Marketing 393 Final Exam

Three countries enter into an agreement to remove all tariffs and trade barriers between them. They decide on a common trade policy with regard to nonmembers. Faced with political backlash, the countries stop short of allowing mobility of factors of production such as labor and capital. Which of the following levels of economic integration best describes this arrangement?

Customs union

Which of the following supports the economic case for regional economic integration?

Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement.

Which of the following statements is most likely to be true regarding the effects of FDI on employment?

A beneficial employment effect claimed for FDI is that it brings jobs to a host country that would otherwise not be created there.

Which of the following statements is true about the current monetary system?

A combination of government intervention and speculative activity drives the current foreign exchange market.

Licensing is NOT attractive to which of the following firms?

Firms requiring tight control of operations for realizing experience curve and location economies

Which of the following exists whenever consumers in different countries are charged different prices for the same product?

Price discrimination

Which of the following communication strategies relies primarily on mass media advertising as opposed to personal selling?

Push strategy

Myra is a firm producing premium handbags for women. These bags are manufactured and patented in the country of Ceria. Manufacturers in the country of Argonia create counterfeit Myra bags and sell them in the local markets of Argonia. These bags are sold at almost similar prices to the original in other countries. Which of the following is likely to happen?

Reduction in the export opportunities for Myra's hand bags in Argonia

Palladia specializes in the production of beef and produces beef more efficiently than any other country. It buys wheat, which it produces less efficiently than beef, from Rhodia, even though it produces wheat more efficiently than Rhodia. Which of the following theories of international trade supports Palladia's decision to buy wheat from Rhodia?

Ricardo's theory of comparative advantage

Why should a high-tech firm avoid selecting licensing as a mode of entry?

Risk of losing control over technology

Which of the following is an expected consequence of the implementation of the North American Free Trade Agreement?

Some U.S. and Canadian firms would move production to Mexico to take advantage of lower labor costs.

The term global commons refers to:

natural resources from which everyone benefits but for which no one is specifically responsible.

Black economy is most likely to be prevalent when

people engage in barter agreements to avoid paying taxes

Location-specific advantages for a firm are those that arise from:

utilizing resource assets that are tied to a particular foreign location and valuable enough to be combined with the firm's own unique assets.

Which of the following identifies an attribute of tariffs?

Tariffs reduce the overall efficiency of the world economy.

Which of the following is true of countertrade?

The governments of developing nations sometimes insist on a certain amount of countertrade.

Which of the following is NOT a constraint on a firm's ability to disperse its productive activities to foreign countries?

The increasing integration of the world economy

Capricorn Creative Inc., a US based advertising firm was the first in the advertising industry to identify the growth potential of Brazil and to make huge investments in its economy. As a result the firm was able to build brand loyalty and gain experience in that country business practices. In the language of business strategy, Capricorn Creative has typically benefited from:

a first mover advantage

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):

acquisition.

Amber Engineers Inc. wants to be able to customize products for different national markets and in turn increase its customer responsiveness. However, the fixed costs associated with its production are high. Hence, these functions will be performed most efficiently if Amber Engineers:

adopts flexible manufacturing technologies to help achieve mass customization.

Which of the following is true about the European Commission?

A. The European Union's competition commissioner has been gaining influence as the chief regulator of competition policy in the member nations of the European Union.

Which of the following is a goal of market segmentation?

A. To optimize the fit between the purchasing behavior of consumers in a given segment and the marketing mix

The country of Argonia and the country of Berylia imposed tariffs on imports from all countries. They set up a free trade area, removing all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Argonia now begins to import sugar from Berylia. Previously, Argonia was indigenously producing sugar at a higher cost. Thus, Argonia benefits from this transaction. This is known as:

A. trade creation

Which of the following statements is true about minimum efficient scale of output?

An advantage of a low minimum efficient scale is that it allows the firm to accommodate demands for local responsiveness.

