BA 347 - International Business

Which of the following characterizes an MNE from a non-MNE?

It enjoys OLI advantages.

Which of the following statements is true of exporting?

It helps a firm achieve economies of scale.

Which of the following is a major advantage of using a letter of credit?

It helps international traders engage in trade with trust.

Investors can reduce the level of risk by diversifying a portfolio internationally.

True

Concentration of production is appropriate when _____.

the product serves universal needs

In a pure market economy:

production is determined by the interaction of supply and demand

In right-wing totalitarianism, the leaders govern according to religious principles.

False

Location-specific advantages never change and only tend to grow.

False

Specific tariffs are levied as a proportion of the value of the imported good.

False

Supraorganizations, such as the United Nations, maintain certain powers over every country in the world.

False

The Foreign Credit Insurance Association does not provide coverage against political risks faced by exporters.

False

Which of the following is a consequence of globalization?

Increasing Outsourcing of services

in 2009, Hewlett-Packard held ___________ in the United States

$800 Million

Which of the following are some of the variants of countertrade?

- barter - counter purchase - switch trading

export.gov provides US companies with the market intelligence, practical advice, and business tools to understand

- how to export - how to connect with foreign buyers - how to expand operations in new markets

The advantages of foreign direct investment for a country include

- increased employment - increased education and training - lower prices in market place

The focus of a fundamental trader is(are) on

- key economic data releases - major political/economic events - news flow

Today's exchange rate system include the following:

- some countries have managed float - some countries, particularly smaller countries, peg the value of their currency to that of a larger country - some countries peg the value of their currencies to a basket of currencies

An Italian corporation issues a bond denominated in dollars. This is an example of a ____.

Eurobond

The _____ is responsible for proposing EU legislation, implementing it, and monitoring compliance with EU laws by member states.

European Commission

Which of the following is a drawback of the Eurocurrency market?

Exposure to foreign exchange risk

Which of the following has enabled globalization of markets?

Falling barriers to cross border trade

"Grease money" is money used to obtain business that would not have otherwise been obtained.

False

A buyback occurs when a direct exchange of goods or services occur between two parties without a cash transaction.

False

A class system is a rigid form of social stratification in which the position a person has by birth cannot be changed through his/her own achievements or luck

False

A common market entails even closer economic integration and cooperation than an economic union.

False

A country's overall Ease of Doing Business ranking by the World Bank is more important than its ranking in any particular criteria (i.e. Starting a business).

False

A currency crisis occurs when investors lose confidence in a country's banking system.

False

A disadvantage of licensing is high development costs.

False

A firm that exports or imports, with or without FDI, is regarded as an MNE.

False

According to the stage model, firms will enter culturally distant countries for their first internationalization.

False

Advocates of fixed exchange rates, use the monetary autonomy argument.

False

Organizations are under pressure to produce products in the optimal location and to serve the world market from there if their products have low value-to-weight ratios.

False

Porter's theory of national competitive advantage recommends unrestricted free trade between countries.

False

Shiite Muslims believed that the successor of Muhammad should be the most able and pious.

False

Smith and Ricardo essentially have the same international trade theories, just worded differently and developed at different times.

False

The River Thames divides the north and south sectors of Paris.

False

The United Nations Conference against Corruption is not a legally binding instrument.

False

The WTO has the ability to force any member nation to take an action to which it is opposed

False

The World Trade Organization (WTO) eventually evolved into the General Agreement on Tariffs and Trade (GATT).

False

The basic principles of Judaism, Christianity, and Islam have nothing in common.

False

The central message of collectivism is that individual economic and political freedoms are the ground rules on which a society should be based

False

The cost of capital is higher in a global market than in a purely domestic capital market.

False

The evaluation of a subsidiary should not be separate from the evaluation of its manager.

False

The global product division structure organizes the MNE according to different geographic areas.

False

The price at which goods and services are transferred between subsidiary companies in a multi-national firm is referred to as minimum retail price.

False

The production possibility frontier will be parabolic if constant return to specialization is observed.

False

The resource-based view suggests that firms need to take actions deemed legitimate and appropriate by the various formal and informal institutions governing market entries.

False

The study of international business is fine if you are going to work in a large multinational enterprise, but it has no relevance for individuals who are going to work in small firms.

False

The task of a manager of a foreign subsidiary of a US company is to impose the company's culture in the subsidiary.

False

The transnational strategy is usually the easiest strategy for an MNE to implement and the first one adopted when the firm ventures abroad.

False

The value systems and norms of a country are unrelated to the costs of doing business in that country

False

Theocratic totalitarianism always requires the backing of a prominent religious group (i.e. Christians, Muslims, Catholics, etc.)

False

There is no evidence that psychological factors play an important role in determining the expectations of market traders as to likely future exchange rates.

False

Those who oppose financial globalization or global capital markets argue that the increased diversification in financial markets do not really reduce risks in financial markets.

False

Time drafts cannot be sold to investors at a discount from its face value.

False

Turnkey projects cannot be established without FDI.

False

Under the Heckscher-Ohlin Theory, if Country A has a greater amount of land than Country B, then it should export goods that utilize that resource (such as crops) to Country B, regardless of whether Country A has more abundant resources than land.

False

Unlike other trade policies, local content regulations tend to benefit consumers and not producers.

False

Using floating exchange rates will help countries reduce the risk of investing in foreign assets

False

Which of the following strategies is often known as "international strategy"?

Home replication

Which of the following strategies is usually the first one adopted when firms venture abroad?

Home replication strategy

Which of the following is a direct consequence of the interdependence between firms in an oligopoly?

Imitative behavior

Which of the following statements about mores is true?

