MKT 393 Final

Which of the following states that combining location-specific assets or resource endowments and the firm's own unique assets often requires FDI, and it also requires the firm to establish production facilities where those foreign assets or resource endowments are located? A. Strategic trade policy B. Integration approach C. Scramble theory D. Eclectic paradigm E. Infant industry argument

D. Eclectic paradigm

Which of the following refers to the sourcing of goods and services from locations around the globe to take advantage of national differences in the cost and quality of factors such as labor, energy, land, and capital? A. Globalization of markets B. Containerization of production C. Dispersal of production D. Globalization of production E. Industrialization of markets

D. Globalization of production

Black economy is most likely to be prevalent when: A. large amounts of economic activity are in the form of legally recorded cash transactions. B. people engage in barter agreements to avoid paying taxes. C. a country's GNI per capita exceeds $30,000. D. the expenses of the government are less than its income. E. a country is in trade surplus with another foreign country.

B. people engage in barter agreements to avoid paying taxes.

Firms that emphasize global standardization try to create value by: A. retaining products and competencies within the parent country. B. realizing experience curve and location economies. C. focusing on local responsiveness. D. emphasizing localization. E. adopting an ethnocentric staffing approach.

B. realizing experience curve and location economies.

A firm will favor FDI over exporting as an entry strategy when: A. the costs of establishing production facilities are high. B. the transportation costs or trade barriers are high. C. there are problems associated with doing business in a different culture. D. the products involved have a high value-to-weight ratio. E. the firm wants to occupy a position that falls inside the efficiency frontier.

B. the transportation costs or trade barriers are high.

Which of the following staffing policies seeks the best people for key jobs throughout the organization, regardless of nationality? A. Global B. Ethnocentric C. Geocentric D. Polycentric E. Transnational

C. Geocentric

The norms and value systems of an organization constitute its: A. corporate social responsibility. B. cultural toughness. C. cultural sensitivity. D. corporate culture. E. perceptual ability.

D. corporate culture.

Without currency devaluation, a country in "fundamental disequilibrium" would experience: A. a persistent trade surplus. B. a balance-of-payments equilibrium. C. an increase in exports. D. high unemployment. E. deflation.

D. high unemployment.

Michelle, an Italian fashion designer, sells her merchandise by exporting them to the United States, United Kingdom, and Brazil. According to this information, Michelle is most likely involved in: A. foreign direct investment. B. globalization of production. C. international trade. D. multinational enterprise. E. outsourcing.

D. multinational enterprise.

Suppose the country of Ceria and Lithinia imposed tariffs on imports from all countries, and then they set up a free trade area, scrapping all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Now, Ceria begins to import sugar from Lithinia. However, Ceria had previously been importing sugar from another country, Cadnia, which produced sugar more cheaply than Ceria or Lithinia. This is known as: A. trade creation B. strategic pricing C. synergy D. trade diversion E. protectionism

D. trade diversion

Collectivist-inclined totalitarian states tend to enact laws that severely restrict private enterprises, 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 that the: A. economic system of a country is independent of its legal system. B. legal system of a country is not influenced by the prevailing political system. C. legal system does not affect the attractiveness of a country as an investment site or market. D. all countries have the same legal environments. E. the legal framework of a country reflects the rulers' dominant political ideology.

E. the legal framework of a country reflects the rulers' dominant political ideology.

Which of the following best illustrates the globalization of production? A. Daily Diamonds Inc. buys diamonds from South Africa and exports them to India for the cutting process. B. Evan Swan, a U.S.-based fashion designer, is planning to open a flagship store in China to serve the Asian market. C. Uncle Crab, a U.K. fast food chain, has been serving customers worldwide through its franchises. D. Silver Unicorn Inc. uses sales personnel from the respective host country to sell its products and services. E. Pizza Gallery, an Italian pizza chain, customizes its pizzas and pastas to suit the tastes of its American and Australian customers.

A. Daily Diamonds Inc. buys diamonds from South Africa and exports them to India for the cutting process.

Which of the following factors constrains the globalization of markets? A. Differences in technical standards B. Uniform standard of living C. Cosmopolitan tastes and preferences D. Market segments that transcend national borders E. Convergence of cultures

A. Differences in technical standards

In the context of "knowledge" economy of the twenty-first century, which of the following statements is true about intellectual property? A. Intellectual property has become an increasingly important source of economic value for businesses. B. Protecting intellectual property has become increasingly easy in the twenty-first century. C. Intellectual property laws limit the creativity and the ability of people to search for novel ways of doing things. D. Firms always choose to stay out of countries where intellectual property laws are strict. E. Companies in a country are more likely to commit themselves to extensive basic research if the country prohibits the use of patents.

