in international trade, businesses can exert a strong influence on government trade policy, lobbying to promote free trade or trade restrictions
T/F: GNI per person figures can be misleading because they don't consider differences in the cost of living.
True -GNI measures the total annual income received by residents of a nation. GNI per person figures can be misleading because they don't consider differences in the cost of living.
T/F: One of the biggest dangers confronting a company that goes abroad for the first time is the danger of being ill-informed.
True -International businesses that are ill-informed about the practices of another culture are likely to fail. Doing business in different cultures requires adaptation to conform to the value systems and norms of that culture. Adaptation can embrace all aspects of an international firm's operations in a foreign country.
T/F: A code of ethics is a formal statement of the ethical priorities that a business follows.
True -Many companies now draft a code of ethics, which is a formal statement of the ethical priorities a business adheres to. Often, the code of ethics draws heavily upon documents such as the UN Universal Declaration of Human Rights, which itself is grounded in Kantian and rights-based theories of moral philosophy.
Offshore production refers to FDI undertaken to serve the home market.
True -The term offshore production refers to DFI undertaken to serve the home market. Far from reducing home-country employment, such FDI may actually stimulate economic growth (and hence employment) in the home country by freeing home-country resources to concentrate on activities where the home country has a comparative advantage.
T/F: Deregulation involves the establishment and operation of private enterprises.
True - removes legal restrictions for free play of markets, est. of private enterprises, and manner in which private enterprises operate
T/F: In a market economy, a supply restriction occurs when a single firm monopolizes a market.
True, market economy is determined by interaction of S and D to signal price of product
Which of the following is the most important vehicle currency by trade volume?
U.S. Dollar -Due to its central role in so many foreign exchange deals, the dollar is a vehicle currency. In 2010, 85 percent of all foreign exchange transactions involved dollars on one side of the transaction.
what was created in the Uruguay Round, December 1993
WTO
In which of the following situations would FDI deteriorate the current account of the host country's balance of payments?
When a foreign subsidiary imports a substantial number of its inputs from abroad -A concern arises when a foreign subsidiary imports a substantial number of its inputs from abroad, which results in a debit on the current account of the host country's balance of payments.
When is a currency said to be externally convertible?
When only nonresidents can convert it into a foreign currency without any limitations.
Most economists would probably argue that the best interests of international business are served by
a free trade stance.
Free trade refers to a situation where _____.
a government does not try to influence what its citizens can buy from global markets
The Eurocurrency market has two significant drawbacks: _____ and _____.
a higher probability of a bank failure due to a lack of regulation; foreign exchange risk
Indulgence refers to
a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. -Indulgence refers to a society that allows relatively free gratification of basic and natural human drives related to enjoying life and having fun. Restraint refers to a society that suppresses gratification of needs and regulates it by means of strict social norms.
Values
abstract ideas about what a group believes to be good, right, and desirable.
Porter argues that a nation's firms should
adopt policies that promote strong competition within domestic markets. -According to Porter, businesses should urge government to increase investment in education, infrastructure, and basic research (since all these enhance advanced factors) and to adopt policies that promote strong competition within domestic markets (since this makes firms stronger international competitors, according to Porter's findings).
opponents of globalization argue that falling trade barriers
allow firms to move manufacturing activities to countries w/ lower wage rates
The Foreign Corrupt Practices Act was amended to
allow for "facilitating payments." -The Foreign Corrupt Practices Act outlawed the paying of bribes to foreign government officials to gain business. Some U.S. businesses immediately objected that the act would put U.S. firms at a competitive disadvantage (there is no evidence that has occurred). The act was subsequently amended to allow for "facilitating payments."
An American executive of a multinational home-furnishings chain finds that one of the company's production units in Philippines employs children to work in its factories. However, most of the children employed at the factory are orphans who will be sold as forced labor or pushed into prostitution, if they lose their jobs. The executive finds that all the available alternatives seem ethically unacceptable. In this example, the American executive faces
an ethical dilemma.
what is a reason why managing an int'l business is different from a domestic?
an int'l business must find ways to work within the limits imposed by governments
globalization has enabled orgs to reduce their costs of production by
creating manufacturing units in developing countries
A(n) _____ occurs when a speculative attack on the exchange value of a currency results in a sharp depreciation in the value of the currency or forces authorities to expend large volumes of international currency reserves and sharply increase interest rates to defend the prevailing exchange rate.
currency crisis
Which account keeps track of the export and import of goods and services in a country?
current acct
A _____ eliminates trade barriers between member countries and adopts a common external trade policy, but does not allow free movement of factors of production between member nations.
customs union -A customs union eliminates trade barriers between member countries and adopts a common external trade policy.
