MG 415 FINAL EXAM
If a basket of goods costs $100 in the United States and €120 in Europe, what would the purchasing power parity theory's prediction of the dollar/euro exchange rate be?
$1 = €1.20
The yen/dollar exchange rate is ×120 = $1 in London and ×123 = $1 in New York at the same time. What is the net profit if a dealer takes $1,000,000 to purchase ×123,000,000 in New York and engages in arbitrage by selling it in London?
$25,000
1-Steven converted $1,000 to ×105,000 for a trip to Japan. However, he spent only ×50,000. During this period, the value of the dollar weakened against the yen. Considering a current exchange rate of $1 = ×100, how many dollars did Steven spend on the trip?
$450
The country of Ambos Republic defined its currency, ambos, as being equivalent to 16 grains of "fine" (pure) gold. Assuming that there are 480 grains in an ounce, the gold par value of the ambos is
30
Many of the world's developing nations peg their currencies, primarily to the
U.S. dollar
The interest rate on borrowings in Rhodia is 2 percent and the interest rate on bank deposits in Maritia is 7.5 percent. In this scenario, a carry trade would be to
borrow money in Rhodian currency, convert it into Maritian currency, and deposit it in a Maritian bank.
Omega, Inc., a U.S.-based firm entered into an agreement with another party to exchange currency and execute the deal at a specific date in the future. What is Omega, Inc. engaging in when it insures itself against foreign exchange risk?
hedging
When the country of Broost suffered from a "fundamental disequilibrium," its government choose not to devalue its currency. A likely consequence of this would be
high unemployment
Which of the following functions of an international business is typically responsible for international labor relations?
human resource management
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.
Small. scale entry into a foreign market makes it difficult to build market share because it
is associated with a lack of commitment demonstrated by the foreign firm.
While personal fitness trackers (such as Fitbit) are widely available in the U. S. , they are scarcely available in international markets. Given the increasing awareness of a healthy lifestyle, such products satisfy an unmet need. A product such as Fitbit in international markets
is likely to have greater value
As an exporter, DTR Trading wants to be paid before a consignment is shipped. Correspondingly, its importer in Japan, ABC Imports, wants to pay only upon receipt of the consignment. These conflicting preferences of DTR Trading and ABC Imports are most likely a manifestation of
lack of trust
Del Trading is exporting for the first time to Japan and has contracted with Abe Imports in Tokyo for an initial order valued at $250,000. Del Trading wants Abe Imports to secure a document from a Tokyo bank that would indicate that the bank would pay Del Trading $250,000 upon presentation of specified documents by the exporter. What is the name of the document that Del Trading is asking for?
letter of credit
Which of the following is a reason why a relatively poor country may be an attractive target for inward investment?
rapid economic growth
All countries were to fix the value of their currency in terms of gold but were not required to exchange their currencies for gold, according to the 1944
Bretton Woods agreement
ll countries were to fix the value of their currency in terms of gold but were not required to exchange their currencies for gold, according to the 1944
Bretton Woods agreement
_____ allows a firm to educate potential consumers about the features of a product.
Direct selling
Which of the following is true according to Theodore Levitt's article in the Harvard Business Review about the globalization of world markets?
Global corporations operate at low relative costs
Which of the following is a statement made by Theodore Levitt about the globalization of world markets?
Global markets for standardized consumer products have emerged on a large scale of magnitude
Which of the following 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
Which of the following institutions within the U. S. Department of Commerce is dedicated to providing businesses with intelligence and assistance for attacking foreign markets?
International Trade Administration
Which of the following is true of price discrimination?
It involves charging whatever the market will bear.
What is the effect of a monetary contraction in a fixed exchange rate system?
It leads to an inflow of money from abroad.
For an importer, which of the following is a disadvantage of using a letter of credit for international transactions?
It reduces the importer's ability to borrow funds for other purposes.
Which of the following foreign exchange trading centers has the highest percentage of activity?
London
Which of the following is true of exporting?
Many foreign customers require face. to. face negotiations on their home turf.
Which of the following organizations runs the Service Corps of Retired Executives (SCORE) program?
Small Business Administration
Which of the following is true according to Theodore Levitt's article in the Harvard Business Review about the globalization of world markets?
Technology has led to the emergence of global markets for standardized consumer products.
Which of the following is a goal of market segmentation?
To optimize the fit between the purchasing behavior of consumers in a given segment and the marketing mix
Which of the following was an announcement made by U. S. President Nixon to enable the devaluation of the dollar during the increase in inflation in 1971 in the United States?
The dollar would no longer be convertible into gold
Which of the following was an announcement made by U.S. President Nixon to enable the devaluation of the dollar during the increase in inflation in 1971 in the United States?
The dollar would no longer be convertible into gold
Which of the following is necessary for a firm to ensure profitable price discrimination?
The firm must be able to keep its national markets separate.
An American company imports laptop computers from Japan. The company knows that after a shipment arrives, it must pay in yen to the Japanese supplier within 30 days. In a particular exchange, the American company must pay the Japanese supplier ×150,000 for each computer at the current dollar/yen spot exchange rate of $1 = ×110. The company intends to resell the computers the day they arrive for $1,600 each but it does not have the funds to pay the Japanese supplier until the computers have been sold. Which of the following will happen if the exchange rate after 30 days is $1 = ×90?