A. Intellectual property has become an increasingly important source of economic value for businesses.

The Boldovian government took Sea Lion Inc., a domestic, private shipbuilding firm, into state ownership to save the company from bankruptcy. However, the other private competitors in the shipbuilding industry were enraged by this decision of the government. As a result, the government had to reduce the tax burden on all other private shipbuilding firms so that both the state-owned enterprise and private firms could co-exist. According to this information, Boldovia has most likely adopted what type of economy? A. Mixed B. Market-based C. Command D. Laissez-faire E. Communist

A. Mixed

Which of the following is true about the European Commission? A. The European Union's competition commissioner has been gaining influence as the chief regulator of competition policy in the member nations of the European Union. B. The European Commission has to be approved by the Council of the European Union before it can begin work. C. The European Commission does not have a policing role with respect to European Union laws. D. The legislation proposed by the European Commission goes directly to the European Parliament. E. The European Commission is the ultimate controlling authority within the European Union.

A. The European Union's competition commissioner has been gaining influence as the chief regulator of competition policy in the member nations of the European Union.

Which of the following is true of countertrade? A. The governments of developing nations sometimes insist on a certain amount of countertrade. B. Countertrade is a means of structuring an international sale when conventional means of payment are cost-effective. C. Nonconvertibility is an advantage for exporters. D. Nonconvertibility implies that the exporter will be paid only in his or her home currency. E. Most exporters desire payment in a currency that is not convertible.

A. The governments of developing nations sometimes insist on a certain amount of countertrade.

Which of the following refers to currency speculation? A. The short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates B. The 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. The purchase of securities in one market for immediate resale in another to profit from a price discrepancy E. The growth in a country's money supply exceeding the growth in its output, leading to price inflation

A. The short-term movement of funds from one currency to another in the hopes of profiting from shifts in exchange rates

91. Which of the following is a goal of market segmentation? A. To optimize the fit between the purchasing behavior of consumers in a given segment and the marketing mix B. To increase participation in shared global conversations by drawing upon shared symbols that include global brands C. To reduce cultural and economic differences which act as a barrier to the emergence of global trends D. To standardize products, manufacturing, and the institutes of trade and commerce E. To increase the costs of value creation and add value by better serving customer needs

A. To optimize the fit between the purchasing behavior of consumers in a given segment and the marketing mix

Consider two countries Daria and Atlantis. Daria is a major producer of wheat and rice while Atlantis specializes in the production of fertilizers and manufacturing equipment. Engaging in free trade benefits both countries since Daria is an agrarian nation and Atlantis lacks arable land. This follows the theory of comparative advantage, and we can say that engaging in free trade benefits all countries that participate in it. Which of the following is an inaccurate assumption on which this conclusion is based? A. We have assumed a simple world in which there are only two countries. B. We have assumed the prices of resources and exchange rates in the two countries are dynamic. C. We have assumed there are barriers to the movement of resources from the production of one good to another within the same country. D. We have assumed that agrarian nations do not specialize in producing fertilizers. E. We have assumed diminishing returns to specialization.

A. We have assumed a simple world in which there are only two countries.

Jupiter Systems is a high-tech firm looking to set up operations in a foreign country. The firm's core competency is in technological know-how. Which of the following modes of entry would be most favorable to the firm if it wants to keep a tight control over its technology? A. Wholly owned subsidiary B. Joint venture C. Franchising D. Licensing E. Turnkey project

A. Wholly owned subsidiary

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): A. acquisition. B. licensing deal. C. greenfield venture. D. turnkey project. E. exporting deal.

A. acquisition.

When Shop Smart opened its first super market in China it was unable to generate any sales. After conducting a research, it was understood that the local sales personnel found it difficult to communicate with the American store managers. In addition, Chinese consumers found it difficult to shop in the American way. Shop Smart's failure in China can be attributed to the lack of: A. cross-cultural literacy. B. class consciousness. C. a first-mover advantage. D. Confucian dynamism. E. ethnocentrism.

A. cross-cultural literacy.

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: A. globalization of production. B. globalization of markets. C. dislocation of a developing nation's economy. D. restriction on foreign direct investment. E. regulation of the environment.

A. globalization of production.

A firm that enters many markets at once: A. runs the risk of spreading its limited management resources too thin. B. becomes established in all the markets. C. gets the time to learn about each market. D. has fewer export opportunities. E. reduces the costs of any subsequent failure.

A. runs the risk of spreading its limited management resources too thin.

Automobile companies promote different car models in different countries depending on a range of factors such as demographics, local taste, local fuel costs, income levels, traffic congestion, and cultural values. This most likely demonstrates that: A. significant differences still exist among national markets. B. cultural diversity has been replaced by global uniformity. C. the global market is less complex than national markets. D. only multinational giants can benefit from the globalization of markets. E. the social norms in a country do not affect purchase decisions of consumers.