In many societies, certain mores have been enacted into law

Which of the following statements concerning a voluntary export restraint is NOT true?

In most cases, it benefits consumers.

_____ is the most common method by which firms transfer funds from foreign subsidiaries to the parent company.

Payment of dividends

Which of the following is an example of tacit knowledge?

Performing surgery

Which of the following products will most likely have high value-to-weight ratios?

Pharmaceuticals

Which of the following statements is true of export credit insurance?

The FCIA provides coverage against commercial risks and political risks.

A pair of shoes costs £40 in Britain. An identical pair costs $50 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.

Phil Knight decided to produce his shoes in foreign countries and import them back into the US for all of the following reasons, EXCEPT:

The US had unreasonably strict labor laws that prevented NIKE from producing the desired level of output

According to the "flat world" view, all of the following helped contribute to the flat modern world, EXCEPT:

The convergence of cultures across national borders

If the demand for dollars outstrips its supply and if the supply of Japanese yen is greater than the demand for it, what will happen?

The dollar will appreciate against the yen

A comparative advantage in labor allows developing countries to grow their economies through job assignments from multinationals.

True

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

A country with a high level of corruption will generally result in lower returns on investments in that country, as opposed to a country with a very low level of corruption.

True

A currency board system limits the ability of the government to print money and, thereby, create inflationary pressures.

True

A firm's ability to establish a centralized depository that can serve short-term cash needs might be limited by government-imposed restrictions on capital flows across borders.

True

A fronting loan is a loan between a parent and its subsidiary channeled through a financial intermediary.

True

A global matrix structure alleviates the disadvantages associated with both geographic area and global product division structures.

True

A key benefit resulting from the adoption of the euro is the ability to compare prices across member markets.

True

A major impediment to economic integration is the loss of sovereignty it entails.

True

A regional free trade agreement will benefit the world only when the amount of trade it creates exceeds the amount of trade it diverts.

True

According to the article, Of Two Minds, researchers have found that sometimes making decisions in a foreign language is actually better.

True

Adam Smith argued that countries should specialize in the production of goods for which they have an absolute advantage.

True

Advocates of a floating exchange rate regime argue that removal of the obligation to maintain exchange rate parity would restore monetary control to a government.

True

An Export Management Company functions in a foreign market just as a sales representative or exclusive wholesaler functions in the US market.

True

Arbitrage in the foreign exchange market involve the purchase of a currency in one market and simultaneously selling it in another, profiting from a temporary difference.

True

Banks charge borrowers a lower interest rate on Eurocurrency borrowings than for borrowings in the home currency.

True

Common law systems allow for a greater degree of flexibility than other legal systems.

True

Countries that require substantial loans from the IMF to survive will endure a sharp contraction of demand in the short term due to IMF-mandated economic policies.

True

Cultures in the modern age are minimally influenced by geographic and political borders and in no way defined by their geographic and political borders.

True

Current trends indicate the world is moving toward an economic system that is more favorable for international business.

True

Decentralization of production is appropriate when the product does not serve universal needs.

True

Differences between countries in a globalized world require an international business vary its practices country by country.

True

Domestic currency deposits are regulated in most industrialized countries.

True

Education plays an important role, from an international business perspective, as a determinant of national competitive advantage

True

Export tariffs are far less common than import tariffs.

True

Exporters often face voluminous paperwork and complex formalities.

True

Externally, MNEs are subject to the formal institutional frameworks erected by various home-country and host-country governments.

True

Foreign borrowers can avail loans from Ex-Im Bank to pay U.S. suppliers.

True

Free trade refers to a situation where a government does not attempt to influence through quotas or duties what its citizens can buy from another country.

True

Globalization critics argue that the decline in unskilled wage rates is due to the migration of low-wage manufacturing jobs offshore and a corresponding reduction in demand for unskilled workers.

True

Guanxi is an important mechanism for building long-term business relationships and getting business done in China

True

Heckscher-Ohlin theory supports the case for unrestricted free trade between nations.

True

Hedge funds position themselves to make "long bets" on assets that they think will increase in value.

True

Hiring an EMC will help a novice exporter identify opportunities and navigate the paperwork involved in exporting.

True

Human rights activists see WTO rules as outlawing the ability of nations to stop imports from countries where child labor is used or working conditions are hazardous.

True

If the law of one price were true for all goods and services, the purchasing power parity (PPP) exchange rate could be found from any individual set of prices.

True

In MNEs adopting the home replication strategy, knowledge is developed at the center and transferred to subsidiaries.

True

In an individualist society, the welfare of society is best served by letting people pursue their own economic self-interest.

True

In command economies, the government has the ability to control the production and output of most goods and services.

True

It is possible to have a democratic political system that emphasizes a mix of collectivism and individualism

True

Lack of knowledge of opportunities available is one of the biggest impediments to a company becoming a successful exporter.

True

Local content regulations provide protection for a domestic producer of parts by limiting foreign competition.

True

Low power distance would mean that society plays down the physical and intellectual inequalities between citizens

True

Lowering the costs is one of the objectives of the production and logistics function of an international firm.

True

MNEs that engage in a transnational strategy promote global learning.

True

Making all or part of a product in-house is beneficial when the firm intends to build valuable capabilities over time.

True

Many firms of all national origins increasingly depend on globally dispersed production systems for their competitive advantage.

True

Many firms phase out the international division structure after their initial stage of overseas expansion.

True

Modern consumer products such as personal computers serve universal needs.

True

Mores are norms that are seen as central to the functioning of a society and to it social life.

True

Nearly every major economy on earth is integrated with one another in some form or another.

True

On average, studies indicate that NAFTA's overall impact has been small but positive

True

One international trade theory is not sufficient to cover the different realities across different countries.

