International Business Final
Assuming the spot exchange rate is $1.50/Pound, how much would 2,000 (pounds) be worth in the US
$3,500
Assume that the exchange rate between the euro and the dollar is €1.00 = $1.50. An American tourist in Germany is buying a product whose price is €50. How much in U.S. dollars would the tourist have to pay to buy the product?
$75
When contract disputes arise in international trade, there is always the question of which country's laws to apply. To resolve this issue, a number of countries, including the United States, have ratified the ______________ agreement, which establishes a uniform set of rules governing certain aspects of the making and performance of everyday commercial contacts.
United Nations Convention of Contracts for the International Sale of Goods
A charge of 15-20% was levied by the government of Cadmia on the value of automobile accessories imported from a neighboring country. This increased the price of those imported car accessories for the consumers in Cadmia. Which of the following instruments of trade policy is being used by the government of Cadmia?
ad valorem tariff
Which of the following is considered ethical in international business?
adopting a zero-tolerance approach toward facilitating payments even if it is considered legal in both home and the host country
Which feature of a customs union differentiates it from a free trade area?
adoption of a common external trade policy
Which of the following is most likely to be the consequence of economic progress?
adoption of democracy
The lowering of trade and investment barriers:
allows firms to base production at optimal locations outside their home country
In Nerumbia, all businesses are owned by the state. The Nerumbian government plans production, fixes commodity prices, and also gives directions on investments to ensure they benefit the nation as a whole and not only a few individuals. What type of economy has Nerumbia adopted?
command
To spur trade, Cormoran, Brithea, and Asmakush decided on economic integration where there were no barriers to trade between the three countries, they agreed on a common external trade policy, and allowed factors of production to move freely between the three countries. In short, the three countries formed a
common market
Which of the following has no barriers to trade among member countries, includes a common external trade policy, and allows factors of production to move freely among members, but does not have a common currency?
common market
According to Porter, which of the following factor endowments would be classified as an advanced factor?
communication infrastructure
Which term indicates that the units of resources required to produce a good are assumed to remain fixed no matter where one is on a country's production possibility frontier?
constant returns to specialization
The product liability laws are established to protect the
consumers in case a product causes injury, death, or damage
Which term refers to the metrics used to measure the performance of subunits and make judgments about how well managers are running those subunits?
controls
With increase economic progress, cultures across the world seem to be moving toward some universally accepted values and norms. This is known as the
convergence hypothesis
In 2012, if the PPP per capita of China was $9,040 and the PPP per capita of the United States was $52,340, this means that the:
cost of living was lower in China
The Coalition for United Nuntica are opposed to Nuntica joining any regional trading bloc. Which of the following are the two main impediments to regional economic integration that they should emphasize in gaining support for their stance?
costs and national sovereignty
Companies can deal with the nonconvertibility problem of currencies by engaging in:
countertrade
Which of the following is NOT included in the Doha agenda of the WTO?
creating an institution to enforce intellectual property rights
Which of the following is NOT a factor of production?
culture
Which of the following refers to the simultaneous purchase and sale of a given amount of foreign exchange for two different value dates?
currency swap
Which of the following transactions is used to move out of one currency and into another for a limited period without incurring foreign exchange risk?
currency swap
To be able to accommodate demands for local responsiveness, a firm should:
decentralize production activities to the major national or regional markets
Which of the following refers to a political system in which the government is by the people, exercised either directly or through elected representatives?
democracy
The purchasing power parity (PPP) theory tells us that a country with a high inflation rate will see:
depreciation in its currency value
In a floating exchange rate system, a current account deficit is likely to be corrected by:
depreciation of the home currency
The Surbeel Republic exercises tight control over prices and output, prohibits private enterprises from operation in most sectors of the economy, and severely restricts foreign direct investment and international trade. Based on this information, the Surbeel Republic is likely against
deregulation
What was the motivation for non-US firms to begin investing across national borders in the 1970s?
desire to disperse production activities to optimal locations
Which of the following is an infrastructure difference between countries that calls for product customization?
difference in consumer electrical systems across continents
The rate of return that a firm makes on its invested capital (ROIC) is calculated by:
dividing the net profits of the firm by total invested capital
Which of the following is variously defined as selling goods in a foreign market at below their costs of production or as selling goods in a foreign market at below their "fair" market value?