A. significant differences still exist among national markets.

The country of Argonia and the country of Berylia imposed tariffs on imports from all countries. They set up a free trade area, removing all trade barriers between themselves but maintaining tariffs on imports from the rest of the world. Argonia now begins to import sugar from Berylia. Previously, Argonia was indigenously producing sugar at a higher cost. Thus, Argonia benefits from this transaction. This is known as: A. trade creation B. strategic pricing C. synergy D. trade diversion E. protectionism

A. trade creation

Managers at the Blue Dragon Inc., an international company with operations in China and the United States, are often heard complaining about the difficulties in achieving synergy and cooperation between the employees of both the countries. On extensive research it was concluded that the cultural differences between these countries, which resulted in different work-related values, caused the lack of cooperation. In order to effectively tackle this problem, Blue Dragon Inc. should: A. vary its management processes and practices to account for these differences. B. adopt the host country's management processes and practices in both countries. C. opt to exit one of the countries to avoid a conflict. D. provide incentives to the employees based only on their individual performance. E. adopt the home country's management processes and practices in both countries

A. vary its management processes and practices to account for these differences

Capricorn Creative Inc., a U.S.-based advertising firm, was the first in the advertising industry to identify the growth potential of Brazil and to make huge investments in its economy. As a result, the firm was able to build brand loyalty and gain experience in that country's business practices. In the language of business strategy, Capricorn Creative has typically benefited from: A.a first-mover advantage. B.forward integration. C. unrelated differentiation. D. lateral diversification. E. technology transfer.

A.a first-mover advantage.

Which of the following statements is true about minimum efficient scale of output? A. With lesser utilization of capital equipment, the chances of a firm realizing economies of scale increases. B. A plant must avoid operating at the minimum efficient scale of output to realize all major plant-level scale economies. C. When the minimum efficient scale of production is very low relative to global demand, it will be economical to manufacture a product at a single location. D. An advantage of a low minimum efficient scale is that it allows the firm to accommodate demands for local responsiveness. E. A low minimum efficient scale increases the risk of potentially adverse fluctuations in exchange rates.

B. A plant must avoid operating at the minimum efficient scale of output to realize all major plant-level scale economies.

Which of the following statements best supports the claim that greater uniformity replaces diversity in the context of global markets? A. Differences in business systems and legal regulations lead companies to customize their marketing strategies, product features, and operating practices to best match conditions in a particular country. B. As rival global firms follow each other across countries, they bring with them their brand names, products, and marketing strategies from other national markets, thus creating homogeneity across markets. C. Truly innovative companies succeed by developing products that serve specific needs of the local markets. D. The volume of goods, services, and investment crossing national borders has expanded at a slower rate than world output for more than half a century. E. The most global of markets are not typically markets for consumer products, as significant differences in consumer tastes and preferences still exist among national markets.

B. As rival global firms follow each other across countries, they bring with them their brand names, products, and marketing strategies from other national markets, thus creating homogeneity across markets.

Which of the following statements is true about economies of scale? A. Economies of scale lead to an increase in the average unit cost of a product. B. Attaining economies of scale increases a firm's profitability. C. The ability to spread variable costs over a large volume is a source of economies of scale. D. Economies of scale result due to the increase in the perceived value of a product.

B. Attaining economies of scale increases a firm's profitability.

How are spot exchange rates determined? A. By using historical average prices of different currencies B. By the interaction between demand and supply of a currency relative to other currencies C. By taking the average of a basket of currencies D. By government decree E. By predicting future currency movements

B. By the interaction between demand and supply of a currency relative to other currencies

Which of the following best exemplifies foreign direct investment (FDI)? A. Pure Pearls, a jewelry store in the United States, imports harvested pearls from Indonesia, Philippines, and Australia. B. Chivalry, a U.S.-based phone manufacturing company, has set up its own assembly plant in Japan to cater to the needs of the Asian market. C. Delicate Love, a reputable florist company in Holland, exports tulips and roses throughout the globe. D. Samantha started an Italian restaurant in her home country, the United States, after she took cooking lessons from a well-known chef in Italy. E. Yin and Yang Inc., a Chinese firm, supplies buttons and zippers to major denim brands in the United Kingdom.

B. Chivalry, a U.S.-based phone manufacturing company, has set up its own assembly plant in Japan to cater to the needs of the Asian market.

Three countries enter into an agreement to remove all tariffs and trade barriers between them. They decide on a common trade policy with regard to nonmembers. Faced with political backlash, the countries stop short of allowing mobility of factors of production such as labor and capital. Which of the following levels of economic integration best describes this arrangement? A. Political union B. Customs union C. Common market D. Economic union E. Monetary union

B. Customs union

Why has FDI grown more rapidly than world trade? A. The decline in trade barriers has erased the fear of protectionist pressures. B. Executives of business firms see FDI as a way of circumventing future trade barriers. C. There has been a general shift toward radical and totalitarian political institutions. D. Privatization has made developing nations less attractive for multinational enterprises. E. There has been a general shift toward centrally planned command economies.