True

One of the late-mover disadvantages is the establishment of entry barriers by the first-mover.

True

Opponents of financial globalization (or global capital markets) argue that sudden capital flows in and out of a country can wreck its economy

True

Strategic alliances build trust between the firm and its suppliers.

True

Strategic goals and cultural and institutional distances influence the location of foreign entries.

True

The Heckscher-Ohlin theory argues that the pattern of international trade is determined by differences in factor endowments.

True

The convergence hypothesis states that there is a slow but steady merging occurring across different cultures towards some universally accepted values and norms

True

The fixed exchange rate system established at Bretton Woods failed due to speculative pressures on the U.S. dollar.

True

The forward exchange market does not provide adequate coverage for long-term borrowings.

True

The global standardization strategy lacks local responsiveness.

True

The governments of some countries require or prefer foreign multinationals to finance projects in their country by local debt financing or local sales of equity.

True

The integration-responsiveness framework allows managers to deal with the pressures for both global integration and local responsiveness.

True

The main tenet of mercantilism was that it was in a country's best interest to maintain a trade surplus.

True

The parties to an agreement normally resort to contract law when one party feels the other has violated either the letter or the spirit of an agreement

True

The performance of international subsidiaries will be affected by the transfer price policies set-up by the corporate.

True

The simple comparative advantage model assumed that trade does not change a country's stock of resources or the efficiency with which it utilizes those resources.

True

The theory of comparative advantage functions on the principle that the relative cost of production of Widget A is cheaper in Country A than in Country B, even though Country B can produce more of Widget A. Conversely, Country B can produce Widget B at a relatively lower cost than Country A; Country B can also produce more of Widget B than Country A. Because of this, Country A should produce Widget A and Country B should produce Widget B.

True

The trade diversion effects of Mercosur outweigh its trade creation effects.

True

The two most common methods of restricting inward FDI are ownership restraints and performance requirements.

True

Understanding the culture a business is practicing in will allow managers to communicate more efficiently and properly, spot opportunities and threats faster, and even influence the culture.

True

When two parties agree to exchange currency and execute the deal at some specific time in the future, a forward exchange occurs.

True

While a letter of credit can be effective in mitigating the commercial and financial risks of trading internationally, it can be quite complex.

True

According to Hofstede, the ____ dimension indicates a society's tolerance for unstructured situations.

Uncertain avoidance

United States had large and growing trade deficit between 1980 and 1985. Despite this, the value of U.S. dollar rose during this period. Which of the following is a factor that caused this occurrence?

United States attracted heavy inflows of capital from foreign investors during this period.

Which of the following explains why economic integration has never been easy to achieve or sustain, despite the strong economic and political arguments in support?

While a nation as a whole may benefit significantly, certain groups may lose.

From least integrated to most integrated, the levels of economic integration are:

a free trade area, a customs union, a common market, an economic union, and a political union.

A greenfield operation refers to _____.

a wholly owned subsidiary created by building a new factory and offices from scratch

Just-in-time inventory systems _____.

economize on inventory holding costs

The distinction between _____ is what defines an MNE from a firm that merely exports or imports.

equity and non-equity modes of entry

The TRIPS regulations established at the 1995 Uruguay Round:

established regulations on patents and copyrights.

The infant industry argument is criticized because it relies on an assumption that:

firms are unable to make efficient long-term investments by borrowing money from the domestic or international capital market.

Company A entered the production of office software before its competitors. Because of this, the company's products are more familiar among and favored by customers. This situation exemplifies the ____.

first-mover advantage

After World War II, the world's major industrial nations arranged their currencies against each other at a mutually agreed on exchange rate. This is an example of a _____ system.

fixed exchange rate

A pegged exchange rate means that the value of a currency is ____.

fixed relative to a reference currency

A(n) _____ is a grouping of various types of machinery, a common materials handler, and a centralized cell controller.

flexible machine cell

The _____ of FDI refers to the amount of FDI undertaken over a year.

flow

When value of U.S. dollars goes down, ____.

foreign borrowers will garner benefits

Mercosur originated as a(n) _____ between Brazil and Argentina in 1988.

free trade pact

The _____ structure is appropriate for a localization strategy.

geographic area

In the context of the customer-focused dimension of a global matrix, the _____ structure supplies customers in a coordinated and consistent way across various countries.

global account

The hallmark of the _____ structure is the coordination of responsibilities between product divisions and geographic areas.

global matrix

The _____ strategy focuses on development and distribution of standardized products worldwide to reap maximum benefits from low-cost advantages.

global standardization

The global product division structure supports the _____ strategy.

global standardization

Under a currency board system, ____.

government lacks the ability to set interest rates

As a receipt, the bill of lading indicates that the carrier ____.

has obtained the merchandise described on the face of the document

In a typical international trade transaction, the ____.

importer's bank sends a letter of credit to the exporter's bank

According to Lessard-Lorange model, the _____ rate refers to the spot exchange rate when the budget is adopted.

initial

The Six Sigma methodology _____.

is a direct descendant of the total quality management philosophy

In countries such as the United States and Britain, firms typically raised capital by _____.

issuing stock or bonds to investors

Contracting out manufacturing allows companies to reduce economic exposure because ____.

it allows companies to shift suppliers from country to country

A political benefit of economic integration is that:

it reduces the potential for violent conflict.

Banks offer higher interest rates on Eurocurrency deposits than on deposits made in the home currency because Eurocurrency deposits ____.

lack government regulations

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

law of one price

Specific tariffs are:

levied as a fixed charge for each unit of a good imported.

Tariff rate quotas are common in agriculture, where their goal is to:

limit imports over quota.