dumping
The six member countries of the Murasian Common Market are unhappy with the outcome of their economic integration. They want something that entails a closer economic integration and cooperation than a common market and want to pursue a common currency. They should form a(n)
economic union
The concept that as plant output expands, unit costs decrease, is known as:
economies of scale
Which of the following refers to the reductions in unit cost achieved by producing a large volume of a product?
economies of scale
Which of the following BEST increases a country's competitive advantage and its attractiveness as a location for international business?
education system that is well developed
The liability associated with foreign expansion is greater for foreign firms that:
enter a national market early
A belief in the superiority of one's own ethnic group or culture is called
ethnocentrism
Which of the following refers to systematic reductions in production costs that have been observed to occur over the life of a product?
experience curve
A policy that partially or entirely restricts the export of a good is called a(n)
export ban
Which of the following raise revenue for the government and reduce exports from a sector, often for political reasons?
export tariffs
3M, an American firm, manufactures adhesive tapes in St. Paul, Minnesota, and ships the tapes to South Korea for sale. According to this information, which of the following is being done by 3M?
exporting
On Time Watches Inc., an American watchmaker, makes custom watches in California, which it then ships to Brazil for sale. Based on this information, On Time Watches Inc. is
exporting
What term does Heckscher-Ohlin use to refer to the extent to which a country is enriched with resources such as land, labor, and capital?
factor endowments
Porter theorizes that four broad attributes of a nation shape the environment in which local firms compete, and these attributes promote or impede the creation of competitive advantage. These attributes are
factor endowments; demand conditions; related and supporting industries; and firm strategy, structure, and rivalry
Which of the following is most likely to be the reason behind the decline in the US share of world output in 2014?
faster economic growth of developing economies, particularly in Asia
Which of the following is an advantage of joint ventures?
firms benefit from a local partner's knowledge of the host country
The economic and strategic advantages that accrue to early entrants into an industry are called
first-mover advantages
The advocates of the floating rate system argue that:
floating rates help adjust trade imbalances
The _____ of FDI refers to the amount of FDI undertaken over a given time period (normally a year).
flow
A computer manufacturing firm from the United States invests in a microprocessor manufacturing plant in Taiwan. This is an example of:
foreign direct investment
Office Plus, a US based company, has invested resources in business activities in New Zealand. This is an example of
foreign direct investment
Which of the following enables organizations to conduct international trade without having to resort to barter?
foreign exchange market
Which of the following occurs when two parties agree to exchange currency and execute the deal at some specific date in the future?
forward exchange
Pizza Hut licenses its brand name to foreign firms as long as they agree to run their restaurants on exactly the same lines as Pizza Hut's restaurants elsewhere in the world. In return, the foreign firms have to pay Pizza Hut a percentage of their profits. According to this information, which of the following is being done by Pizza Hut?
franchising
The _____ view argues that international production should be distributed among countries according to the theory of comparative advantage.
free market
If seven countries formed a common market, which of the following would be a feature of their trade agreement?
free movement of factors of production between member nations
A situation in which a government does not attempt to influence through quotas or duties what its citizens can buy from another country or what they can produce and sell to another country is called
free trade
The countries of Mimbo, Juwan, and Ninot agreed to remove all barriers to the trade of goods and services among each other. However, the three countries agreed that each would be allowed to determine its own trade policies with regard to nonmembers. The economic integration among these three countries is a(n)
free trade area
Moral theorists argue that _____ form the basis for the moral compass that managers should navigate by when making decisions that have an ethical component.
fundamental human rights
Which of the following is NOT a determinant of culture?
geography
West Electronic Corporation sources goods and services for its electronics products from 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 a floating exchange rate, the relative value of a currency:
is determined by market forces
Which of the following is NOT a benefit of inward FDI for a host country?
it increases national sovereignty
Which of the following is an argument against economic integration?
it reduces the degree of control over certain issues such as monetary and fiscal policy
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
Mark expects the value of currency X to appreciate in the near future. Hence, he delays the collection of payments from foreign customers until the next month. Which tactic is Mark making use of to minimize the foreign exchange exposure?