B. Executives of business firms see FDI as a way of circumventing future trade barriers.

In the context of individualism, which of the following is inconsistent with the works of the ancient Greek philosopher Aristotle? A. Guaranteeing individual freedom B. Government dictating what is in the best interest of society C. Guaranteeing self-expression D. Committing to private ownership E. Treating individual diversity as desirable

B. Government dictating what is in the best interest of society

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? A. Wholly owned subsidiary B. Joint venture C. Exporting D. Greenfield investments E. Licensing

B. Joint venture

Myra is a firm producing premium handbags for women. These bags are manufactured and patented in the country of Ceria. Manufacturers in the country of Argonia create counterfeit Myra bags and sell them in the local markets of Argonia. These bags are sold at almost similar prices to the original in other countries. Which of the following is likely to happen? A. Expansion of world market for Cerian products B. Reduction in the export opportunities for Myra's hand bags in Argonia C. Reduction in import of all Argonian goods D. Increase in the prices of handbags produced by Myra in Argonia E. Reduction in opportunities of export from Argonia to other countries

B. Reduction in the export opportunities for Myra's hand bags in Argonia

Why should a high-tech firm avoid selecting licensing as a mode of entry? A. Threat of creating efficient partners B. Risk of losing control over technology C. Fear of rapid imitation of core technology D. Lack of a transitory technological advantage E. Inability to deter development costs

B. Risk of losing control over technology

Which of the following identifies an attribute of tariffs? A. Tariffs reduce the price of foreign goods for domestic consumers. B. Tariffs reduce the overall efficiency of the world economy. C. Tariffs increase exports from a sector. D. Tariffs increase foreign competition for domestic producers. E. Tariffs increase efficient utilization of resources

B. Tariffs reduce the overall efficiency of the world economy.

Which of the following is true about channel quality? A. The quality of retailers is variable in developed nations. B. The quality of retailers is variable in emerging markets and less developed nations. C. Channel quality refers to a measure of the number of intermediaries between the manufacturer and the consumer. D. An international business cannot establish its own distribution channel when the existing channel quality is poor. E. The lack of a high-quality channel does not impede market entry.

B. The quality of retailers is variable in emerging markets and less developed nations.

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.

If a firm is unable to keep its national markets separate, individuals or businesses may undercut its attempt at price discrimination by engaging in: A. speculation. B. arbitrage. C. dumping. D. predatory pricing. E. forecasting.

B. arbitrage.

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: A. merchandise bill. B. bill of lading. C. bill of exchange. D. draft. E. letter of credit.

B. bill of lading.

In the country of Burnada, the citizens are restricted from moving out of the strata they are born into. Also, individuals are allowed to engage only in the occupation associated with their particular strata. The system of social stratification being practiced in Burnada can be identified as a: A. cluster system. B. caste system. C. merit-based system. D. class system. E. bureaucracy-based system.

B. caste system.

The United Nation of Zorwaya has strict restrictions on direct investment by foreign enterprises, and it opposes the establishment and operation of private enterprises. The highest authority in the country enforces tight control over prices and production output. According to this information, the United Nation of Zorwaya most likely opposes: A. nationalization of private assets. B. deregulation. C. socialism. D. totalitarian ideologies. E. command economies.

B. deregulation.

Yuriko, a citizen of Japan, was working as a manager in the Japanese branch of an American firm. Due to her efficiency, she was assigned a temporary posting at the headquarters of the firm in America. In this situation, she is known as a(n): A. repatriate. B. inpatriate. C. third-country national. D. beneficiary. E. parent-country national.

B. inpatriate.

According to internalization theory: A. licensing gives a firm the tight control over manufacturing, marketing, and strategy in a foreign country that may be required to maximize its profitability. B. licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor. C. licensing has no major drawbacks as a strategy for exploiting foreign market opportunities. D. a problem with licensing arises when the firm's competitive advantage is based much on its products rather than on the management, marketing, and manufacturing capabilities that produce those products. E. licensing is more profitable than FDI.

B. licensing may result in a firm's giving away valuable technological know-how to a potential foreign competitor.

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: A. economies of scope. B. location economies. C. diseconomies of scale. D. economies of power. E. learning economies.

B. location economies.

Countertrade is most likely to be used when: A. the foreign currency is easily convertible. B. the exporter has a letter of credit. C. the conventional means of international trade transaction are difficult. D. there is mutual trust between the exporter and the importer. E. an export management company is used.

C. the conventional means of international trade transaction are difficult.

In the country of Normian Republic, an individual's right to own land is restricted to a large extent on the basis that it runs counter to "the common good." In this context, which of the following is most likely to be the political system adopted by Normian Republic? A. Individualism B. Democracy C. Collectivism D. Capitalism E. Protectionism

C. Collectivism

Which of the following supports the economic case for regional economic integration? A. International institutions such as the World Trade Organization have been moving the world away from a free trade regime. B. The greater the number of countries involved in a free trade agreement, the fewer the perspectives that must be reconciled. C. Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement. D. It is difficult to establish a free trade and investment regime among a limited number of adjacent countries as compared to the world community. E. Since most governments do not intervene, unrestricted free trade and FDI have become a reality.