According to ____, some specific fraction of a good must be produced domestically.

local content requirements

Advantages that arise from using resource endowments or assets that are tied to a particular place and that a firm finds valuable to combine with its own unique assets are known as:

location-specific advantages.

The WTO argues that removing tariff barriers and subsidies in the agricultural sector could:

lower prices to consumers.

Central to the concept of economies of scale is the idea that the best way to achieve high efficiency, and hence low unit costs, is through the _____.

mass production of a standardized output

FDI undertaken to serve the home market is known as:

offshore production.

When using the Euromarkets, companies ____.

pay less for the loans

As investors increase the number of stocks in their portfolio, the portfolio's risk ____.

declines rapidly in the beginning

When a company's product has a low value-to-weight ratio, the company should _____.

produce the product in multiple locations close to major markets

Of the five combinations, Lessard and Lorange recommend that firms use the _____ spot exchange rate to translate both the budget and performance figures into the corporate currency.

projected

The World Bank was established at the at Bretton Woods conference to ____.

promote general economic development

Multilateral netting is used majorly to _____.

reduce the number of transactions between subsidiaries

Import tariffs:

reduce the overall efficiency of the world economy.

After the Uruguay Round of GATT extended global trading rules to cover trade in services, the first two industries targeted for reform by the WTO were:

telecommunications and financial services.

An advantage of buying component parts, or even an entire product, from independent suppliers is that _____.

the firm can maintain its flexibility by switching orders according to circumstances

Most international businesses require all budgets and performance data within the firm to be expressed in the "corporate currency," which is normally _____.

the home country currency

A country is said to be in balance-of-trade equilibrium when ____.

the income its residents earn from exports is equal to the money its residents pay for imports

Mores are:

the norms that are seen as central to the functioning of a society and its social life

The country-of-origin effect refers to _____.

the positive or negative perception of firms and products from a certain country

The individualism versus collectivism dimension of Hofstede's study explored:

the relationship between the individual and his/her fellows

Natural resource-seeking firms have compelling reasons to enter culturally and institutionally distant countries. This is a counter example of _____.

the stage model

The stock of FDI is:

the total accumulated value of foreign-owned assets at a given time.

Foreign producers typically agree to voluntary export restrictions because:

they fear far more damaging punitive tariffs or import quotas might follow if they do not.

Hofstede's uncertainty avoidance dimension considered:

the extent to which different cultures socialized their members into accepting ambiguous

A(n) _____ is a non-equity mode of entry used to build a longer-term presence by building and then operating a facility for a period of time before transferring operations to a domestic agency or firm.

BOT agreement

_____ is the direct exchange of goods and/or services between two parties without a cash transaction and is the simplest arrangement.

Barter

Why is it said that not all the new jobs created by FDI represent net additions in employment?

Because jobs created by an investment may be offset by the jobs lost in domestic companies

Which of the following is a reason why Turkey is not yet a member of the EU?

Because of concerns over human rights issues in the country.

A(n) _____ occurs when 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.

Buyback

How is the adverse effect of the balance of payments for the home country due to an FDI usually offset?

By the subsequent inflow of foreign earnings

A key issue in the "millennium round" of the WTO was to increase barriers to cross-border trade in agricultural products.

False

A letter of credit states that an exporter has availed credit from the bank to manufacture goods.

False

A nation's legal system is usually of very little interest to international business managers, because international businesses are headquartered in different countries

False

A tax haven is a country that gives income tax exemptions to firms that export all or part of its products.

False

A trade surplus within a country means that country imports more than it exports.

False

All US multinational companies first produce and sell their products in the US before exporting

False

All of Apple's supply chain activities are performed, at least in part, in foreign countries.

False

Although a foreign exchange transaction can involve any two currencies, most transactions involve pounds on one side.

False

Cash flows through tax havens are usually illicit.

False

Companies that trade small volumes of product can benefit from economies of scale.

False

Deming, the proponent of total quality management, suggested that management shouldn't attempt to train employees in new skills.

False

Direct effects of FDI arise when jobs are created in local suppliers as a result of the FDI and when jobs are created because of increased local spending by employees of the MNE.

False

Entering into a forward contract will lower the borrower's cost of capital.

False

Equity modes tend to reflect relatively smaller commitments to overseas markets, whereas non-equity modes are indicative of relatively larger, harder-to-reverse commitments.

False

FDI has been declining in the last few decades because protectionist pressures have become less intense.

False

Globalization has hindered the development of NGO's.

False

Governments normally are concerned when their country is running a surplus on the current account of their balance of payments.

False

Hofstede's dimension of power distance refers to how strongly gender roles are defined in a society.

False

In the McKinsey Global Survey, the report from executives representing North American companies indicated that they were developing new business models at a higher rate than companies in other regions.

False

Industrial parks refer to the clustering of economic activities in certain locations.

False

The governments of both Canada and the United States are keen on adding other Latin American countries to NAFTA.

False

The impact of currency exchange rates on the reported financial statements of a company is called economic exposure.

False

The internet is not one of the factors that contributed to increasing globalization.

False

The movement toward regional economic integration has been most successful in Asia.

False

The payment of dividends is an uncommon method of transferring funds from foreign subsidiaries to the parent company.

False

The product life-cycle theory is just as relevant today as it was in the 1960's.

False

A United States company sells bonds that are denominated in dollars in Europe. This is an example of a _____ bond.

Foreign

Which of the following is a disadvantage of global capital market?

Foreign investments may be driven by speculative flows in the market.

The theory of comparative advantage provides strong rationale for supporting the idea of ____.

Free trade

MNEs adopting the _____ strategy may designate centers of excellence.

Global

Which of the following is an advantage that banks have when they deal with foreign currencies?

Governments give banks more freedom when dealing with foreign currencies.