lag strategy
Assume that the exchange rate between the U.S. dollar and the Japanese yen is $1 = 120 yen. A pen that retails for $10 in New York should sell for 1,200 yen in Tokyo, if there are no trade barriers and transportation costs, according to the:
law of one price
An employee takes much less time to do a specific task now than it took him when he first started working on it six months ago. Which of the following is this an example of?
learning effects
US-based Royal Corporation is hesitant about entering into a licensing agreement with Hexagon, Inc., a company from the Monaslu Republic, due to the likelihood that Hexagon will opportunistically break a contract or expropriate property rights. What type of risk is Royal Corporation trying to avoid?
legal
Royal Chocolatier, a British manufacturer of chocolates, granted U.S. company American Candy Inc. the right to produce and sell Royal Chocolatier's products in the U.S. In return, American Candy Inc. has to pay a royalty fee on every unit sold. According to this information, which of the following is being done by Royal Chocolatier?
licensing
Which of the following is one of the three measures used to determine the Human Development Index (HDI) of a country?
life expectancy at birth
Which of the following factors is most likely to make a country more attractive for international business?
likely economic growth
An implication of trade barriers for business practice is that they
limit a firm's ability to serve a country from locations outside of that country
Which of the following refers to a strategy that focuses on increasing profitability by customizing the firm's goods or services so that they provide a good match to tastes and preferences in different national markets?
localization
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
According to Geert Hofstede, what dimension captures attitudes toward time, persistence, ordering by status, protection of face, respect for tradition, and reciprocation of gifts and favors?
long-term versus short-term orientation
The viability of an exporting strategy is often constrained by transportation costs, particularly of products that can be produced in almost any location and have a:
low value-to-weight ratio
According to the Bretton Woods agreement, the task of IMF would be to:
maintain order in the international monetary system
Which of the following is a system under which some currencies are allowed to float freely, but the majority are either controlled by government intervention or pegged to another currency?
managed-float
Countries that emphasize individual goals over collective goals tend to have what type of economic system?
market
Which of the following refers to an economic system in which the interaction of supply and demand determines the quantity in which goods and services are produced?
market
As a result of globalization, we have been moving toward a world in which
material culture is starting to look similar the world over
Which of the following applies to most totalitarian states?
media are heavily censored
The Republic of Marunia believes that it is in its best interests to maintain a trade surplus, to export more than it imports. In so doing, the Republic of Marunia hopes to accumulate gold and silver, and consequently, increase its national wealth, prestige, and power. Which of the following influences the Republic of Marunia's approach to international trade?
mercantilism
The government of the country of Bealand uses various instruments of trade policy to minimize imports and maximize exports. For example, imports are limited by tariffs and quotas, while exports are subsidized. By using these instruments, the government seeks to achieve a surplus in the balance of trade. Based on this information, which of the following influences Bealand's approach to international trade?
mercantilism
_____ advocates that countries should simultaneously encourage exports and discourage imports.
mercantilism
In what type of economy are certain sectors of the economy left to private ownership and free market mechanisms, while in other sectors there is significant state ownership and government planning?
mixed
Which of the following gives employees the integrity to go public to the media and blow the whistle on persistent unethical behavior in a company?
moral courage
Which of the following arises when people behave recklessly because they know they will be saved if things go wrong?
moral hazard
Green Cleaners Inc., a US-based company that specializes in environmentally-friendly cleaning supplies, has production facilities in Poland and Spain. Based on this information, Green Cleaners can be classified as what type of enterprise?
multinational
_____ arises when two or more enterprises encounter each other in different regional markets, national markets, or industries.
multipoint competition
Which of the following asserts that if a manager of a multinational sees that firms from other nations are not following ethical norms in a host nation, that manager should not either?
naive immoralism
Which theory stresses that in some cases, countries specialize in the production and export of particular products not because of underlying differences in factor endowments, but because in certain industries the world market can support only a limited number of firms?
new trade theory
Which theory suggests that nations may benefit from trade even when they do not differ in resource endowments or technology?
new trade theory
Brental, a detergent manufacturing company, has a market share of 30 percent in Lithasia. Three of its competitors together control 55 percent of the market. Whenever Brental raises or lowers the prices of its products, the other three companies quickly imitate its action. What is the market structure of the detergent industry in Lithasia?