If lots of people want euros and euros are in short supply, and a few people want Japanese yen and yen are in plentiful supply, the yen is likely to _____ against the euro.
depreciate
The extent to which a firm's future international earning power is affected by changes in exchange rates in the long-run is known as _____.
economic exposure
role of government in a market economy involves
encouraging vigorous free and fair competition among private producers, accomplished by outlawing restrictive business practices to monopolize a market (antitrust laws)
A borrower can hedge against unpredictable movements in foreign exchange rates that can make the global capital market riskier by
entering into a forward contract.
This refers to a set of moral principles, or values, that are used to guide and shape behavior.
ethical system
To make sure that a business behaves in an ethical manner, a number of companies have hired _____, who are responsible for making sure the company's code of ethics is followed in every business decision.
ethics officers
A(n) _____ is any currency banked outside its country of origin.
eurocurrency
Fixed exchanged rates can help a country deal with economic crises.
false -Advocates of floating exchange rates argue that exchange rate adjustments can help a country deal with economic crises.
An efficient market has many impediments to the free flow of goods and services.
false -An efficient market has no impediments to the free flow of goods and services, such as trade barriers.
Small government deficits are an underlying cause of a foreign debt crisis.
false -Foreign debt crises tend to have common underlying macroeconomic causes: high relative price inflation rates, a widening of current account deficit, excessive expansion of domestic borrowing, high government deficits, and asset price inflation (such as sharp increases in stock and property prices).
The Jamaica agreement banned International Monetary Fund members from entering the foreign exchange market to even out fluctuations.
false -IMF members were permitted to enter the foreign exchange market to even out "unwarranted" speculative fluctuations in the Jamaica agreement.
The global capital market limits the opportunity for businesses and individuals to build a diverse financial portfolio.
false -On the investment side, the growth of the global capital market is providing opportunities for firms, institutions, and individuals to diversify their investments to limit risk. By holding a diverse portfolio of stocks and bonds in different nations, an investor can reduce total risk to a lower level than can be achieved in a purely domestic setting.
According to the _____, international production should be distributed among countries according to the theory of comparative advantage.
free market view
_____ draws on economic theory to construct sophisticated econometric models for predicting exchange rate movements.
fundamental analysis
Countries with free market economies in which property rights are protected tend to have _____ than command economies or economies where property rights are poorly protected.
greater economic growth rates
One of the consequences of the global financial crisis of 2008 and 2009 for hedge funds, which are private investment funds, was a(n)
growing concern that deregulation had gone too far.
The lowering of trade and investment barriers among countries in a trade group has led to
increased price competition throughout the EU and NAFTA.
A global capital market benefits borrowers by lowering the cost of capital and
increasing the supply of funds available for borrowing.
Two factors that helped global capital markets take off in the last decades of the 20th century were _____ and _____.
information technology; deregulation by governments
Increasingly, the International Monetary Fund (IMF) has been acting as the macroeconomic police of the world economy by
insisting that countries seeking significant borrowings adopt IMF-mandated macroeconomic policies.
the (...) is often seen as the lender of last resort
international monetary fund, last resort for economies in turmoil and currencies losing value against those of other nations
A managed float is the exchange rate policy where the government
intervenes in the exchange rate system only in a limited way.
an international business
is any firm the exports or imports
The threat of antidumping action affects a firm by
limiting its ability to use aggressive pricing to gain market share in a country.
A banking crisis refers to
loss of confidence in the banking system.
When a firm borrows funds from the global capital market, it must weigh the benefits of a
lower interest rate against the risks of an increase in the real cost of capital due to adverse exchange rate movements.
Different accounting conventions can make the problem of lack of information about the quality of foreign investments by
making direct comparisons difficult.
globalization critics argue that the decline in unskilled wage rates is due to the
migration of low-wage manufacturing jobs offshore
If General Electric, a U.S. based corporation, purchases a 12 percent interest in a company in Italy, that purchase would be an example of a(n) _____.
minority acquisition -Acquisitions can be a minority (where the foreign firm takes a 10 percent to 49 percent interest in the firm's voting stock), majority (foreign interest of 50 percent to 99 percent), or full outright stake (foreign interest of 100 percent).
