MG415 Final
Which of the following is a reason why a relatively poor country may be an attractive target for inward investment? A.rapid economic growth B. political instability C. currency depreciation D. high cost of living E. less developed infrastructure
A.rapid economic growth
Many of the world's developing nations peg their currencies, primarily to the A.U.S. dollar. B. Saudi riyal. C. Japanese yen. D. Chinese yuan. E. German deutsche mark.
A.U.S. dollar.
Which of the following is an example of a first-mover advantage? A.ability to create switching costs that tie customers into one's products or services B. avoidance of pioneering costs that a later entrant into the foreign market has to bear C. increased probability of surviving in a foreign market D. opportunity to observe and learn from the mistakes of other entrants E. ability to let later entrants ride ahead on the experience curve
A.ability to create switching costs that tie customers into one's products or services
First-mover disadvantages refer to A.disadvantages associated with entering a foreign market before other international businesses. B. costs that a late entrant to a foreign market has to bear. C. a direct restriction on the quantity of a good that can be imported into a country. D. imperfections in the operation of the market mechanism. E. disadvantages experienced by being a late entrant in a foreign market.
A.disadvantages associated with entering a foreign market before other international businesses.
Which of the following is a reason for the emergence of the gold standard? A.expansion in the volume of international trade due to the Industrial Revolution B. inability of governments to convert gold into paper currency on demand at a fixed rate C. widening gap between the developed and the developing nations D. failure of the Bretton Woods fixed exchange rate system E. failure of the U.S. dollar to act as a reference currency
A.expansion in the volume of international trade due to the Industrial Revolution
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 A.is likely to have greater value. B. will have to be priced relatively low. C. will see a decrease in sales volume. D. is not suited to that particular market. E. will fail to make a profit.
A.is likely to have greater value.
Typically, the price a firm charges for a good or service is A.less than the value placed on that good or service by the customer. B. more than what customers assume it would be. C. more than the market price for similar goods or services. D. the same as the value placed on that good or service by the customer. E. less than the lowest priced similar good or service in the market.
A.less than the value placed on that good or service by the customer.
Robben Inc. converts $1,000,000 into euros when the exchange rate is $1 = €0.75. After three months, the company converts this back into dollars when the exchange rate is $1 = €0.80. Which of the following is the outcome of this transaction? A.loss of $62,500 B. loss of $66,667. C. gain of $50,000 D. gain of $62,500 E. loss of $50,000
A.loss of $62,500
Which of the following refers to the gold standard? A.pegging currencies to gold and guaranteeing convertibility B. conducting international trade by physically exchanging gold C. the most valuable currency in the world at any given point in time D. the common global standard of gold quality to be maintained E. the quality of merchandise to be maintained for it to be exportable
A.pegging currencies to gold and guaranteeing convertibility
Which of the following is a function of the foreign exchange market? A.provide some insurance against foreign exchange risk B. protect short-term cash flow from adverse changes in exchange rates C. eliminate volatile changes in exchange rates D. reduce the economic exposure of a firm E. enable companies to engage in capital flight when countertrade is not possible
A.provide some insurance against foreign exchange risk
Which of the following refers to currency speculation? A.short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates B. exchange rate at which a foreign exchange dealer will convert one currency into another that particular day C. simultaneous purchase and sale of a given amount of foreign exchange for two different value dates D. purchase of securities in one market for immediate resale in another to profit from a price discrepancy E. growth in a country's money supply exceeding the growth in its output, leading to price inflation
A.short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates
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. The speculative element of John's carry trade is that its success is based upon his belief that A.there will be no adverse movement in exchange rates or interest rates. B. liquidity is the key factor in determining interest rates. C. increasing money supply will not drive inflation. D. spot exchange rates are more favorable than forward exchange rates. E. hedging insures a company against foreign exchange risks.
A.there will be no adverse movement in exchange rates or interest rates.
Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. While Tom values the Omega wrist band at $122, his friend Dan values it at $105. The value placed by Tom and Dan are what economists would call A. producer's surplus. B. each customer's reservation price. C. each customer's value price. D. the efficiency frontier. E. competitive advantage.