Which of the following statements and legal regulations lead companies to customize their marketing strategies, product features, and operating practices to best match conditions in a particular country

As rival global firms follow each other across countries, they bring with them their brand names, products, and marketing strategies from the national markets, thus creating homogeneity across markets

Which of the following refers to carry trade?

Borrowing in one currency where interest rates are low and then using the proceeds to invest in another currency where interest rates are high

How are spot exchange rates determined?

By the interaction between demand and supply of a currency relative to other currencies

A second strategic objective shared by production and supply chain management is to increase product quality. In this context, quality means:

C. reliability.

Countertrade is most likely to be used when:

C. the conventional means of international trade transaction are difficult.

Which of the following best exemplifies foreign direct investment (FDI)?

Chivalry, a US based phone manufacturing company has set up its own assemble plant in Japan to cater to the needs of the Asian Market

In the country of Normian Republic, an individual's right to own land is restricted to a large extent on the basis that it runs counter to the common good. In this context which of the following is most likely to be the political system adopted by Normian Republic?

Collectivism

Suppose the country of Ceria and Lithinia imposed tariffs on imports from all countries, and then they set up a free trade area, scrapping all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Now, Ceria begins to import sugar from Lithinia. However, Ceria had previously been importing sugar from another country, Cadnia, which produced sugar more cheaply than Ceria or Lithinia. This is known as:

D. trade diversion

Which of the following best illustrates the globalization of production?

Daily Diamonds inc. buys diamonds from South Africa and Exports them to India for the cutting process

Which of the following factors constrains the globalization of markets?

Differences in technical standards

Which of the following is a macro factor underlying the trend toward greater globalization?

Dramatic Developments in information processing and other technologies

Which of the following states that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI, and it also requires the firm to establish production facilities where those foreign assets or resource endowments are located?

Eclectic paradigm

Lamboria Republic is facing a high rate of inflation, and the government debt in the country is also high. As a result, the country's business environment is beginning to deteriorate, and the profits of the business enterprises are hurt. According to this information, Lamboria Republic is facing which of the following type of risk?

Economic

Which of the following is most likely to prove detrimental to democracy and international business?

Emergence of increasingly prosperous middle and working classes

The pragmatic nationalist view is that:

FDI has both benefits and costs.

Which of the following staffing policies seeks the best people for key jobs throughout the organization, regardless of nationality?

Geocentric

Which of the following refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors such as labor, energy, land and capital?

Globalization of Production

West Electronic sources goods and services for its electronic products from the different locations around the globe in an attempt to take advantage of differences in the cost and quality of labor and land. This practice demonstrates the:

Globalization of production

In the context of individualism, which of the following is inconsistent with the works of the ancient Greek philosopher Aristotle?

Government dictating what is in the best interest of society

Which of the following is true of international firms considering foreign expansion?

If the firm's core competence is based on proprietary technology, entering a joint venture might risk losing control of that technology to the joint-venture partner.

Which of the following is a characteristic of a time draft?

It is a negotiable instrument.

Which of the following is true of a transnational strategy?

It is used by firms that try to achieve low costs through location economies, economies of scale, and learning effects.

Which of the following is an implication of a currency crisis?

It results in the government sharply increasing interest rates to defend the prevailing exchange rate.

If a company were to draw from the ideas proposed in the various theories of international trade, from a profit perspective, how would it go about selecting locations for its businesses?

It would disperse its productive activities to those countries where they can be performed most efficiently.

Axiom International, an Australian company, wants to expand its operations to China, a country that is politically, culturally, and economically different. The firm needs to select a mode of entry that would give it access to local knowledge, allow sharing of development costs and risks, and also be politically acceptable. Which of the following modes of entry into foreign markets is most suitable for Axiom International?

Joint venture

Which of the following statements is true about performing a manufacturing activity in several locations at once

Many firms disperse their manufacturing plants to different locations as a "real hedge" against potentially adverse moves in currencies.