During the late 1980s and early 1990s, totalitarian governments collapsed and were replaced by democratically elected governments that were typically _____ than their predecessors had been.
more committed to free market capitalism
The ethical obligations of a multinational corporation toward employment conditions, human rights, corruption, and environmental pollution are
not always clear cut
The term _____ refers to the values and norms that are shared among employees of an organization.
organizational culture
Host governments use a wide range of controls to restrict FDI in one way or another. The two most common are _____ and performance requirements.
ownership restraints
Economist Martin Feldstein has coined the term _____ to pertain to long-term, cross-border capital flows.
patient money
A country bases the valuation of its currency on a reference currency. The value of the country's currency is changed based on the changes in the value of the reference currency. This is an example of a _____ exchange rate system.
pegged -Under a pegged exchange rate regime, a country will attach the value of its currency to that of a major currency so that, for example, as the U.S. dollar rises in value, its own currency rises too.
A _____ rate means the value of the currency is fixed relative to a reference currency and then the exchange rate between that currency and other currencies is determined by the reference currency exchange rate.
pegged exchange rate
at Doha Round of WTO in 2001, agenda was est. to...
phase out subsidies to agricultural producers
The benefits, costs, and risks associated with doing business in a country are a function of that country's
political, economic, and legal systems.
The _____ is that FDI has both benefits and costs. FDI can benefit a host country by bringing capital, skills, technology, and jobs, but those benefits come at a cost.
pragmatic nationalist view -The pragmatic nationalist view is that FDI has both benefits and costs. FDI can benefit a host country by bringing capital, skills, technology, and jobs, but those benefits come at a cost. When a foreign company rather than a domestic company produces products, the profits from that investment go abroad. Many countries are also concerned that a foreign-owned manufacturing plant may import many components from its home country, which has negative implications for the host country's balance-of-payments position.
The _____ theory argues that such advanced nations as the United States have an incentive to develop consumer products and hence such nations tend to produce newer products.
product life-cycle
United Nations has developed the Human Development Index (HDI) to measure the
quality of human life in different nations.
Which of the following is an example of an advanced factor that a nation will possess as proposed by Porter?
skilled labor -Such factors as natural resources, climate, location, and demographics are basic factors. Factors such as communication infrastructure, sophisticated and skilled labor, research facilities, and technological know-how are examples of and advanced factors.
The _____ committed themselves to achieving socialism without resorting to violent revolution and dictatorship.
social democrats- communist believed socialism could only happen through violent revolution and totalitarian dictatorship
A Japanese tourist in New York goes to a bank to convert his yens into dollars. The exchange rate that will be used for conversion will be the _____.
spot exchange rate -The spot exchange rate is the rate at which a foreign exchange dealer converts one currency into another currency on a particular day.
General Motors' stand against apartheid in South Africa was based upon what came to be known as _____.
the Sullivan principles -GM adopted what came to be called the Sullivan principles, named after Leon Sullivan, a black Baptist minister and a member of GM's board of directors. Sullivan argued that it was ethically justified for GM to operate in South Africa so long as two conditions were fulfilled. First, the company should not obey the apartheid laws in its own South African operations (a form of passive resistance). Second, the company should do everything within its power to promote the abolition of apartheid laws.
If a country increases its money supply rapidly under a fixed exchange rate regime
the country will face high levels of price inflation.
Hofstede's masculinity versus femininity dimension examined
the relationship between gender and work roles.
Folkways
the routine conventions of everyday life. - actions f little moral significance
the stock of foreign direct investment refers to
the total cumulative value of foreign investments
Under the gold standard, when United States has a trade surplus
there will be a net flow of gold from other countries to the United States.
A currency board can issue additional domestic notes and coins only when there are foreign exchange reserves to back it.
true
Speculative buying and selling of currencies can create volatile movements in exchange rates under the present foreign exchange system.
true
The Bretton Woods agreement called for a system of fixed exchange rates that would be policed by the International Monetary Fund.
true
The inefficient market school argues that investing in exchange rate forecasting services would be a waste of money.
true
The movement toward regional economic integration has been most successful in Europe.
true
The rapid growth of information technology allows for 24-hours-a-day trading in the financial world.
true
The rate at which one currency is converted into another is known as the exchange rate.
true
While a nation as a whole may benefit significantly from a regional free trade agreement, certain groups within the country may lose.
true
If the spot rate is $1 = ¥120, and the 30-day forward rate is $1 = ¥130, the dollar is selling at a premium in the forward market.
true -dollar selling at premium in 30 day forward mkt
Constant returns to specialization occurs when
units of resources remain stable for any number of goods produced. -Constant returns to specialization mean that the units of resources required to produce a good (cocoa or rice) are assumed to remain constant no matter where one is on a country's production possibility frontier.
contracts drafted under a common law framework tend to be...
very detailed with contingencies spelled out, more expensive to draw out and can be very adversarial in resolving contract disputes
As a philosophy for business ethics, utilitarianism focuses attention on the need to
weigh carefully all of the social benefits and costs of a business action. -moral worth of practices is determined by their consequences, focuses on need to weigh all social costs and benefits of a business action and only pursue actions where benefits outweigh costs
_____ involves granting a foreign entity the right to produce and sell the firm's product in return for a royalty fee on every unit sold.