B. each customer's reservation price.
Darren Bloom, the sales manager for John Fountain Products, a small family business, is eager to get the company on an export path. The CEO of the company is not convinced, however. Which of the following is an advantage of exporting that Bloom should use to convince the CEO? A. It helps in easy currency conversion. B.It provides large revenue and profit opportunities. C. It reduces the administrative costs incurred by a company. D. It helps companies increase their unit costs. E. It reduces paperwork and complex formalities.
B.It provides large revenue and profit opportunities.
Which of the following is true of medium-sized and small firms? A. They are proactive about seeking opportunities for profitable exporting. B.They consider exporting only after their domestic market is saturated. C. They are not intimidated by the complexities of foreign legal systems. D. They have a high degree of familiarity with foreign market opportunities. E. They explore foreign markets to see where the opportunities lie for leveraging their technology.
B.They consider exporting only after their domestic market is saturated.
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? A. Lutetia's products will achieve a competitive pricing in Venadia. B.Venadia's exports to Lutetia will increase, because Venadian goods will become cheaper in Lutetia. C. Venadia's products will cost more in Lutetia. D. There will be no difference in the volume or direction of trade. E. Lutetia's exports to Venadia will increase, because Lutetian goods will become cheaper in Venadia.
B.Venadia's exports to Lutetia will increase, because Venadian goods will become cheaper in Lutetia.
Which of the following countries presents a favorable benefit-cost-risk trade-off scenario for foreign expansion? A. a country ridden by private-sector debt B.a country with a free market system C. a country experiencing a dramatic upsurge in inflation rates D. a country that is heavily populated E. a country that is less developed and politically unstable
B.a country with a free market system
Which of the following caused a decline in the dollar/yen carry trade during 2008-2009? A. increase in risk appetite making the carry trade less attractive B.decrease in interest rate differentials as the U.S. rates came down C. increase in interest rate differentials as Japanese interest rates came down D. decrease in interest rate differentials as the U.S. interest rates went up E. decrease in interest rate differentials as the Japanese rates went up
B.decrease in interest rate differentials as the U.S. rates came down
Jarinia, a leading global economic power, lets the foreign exchange market determine the relative value of its currency, called the junid. Jarnia's exchange rate regime is called a _____ exchange rate. A. fixed B.floating C. forward D. pegged E. nominal
B.floating
In a floating exchange rate, the relative value of a currency A. is more predictable and less volatile. B.is determined by market forces. C. changes infrequently only under a specific set of circumstances. D. is set against other currencies at some mutually agreed on exchange rate. E. does not depend on the free play of market forces
B.is determined by market forces.
Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. Customers value the wrist band at $110. One of the reasons why Omega typically charges for its wrist band less than the value placed on it by the customer is because A. the firm attempts to create value for the consumers by providing them a wide range of products. B.it is normally impossible to segment a market based on each customer's reservation price. C. the value creation results in a corresponding reduction in costs of production. D. the firm frequently modifies its products to compete with the products introduced by other firms. E. it is highly unlikely that the same good or service will be available to the customers from other firms.
B.it is normally impossible to segment a market based on each customer's reservation price.
Darren Bloom, the sales manager for John Fountain Products, a small family business, is eager to get the company on an export path. The CEO of the company is not convinced, however. To convince the CEO, Bloom should point out that firms that do not export often A. face problems of currency conversion. B.lose out on significant opportunities for cost reduction. C. are able to reduce their unit costs. D. are not intimidated by the business practices of foreign countries. E. explore foreign markets to see where they can leverage their technology.
B.lose out on significant opportunities for cost reduction.
The value of Surnum's, a developing economy, currency is fixed relative to the U.S. dollar. The exchange rate between the Surnum currency and other currencies is determined by the dollar exchange rate. Surnum's exchange rate is A. flexible. B.pegged. C. real. D. dirty-float E. floating.
B.pegged.
The rate of return that a firm makes on its invested capital is referred to as A. stakeholder return. B.profitability. C. profit growth. D. process value E. strategic fit.
B.profitability.
Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. Customers value the wrist band at $110. In this scenario, Omega's value creation is A. $38. B. $48. C.$10. D. $28. E. $272
C.$10.
Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. Customers value the wrist band at $110. In this scenario, the consumer surplus is A. $38. B. $48. C.$10. D. $28. E. $272
C.$10.