oligopoly
A currency is said to be externally convertible when:
only nonresidents may convert it into a foreign currency without any limitations
ABC Medical Corporation has developed a new medication to treat a rare disease. Which type of legal protection grants ABC Medical Corporation exclusive rights for a defined period to the manufacture, use, or sale of the new medication?
patent
ABC Company is hesitant about entering Ukraine, because the country has been experiencing social unrest in recent years. Based on this information, what type of risk is ABC Company trying to avoid?
political
Which of the following location externalities is favorable for foreign direct investment in a country?
presence of supporting industries
Which of the following is a root cause of unethical behavior in business?
pressure to meet unrealistic performance goals
The government of Kimmurak is selling state-owned assets such as TeleKimmurak, a state-owned telecommunications enterprise, to private investors. This is an example of
privatization
In mixed economies, governments sometimes tend to take into state ownership troubled firms whose continued operation is thought to be vital to national interests. Once a government takes into state ownership such troubled firms, they are said to be:
privatized
Which of the following is a disadvantage of wholly owned subsidiaries as a mode of entry into foreign markets?
problems with local marketing agents
The motive behind the high tariffs imposed by nations on imports of manufactured goods, prior to World War II, was to:
protect domestic industries from foreign competition
In the context of violation of property rights, which of the following refers to the extortion of income or resources of property holders by public officials, such as politicians and government bureaucrats?
public action
Which of the following is a measure of economic development that allows for a direct comparison of living standards in different countries?
purchasing power parity
People in the West tend to associate which of the following with a free market system, strong property rights protection, and economic progress?
representative democracy
The United Nations Convention on Contracts for the International Sale of Goods (CIGS) was introduced to
resolve disputes that arise in international trade regarding which country's laws to apply
Ownership restraint is a method of
restricting inward FDI by host country
The fascist regimes that ruled Germany and Italy in the 1930s and 1940s had adopted:
right-wing totalitarianism
Which of the following is typically associated with managers from developed nations, and claims that a multinational's home-country standards of ethics are the appropriate ones for companies to follow in foreign countries?
righteous moralism
The only way in which a current account deficit can be supported by a country in the long run is by
selling off assets to foreigners
Which of the following are NOT considered external stakeholders of a company?
shareholders
The rate at which a foreign exchange dealer converts one currency into another currency on a particular day is the:
spot exchange rate
Which of the following creates an unfavorable environment for innovations and entrepreneurship?
state monopoly in production
Cooperative agreements between potential or actual competitors are:
strategic alliances
Which government policy is aimed at improving the competitive position of a domestic industry and/or domestic firm in the world market?
strategic trade policy
What is required for the business environment of a country to be conducive to innovation and entrepreneurial activity?
strong property rights protection
In order to encourage its farmers, the Cerian government provided them with low-interest loans for the purchase of seeds and fertilizers. The government also gave cash grants and made tax reductions. Which instrument of trade policy is being used by the government of Ceria?
subsidies
Strategies that not only help the multinational firm make good profits, but that do so without harming the environment while simultaneously ensuring that the corporation acts in a socially responsible manner with regard to its stakeholders are called
sustainable strategies
The country of Begola imposes an ad valorem tariff rate of 2.5 percent on 1 million tons of sugar imports, after which an out-of-quota rate of 30 percent is applied. Which instrument of trade policy is being used by Begola?
tariff rate quota
_____ are the oldest and simplest instrument of trade policy.
tariffs
Which of the following is a key macro factor that underlies the trend toward greater globalization?
technological change, particularly in communication, information processing, and transportation
The present base for the adjustment of purchasing power parity is the cost of living in
the United States
A macro factor underlying the trend toward greater globalization is
the decline in trade barriers since the end of WWII
By moving production to locations where they are free to pump pollutants into the atmosphere, corporations contribute to
the global tragedy of the commons
Which of the following is true about a strict currency board system?
the government lacks the ability to set interest rates
Which of the following is NOT a technological change that affects globalization?
the introduction of tougher environmental and labor laws
According to Adam Smith, _____ should determine what a country imports and what it exports.