C. Coordination and policy harmonization problems are largely a function of the number of countries that seek agreement.

Licensing is NOT attractive to which of the following firms? A. Firms lacking the capital to develop operations overseas B. Firms unwilling to commit substantial financial resources to an unfamiliar market C. Firms requiring tight control of operations for realizing experience curve and location economies D. Firms wanting to explore markets but prohibited from doing so by investment barriers E. Firms with intangible properties with business applications that it does not want to develop itself

C. Firms requiring tight control of operations for realizing experience curve and location economies

Which of the following is true of international firms considering foreign expansion? A. The timing and scale of entry of foreign expansion are minor details in comparison with the choice of foreign market. B. The long-run economic benefits of doing business in a country are solely a function of the country's population size. C. 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. D. The costs and risks associated with foreign expansion are higher in economically advanced nations. E. Politically unstable and less developed nations offer favorable benefit-cost-risk trade-off conditions.

C. 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 a characteristic of a time draft? A. It has no value given the deferred nature of the document. B. It is generally not preferred in international transactions. C. It is a negotiable instrument. D. It is also known as a bill of lading. E. It cannot be sold by an exporter.

C. It is a negotiable instrument.

If a company were to draw from the ideas proposed in the various theories of international trade, from a profit perspective, how would it go about selecting locations for its businesses? A. It would concentrate its productive activities mostly in developing countries. B. It would concentrate its productive activities in its home country. C. It would disperse its productive activities to those countries where they can be performed most efficiently. D. It would disperse its productive activities across all countries that serve as its market. E. It would concentrate its productive activities mostly in developed countries.

C. It would disperse its productive activities to those countries where they can be performed most efficiently.

The Republic of Argonia, owing to its vast resources of arable land and fresh water, is an agrarian nation. It exports agricultural products and in turn imports products that it does not produce such as oil, machinery, computers, and electronic devices. The result is that it spends more on imports than it gains from exports. Which of the following theories prohibits such international trade? A. New trade theory B. Product life-cycle theory C. Mercantilism D. Heckscher-Ohlin theory E. Theory of national competitive advantage

C. Mercantilism

Which of the following communication strategies relies primarily on mass media advertising as opposed to personal selling? A. Telemarketing B. Pull strategy C. Push strategy D. Customized advertising E. Point-of-purchase advertising

C. Push strategy

Palladia specializes in the production of beef and produces beef more efficiently than any other country. It buys wheat, which it produces less efficiently than beef, from Rhodia, even though it produces wheat more efficiently than Rhodia. Which of the following theories of international trade supports Palladia's decision to buy wheat from Rhodia? A. The Samuelson critique B. Mercantilism C. Ricardo's theory of comparative advantage D. Adam Smith's theory of absolute advantage E. The Leontief paradox

C. Ricardo's theory of comparative advantage

The value of a product to an average consumer is V, the average price that the firm can charge a consumer for that product is P, and the average unit cost of producing that product is C. For this scenario, which of the following is true? A. The firm makes a profit so long as C is greater than P. B. The higher C is relative to P, greater will be the profit. C. The consumer surplus per unit is equal to V - P. D. The higher the intensity of competitive pressure, the higher the price charged relative to V. E. The lower the consumer surplus, the greater the value for the money the consumer gets.

C. The consumer surplus per unit is equal to V - P.

Assume that the dollar is selling at a premium on the 30-day dollar/euro forward market. Which of the following is true of the foreign exchange dealers' market's expectations about the dollar over the next 30 days? A. The dollar will depreciate against the euro. B. The market is undecided about the direction of currency movement. C. The dollar will appreciate against the euro. D. The dollar/euro exchange rate will be steady. E. The dollar will buy more euros with a spot exchange than with a 30-day forward exchange.

C. The dollar will appreciate against the euro.

Vornoda Inc., a multinational clothing and accessory brand, has been facing huge economic losses due to unpredictable exchange rate movements. In order to gain considerable immunity against such currency fluctuations, Vornoda Inc. should: A. pursue strategies that increase its economic exposure. B. avoid using instruments like forward market and swaps. C. disperse production to different locations around the globe. D. not contract out manufacturing. E. restrict its low-value-added manufacturing to one location.

C. disperse production to different locations around the globe.

Dumping involves foreign producers: A. attempting hostile takeovers of domestic firms and usurping the available resources for production. B. indiscriminately exploiting the natural resources of a foreign country to create a later demand that can be met only by imports. C. eliminating competition by subsidizing prices in a foreign market with home market profits and eventually raising prices to earn substantial profits. D. capturing the niche market rather than the masses. E. exporting only a small quantity of their products into an importing country

C. eliminating competition by subsidizing prices in a foreign market with home market profits and eventually raising prices to earn substantial profits.

