international business

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 into a british bank. what is this trader involved in?

a carry trade

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

which feature of a customs union differentiates it from a free trade area?

adoption of a common external trade policy

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

which of the following trade pacts collapsed due to a war?

central american 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

which term refers to the metrics used to measure the performance of subunits and make judgements about how well managers are running those subunits?

controls

companies can deal with the nonconvertibility problem of currencies by engaging in...

countertrade

which of the following are NOT included in the doha agent of the wto?

creating an institution to enforce intellectual property rights

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 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 the 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

which of the following refers to the reductions in the unit cost achieved by producing a large volume of product?

economies of scale

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 an...

export ban

which of the following raise revenue for the government and reduce exports from a sector, often for political reasons?

export tariffs

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

the lowering of barriers to trade and investment among countries has led to decreased price competition throughout the eu and nafta

false

true or false: a strategy that focuses primarily on increasing the attractiveness of a product is referred to as a low-cost strategy

false

true or false: in addition to nafta, the other successful trade bloc in the americas is the free trade area of the americas (ftaa)

false

true or false: pressures for cost reduction are most intense in industries that produce highly differentiated products

false

true or false: spot rates are constant for a period of one year

false

true or false: strategic alliances refer to cooperative agreements between subsidiaries of a company

false

true or false: the british pound is the world's second most important vehicle currency

false

true or false: the ultimate controlling authority within european union is the european commission

false

the -- of fdi refers to the amount of fdi undertaken over a given time period (normally a year)

flow

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

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)

which of the following involves the establishment of a new operation in a foreign country?

greenfield investment

which features of an economic union differentiates it from a common market?

harmonization of tax rates of member countries

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

which of the following was proposed by alexander hamilton in 1792 and is by far the oldest economic argument for government intervention?

infant industry

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 customization?

international

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 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

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

an employee takes much less time to do a specific task now than it took him when he first started working six months ago. which of the following is this an example of?

learning effects

royal chocolatier, a british manufacturer of chocolates, granted us company american candy inc. the right to produce and sell royal chocolateir's products in the us. 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?

licensing

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

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

-- arises when two or more enterprises encounter each other in different regional markets, national markets, or industries

multipoint competition

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, hte 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

ownership restraint is a method of...

restricting inward fdi by a host country

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, enacted by the us congress in 1930, erected a wall of tariff barriers against imports into the united states?

smoot-hawley act

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

spot exchange rate

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

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

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 quotas

-- are the oldest and simplest instruments of trade policy

tariffs

collectively, member-states of which of the following account for about 54 percent of the world's gnp and 54 percent of the world's trade?

the asia-pacific economic cooperation

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 treaty committed ec members to adopting a common currency by january 1, 1999?

the maastricht treaty

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

the stock of fdi refers to the...

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

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 creation

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...

transnational

true or false: capital flight is most likely to occur when the value of the domestic currency is depreciating rapidy

true

true or false: free trade agreements are the most popular form of regional economic integration, accounting for almost 90 percent of regional agreements

true

true or false: 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

true

true or false: localization is most appropriate when there are substantial differences across nations with regards to consumer tastes and preferences and where cost pressures are not too intense

true

true or false: 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

true

true or false: the exchange rate allows us to compare the relative prices of goods and services in different countries

true

true or false: the term core competence refers to skills within the firm that competitors cannot easily match or imitate

true

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