Licensing
Paul Samuelson's critique looks at what happens when a rich country enters into a free trade agreement with a poor country.
True
T/F: During the late 1980s and early 1990s, a wave of democratic revolutions swept the world.
True
From an international business perspective, some argue that what is ethical
depends on one's cultural perspective.
which stmt is accurate for the UN's Millennium Goals to cut in half the number of people living in extreme poverty?
goal was reached 5 years ahead of schedule
The _____ suggests that given relatively efficient markets, the price of a "basket of goods" should be roughly equivalent in each country.
purchasing power parity theory
An integrated international capital market is more volatile compared to a nonintegrated market.
true
the (...) was created in 1944 by 44 nations to promote economic development
world bank
changes in global economy of 21st century
world is moving toward an economic system more favorable for int'l business
what contributed to the great depression of 1930
countries progressively raised trade barriers against each other
The fast-food industry is a good example of a business sector where licensing is a poor option for FDI.
False -Licensing tends to be more common, and more profitable, in fragmented, low-technology industries in which globally dispersed manufacturing is not an option. A good example is the fast-food industry. McDonald's has expanded globally by using a franchising strategy, which is essentially the service-industry version of licensing. With franchising, the firm licenses its brand name to a foreign firm in return for a percentage of the franchisee's profits.
Entrepreneurs and business-owners of high uncertainty avoidance cultures will be more willing to take risks and make changes.
False -Lower uncertainty avoidance cultures were characterized by a greater readiness to take risks and less emotional resistance to change.
New trade theorists argue that getting a first-mover advantage is not a significant determinant of international trade.
False -New trade theorists stress the role of luck, entrepreneurship, and innovation in giving firm first-mover advantages.
T/F:The new trade theory stresses that countries should have favorable factor endowments to excel in the production of a good.
False -New trade theory stresses that in some cases countries specialize in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms.
Economic arguments for intervention are concerned with protecting the interests of certain groups within a nation, often at the expense of other groups, or with achieving some objective that lies outside the sphere protecting the environment or human rights.
False -Political arguments for intervention are concerned with protecting the interests of certain groups within a nation (normally producers), often at the expense of other groups (normally consumers), or with achieving some political objective that lies outside the sphere of economic relationships, such as protecting the environment or human rights. Economic arguments for intervention are typically concerned with boosting the overall wealth of a nation (to the benefit of all, both producers and consumers).
T/F:The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions obliges member states to make facilitating payments made to expedite routine government action a criminal offense.
False -The Convention on Combating Bribery of Foreign Public Officials in International Business Transactions obliges member states and other signatories to make the bribery of foreign public officials a criminal offense. The convention excludes facilitating payments made to expedite routine government action from the convention.
The ultimate controlling unit within the EU is the European Parliament.
False -The European Council represents the interests of member states. It is clearly the ultimate controlling authority.
The infant industry argument relies on an assumption that firms can make efficient long-term investments by borrowing money from the domestic or international capital market.
False -The infant industry argument relies on an assumption that firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market. Consequently, governments have been required to subsidize long-term investments.
The location-specific advantages argument associated with John Dunning explains why firms prefer FDI to licensing or to exporting.
False -The location-specific advantages argument associated with John Dunning does help explain the direction of FDI. However, the location-specific advantages argument does not explain why firms prefer FDI to licensing or to exporting.
T/F: The value systems and norms of a country have little influence on the costs of doing business in that country.
False -The value systems and norms of a country influence the costs of doing business in that country. The costs of doing business in a country influence the ability of firms to establish a competitive advantage in the global marketplace.
T/F: It can be more costly to do business in a country where there are no laws and regulations with regard to product safety.
False -adhering to regulations is costly
T/F: People who violate folkways are considered to be evil or bad.
False -may be thought to be ill-mannered but not evil, foreigners may be excused from countries for violating folkways
T/F: Using Hofstede's dimensions of social culture, research has shown that companies headquartered in cultures where masculinity and power distance are important attributes were more likely to emphasize the importance of behaving ethically.