The probability of survival for an international business increases if it: A. enters a national market after several other foreign firms have already done so. B. avoids the use of countertrade agreements. C. enters a national market early. D. enters a foreign market via turnkey projects. E. avoids engaging in joint ventures.

C. enters a national market early.

Due to certain strict environmental and employment standards in its home nation, Taurus Inc. has shifted its operations to developing nations. Hence, the firm has now been able to gain competitive advantage by avoiding costly pollution controls. This strategic move of Taurus Inc. will be considered: A. illegal. B. ethical. C. immoral. D. uneconomical. E. totalitarian.

C. immoral.

The Cedian government believes that its citizens should have complete freedom in their economic and political pursuits, and the Cedian ideology is "private profit over public good." In this context, it can be said that Cedia most likely follows the philosophy of: A. totalitarianism. B. socialism. C. individualism. D. communism. E. Marxism.

C. individualism

A key advantage of adopting the euro is that it: A. helps in reduction of competition in Europe. B. has prevented the development of a highly liquid pan-European capital market. C. lowers foreign exchange and hedging costs in Europe. D. insulates Europe from international competition. E. increases the range of investment options open to institutions only.

C. lowers foreign exchange and hedging costs in Europe.

The term global commons refers to: A. social norms and values that are common across the globe. B. a group of nations that share similar ideologies on globalization. C. natural resources from which everyone benefits but for which no one is specifically responsible. D. common laws to be obeyed by companies involved in international business. E. arrangements, like common currencies, between countries to simplify international trading.

C. natural resources from which everyone benefits but for which no one is specifically responsible.

A second strategic objective shared by production and supply chain management is to increase product quality. In this context, quality means: A. affordability. B. flexibility. C. reliability. D. adaptability. E. patentability.

C. reliability.

As a result of consumer surplus, a firm typically charges a lower price for a good or service 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.

Spring, an American firm, recently acquired another company, Tazel Inc., in Indonesia. The high-level managers at Tazel quit because they could not cope with the domineering and straightforward approach of their American counterparts. This illustrates how acquisitions may fail because: A. managers overestimate their ability to create value from an acquisition. B. integration of operations between the two firms takes longer than forecasted. C. there is a clash between the cultures of the acquired and the acquiring firm. D. an acquiring firm overpays for the assets of an acquired firm. E. inadequate pre-acquisition screening has been done.

C. there is a clash between the cultures of the acquired and the acquiring firm.

Which of the following is an implication of a currency crisis? A. It occurs due to a sharp appreciation in the value of a currency. B. It forces authorities to block large volumes of international currency reserves. C. A country in currency crisis is not eligible for loans from the International Monetary Fund. D. It results in the government sharply increasing interest rates to defend the prevailing exchange rate. E. A country in currency crisis faces sharp decreases in stock and property prices.

D. It results in the government sharply increasing interest rates to defend the prevailing exchange rate.

Jade, a working professional, began driving rashly ever since she got her car insured against damage. She believed that the insurance claim would cover her in case of any accidents. What does Jade's behavior display? A. Cognitive dissonance B. Conflict of interest C. Systemic risk D. Moral hazard E. Tragedy of the commons

D. Moral hazard

Australia is a major producer of agricultural and dairy products and exports coffee, tea, spices, and milk products to the United States. United States is the world's third largest supplier of machinery and exports heavy machinery to Australia. What explains the trade equation between Australia and the United States? A. Tariff barriers determine the flow of goods and services between nations. B. Countries are simultaneously encouraging exports and discouraging imports. C. First entrants to the industry ensure their nations have the first-mover advantages. D. Nations with an absolute advantage in producing certain goods trade them for goods produced by other countries. E. Gold and silver are the mainstays of national wealth and essential to vigorous commerce.

D. Nations with an absolute advantage in producing certain goods trade them for goods produced by other countries.

Which of the following exists whenever consumers in different countries are charged different prices for the same product? A. Penetration pricing B. Premium pricing C. Predatory pricing D. Price discrimination E. Price skimming

D. Price discrimination

Which of the following is a dimension of social structure that is particularly important when explaining differences between cultures? A. The average income of the people who belong to a particular culture B. The dominant race and the gender in the society C. The extent to which work is viewed as more important than family D. The degree to which the society is stratified into classes or castes E. The degree to which a society supports multiple subcultures

D. The degree to which the society is stratified into classes or castes

Which of the following is NOT a constraint on a firm's ability to disperse its productive activities to foreign countries? A. Tariff barriers raising the costs of exporting products to a country B. Quotas restricting the quantity of a good that can be imported into a country C. Local content requirements demanding a specific fraction of domestic production D. The increasing integration of the world economy E. Antidumping policies limiting the ability of a firm to use aggressive pricing