the market mechanism
Gerald bought his son, David, a computer two years ago. Recently, he decided to buy his daughter, Julian, a computer of her own. In the context of the two-year gap between the purchase of both the computers and Moore's law, it is most likely that:
the microprocessor in Julian's computer will be more advanced in terms of power than that of David's
Collectivist-inclined totalitarian states tend to enact laws that severely restrict private enterprise, 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 how:
the political system of a country is insulated from its legal system
The spread of democracy among countries is most likely to lead to
the promotion of greater competition
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
A number of employees at Sports Plus Inc., which is headquartered in a country where masculinity and power distance are high, do not behave in an ethical manner. In this context, the roots of unethical behavior can be traced to
the societal culture
The Republic of Monaslu has the world's most efficient car manufacturing industry, while the country of Ingora has the world's most efficient electronics industry. The Republic of Monaslu trades cars with Ingora in exchange for consumer electronics. This form of trade between the two countries illustrates
the theory of absolute advantage
A firm will favor FDI over exporting as an entry strategy when:
the transportation costs or trade barriers are high
A form of government in which political power is monopolized by a party, group, or individual that governs according to religious principles is called what type of totalitarianism?
theocratic
Which of the following is an advantage of acquisitions as a means of entering foreign markets?
they are quick to execute and help firms to rapidly build their presence in the target foreign market
Which of the following is NOT a reason why firms typically set up production facilities in a foreign country?
to lobby the host government for export tariffs
Why was the WTO established?
to police the international trading system
Why was the World Bank set up?
to promote economic development
The stock of FDI refers to the
total accumulated value of foreign-owned assets at a given time
Which of the following is a form of government in which one person or political party exercises absolute control over all spheres of human life and prohibits opposing political parties?
totalitarianism
Two countries, Cadmia and Palladia, have formed a free trade agreement. This has resulted in Cadmia importing sugar from Palladia, which Cadmia previously imported from another country at a lower cost. This agreement has led to:
trade diversion
Which of the following refers to a strategy that firms pursue when they are trying to simultaneously achieve low costs through location economies, economies of scale, and learning effects; differentiate their product offering across geographic markets to account for local differences; and foster a multidirectional flow of skills between different subsidiaries in the firm's global network of operations?
transnational
ABC Company, which is headquartered in the US, has its production plant located in a less-developed country. In this production plant, working conditions are very poor. For example, employees work 15-hour shifts, are exposed to toxic chemicals, and are forced to work overtime. In addition, the pay is extremely low. What type of behavior is ABC Company exhibiting?
unethical
Which of the following holds that the moral worth of actions or practices is determined by their consequences, and is committed to the maximization of good and the minimization of harm?
utilitarianism
Which of the following include a society's attitudes toward such concepts as individual freedom, democracy, truth, justice, honesty, loyalty, and social obligations?
values
Vintage Incorporated is going to do business with a company that is located in the Pabul Republic, a common law country. The companies have agreed to draft the business contract in the Pabul Republic. Since the contract will be drafted under a common law framework, which of the following best characterizes the contract?
very detailed with all contingencies spelled out
Foreign producers agree to _____ imposed by an exporting country because they fear more damaging punitive tariffs or import quotas might follow if they do not.
voluntary export restraints
At what stage of the product life-cycle theory does production within other advanced countries begin to limit the potential for exports from the United States?
when the US firms set up production units in the advanced nations to meet rapidly growing demand
Which the following best represents a mores violation?
Bribing a government official in a country where bribery is illegal
Which of the following is a policy implication of Porter's theory of national competitive advantage?
Businesses should urge government to increase investment in education, infrastructure, and basic research
Which of the following statements is true of purchasing power parity (PPP)?
The PPP data gives a static picture of economic development
The term core competence refers to skills within the firm that competitors cannot easily match or imitate. (T/F)
True
Assume that the exchange rate between the euro and the dollar is € 1 = $1.20. If the law of one price holds, a camera that retails for $300 in New York should sell for _____ in Germany.
250 euros
The belief that geography can influence economic policy, and hence economic growth rates, goes back to:
Adam Smith
How are spot exchange rates determined?
By the interaction between demand and supply of a currency relative to other currencies
Which of the following trade pacts collapsed due to a war?