The Republic of Argonia, owing to its vast resources of arable land and fresh water, is an agrarian nation. It exports agricultural products and in turn imports products that it does not produce such as oil, machinery, computers, and electronic devices. The result is that it spends more on imports than it gains from exports. Which of the following theories prohibits such international trade?

Mercantilism

The Bolivian government took sea lion Inc. a domestic private shipbuilding firm, into state ownership to save the company from bankruptcy. However the other private competitors in the shipbuilding industry were enraged by this decisions of the government. As a result, the government had to reduce the tax burden on all private shipbuilding firms so that both the state-owned enterprise and private firms could co-exist. According to this information, Bolivia has most likely adopted what type of economy?

Mixed

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?

Moral hazard

Australia is a major producer of agricultural and dairy products and exports coffee, tea, spices, and milk products to the United States. United States is the world's third largest supplier of machinery and exports heavy machinery to Australia. What explains the trade equation between Australia and the United States?

Nations with an absolute advantage in producing certain goods trade them for goods produced by other countries

Which of the following is most likely to be considered unethical?

Orion Inc. sends its waste products for disposal to a developing nation because the pollution control laws in its home country are much more strict than those in the developing nation.

The value of a product to an average consumer is V, the average price that the firm can charge a consumer for that product is P, and the average unit cost of producing that product is C. For this scenario, which of the following is true?

The consumer surplus per unit is equal to V - P.

Assume that the dollar is selling at a premium on the 30-day dollar/euro forward market. Which of the following is true of the foreign exchange dealers' market's expectations about the dollar over the next 30 days?

The dollar will appreciate against the euro.

What is meant by arbitrage?

The purchase of securities in one market for immediate resale in another to profit from a price discrepancy

Which of the following refers to currency speculation?

The short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates

The currency of the country of Venadia falls sharply in value against the currency of Lutetia, a neighboring country. Which of the following is a consequence of this exchange rate movement?

Venadia's exports to Lutetia will increase, because Venadian goods will become cheaper in Lutetia.

Consider two countries Daria and Atlantis. Daria is a major producer of wheat and rice while Atlantis specializes in the production of fertilizers and manufacturing equipment. Engaging in free trade benefits both countries since Daria is an agrarian nation and Atlantis lacks arable land. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it. Which of the following is an inaccurate assumption on which this conclusion is based?

We have assumed a simple world in which there are only two countries.

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?

Wholly owned subsidiary

Davis is the manager of a pharmaceutical manufacturing facility in a developing country. The manufacturing unit does not meet the acceptable standards of the manufacturing facility in the home nation. He knows that demanding a better manufacturing unit will raise the cost of the drugs mainly exported to other less developed countries, and hence its price. But he also realizes that by not demanding a better unit, the employees are prone to serious health issues. Davis is facing:

an ethical dilemma.

If a firm is unable to keep its national markets separate, individuals or businesses may undercut its attempt at price discrimination by engaging in:

arbitrage.

In terms of using a third party in international trade, title to the products is given to a bank by the exporter in the form of a document known as a:

bill of lading.

In the country of Burnada, the citizens are restricted from moving out of the strata they are born into. Also, individuals are allowed to engage only in the occupation associated with their particular strata. The system of social stratification being practiced in Burnada can be identified as a:

caste system

According to internalization theory:

censing may result in a firm's giving away valuable technological know-how to a potential foreign competitor.

A firm maximizes its profitability when it:

configures its internal operations to support the position selected by it on the efficiency frontier.

The norms and value systems of an organization constitute its:

corporate culture.

When Shop Smart opened its first super market in China it was unable to generate any sales. After conducting a research, it was understood that the local sales personnel found it difficult to communicate with the American store managers. In addition, Chinese consumers found it difficult to shop in the American way. Shop Smart's failure in China can be attributed to the lack of:

cross-cultural literacy

Green Quantum Inc. has research and production units all across the globe. The company expects its expatriate managers to adopt the ethics propagated by the culture in which they operate their respective units. Even in situations when others consider certain actions as unethical, the company allows its managers to pursue such actions if they are permitted in the host nation. Green Quantum is most likely following:

cultural relativism.