Which of the following is the reason why the current foreign-exchange system are sometimes thought of as a managed-float system?

Governments intervene frequently in the foreign exchange market.

Which of the following summarizes the total amount of resources invested in factories, stores, office buildings, and the like?

Gross fixed capital formation

A French wind power company gives an Indonesian company the right to produce and sell wind turbines in return for a royalty fee on every unit sold. Which business practice is this an example of?

Licensing

Which of the following entry modes is a type of strategic alliance?

Licensing

In the LLL framework, _____ refers to an emerging MNE's ability to identify and bridge gaps in its market.

Linkage

Which of the following strategies has the lowest interdependence on knowledge management?

Localization strategy

Which of the following is seen as a benefit of the euro?

Lower foreign exchange and hedging costs

Which of the following is a reason for the pressure for greater protectionism that occurred during the 1980s and early 1990s?

Many countries found ways to get around GATT regulations.

_____ refers to the amount of resources committed to entering a foreign market.

Scale of entry

A financial crisis in a country can be made worse when foreign funds intended for speculative or short-term securities flee to safe havens. They do this by ___________.

Selling their securities and converting their local currency to dollars or other currencies

In the Lessard and Lorange model, when firms use the projected spot exchange rate to translate both the budget and performance figures into the corporate currency, the projected rate will typically be the forward exchange rate as determined by the foreign exchange market.

True

According to Edward T. Hall, the difference between a high context and a low context culture lies in how a message is communicated.

True

An example of countertrade is when USSR paid Coca-Cola in vodka.

True

Anti-dumping charges in the US must be filed by an industry with the Department of Commerce and the International Trade Commission.

True

Apple is able to secure lower priced inputs and, as a result, produced lower priced products for their consumers through outsourcing.

True

Because of financial globalization, or the existence of global capital markets, a Chinese individual can purchase Apple stocks.

True

By using the global capital market, investors have a much wider range of investment opportunities than in a purely domestic capital market.

True

Capital flight is most likely to occur when the value of the domestic currency is depreciating rapidly because of hyperinflation, or when a country's economic prospects are shaky in other respects.

True

Command economies are most frequently associated with totalitarian states.

True

Communists and social democrats both stemmed from the socialist ideology.

True

Countertrade is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.

True

Countries adopting a pragmatic stance pursue policies designed to maximize the national benefits and minimize the national costs.

True

Eurocurrency can be created anywhere in the world.

True

If the FDI is a substitute for imports of goods or services, the effect can be to improve the current account of the host country's balance of payments.

True

In the "World's Best Tax Havens" article, secrecy is the key that shields the identities of those making use of its flexible regulatory system.

True

In the Corruption Perception Index of 2016, not one country had a score of 100.

True

In the case of Five Rivers Electronics, an example of a successful anti-dumping complaint filed with the WTO, the company was the sole surviving American owned television manufacturer, and therefore it was the industry affected.

True

Indian social structure is an example of the caste system.

True

Management of MNE structure, learning, and innovation needs to take into account VRIO.

True

Offshore production can stimulate economic growth in the home country by freeing up resources to concentrate on activities where the home company has a comparative advantage

True

One of the goals of socialism is to ensure that workers are fully compensated for their labor.

True

Porter argues that a nation's firms gain competitive advantage if ____.

their domestic consumers are sophisticated and demanding

The problem of blocked earnings is not as serious now as it once was because _____.

there is greater acceptance of free market economics now

Organizations like the World Bank maintain and allow access to data on such measures as getting credit, dealing with construction permits, getting electricity, registering property, and so on

True

Other things being equal, a firm should locate its various manufacturing activities where the relative factor costs are conducive to the performance of those activities.

True

Other things being equal, the greater the capital investment in an economy, the more favorable its future growth prospects are likely to be.

True

Politicians like Bernie Sanders and Donald Trump agree that the shrinking middle class in America is caused, at least in part, by America's rampant free trade policy.

True

Primark, an Irish cheap fashion retailer, Marks and Spencer, a British chain, and Starbucks, an American coffee house, are some of the trending foreign brands in France.

True

Property rights refer to the legal rights over the use to which a resource is put and over the use made of any income that may be derived from that resource

True

Ricardo's theory of comparative advantage claims that both parties can benefit from trade, not just one or the other.

True

Right-wing totalitarian leaders are often backed by the military of the nation they lead.

True

Strategic trade policy suggests that a government should use subsidies to support promising firms that are active in newly emerging industries.

True

Systematic risk refers to the movements in a stock portfolio's value that are attributable to macroeconomic forces affecting all firms in an economy.

True

The Ancient Silk Road laid the groundwork for modern day exchange and globalization.

True

The Ancient Silk Road was very successful because people liked goods from other cultures at that time in history.

True

The European Parliament is primarily a consultative rather than legislative body.

True

The IMF and WB were intended to help the economic stability of the world.

True

The IMF and the World Bank were created after WWII to help maintain economic stability across different countries.

True

The PPP theory tells us that a country with a high inflation rate will see depreciation in its currency exchange rate.

True

The TRIPS regulations oblige WTO members to grant and enforce patents lasting at least 20 years and copyrights lasting 50 years.

True

The WTO is responsible for regulating trade among its member states. Its member states are responsible for 95% of world trade.

True

The World Trade Organization was created as part of the Uruguay Round.

True

The amount of FDI undertaken over a given time period is known as the flow of FDI

True

The article Is The World Turning Its Back on Free Trade? argues that many people are beginning to prefer fair trade over free trade.

True

The austerity measures imposed by the IMF and EU on Greece as they organized the debt bailout of the country angered the people.

True

The benefits of making all or part of a product in-house is minimal when highly specialized assets are involved.