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? A. $550 B. $523 C.$450 D. $600 E. $500
C.$450
Assume that the value of a base model computer to an average consumer is $300, the average price that Dell can charge a consumer for that product is $275, and the average unit cost of producing that product for Dell is $150. For this scenario, which of the following is true? A. Dell can easily increase its price above $300 B. The profit for Dell on each computer is $150 C.The consumer surplus per computer is $25. D. The higher the intensity of competitive pressure, the higher the price that Dell can charge relative to $300. E. The lower the consumer surplus, the greater the value for the money the consumer gets.
C.The consumer surplus per computer is $25.
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 A. borrow money in Maritian currency, convert it into Rhodian currency, and deposit it in a Rhodian bank. B. borrow money in Rhodian currency and invest in stocks with good growth potential in Rhodia. C.borrow money in Rhodian currency, convert it into Maritian currency, and deposit it in a Maritian bank. D. invest in bank deposits of Maritia and reinvest the earnings in Rhodia .E. invest in bank deposits of Rhodia and reinvest the earnings in Maritia
C.borrow money in Rhodian currency, convert it into Maritian currency, and deposit it in a Maritian bank.
The liability associated with foreign expansion is greater for foreign firms that A. choose to ride on an early entrant's investments. B. use countertrade agreements. C.enter a national market early. D. ride down the experience curve behind their rivals. E. avoid pioneering costs.
C.enter a national market early.
Omega, Inc. is an early entrant for its fitness product in the country of Malnesia. As an early entrant, Omega, Inc. may find itself at a disadvantage if it A. is trying to realize location and experience curve economies. B. incurs low development costs. C.faces a subsequent change in business regulations in Malnesia. D. has a core competence based on control over technological know-how. E. considers a greenfield strategy.
C.faces a subsequent change in business regulations in Malnesia.
Moora and Trun, two countries that are part of the BURPHA common market have an exchange rate system where the values of their currencies are set against each other at a mutually agreed on exchange rate. Moora and Trun's exchange rate system is called A. clean float. B. floating. C.fixed. D. dirty-float. E. pegged.
C.fixed.
Which of the following refers to the institutional arrangements that govern exchange rates? A. generally accepted accounting principles B. general agreement on tariffs and trade C.international monetary system D. general agreement on trade in services E. financial management information system
C.international monetary system
The value that an international business can create in a foreign market is determined by the A. population density in the foreign market B. political stability of the foreign market C.nature of indigenous competition D. per capita income in the foreign market E. type of political system in the foreign market
C.nature of indigenous competition
Omega, Inc. sells its fitness wrist band for $100. It cost the company $62 to make the product. Customers value the wrist band at $110. While Omega's pricing practice results in a consumer surplus, it typically charges a lower price for the wrist band than the value placed on it by customers because A. the value creation results in a corresponding reduction in costs of production. B. it is highly unlikely that the same good or service will be available to the customers from other firms. C.the firm is competing with other firms for the customer's business. D. the firm charges a price that reveals a consumer's assessment of the product's value. E. the firm creates value for the customer by producing a wide range of products.
C.the firm is competing with other firms for the customer's business.
In which of the following situations can an international business command higher prices for a particular product in a foreign market? A. the product is widely available in the foreign market B. sales volumes is relatively low in the foreign market C.the product offers greater value to customers in the foreign market D. the product is more suitable to other foreign markets E. domestic competitors are selling alternatives at reduced prices
C.the product offers greater value to customers in the foreign market
Omega, Inc. is considering international expansion and wants to know if it is likely to command a high price for its fitness product. In which of the following situations can Omega, Inc. command higher prices for its fitness product in a foreign market? A. the product is widely available in the foreign market B. sales volumes is relatively low in the foreign market C.the product offers greater value to customers in the foreign market D. the product is more suitable to other foreign markets E. domestic competitors are selling alternatives at reduced prices
C.the product offers greater value to customers in the foreign market
Mary Warner, the sales manager for a medium-sized apparel company, is facing a tremendous challenge in convincing her boss to get the company to export. As she reflected on this challenge, she realized that many medium-sized firms like hers are not proactive in seeking export opportunities because A. they are familiar with the foreign market and do not find it challenging enough. B. the export market is similar to the home market in terms of legal and business practices. C.they are intimidated by the complexities and mechanics of exporting to foreign countries. D. domestic regulations limit their ability to export profitably. E. they can't recruit managers with the expertise needed to cultivate business in foreign countries.