Central American Common Market
Which of the following countries has adopted the policy of dirty float?
China
Mountland Republic follows a system of social stratification that allows for flexibility in terms of social mobility. In this system of open stratification the status of a person is solely determined by his or her own socioeconomic achievements. Mountland Republic is most likely to be following what type of system of social stratification?
Class
Company XYZ is planning to set up a production plant abroad. It has selected five potential countries based on their population size, stage of economic development, labor costs, and access to world markets. Considering the connection between culture and competitive advantage, which of the following countries would be the best investment site for Company XYZ?
Country B, where the education is well-developed and social stratification is lacking
The Hourglass, a US-based company, is planning to expand operations to a foreign country. Considering the factors that make a country attractive as a place in which to do business, which of the following countries should The Hourglass enter?
Country D, which has democratic institutions and a market-based economic system
Eripria, Gautom, and Kasmonis, three countries in a specific geographic area decide to form a free trade area. Which of the following is true with regard to their free trade area?
Each member country is allowed to determine its own trade policies with regard to nonmembers
Which of the following is most likely to prove detrimental to democracy and international business?
Emergence of different civilizations, each of which has its own value systems and ideology
American company Tech-Solutions is planning to expand its operations to the Bangol Republic. In this country, the group is the primary unit of social organization. According to this information, which of the following is a likely outcome for Tech-Solutions from operating in the Bangol Republic?
Employees will achieve close cooperation with others
Why has FDI grown more rapidly than world trade?
Executives of business firms see FDI as a way of circumventing future trade barriers
A firm that does not want to bear the costs of establishing production facilities in a foreign country should avoid:
FDI
A strategy that focuses primarily on increasing the attractiveness of a product is referred to as a low-cost strategy. (T/F)
False
All the members of IMF follow the same exchange rate policy. (T/F)
False
In addition to NAFTA, the other successful trade bloc in the Americas is the Free Trade Area of the Americas (FTAA). (T/F)
False
One of the tenets of collectivism is that the welfare of society is best served by letting people pursue their own economic self-interest. (T/F)
False
Political systems that emphasize collectivism tend to be democratic, while political systems that place a high value on individualism tend to be totalitarian. (T/F)
False
Pressures for cost reduction are most intense in industries that produce highly differentiated products. (T/F)
False
Spot rates are constant for a period of one year. (T/F)
False
Strategic alliances refer to cooperative agreements between subsidiaries of a company. (T/F)
False
The British pound is the world's second most important vehicle currency. (T/F)
False
The lowering of barriers to trade and investment among countries has led to decreased price competition throughout the EU and NAFTA. (T/F)
False
The ultimate controlling authority within European Union is the European Commission. (T/F)
False
When the foreign exchange market determines the relative value of a currency, we say that the country is adhering to a pegged exchange rate regime. (T/F)
False
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 is most likely to be the result of a country having lax intellectual property laws?
Firms will be reluctant to enter into such a country
Which of the following best exemplifies the globalization of markets?
Fluffy Pillows, a US-based pillow company, sells the same pillows worldwide
Which of the following is true of folkways?
Folkways are routine conversations of everyday life
Identify the correct sequence of economic integration starting from the least integrated to the most integrated.
Free trade area, customs union, common market, economic union, and political union
Which of the following was a multilateral agreement established in 1947 whose objective was to liberalize trade by eliminating tariffs, subsidies, import quotas, and the like?
General Agreement of Tariffs and Trade (GATT)
According to globalization supporters, which of the following is an advantage of globalization?
Globalization helps create jobs in all countries that participate in the global trading system
Which of the following involves the establishment of a new operation in a foreign country?
Greenfield investment
If a firm is considering entering a country where incumbents exist, and if the competitive advantage of the firm is based on the transfer of organizationally embedded competencies, skills, routines, and culture, what would be the preferable mode of entry?
Greenfield venture
Which of the following statements is true of Hinduism?
Hinduism supported India's caste system
Which index was developed by the UN to measure the quality of human life in different nations?
Human Development Index
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 true about individualism?
In individualism, private ownership is desirable
Which of the following statements is true about innovations and entrepreneurship?
Innovations in production and business processes lead to an increase in the productivity of labor and capital
Which of the following is true about Geert Hofstede's research on cultural dimensions?