True

The bulk of intra-ASEAN trade consisted of goods whose tariffs had been reduced through an ASEAN preferential trade arrangement.

True

The establishment of the euro required participating countries to give up their monetary policy.

True

The firm that improves its quality control will also reduce its costs of value creation.

True

The great virtue claimed for a pegged exchange rate is that it imposes monetary discipline on a country and leads to low inflation.

True

The home replication strategy duplicates home country-based competencies in foreign countries.

True

The implied loss of national sovereignty to the European Central Bank (ECB) underlies the decision by Great Britain, Denmark, and Sweden to stay out of the euro zone for now.

True

The preemption of scarce resources is a first-mover advantage.

True

The relationship between strategy and structure is reciprocal.

True

The risk that arises from volatile changes in exchange rates is known as foreign exchange risk.

True

The scale of entry refers to the amount of resources committed to entering a foreign market.

True

The share of US exports (relative to other countries) has decreased as a result of the evolution of the global economy.

True

When a bank is used as a third party in an international transaction, the bank promises to pay on behalf of the importer.

True

When trading according to the principles of absolute advantage, both countries should -in theory - be charged the lowest possible price for the products they purchase.

True

World Bank offers low-interest loans to risky customers whose credit rating is often poor.

True

When a company brings capital and/or technology to a host country, the host country benefits from the:

resource-transfer effect of FDI.

When an investor purchases a corporate bond, he purchases the right to receive a ____.

specified fixed stream of income from the corporation

The _____ is the rate at which a foreign exchange dealer converts one currency into another currency on a particular day.

spot exchange rate

A _____ between two countries is an agreement specifying what items of income will be taxed by the authorities of the country where the income is earned.

tax treaty

Bolivia, Peru, Ecuador, Columbia, and Venezuela are all members of:

the Andean Pact.

An advantage of joint ventures is _____.

the access to partners' assets

International businesses use foreign exchange markets for all of the following reasons except:

to cover themselves from all risks involved in currency speculation.

A German firm raising capital by selling stock through the London Stock Exchange is an example of _____.

transnational financing

According to the law of one price, if the exchange rate between the British pound and the dollar is £1 = $1.50, a shirt that retails for $120 in New York should sell for _____ in London.

£80

When an MNE is locally responsive, _____.

costs increase

Mergers and acquisitions are more common in developing countries than greenfield investments.

False

International investing brings the following risk(s):

-some countries may have a high risk of political and social instability, which could affect the value of investments in those markets -many countries lack the high standard for accounting and financial reporting, which could mean incomplete or inaccurate information -fluctuations in the value of the currency in the country where a company invests can add to the volatility of its investment

At Six Sigma, a production process would be highly accurate and create just _____.

3.4 defects per million units

The type/ of government in England is a

A constitutional monarchy

Which feature of a common market differentiates it from a customs union?

Ability of factors of production to move freely between members

Which of the following is an advantage of R&D contracts?

Ability to tap into the best, cost-effective locations

____ is the ability to recognize the value of new information, assimilate it, and apply it.

Absorptive capacity

An early example of international trade, Chinese silk eventually ended up in Rome ____.

After going through a series of intermediaries (i.e. Indians, Greeks, Arabs, etc.) who transported the product over land and water

_____ refers to the clustering of economic activities in certain locations.

Agglomeration

To properly define the forms and types of governments, it is important to determine

All of the above (How governments operate, how they are organized, who holds power)

UNCAC, the United Nations Convention against Corruption, ratified by 148 states in 2010, includes obligations by governments to

All of the above: - prevent corruption - cooperate internationally with other countries - criminalize corruption

Assume that the law of one price holds. A shirt that retails for $120 in New York sells for £60 in London. The exchange rate between the British pound and the dollar is £1 = $1.50. Assuming away transportation costs and trade barriers, this creates a profit-making opportunity called ____.

Arbitrage

Assume that the yen/dollar exchange rate quoted in Tokyo at 3:00 p.m. is ¥120 = $1, and the yen/dollar exchange rate quoted in New York at the same time is ¥123 = $1. A dealer in New York uses dollars to purchase yen and then immediately sells the yen to buy dollars in Tokyo, thereby making a profit. The dealer has engaged in a(n):

Arbitrage

Most of the loans issued by the IMF are unconditional loans.

False

In early 2006, six CARICOM members and the United States established the ____, which was modeled on the EU's single market.

Caribbean Single Market and Economy

A political system that prioritizes the needs of the society over individual freedoms is called ____

Collectivism

Which of the following provides exclusive legal rights to authors, composers, playwrights, artists, and publishers to publish and disperse their work as they see fit?

Copyrights

_____ denotes a whole range of barter-like agreements and its principle is to trade goods and services for other goods and services when they cannot be traded for money.

Countertrade

Which of the following is a major drawback of engaging in countertrade?

Countertrade may involve the exchange of unusable goods.

Country A can produce product X, but it can also buy it at a cheap rate from Country B. Which of the following courses of action is suitable in this situation according to Adam Smith's theory of absolute advantage?

Country A should import product X from country B and it should not attempt to produce it at home.

Which of the following statements is true of when the Gold standard was established prior to 1939?

Currencies were pegged to gold under the gold standard.

What are the two main functions of the foreign exchange market?

Currency conversion and providing some insurance against foreign exchange risk

Which of the following is seen to be a consequence of the size of the EU from 15 nations to 27 nations?

Delays in the decision-making processes

Which of the following factors hinders globalization of consumer goods market?

Differences in tastes and preferences across countries

_____ are the most basic non-equity mode of entry, capitalizing on economies of scale in production concentrated in the home country and providing better control over distribution.

Direct exports

Which of the following will help a company hedge against currency fluctuations?