C.they are intimidated by the complexities and mechanics of exporting to foreign countries.
Which of the following is true of the costs and risks associated with doing business in a foreign country? A. They are greater for late entrants. B. They are higher in politically democratic nations C. They are less pronounced in the case of licensing. D.They are lower in economically advanced nations. E. They are called opportunity costs.
D.They are lower in economically advanced nations.
Which of the following statements is true about the various exchange rate systems? A. In a fixed exchange rate system, the value of a currency is adjusted according to the day to day market forces. B. In a clean float, the central bank of a country will intervene in the foreign exchange market to try to maintain the value of its currency. C. After the collapse of the Bretton Woods system of floating exchange rates in 1973, the world has operated with a fixed exchange rate system. D.Under the Bretton Woods system, currency devaluations over 10 percent were allowed only with the approval of the IMF. E. In dirty float, the exchange rate between a currency and other currencies is relatively fixed against a reference currency exchange rate.
D.Under the Bretton Woods system, currency devaluations over 10 percent were allowed only with the approval of the IMF.
The 1944 Bretton Woods conference created two major international institutions that play 11a role in the international monetary system—the International Monetary Fund (IMF) and the A. United Nations. B. European Union. C. World Trade Organization. D.World Bank. E. G20
D.World Bank.
Joanna's assessment of the value of a handbag sold at $110 is $200. The $200 is referred to as the A. market price. B. customer's negotiated price. C. base value of the product. D.customer's reservation price. E. profit growth price.
D.customer's reservation price.
The government of Darnia allows its currency to nominally float freely against other currencies, but the government has the right to intervene, buying and selling currency, if it believes that the currency has deviated too far from its fair value. What Darnia is doing is called a _____ float. A. fixed B. clean C. pegged D.dirty E. capital
D.dirty
While seeking opportunities for profitable exporting, large firms generally tend to be A. passive. B. risk averse. C. wary. D.proactive. E. neutral.
D.proactive.
Exporting is nearly always a way to increase the revenue and profit base of a company because A. there is little competition in the international market. B. foreign governments encourage imports from other countries. C. international markets are less complex than their domestic counterparts. D.the international market is much larger than the domestic market. E. it does not involve wasting resources on paperwork.
D.the international market is much larger than the domestic market.
Profit growth is measured by A. dividing the net profits of the firm by total invested capital. B. subtracting the previous year's gross profit from the current year's gross profit. C. calculating the difference between the previous year's profitability and the current year's profitability. D.the percentage increase in net profits over time. E. adding the profitability of the last two fiscal years.
D.the percentage increase in net profits over time.
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 A. currency speculation. B. hedging. C. currency swap. D. arbitrage. E.carry trade.
E.carry trade.
In general, the more value customers place on a firm's products A. the lesser the profitability of the firm. B. the higher the competitive pressure from other firms. C. the lesser the quality of the product. D. the lesser the consumer surplus for those products. E.the higher the price the firm can charge for those products.
E.the higher the price the firm can charge for those products.
A French company wants to invest 20 million euros for three months. The company found that investing in a Thai money market account would give it a higher interest rate than domestic investments. Which of the following is true about this investment? A. The investment is risk-free because money market investments are considered to be equivalent to bank deposits. B.The investment is not risk-free because foreign currency movements in the intervening period can affect the profitability of the firm. C. The investment is risk-free because such investments also lock foreign exchange rates for the duration of the investment. D. The investment is not risk-free because money market instruments are considered to be the most speculative of all investments. E. The investment is risk-free because the Thai money market is considered to be more stable and secure than other markets
The investment is not risk-free because foreign currency movements in the intervening period can affect the profitability of the firm.
Which of the following enables organizations to conduct international trade without having to resort to barter? A.foreign exchange market B. Caribbean Single Market and Economy C. auction market D. countertrade E. balance-of-trade equilibrium
foreign exchange market