Inspired by Confucianism, Hofstede subsequently added a fifth dimension as a function of the data obtained via the Chinese Value Survey (CVS)
The official name for the World Bank is the:
International Bank for Reconstruction and Development
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
Who is often seen as the lender of last resort to nation-states whose economies are in turmoil and currencies are losing value against those of other nations?
International Monetary Fund (IMF)
Which of the following statements is true of Islam?
Islam forbids the consumption of pork and alcohol
Three months ago, the Japanese ¥/U.S. $ exchange rate was 100¥/$1. However, today the rate now stands at 80¥/$1. What has happened to the value of the ¥en?
It has appreciated against the $
Which of the following is a disadvantage of greenfield ventures?
It is slower to establish than acquisitions
Which of the following is a possible downside of emphasizing the primacy of group identification over individualism?
It leads to a lack of dynamism and entrepreneurship
Which of the following is a drawback of licensing as a mode of entry into foreign markets?
Licensing does not give a firm tight control over manufacturing, marketing, and strategy
The mother tongue of the largest number of people is
Mandarin
Which of the following is true with regard to NAFTA?
Many observers credit NAFTA with helping to create the background for increased political stability in Mexico
In 1904, who theorized that there was a relationship between Protestantism and the emergence of modern capitalism?
Max Weber
New Zealand is the largest exporter of dairy products to the United States. The United States is the world's third largest supplier of machinery and exports heavy machinery to New Zealand. What explains the trade equation between New Zealand and the United States?
Nations with an absolute advantage in producing certain goods trade them for goods produced by other countries
Which treaty committed EC members to adopting a common currency by January 1, 1999?
The Maastricht Treaty
Which of the following statements is true about privatization?
Privatization involves replacing a state-owned monopoly with a private monopoly
Which of the following, enacted by the U.S. Congress in 1930, erected a wall of tariff barriers against imports into the United States?
Smoot-Hawley Act
Collectively, member-states of which of the following account for about 54 percent of the world's GNP and 54 percent of world trade?
The Asia-Pacific Economic Cooperation
According to economists, which of the following led to the breakup of the fixed exchange rate system?
The US macroeconomic policy package of 1965-1968
Which of the following is an advantage of licensing?
The firm does not have to bear the development costs and risks associated with opening a foreign market
Which of the following is one of the main benefits that FDI provides to the home country?
The home country's balance of payments benefits from the inward flow of foreign earnings
Which of the following is the basic position of the Friedman doctrine?
The only social responsibility of business is to increase profits, so long as the company stays within the rules of law
Which of the following does Moore's law predict?
The power of the microprocessor technology doubles and its cost of production falls in half every 18 months
Which of the following statements reflects how the political economy of many of the world's nation-states has changed radically since the late 1980s?
There has been a move away from centrally planned and mixed economies and toward a more free market economic model
Why do acquisitions fail sometimes?
There is a clash between the cultures of the acquiring and acquired firm
How have new information and communication technologies, including the Internet, affected the political economy in general?
They have reduced a state's ability to control access to uncensored information
A main criticism of the IMF is that it has become too powerful for an institution that lacks any real mechanism for accountability. (T/F)
True
Capital flight is most likely to occur when the value of the domestic currency is depreciating rapidly. (T/F)
True
Critics of a floating exchange rate regime argue that speculation can cause fluctuations in exchange rates. (T/F)
True
Despite all the talk about the emerging global village, differences between countries such as cultures and political systems are very profound and enduring. (T/F)
True
Free trade agreements are the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements. (T/F)
True
Inflation can be avoided if the output of goods and services in an economy is growing at a rate similar to that of the money supply. (T/F)
True
Localization is most appropriate when there are substantial differences across nations with regard to consumer tastes and preferences and where cost pressures are not too intense. (T/F)
True
Regional economic integration and the consequent increased dependence on each other create incentives for political cooperation between the neighboring states and reduce the potential for violent conflict. (T/F)
True
The exchange rate allows us to compare the relative prices of goods and services in different countries. (T/F)
True
The great strength claimed for the gold standard was that it contained a powerful mechanism for achieving balance-of-trade equilibrium by all countries. (T/F)
True
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?