The United National of Zorwaya has strict restrictions on direct investment by foreign enterprises, and it opposes the establishment and operation of private enterprises. the highest authority in the country enforces tight control over prices and production output. According to this information, the United Nation of Zorwaya most likely opposes:

deregulation

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:

disperse production to different locations around the globe.

Dumping involves foreign producers:

eliminating competition by subsidizing prices in a foreign market with home market profits and eventually raising prices to earn substantial profits.

The probability of survival for an international business increases if it:

enters a national market after several other foreign firms have already done so.

Without currency devaluation, a country in "fundamental disequilibrium" would experience:

high unemployment.

In comparison to a floating exchange rate regime, a fixed exchange rate system is characterized by:

higher monetary discipline.

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:

immoral

The law of one price states that:

in competitive markets free of transportation costs and trade barriers, identical products sold in different countries must sell for the same price when their price is expressed in terms of the same currency.

The Cedian Government believes that its citizens should have complete freedom in their economic and political pursuits and the Median ideology is private profit over public good. In this context it can be said that Cedia most likely followings the philosophy of:

individualism

Yuriko, a citizen of Japan, was working as a manager in the Japanese branch of an American firm. Due to her efficiency, she was assigned a temporary posting at the headquarters of the firm in America. In this situation, she is known as a(n):

inpatriate.

In the context of "knowledge" economy of the twenty-first century, which of the following statements is true about intellectual property?

intellectual property has become an increasingly important source of economic value for businesses

A critical competitive feature of an oligopoly is the:

interdependence of the major players.

Michelle, an Italian fashion designer, sells her merchandise by exporting them to the US, UK and Brazil. According to this information, Michelle is most likely involved in:

international trade

A key advantage of adopting the euro is that it:

lowers foreign exchange and hedging costs in Europe.

Uniway Technologies Inc. has based its manufacturing units in the country of Lanthania. The country's stable economic and political environment has helped the firm gain competitive advantage by lowering its production costs and improving product quality. Other things being equal, the benefits realized from such a strategy can be typically referred to as:

location economies.

Firms that emphasize global standardization try to create value by:

realizing experience curve and location economies.

A firm that enters many markets at once:

runs the risk of spreading its limited management resources too thin.

Automobile companies promote different car models in different countries spending on a range of factors such as demographics, local taste, local feel costs, income levels, traffic congestion, and cultural values. This most likely demonstrates that:

significant differences still exist among national markets

Which of the following is a dimension of social structure that is particularly important when explaining differences between cultures?

the degree to which the society is stratified into classes or castes

Collectivist-inclined totalitarian states tend to enact laws that severely restrict private enterprises, whereas the laws enacted by governments in democratic states, where individualism is the dominant political philosophy, tend to be pro-private enterprise and pro-consumer. This indicates that the:

the legal framework of a country reflects the rulers' dominant political ideology

A firm will favor FDI over exporting as an entry strategy when:

the transportation costs or trade barriers are high.

As a result of consumer surplus, a firm typically charges a lower price for a good or service than the value placed on it by customers because:

the value creation results in a corresponding reduction in costs of production.

Spring, an American firm, recently acquired another company, Tazel Inc., in Indonesia. The high-level managers at Tazel quit because they could not cope with the domineering and straightforward approach of their American counterparts. This illustrates how acquisitions may fail because:

there is a clash between the cultures of the acquired and the acquiring firm.

Managers at the Blue Dragon Inc., an international company with operations in China and the United States, are often heard complaining about the difficulties in achieving synergy and cooperation between the employees of both the countries. On extensive research it was concluded that the cultural differences between these countries, which resulted in different work-related values, caused the lack of cooperation. In order to effectively tackle this problem, Blue Dragon Inc. should:

vary its management processes and practices to account for these differences

When a time draft is presented to a drawee, he or she signifies acceptance of it by:

writing or stamping a notice of acceptance on its face.