False -more likely for unethical behavior, Russia...corruption is endemic
There is consensus that EU is what economists would call an optimal currency area.
False According to critics, a drawback of the euro is that the EU is not what economists would call an optimal currency area.
T/F: on a command economy, certain sectors are left to private ownership and free market mechanisms, while others have significant state ownership and govn't planning
False, this is a mixed economy
T/F: The naive immoralist claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries.
False: A naive immoralist asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either.
T/F: In calculating GNI data in some countries, the official figures take into account the barter agreements that take place as part of daily business transactions.
False: official figures may not tell entire story for GNI, unrecorded cash trans are not accounted for
T/F: since the 1960's, a notable trend in the demographics of the multinational enterprise has been the rise of US multinationals
False; an incr. in non-US multinationals and mini-multinationals
T/F: A civil law system tends to be more adversarial than a common law system.
False; civil is less adversarial since judges rely on detailed legal codes rather than interpreting tradition, precedent, and custom
T/F: common feature of right-wing democrats is they support socialist or communist ideas
False; common feature is overt hostility to socialist or communist ideas
The WTO argues that by removing all tariff barriers and subsidies to agriculture, which of the following would occur?
Global economic growth would rise. -The net effect of high tariff barriers and significant subsidies is to raise prices to consumers, reduce the volume of agricultural trade, and encourage the overproduction of products that are heavily subsidized. The WTO argues that removing tariff barriers and subsidies could significantly boost the overall level of trade, lower prices to consumers, and raise global economic growth by freeing consumption and investment resources for more productive uses.
To achieve full economic union, the European Union introduced a common currency, the euro, controlled by a central EU bank. Although most member states have signed on, _____ remains an important holdout.
Great Britain
Which of the following is true about planned economies?
In a planned economy, the state owns all means of production. - individuals have few incentives to create valuable innovations bc state gets to capture most of the gains
_____ is also known as the market imperfections theory.
Internalization theory -Internalization theory is also known as the market imperfections approach. It seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets.
Which of the following exemplifies privatization? a) A country reduces trade barriers, allowing individuals to engage in export and import. b) A country sells its postal services to a consortium of companies that runs it as a profit making venture without any state funding. c) A country enlists the services of Somers Consultancy, a global management consulting firm, to improve the profitability of the state-owned airlines company. d) A country allows state-owned coal companies to sell coal to private parties.
b) -Privatization transfers the ownership of state property into the hands of private individuals, frequently by the sale of state assets through an auction.
Investors using the global capital market have a wider range of investment opportunities than a purely domestic capital market. One of the most significant consequences of their choice is that they
can reduce their risk to below what could be achieved in a strictly domestic market.
What is the most widely practiced religion in the world?
christianity
In Samuel Huntington's thesis, global terrorism is a product of the _____.
clash of value systems and ideology -thesis defines global terrorism as a product of tension b/w civilizations and clash of value systems and ideology
Historically, command economies were found in _____, where collectivist goals were given priority over individual goals.
communist countries - fallen drastically since 1980's
Problems of limited liquidity are limited to less developed nations, which tend to have smaller domestic capital markets.
false -Problems of limited liquidity are not restricted to less developed nations, which naturally tend to have smaller domestic capital markets. In recent decades, even very large enterprises based in some of the world's most advanced industrialized nations have tapped the international capital markets in their search for greater liquidity and a lower cost of capital, such as Germany's Daimler and Deutsche Telekom.
The PPP theory tells us that a country with a high inflation rate will see an appreciation in its currency exchange rate.
false -The PPP theory tells us that a country with a high inflation rate will see depreciation in its currency exchange rate.
Trade diversion occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.
false -Trade creation occurs when high-cost domestic producers are replaced by low-cost producers within the free trade area.
Amazon.com was the earliest, major online bookstore, which allowed it to generate brand awareness and have a significant presence in the market. Amazon.com had a head start on later entrants to the online bookstore market. In this example, Amazon.com has _____.
first-mover advantages
A country that introduces a currency board commits itself to converting its domestic currency on demand into another currency at a _____.
fixed exchange rate
The risk that arises from volatile changes in exchange rates is commonly referred to as
foreign exchange risk.
The lack of progress in the Doha Round negotiations has resulted in countries
forging ahead with their own bilateral agreements. -In response to the apparent failure of the Doha Round negotiations to progress, many nations have pushed forward with bilateral trade agreements. These include the United States and the EU, which in 2013 launched bilateral talks aimed at reducing trade barriers between them.