Dispersing production to different geographic locations

Which of the following is a nationwide group of international trade attorneys who provide free initial consultations to miniature businesses on export-related matters?

ELAN

Which of the following is a disadvantage of comparing managers in different countries only on the basis of return on investment?

Environmental factors also contribute to ROI of firms and these factors differ.

Which of the following is true of modes of entry?

Equity modes are indicative of relatively larger, harder-to-reverse commitments.

Which of the following is a consequence of subsidies?

Subsidies protect inefficient domestic producers.

An importer obtains a letter of credit from a bank in the exporter's country in a typical international transaction.

False

As transportation costs or trade barriers increase, exporting becomes unprofitable, compared to FDI and licensing.

False

Because of the fact that everyone benefits from economic integration, it is easy to achieve and sustain.

False

Business firms that lobby their governments to engage in protectionism have an opportunity to build a competitive advantage by constructing a globally disperse production system.

False

Buying a product from external vendors is highly appropriate when a firm intends to protect proprietary technology.

False

Compared to major currencies, throughout the last couple of decades, the dollar remained stable.

False

Compliance to IASB standards is mandatory for countries to engage in international trade.

False

Cost pressures often push MNEs to adapt locally.

False

Cultural differences only result in threats to multinational companies.

False

Decentralization of production is appropriate when location externalities are important.

False

Ethical systems may be defined as a system of shared beliefs and rituals that are concerned with the realm of the sacred

False

FDI does not benefit the host country's balance of payments if the foreign subsidiary creates demand for home-country exports of capital equipment, intermediate goods, or complementary products to the host country.

False

Firms would prefer buying component parts, or an entire product, from independent suppliers to protect proprietary product technologies.

False

For the home country, the current account of the balance of payments improves if the purpose of the foreign investment is to serve the home market from a low-cost production location.

False

Global learning refers to the idea that valuable international knowledge does resides just in a firm's domestic operations.

False

Government limitations are more severe for securities denominated in foreign currencies than for domestic securities.

False

Governments allow convertibility to preserve their foreign exchange reserves.

False

Hofstede's study found that in masculine cultures, sex roles were less sharply distinguished, and little differentiation was made between men and women in the same job

False

If $1 bought more yen with a spot exchange than with a 30-day forward exchange it indicates the dollar is expected to depreciate against the yen in the next 30 days. When this occurs, we say the dollar is selling at a premium on the 30-day forward market.

False

If a country has an externally convertible currency, neither residents nor nonresidents are allowed to convert it into a foreign currency.

False

If the spot rate is $1 = ¥120, and the 30-day forward rate is $1 = ¥130, the dollar is selling at a discount in the forward market.

False

Implementing a fixed exchange rate regime increases the price inflation in countries.

False

In France, Malls containing foreign brands accounted for only 4.5% of total retail sales.

False

In a transnational strategy, the flow of knowledge is unidirectional.

False

In general, Saudi Arabian and Iranian Islamic beliefs are very similar.

False

In general, developing countries are falling farther behind developed countries in terms of output.

False

In the 1990s, most of the borrowing by the companies who invested in Asian countries had been in local currencies.

False

Innovation-seeking firms often single out the most efficient locations featuring a combination of scale of economies and low cost factors.

False

Innovations flow only from the host countries to the home country in a transnational strategy.

False

It is easy for a business to get adequate insurance coverage for exchange rate changes that might occur several years in the future

False

It is not legal to charge interest under Islamic laws therefore Islamic banks have a difficult time earning a profit.

False

It is uncommon for a parent company to charge its foreign subsidiaries royalties for the technology, patents, or trade names it has transferred to them.

False

Judges have more flexibility in a civil law system as they have the power to interpret the law so that it applies to unique circumstances.

False

Just-in-time systems reduce product quality although it brings about huge cost savings.

False

Liability of foreignness is the inherent disadvantage firms experience in home countries.

False

Licensing is usually a good option for firms in high-tech industries where protecting firm-specific expertise is of paramount importance.

False

The _____ states that for any two countries, the spot exchange rate should change in an equal amount but in the opposite direction to the difference in nominal interest rates between the two countries.

International Fisher Effect

Identify an advantage of adopting a low minimum efficient scale.

It allows the firm to accommodate demands for local responsiveness.

How does the NAFTA seem to increase the international competitiveness of U.S. and Canadian firms?

It allows them to take advantage of lower labor costs in Mexico.

Which of the following observations concerning Knickerbocker's theory is true?

It does not explain why the first firm in an oligopoly decides to undertake FDI rather than to export or license.

Which of the following is a major benefit of engaging in free trade?

It gives countries access to products that they cannot produce.

How has the adoption of just-in-time inventory systems, computer-aided design, and computer-aided manufacturing impact firms' associations with suppliers?

It has increased pressures to establish long-term relationships with suppliers.

Which of the following is a disadvantage of the home replication strategy?

It lacks local responsiveness.

A(n) _____ involves attempting to collect foreign currency receivables early when a foreign currency is expected to depreciate and paying foreign currency payables before they are due when a currency is expected to appreciate.

Lead strategy

_____ allows the company to produce a wider variety of end products at a unit cost that at one time could be achieved only through the mass production of a standardized output.

Lean production

Which of the following is a function of World Bank?

Lending money to governments for development

Globalization of markets results in markets becoming ____.

More independent

What is the term that describes when two or more enterprises encounter each other in different regional markets, national markets, or industries?

Multipoint competition

According to Lessard-Lorange model, the ending rate is the spot exchange rate:

NOT According to Lessard-Lorange model, the ending rate is the spot exchange rate:

The practice of Microsoft, for example, of transferring nearly half its net revenues from US retail sales to a Puerto Rican subsidiary and saving billions in US taxes is

NOT tax evasion

Which of the following theories stress the role of luck, entrepreneurship, and innovation in the production and export of a good or service by the firms in a country?