D. The increasing integration of the world economy

What is meant by arbitrage? A. To provide insurance or hedge against the risks that arise from volatile changes in exchange rates B. A transaction between two parties that involves exchanging currency and executing a deal at some specific date in the future C. Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates D. The purchase of securities in one market for immediate resale in another to profit from a price discrepancy E. To borrow in one currency where interest rates are low and use the proceeds to invest in another currency where interest rates are high

D. The purchase of securities in one market for immediate resale in another to profit from a price discrepancy

Amber Engineers Inc. wants to be able to customize products for different national markets and in turn increase its customer responsiveness. However, the fixed costs associated with its production are high. Hence, these functions will be performed most efficiently if Amber Engineers: A. sets up a production facility that is well suited for mass production. B. establishes multiple manufacturing facilities in each major national market. C. increases each manufacturing unit's minimum efficient scale of output. D. adopts flexible manufacturing technologies to help achieve mass customization. E. locates its production unit in countries that have fluctuations in exchange rates.

D. adopts flexible manufacturing technologies to help achieve mass customization.

Davis is the manager of a pharmaceutical manufacturing facility in a developing country. The manufacturing unit does not meet the acceptable standards of the manufacturing facility in the home nation. He knows that demanding a better manufacturing unit will raise the cost of the drugs mainly exported to other less developed countries, and hence its price. But he also realizes that by not demanding a better unit, the employees are prone to serious health issues. Davis is facing: A. a role conflict. B. the tragedy of the commons. C. a positivity offset. D. an ethical dilemma. E. a negativity effect.

D. an ethical dilemma.

In comparison to a floating exchange rate regime, a fixed exchange rate system is characterized by: A. smoother trade balance adjustments. B. increased destabilizing effects of exchange rate speculation. C. greater autonomy in terms of monetary policy. D. higher monetary discipline. E. greater exchange rate uncertainty and volatility.

D. higher monetary discipline.

A critical competitive feature of an oligopoly is the: A. lack of interaction among the major players. B. presence of a domestic market which is open for foreign firms. C. desire of all the major players to avoid the phenomenon of diminishing returns. D. interdependence of the major players. E. lack of imitative behavior among the major players.

D. interdependence of the major players.

Location-specific advantages for a firm are those that arise from: A. acquiring the home markets of foreign firms that threaten a firm's domestic market. B. gaining a commanding position in one market and using them to subsidize competitive attacks in other markets. C. preferring exporting over licensing in order to retain control over know-how, manufacturing, marketing, and strategy. D. utilizing resource assets that are tied to a particular foreign location and valuable enough to be combined with the firm's own unique assets. E. franchising and licensing.

D. utilizing resource assets that are tied to a particular foreign location and valuable enough to be combined with the firm's own unique assets.

When a time draft is presented to a drawee, he or she signifies acceptance of it by: A. delivering the goods immediately. B. paying the draft amount immediately. C. providing a collateral for the amount specified in the bill. D. writing or stamping a notice of acceptance on its face. E. selling the draft to an investor at a discount from its face value.

D. writing or stamping a notice of acceptance on its face.

The pragmatic nationalist view is that: A. FDI benefits only the host country. B. FDI does not make any positive contribution to the host economy. C. every country should adopt the free market view. D. FDI should not be allowed by any country as it is an instrument of economic domination rather than economic development. E. FDI has both benefits and costs.

E. FDI has both benefits and costs.

Which of the following statements is most likely to be true regarding the effects of FDI on employment? A. FDI does not result in job creation. B. FDI has only indirect effects on employment in the host country. C. The indirect employment effects of FDI are always smaller than the direct effects. D. When FDI takes the form of an acquisition of an established enterprise in the host economy as opposed to a greenfield investment, the immediate effect is always an increase in the employment. E. A beneficial employment effect claimed for FDI is that it brings jobs to a host country that would otherwise not be created there.

E. A beneficial employment effect claimed for FDI is that it brings jobs to a host country that would otherwise not be created there.

Which of the following statements is true about the current monetary system? A. Use of instruments such as the forward market and swaps has decreased since the breakdown of the Bretton Woods system. B. The present monetary system lacks the volatile movements in exchange rates that existed in a fixed exchange rate system. C. The current foreign exchange market works exactly as depicted in the purchasing power parity theory. D. Instruments such as the forward market and swaps increase the foreign exchange risk a company faces. E. A combination of government intervention and speculative activity drives the current foreign exchange market.