The importer will incur a loss of approximately $67 per computer.
Which of the following is true about channel quality?
The quality of retailers is variable in emerging markets and less developed nations
Which of the following is true of the costs and risks associated with doing business in a foreign country?
They are lower in economically advanced nations
The 1944 Bretton Woods conference created two major international institutions that play a role in the international monetary system—the International Monetary Fund (IMF) and the
World Bank
A(n) expatriate manager refers to
a citizen of one country who is working abroad in one of the firm's subsidiaries.
Which of the following countries presents a favorable benefit. cost. risk trade. off scenario for foreign expansion?
a country with a free market system
Which of the following is an example of a first. mover advantage?
ability to create switching costs that tie customers into one's products or services
Assume that the yen/dollar exchange rate quoted in London at 3:00 p.m. is 125 yen = 1 dollar. Sylvia finds out that the rate quoted in New York at 10:00 a.m. New York time (3:00 p.m. in London) is 130 yen = 1 dollar. Sylvia decides to buy yen in New York and sell it in London. Sylvia is engaging in
arbitrage.
The architects of the Bretton Woods agreement built limited flexibility into the fixed exchange rate system in order to
avoid high unemployment.
Which of the following describes a country when the income its residents earn from exports is equal to the money its residents pay to other countries for imports?
balance-of-trade equilibrium
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.
An advantage of choosing exporting as a mode of entry into foreign markets is that a firm
can avoid the cost of establishing manufacturing operations in the host country.
Assume that the interest rate on borrowings in India is 1 percent while the interest rate on bank deposits in a U.S. bank is 6 percent. John, an active currency trader borrows in Japanese yen, converts the money into U.S. dollars and deposits it in a U.S. bank. John is engaging in
carry trade
The number of intermediaries between the product (or manufacturer) and the consumer is referred to as
channel length
Algonquin Cosmetics noticed that while India had a population of more than 1. 2 billion people, the retail market was such that more than 95% of retail was through stand. Alone stores that were not part of a chain. In other words, if Algonquin were to enter India, they would have to sell through more than a million independent retail stores. What kind of a retail system does India have for the products that Algonquin Cosmetics is trying to sell?
concentrated
Assume that a Big Mac cost $4.93 in the U.S. and that the Brazilian real is undervalued by 23 percent. According to the Big Mac Index published by The Economist, a Big Mac would
cost less in Brazil than in the U.S.
Anson Apparel's marketing message in the United States is one of apparel for the rugged man who spends most of his time outdoors. While this marketing message has worked very well for the company, it is concerned about using the same marketing message in its new market of China. Which of the following factors limits Anson Apparel's ability to use the same marketing message in both the United States and China?
cultural differences
Which of the following is the most important determinant of channel length?
degree to which the retail system is fragmented
The nominal interest rate is 9 percent in Brazil and 6 percent in Japan. Applying the international Fisher effect, the Brazilian real should
depreciate by 3 percent against the Japanese yen.
Algonquin Cosmetics is deciding on its marketing mix to enter Brazil. It is deciding on the means for delivering the product to the consumer. What strategy is Algonquin Cosmetics working on?
distribution
The probability of survival for an international business increases if it
enters a national market after several other foreign firms have already done so
Which of the following is a reason for the emergence of the gold standard?
expansion in the volume of international trade due to the Industrial Revolution
Megan, a U.S. citizen, is the operations manager at the Middle East office of HS Constructions Inc., an American firm. In this situation, she is an example of a(n
expatriate manager
The Forlan Group is a firm that acts as an export marketing department for client firms. As an export specialist, The Forlan Group is a(n)
export management company.
Which of the following was the initial mission of the World Bank?
financing the building of Europe's economy by providing low. interest loans
Which of the following enables organizations to conduct international trade without having to resort to barter?
foreign exchange market
The developing country of Nambodia has a retail system that has many independent retailers, no one of which has a major share of the market. What is Nambodia's retail system called?
fragmented
Which of the following strategies is compatible with a geocentric staffing policy?
global standardization strategy
In the 1930s, countries were devaluing their currencies at will in order to boost exports, thus shattering confidence in the
gold standard system
The value that an international business can create in a foreign market is determined by the
nature of indigenous competition
Which of the following refers to the gold standard?
pegging currencies to gold and guaranteeing convertibility
While seeking opportunities for profitable exporting, large firms generally tend to be
proactive
Japan's great trading houses are referred to as
sogo shosha.
Imogene Davis of Benedict Pharmaceuticals' Human Resources department is responsible for developing the criteria for selecting people for particular jobs. Which of the following strategies is Imogene Davis involved in?
staffing policy
Gundogan Food Products manufactures and markets a wide range of dairy products. In the lead up to going international, the company's marketing and international sales staff is having a big debate with regards to the factors affecting product attributes for their business. In terms of the factors affecting product attributes, the impact of which of the following is particularly important for Gundogan Food Products?
tradition
In which of the following modes of entry into foreign markets does a firm agree to set up an operating plant for a foreign client and hand over the plant when it is fully operational?
turnkey project
The euro/dollar exchange rate is €1 = $1.20. According to the law of one price, how much would a camera that retails for $300 in New York sell for in Germany?
€250