Venedia's exports to Lutetia will increase, because Venedian goods will become cheaper in Lutetia
Which of the following was established after the Uruguay Round to police the international trading system?
World Trade Organization
Assume that the interest rate on borrowings in South Korea is 1 percent, but the interest rate on deposits in British banks is 7 percent. A trader borrows 1 million South Korean won, then converts the money into British pounds and deposits it in a British bank. What is the trader involved in?
a carry trade
People in the West tend to associate a representative democracy with
a market economic system
Which of the following is a reason for the widespread retreat of the radical position toward FDI in the 1990s?
abysmal economic performance of those countries that embraced the radical position
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
A caste system and a class system fundamentally differ from one another in the
amount of social mobility they allow
In the Republic of Cedia, people are extremely conscious about their social backgrounds. This in turn regulates their relationships with members of other classes. As a result of the heightened class consciousness:
an antagonistic relationship will exit between management and labor classes
John, an American executive, finds that a foreign subsidiary in a poor nation has hired a 12-year old orphan girl to work on the factory floor. He knows that using child labor is in direct violation of the company's own ethical code. At the same time, he does not think that denying the child her only source of income is right. John is facing
an ethical dilemma
Which of the following refers to the purchase of a foreign currency or security in one market for immediate resale in another to profit from a price discrepancy?
arbitrage
Which of the following refers to the purchase of securities in one market for immediate resale in another to profit from a price discrepancy?
arbitrage
When the income its residents earn from exports is equal to the money its residents pay to other countries for imports, a country is said to be in:
balance-of-trade equilibrium
How can a wholly owned subsidiary be established in a foreign market?
by acquiring an established firm in the host nation
hich of the following products has a low value-to-weight ratio?
cement
A legal system which is based on a detailed set of laws organized into codes is referred to as
civil law system
Which of the following factors is most likely to make a country unattractive for international business?
closed totalitarian dictatorship
The influential economist Jeffrey Sachs argues that throughout history, which of the following, with their long engagements in international trade, have been the most supportive of market institutions.
coastal states
An individual's rights to do something may be restricted on the grounds that it runs counter to "the good of society" when the political system emphasizes
collectivism
A payment made to expedite or to secure the performance of a routine governmental action is called a
grease payment
Which feature of an economic union differentiates it from a common market?
harmonization of tax rates of member countries
What is a firm engaging in when it insures itself against foreign exchange risk?
hedging
Within the context of the individual as the basic unit of a social organization, which of the following is an implication of the emphasis on individualism in many Western societies?
high degree of managerial mobility between companies
Which of the following is the first step in the process of ethical decision-making?
identifying which stakeholders a decision would affect and in what ways
The Republic of Monaslu has a direct restriction on the quantity of cheese that may be imported into the country. Which of the following instruments of trade policy is being used by the Republic of Monaslu?
import quota
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
Producing a standardized product in large volumes will:
increase production efficiency
Which of the following is an appropriate solution to the problem of slow real income growth among the unskilled workers in the US?
increasing society's investment in education
The Median 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, Cedia most likely follows the philosophy of
individualism
Which of the following was proposed by Alexander Hamilton in 1792 and is by far the oldest economic argument for government intervention?
infant industry
Maroji, a developing country, has a potential comparative advantage in manufacturing electronic goods but is unable to compete with China, at least for the near future. Maroji's predicament is best explained by the
infant industry argument
The development of new products, processes, organizations, management practices, and strategies is called
innovation
Which of the following is broadly defined as the development of new products, processes, organizations, management practices, and strategies?
innovation
Which of the following seeks to explain why firms often prefer foreign direct investment over licensing as a strategy for entering foreign markets?
internalization theory
Which of the following refers to a strategy companies pursue when they take the products first produced for their domestic market and sell them internationally with only minimal local customization?
international
Canadian company Yummy Snacks exports a number of products in Peru, Chile, and Argentina. According to this information, Yummy Snacks is most likely involved in
international trade
Due to strong legal protection of property rights, businesses and individuals will:
invest more in innovations
For foreign direct investment (FDI) to occur, a firm should primarily:
invest resources in business activities outside its home country
A situation in which an economic gain by one country results in an economic loss by another is called a
zero-sum game