E. A combination of government intervention and speculative activity drives the current foreign exchange market.

Which of the following refers to carry trade? A. Providing insurance or hedging against the risks that arise from volatile changes in exchange rates B. A transaction between two parties that involves exchanging currency and executing a deal at some specific date in the future C. Simultaneous purchase and sale of a given amount of foreign exchange for two different value dates D. The purchase of securities in one market for immediate resale in another to profit from a price discrepancy E. Borrowing in one currency where interest rates are low and then using the proceeds to invest in another currency where interest rates are high

E. Borrowing in one currency where interest rates are low and then using the proceeds to invest in another currency where interest rates are high

Which of the following is a macro factor underlying the trend toward greater globalization? A. Rise of communism across the globe B. Increase in nationalization of private organizations C. Increase in diversity in consumer tastes and preferences D. Increase in trade regulations across the globe E. Dramatic developments in information processing and other technologies

E. Dramatic developments in information processing and other technologies

Lamboria Republic is facing a high rate of inflation, and the government debt in the country is also high. As a result, the country's business environment is beginning to deteriorate, and the profits of the business enterprises are hurt. According to this information, Lamboria Republic is facing which of the following type of risk? A. Legal B. Ethical C. Demographic D. Ethnographic E. Economic

E. Economic

Which of the following is true of a transnational strategy? A. It is easy to implement because it does not place any conflicting demands on a company. B. It is used when the pressures for cost reductions are low. C. It is usually used when the pressure for local responsiveness is relatively low. D. It enables the one-way flow of core competencies. E. It is used by firms that try to achieve low costs through location economies, economies of scale, and learning effects.

E. It is used by firms that try to achieve low costs through location economies, economies of scale, and learning effects.

Which of the following statements is true about performing a manufacturing activity in several locations at once? A. A manufacturing activity must be performed at multiple locations when the fixed costs of setting up a production plant are high. B. Performing a manufacturing activity in several locations makes it difficult for a firm to accommodate demands for local responsiveness. C. Producing in multiple locations reduces the bargaining power of a firm against manufacturers. D. The larger the minimum efficient scale of a plant relative to total global demand, the greater the need for decentralizing production to multiple locations. E. Many firms disperse their manufacturing plants to different locations as a "real hedge" against potentially adverse moves in currencies.

E. Many firms disperse their manufacturing plants to different locations as a "real hedge" against potentially adverse moves in currencies.

Which of the following is most likely to be considered unethical? A. Galaxy Inc. ceased its operations in some developing nations on account of low employment standards in those countries. B. Unicorn Inc. sells its medicines at a lower price in less developed nations. C. Capricorn Inc., a multinational company operating in developing nations, pays its labor 30 percent more than what the local competitors pay. D. Centaur Inc. had to close down a production plant as the local management there had employed child labor. E. Orion Inc. sends its waste products for disposal to a developing nation because the pollution control laws in its home country are much more strict than those in the developing nation.

E. Orion Inc. sends its waste products for disposal to a developing nation because the pollution control laws in its home country are much more strict than those in the developing nation.

Which of the following is an expected consequence of the implementation of the North American Free Trade Agreement? A. Low-skilled jobs will be moved out to Mexico resulting in lowering of average wage rates in the United States and Canada. B. Increased imports from Mexico will help reduce the huge trade deficit for United States and Canada. C. Lower incomes of the Mexicans would allow them to import fewer U.S. and Canadian goods, thereby decreasing demand. D. A large number of Mexican firms will hire low-skilled workers from the United States. E. Some U.S. and Canadian firms would move production to Mexico to take advantage of lower labor costs.

E. Some U.S. and Canadian firms would move production to Mexico to take advantage of lower labor costs.

A firm maximizes its profitability when it: A. creates products similar to the products of its competitors. B. minimizes the value provided by its products. C. picks a position on the efficiency frontier that is not viable. D. strips all the value out of its product offering. E. configures its internal operations to support the position selected by it on the efficiency frontier.

E. configures its internal operations to support the position selected by it on the efficiency frontier.

Green Quantum Inc. has research and production units all across the globe. The company expects its expatriate managers to adopt the ethics propagated by the culture in which they operate their respective units. Even in situations when others consider certain actions as unethical, the company allows its managers to pursue such actions if they are permitted in the host nation. Green Quantum is most likely following: A. the Friedman doctrine. B. Sullivan's principles. C. righteous moralism. D. Kantian ethics. E. cultural relativism.

E. cultural relativism.

The law of one price states that: A. by comparing the prices of identical products in different currencies, it would be possible to determine the "real" or PPP exchange rate that would exist if markets were efficient. B. a country's "nominal" interest rate (i) is the sum of the required "real" rate of interest (r) and the expected rate of inflation over the period for which the funds are to be lent (I). C. a country in which price inflation is running wild should expect to see its currency depreciate against that of countries in which inflation rates are lower. D. when the growth in a country's money supply is faster than the growth in its output, price inflation is fueled. E. 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.

E. 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.

Which of the following is most likely to prove detrimental to democracy and international business? A. Emergence of increasingly prosperous middle and working classes B. Development of new information and communication technologies C. Dominance of a universal civilization which leads to the establishment of a more harmonious world D. Transformation of nations from centrally planned command economies to market-based economies

NONE OF THEM