New trade theory

Social rules and guidelines that prescribe appropriate behavior in particular situations are best described as:

Norms

Which of the following is a reason why the European Union is considered an imperfect economic union?

Not all members of the union have adopted the euro.

____ innovation is the use of purposive inflows and outflows of knowledge to accelerate internal innovation and expand the markets for external use of innovation.

Open

Antitrust laws in the United States are designed to:

Outlaw monopolies

The _____ dimension of Hofstede's study explores how a society deals with the fact that people are unequal in physical and intellectual capabilities.

Power distance

Assuming the 30-day forward exchange rate were $1 = ¥130 and the spot exchange rate were $1 = ¥120, the dollar is selling at a _____ on the 30-day forward market.

Premium

In Russia in the chaotic period following the collapse of communism, an outdated legal system, coupled with a weak police force and judicial system, allowed the Russian Mafia to demand "protection money" from business owners. Any business owner who rebelled had to face violent retribution. This violation of property rights exemplifies ____

Private action

According to the _____ view of FDI, MNEs extract profits from the host country and take them to their home country, giving nothing of value to the host country in exchange.

Radical

Which of the following is NOT an impediment that makes it difficult for firms to achieve the optimal dispersion of their productive activities to locations around the globe?

Reduced formal and informal barriers to trade between countries

Which of the following products will have low value-to-weight ratios?

Refined sugar

Which of the following statements is true of the country factors that govern international

Relative factor costs should be considered when selecting a country for production.

The U.S. government has used the threat of punitive trade sanctions to try to get the Chinese government to enforce its intellectual property laws. This is an example of government intervention based on:

Retaliation

Through its _____ program, the SBA oversees about 850 volunteers with international trade experience to provide one-on-one counseling to active and new-to-export businesses.

SCORE

Which of the following is a disadvantage of the integration facilitated by technology?

Shocks that occur in one financial center will spread globally.

RSA is a bicycle manufacturing company. Which of the following is a make-or-buy decision that the company will have to make?

Should the company outsource production of its bicycle frame to a low-cost vendor?

Why is the European Council said to be the ultimate controlling authority within the EU?

Since draft legislation from the commission can become EU law only if the council agrees

Economic problems during the Great Depression were compounded in 1930 when the U.S. Congress passed the ____, aimed at avoiding rising unemployment by protecting domestic industries and diverting consumer demand away from foreign products.

Smoot-Hawley Act

According to the _____ policy, subsidies can help a firm achieve a first-mover advantage in an emerging industry.

Strategic trade

If foreigners suddenly reduced their investments in the United States, which of the following would happen?

The foreigners would sell U.S. dollars for another currency.

Which of the following is a disadvantage of using a letter of credit (L/C)?

The importer must pay a bank fee for the letter of credit.

Which of the following is true of licensing/franchising?

The licensor/franchisor does not have tight control over technology and marketing.

Which of the following is a major limitation of the simple Ricardian model of comparative advantage?

The model ignores the principle of diminishing marginal returns.

A country rejects FDI proposals in certain industries. It does so because the tangible advantages of such investments are lesser than potential costs like loss of employment and reduction of overall well-being. However, it aggressively pursues inviting foreign investments in sectors like infrastructure, education, and healthcare because of the benefits that accrue with them. Which political view of FDI is discussed in this example?

The pragmatic nationalist view

Which of the following is true of indirect exports?

They export through domestically based export intermediaries.

Why do governments limit currency convertibility?

To preserve foreign exchange reserves.

What will happen if a country increases its money supply rapidly under fixed exchange rate regime?

Trade deficit would widen in that country.

Which of the following arguments strengthen the idea of floating exchange rates?

Trade deficits can be corrected through changes in exchange rates.

Country A and Country B entered into a free trade agreement recently. After this, Country A starts importing heavy machinery from Country B. Country A used to previously import such machinery at lower rates from another country. Which of the following has occurred in this scenario?

Trade diversion

Design and names by which merchants or manufacturers designate and differentiate their products are known as ____

Trademarks

Which of the following is a disadvantage of pursuing a transfer pricing policy?

Transfer pricing does not treat each subsidiary as a profit center.

Which of the following combinations of exchange rates was ruled out by Lessard and Lorange as illogical and unreasonable?

Translating budget using ending rate and translating actual performance using initial rate

Which strategy is organizationally complex and most difficult to implement?

Transnational strategy

Which of the following specifically reduces the viability of an exporting strategy specifically for products with low value-to-weight ratios?

Transportation costs

A bill of lading serves as a receipt, a contract, and a document of title.

True

A central reason for the establishment of the EU was the devastation of Western Europe during two world wars and the desire for a lasting peace.

True

A common market has no barriers to trade between member countries, includes a common external trade policy, and allows factors of production to move freely between members.

True

A company that sells its product in a foreign market below the cost of production may be accused of dumping.

True

Issues in international capital budgeting include: - parent versus project cash flow - exchange rate risk - transfer prices

all of the above

According to Adam Smith, A country should specialize in the production of a good when it has ____.

an absolute advantage in the production of the good

A country that introduces a currency board commits itself to converting its domestic currency on demand into ____.

another currency at a fixed exchange rate

Firms use fronting loans to _____.

avoid host-country restrictions on the remittance of funds from a foreign subsidiary

Which of the following is a document used to give the title of the products to a bank?

bill of lading

A currency is said to be freely convertible when:

both residents and nonresidents are allowed to purchase unlimited amounts of a foreign currency with it.